AMR, parent company of American Airlines, said the AMR stock fund, one of 27 funds offered through the 401(k) plan, was created two years ago, according to news reports. Fewer than 10,000 of AMR’s 113,000 employees participated in the AMR stock fund, and the company has prohibited employees from investing more than 10% of their savings in AMR stock.
Andrea Radar, an AMR spokeswoman, said US Trust decided to scrap AMR shares as an investment option “given the volatility of the stock, everything that’s going on in the industry and everything that’s going on in the company.” US Trust is still evaluating whether to liquidate the $13 million of AMR stock it currently manages, Radar said.
AMR also announced that it will record an approximate $1.1 billion charge to equity at year end. This minimum pension liability will reflect the amount that the company’s pension plans’ accumulated benefit obligations at December 31, 2002 exceeded the plans’ assets at that date, according to the company.
Partnering With Labor in Cost Cutting
Also this week, American asked i ts labor unions to agree to permanently slash pay and benefits and change work rules to lower costs by 25% “as a last resort” to help the world’s largest airline recover financially. AMR, which has suffered losses totaling $5.6 billion over the past two years, said it needs $1.8 billion in labor-cost savings, with $1.62 billion of that coming from pilots, mechanics and flight attendants, according to news reports.
American says it has already slashed $2 billion in annual cuts from operational changes such as grounding planes, laying off workers, paring food service and smoothing out hub-airport schedules. Also AMR said it would close two of its 10 domestic reservations offices, eliminating 910 jobs in Norfolk, Virginia and Las Vegas.
But the Fort Worth, Texas, company says it still needs another $2 billion or so in cuts in order to compete both with low-cost carriers and with competitors now undergoing bankruptcy restructuring.
Union leaders struck a cooperative tone and said they would study the company request. American didn’t set a deadline for negotiations, and union officials described the meeting Tuesday as “cordial,” with the company offering unions leeway on how to achieve savings through various pay and productivity changes.
US airlines have struggled mightily over the past two years with a business-travel recession, terrorist attacks, war jitters and high fuel prices. Rapidly growing low-fare carriers have created widespread alternatives to old-line, high-cost carriers, and the Internet has made cheap tickets far more accessible.
The nine major US carriers tallied a staggering net loss of $11.2 billion last year. They collectively had revenue of $79.6 billion — nearly $17 billion less than the major carriers’ 2000 revenue of $96.4 billion.