American Airlines follows capacity cuts with job cuts
Back in May, American Airlines announced that it would cut its capacity by 3-4 percent this year, with domestic capacity cuts of approximately 8 percent.
Today, the company announced that it will now cut over 7,000 jobs by the end of 2008, representing an 8 percent reduction in the size of their global workforce.
American, and the entire airline industry, has suffered greatly due to the ever-climbing price of fuel. The airlines have few options to compensate for expensive fuel: increase revenue or decrease other costs. Aside from layoffs, other cost cutting opportunities may be difficult to unearth and/or provide little immediate relief.
So, the airlines have taken the easy route, no pun intended ;)
Many carriers have resorted to a variety of new fees to combat the cost of fuel. American, United and US Airways now charge a $15 fee for the first checked bag. US Airways announced a fee to redeem mileage awards and is the first to begin charging $2 for soft drinks.
As long as oil prices show no sign of retreat, neither will the fees.
Tags: airlines, american airlines, fees, job cutsRelated Stories
POSTED IN: Commodities, Corporate, Economy, Market, News, Uncategorized
8 opinions for American Airlines follows capacity cuts with job cuts
Tyrone Edwards
Jul 3, 2008 at 3:04 pm
Oil prices have raised to $145.29 per barrel today as the holiday weekend approaches. With record highs in oil prices this year the airline industry has found innovative ways to cut cost and increase fees to compensate for the high oil prices. However according to this article even fees and cost cutting methods are unable to compensate and American Airlines has been forced to layoff 7,000 employees by the end of 2008. Unemployment is currently around 5.5% and increasing, which resembles the Reagan recession which saw unemployment levels around 5.5% and as high as 9%.
John McMillan
Jul 6, 2008 at 4:03 pm
Airlines can hope that the government will increase taxes on gasoline for passenger cars. As stated at , “the biggest consumers of petroleum in the US are personal cars (http://www.airlinebulletin.com/ “What to do About this Oil Mess…”).” The recent rise in fuel prices have reduced consumption. Increasing the taxes on fuel will reduce consumption further. They could also create tax incentives to mass transit users. If fuel consumption is reduce this should reduce the price as well.
Levi McDonough
Jul 9, 2008 at 8:31 pm
I believe that the rise in oil prices will definately force airlines to evaluate their business plans. I think the introduction of fees like $2 for soft drinks is a much better alternative to charging for checking bags, or mass layoffs. Southwest has a very good business plan, with their no frills style of air travel. However, drinks and food is available, but you have to pay for it. I believe this is a much better cost cutting alternative.
Justin Bonifacino
Jul 10, 2008 at 9:26 pm
It’s a shame that things have had to come to this. It’s only a matter of time before job cuts and unemployment hits home for just about everyone if things continue to go the way they are. I think there is too much corruption out there in the world. I believe there is alternative means that will lessen oil consumption primarily in the automobile industry which should cut down on the demand and lower prices for everyone. For instance theres patent pending invention a mid west auto mechanic developed to get 110 miles per gallon of e85 ethanol in a v8 vehicle that doesnt cut down it’s performance. If the science exists to get 110 mpg out of a vehicle that has 8 cylinders how come they struggle to get 50 mpg out of electric hybrids that have 4 cylinders? I have also researched that anytime developments like this occur oil companys buy out the patents so they wont hurt their monopolistic sales… the oil company is controlling the world and this isnt by any means the last of the job cuts or surcharge/fees.
Chris Hayes
Jul 11, 2008 at 2:50 pm
I have noticed with the increase of gas prices airline companies are looking at other methods for revenue. They already charge for checking your bag and food/drinks on the airline. One solution is decrease the price of tickets which would bring more customers. I know an airline in Europe doesn’t charge for tickets and makes their money in other ways. Some of the ways are charging for checking your bag and another is charging for pay per events like movies on the airplane.
Cliff Seals
Jul 13, 2008 at 9:20 am
Airlines are doing every cut cost possible. There are even stories of airlines removing magazine racks to reduce the weight of the plane. What I do not understand is they could make a lot of money without annoying people by just raising the price of a ticket. When people are hassled by all these new costs, going hand in hand with less luxury flying, they do not react well.
Rob Curl
Jul 13, 2008 at 11:03 am
Seriously, why do airlines have to make air travel so incredibly annoying for passengers? Currently Southwest seems to be the only airline with clear heads running things. Sure their no frills business model is great, but their forethought into fuel hedging strategies is almost just common sense for an industry that’s so sensitive to the price of fuel. Yet, it seems every other company is cutting jobs, creating fees, and reporting losses. No one can deny that the industry is completely bloody from battling fuel prices, but, as Southwest has shown, if you put some armor on its possible to just leave with some bruises.
Sean Sweeney
Jul 13, 2008 at 4:24 pm
The strugles of American are felt industry wide, and the people who are really suffering are the employees. My dad is an airline pilot for US Airways, and since 2001 it has been hell. Between job, benifit, and salary cuts airline employees lost a lot. In 2002 and 2004 US Airways restructured under chapter 11 bankrupcy protection, which allowed them to cut salaries by almost 25%. They also got off the hook for a significant portion of the employee pension plan. Not to mention these things happened to the lucky few who werent furlough or laid off completely.
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