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American AirlineAmerican Airlines asks Bankruptcy Judge to allow them to cancel labor contracts

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americanairFull text: American CEO's letter to workers

American Airlines today asked a bankruptcy judge to allow it to break its union contracts** and impose cost-cutting terms on workers. AA CEO Tom Horton explained the move today in a letter to employees. Read on for the full text of the letter:

Thomas W. Horton
Chairman and Chief Executive Officer

March 27, 2012

Dear American Team:

It has been four months since we began our journey to restore American to industry leadership, profitability and growth as America's Flag Carrier. The plan put forth is all about renewal and growth, but also includes necessary and difficult cost reduction. I would like to provide another update on the progress so far and next steps in the process.

FULL STORY:  American Airlines asks judge to break union contracts**

We have made very good progress during this time on restructuring the balance sheet and aircraft leases and by grounding some older inefficient aircraft in anticipation of new aircraft deliveries. We are improving the terms of supplier contracts and shedding surplus facilities. Starting at the top, we are streamlining the management structure to reduce cost and to remove barriers to fast, effective decision making. We have reduced the top leadership team in size by nearly 30% and we will continue through all levels of the organization. All of these steps together, when complete, will help reduce our costs by hundreds of millions of dollars as part of the plan to make our company profitable and successful again.

The next phase of the process will be the most challenging. This is the point at which we must achieve competitiveness and flexibility associated with all of our employee related costs. This will require many changes in the way we do business and, regrettably, job losses. But we must remember failure to make the right changes is failure and that puts all jobs at American at risk. We will continue to work for the best outcome for the greatest number of our people.

As you know, company and union negotiators have been working long hours to try to agree upon new labor contracts in the interest of making the company successful. This has gone on for some time since restructuring began and indeed years prior to that without conclusion. With losses mounting and oil prices rising, there is growing urgency to move more quickly. The bankruptcy law provides a process for the court to address such a situation as has been done in virtually all prior successful airline restructurings.



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Healthcare Costs grew a cumulative 138% between 1999 and 2010 and outpacing cumulative wage growth of 42% over the same period. Average employer costs for health insurance per employee hour rose from $1.60 to $3.35 during the 1999 to 2010 period. This almost 110% increase in average costs per hour was  much larger than the 39% increase in average employer payroll costs per hour for these workers  KFF


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