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Friday, June 12, 2009

Well, this is disconcerting. AA cutting 1600 jobs, Delta may follow soon.

By Mary Schlangenstein and Mary Jane Credeur

June 12 (Bloomberg) -- AMR Corp.’s American Airlines will eliminate 1,600 jobs and Delta Air Lines Inc. may pare its payroll again as waning travel demand spurs deeper cuts in seating capacity.

American’s reductions equal about 2.4 percent of the workforce, while Delta said it would “reassess staffing needs” without giving a figure. US Airways Group Inc. said it wants 400 flight attendants to take leaves or it will resort to layoffs.

The cutbacks in flights and jobs announced yesterday may herald similar steps by other U.S. airlines. Revenue is vanishing as they trim fares to lure customers who are flying less because of the recession, especially in premium-class cabins on overseas routes.

“Unless there is a huge upturn in business travel propensity and spending, it’s inevitable there will be further cutbacks in capacity on the international side,” said Robert Mann, who owns consulting firm R.W. Mann & Co. in Port Washington, New York.

Delta, the world’s largest airline, will slash available seats as much as 4 percentage points more than planned, for a cutback of 10 percent from 2008 levels, Chief Executive Officer Richard Anderson told employees. American, the second-biggest carrier, said it would shrink flying by 1 percentage point more than projected, to 7.5 percent.

American may have to shed more jobs as it analyzes the “full impact” of the latest capacity moves, said Jeff Brundage, senior vice president for human resources. The Fort Worth, Texas-based airline eliminated 6,840 jobs last year and has a workforce of 67,000.

‘Trying Times’

“These are trying times in the airline industry and our economy,” Brundage said in a message to employees. “The recession has taken a disproportionate toll on airlines and there is no easy way to announce yet more bad news.”

About 75 percent of the positions being dropped, or 1,200, would be flight attendants, American said.

New reductions at Delta would expand on 2,100 jobs shed earlier this year through buyouts and 6,000 dumped in 2008 by the Atlanta-based carrier and Northwest Airlines, acquired by Delta in October. Delta said it has more than 70,000 employees.

“While the challenges of the current environment preclude us from making guarantees, our goal remains to try to avoid any involuntary furloughs of front-line employees,” Anderson said in his message to employees.

American and Delta said their capacity reductions would start taking effect in September, after the U.S. summer travel season.

US Airways

US Airways, the smallest of the so-called full-fare airlines, has 6,700 attendants -- too many, it said, after attrition didn’t thin their ranks as much as forecast. The Tempe, Arizona-based carrier has targeted capacity cuts of as much as 6 percent, and hasn’t announced new reductions.

Delta fell 6 cents to $6.62 at 9:47 a.m. in New York Stock Exchange composite trading. AMR rose 4 cents to $4.63, and US Airways gained 7 cents to $2.74.

US Airways disclosed the proposed leaves in an employee newsletter and in meetings with attendants, much like Delta and American commented on their plans in messages to workers issued separately from presentations yesterday at a Bank of America airlines conference in New York.

UAL Corp.’s United Airlines said premium-class travel to Asia is down and Southwest Airlines Co. said June revenue for each seat flown a mile will be worse than in May.

United’s Watch

United, the third-biggest U.S. carrier, is assessing capacity and demand on its routes daily, CEO Glenn Tilton said after the Chicago-based airline’s annual meeting. United “is not predisposed” to make additional capacity cuts now, he said.

Travelers flying overseas, particularly those who buy first- and business-class tickets, typically generate the most profit for U.S. airlines because discounters don’t compete on those routes.

“You can clearly fill up the airplane with cheap fares, but that doesn’t get you the economics you want,” said Mann, the airline consultant. “The maximum revenue is just less than you’d hoped. It doesn’t necessarily get you to a positive bottom line.”

Weak travel demand is eroding Delta’s revenue, overwhelming the $6 billion in benefits the airline had expected in 2009 from lower fuel prices than a year earlier, merger savings and previous capacity reductions.

With international travel down “significantly,” Delta said it will cut overseas capacity by an additional 5 percent from what it announced in March, for a 15 percent total reduction on those routes.

Traffic, or miles flown by paying passengers, on overseas routes dropped 10 percent at Delta through May and 8.7 percent at American, according to the airlines’ monthly traffic reports.

American said yesterday it will buy 8 more Boeing Co. 737- 800s than planned by 2011. American now will take 31 of the jets by December, up from 29, and 45 in 2010, up from 39, according to a U.S. regulatory filing. The planes are replacing less-fuel- efficient models being removed from American’s fleet.

To contact the reporters on this story: Mary Schlangenstein in Chicago at maryc.s@bloomberg.net; Mary Jane Credeur in Chicago at mcredeur@bloomberg.net