American Airlines cuts 7,000 jobs

American says it will remain the world's biggest airline

American Airlines, the world's biggest airline, is to cut 7,000 jobs, scrap orders for new planes and spread flights more evenly through the day.

We must get our costs down in order to compet

Donald Carty
American Airlines

The company hopes the cutbacks will save it more than $1.1bn (£700m) a year and said the changes were necessary if it was to become profitable again and have a long-term future.

"We must get our costs down in order to compete... and resize the airline in light of a continued sluggish economy and changes in consumer flying behaviour," said chief executive Donald Carty.

The announcement came two days after US Airways, the number six US carrier, filed for bankruptcy, triggering fresh speculation about the financial health of US airlines.

Airlines under pressure

Speculation has focused on United Airlines, which has applied for $1.8bn of US government aid to keep its planes in the air.

Since the 11 September suicide hijacking attacks on New York and Washington, the US government has bailed out the airline industry with loan guarantees and cover for higher insurance costs.

Between them, American Airlines and United Airlines, the country's second biggest carrier, laid off about 40,000 workers after 11 September.

American Airlines has been particularly hit by the shortage of business travellers since the attacks as they formed a major portion of its customer base, its chief executive said in April.

Analysts say the root of the industry's problems is that there are too many carriers. However, several big mergers have been blocked by regulators in recent years.

US regulators blocked a planned tie-up between US Airways and United, while attempts to bring together American Airlines and British Airways ran into trouble on both sides of the Atlantic.

Better use

American Airlines' latest restructuring contained bleak news for plane makers as well as the airline's staff.

The airline said it intends to reduce its fleet by retiring some planes early and deferring 35 new plane deliveries. It will "seek every opportunity to defer or cancel new deliveries" in future.

By making better use of existing planes and scrapping new deliveries, the airline hopes to save a further $1.3bn.

American Airlines has put $5bn of capital expenditure on hold since early 2001.

By spreading flights across the day rather than concentrating departures at peak hours, the airline believes it can offer the same number of flights whilst using fewer aircraft and paying for fewer airport gates.