AA Announces 'Fundamental Business Changes'

American Airlines today announced a series of structural changes aimed at slashing an additional $1.1 billion from its operating costs. These "fundamental business changes" include fleet simplification, thousands of fresh layoffs and a realignment of hub operations.

The carrier said on Nov. 1 it will increase scheduling efficiencies at Dallas Ft. Worth, its largest hub, similar to changes made at Chicago O'Hare. The "de-peaking" involves a more continuous flow of aircraft into and out of the airport, which will better utilize staff, gates and equipment. Though travelers may experience longer connection times at DFW and O'Hare, American said the result will be improved flight options with fewer necessary aircraft.

AA also will begin phasing out its entire 74-aircraft fleet of Fokker 100s. The planes will begin leaving service in about a year at the time of each scheduled maintenance overhaul, with complete fleet retirement by the third quarter of 2005.

"The Fokker is a small plane with very high operating costs, complicated by the manufacturer's bankruptcy. Its economics simply no longer work for us," said Don Carty, chairman and CEO of AA parent AMR Corp.

The plan also calls for standardized configurations of Boeing 777 and 767 fleets. B777s will be used primarily to European business markets, parts of South America and Asia. B767s will serve remaining European and Latin American destinations, as well as Hawaii. However, AA said it has deferred 35 aircraft deliveries in 2002 and will look for opportunities to defer or cancel other planned deliveries.

All told, AA's November capacity will be down 9 percent versus the current summer schedule. "This more broadly represents a re-sizing of the airline to draw down some of the excess capacity we see in the marketplace," Carty said.

As a result of the capacity reduction, fleet simplification and hub alterations, the carrier by March will cut an additional 7,000 employees from its workforce. Considering initiatives announced today and previously announced cost-cutting efforts, AA expects to slash $1.1 billion from annual operating expenses.

"These are a combination of fundamental structural changes and tactical moves to re-position and re-size the airline in light of a continued sluggish economy and changes in consumer flying behaviors," Carty said. "We view change as an ongoing process at American as we continue to evaluate every aspect of our business."