FORT WORTH, Texas—American Airlines today asked union leaders and non-union employees to forge an unprecedented partnership with management in a new course of “active engagement” focused on finding solutions to the airline’s continuing financial crisis.
CEO and Chairman Don Carty and airline President Gerard Arpey asked union leaders to begin meeting weekly with management in a collaborative, problem-solving process. Stepped-up discussions could begin as early as next week.
“Given what is at stake and the severity of our financial situation, it is critical that we - management and labor - work more closely than ever before in our history and intensify our efforts to find both short- and long-term solutions to save and restructure American,” the letter said.
“There is no time to waste,” Carty and Arpey wrote. “In short, we are losing millions of dollars every day, which has forced us to borrow vast sums of money just to meet payroll and stay in business.”
To date, the company has identified $2 billion of the $4 billion needed in annual, permanent cost savings, but faces a cash crisis and must lower overall structural costs to respond to new market realities.
Among the economic challenges the letter cited:
The financial pressure of competing against United and US Airways, which have used the bankruptcy process to eliminate billions of dollars in costs, many imposed by courts and creditors;
Rising costs from government-imposed security measures, ballooning insurance premiums and escalating fuel prices;
Depressed revenues driven by competition from low-cost carriers in 75 percent of AA’s markets and the downward pressure on fares brought on by Internet fare shopping; and
Decreased passenger traffic attributed to a weak economy, fear of terrorism and the threat of war in the Middle East.
The company said management will persist in its efforts to cut administrative costs. To date, AA has cut management staff positions by 22 percent, deferred management pay increases for two years in a row and is consolidating its headquarters operations from eleven buildings to two. “This is a time for shared sacrifices,” the letter said.
In December, the company asked employees to forgo across-the-board pay increases in 2003 to help meet the company’s immediate cash needs, and said that it will be necessary to restructure labor agreements to guarantee the company’s long-term financial stability and to ensure its survival. The unions are still weighing the request and have asked independent consultants to review the company’s finances.
The company hopes to hold the first active engagement meeting next week, pending response from its unions.