American flying to uncertain future

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February 2, 2012, 7:51 pm
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(NECN: Peter Howe, Boston) - Hours after bankrupt American Airlines dropped the stunning announcement it will lay off 13,000 workers as it tries to slash its cost 20 percent, many passengers here were worried about American’s future – including Tony Gallo, who flies 100,000 miles a year as a marketing consultant.

“Laying off 13,000 people, that’s bound to make service go down, and that’s not what I want,’’ Gallo said. “I hope for service to get better, and I think that’s what we all want for all the airlines.’’

Darrah Montgomery of Foxborough, Mass., who flies often to Miami on American to visit with family, said he worries about more damage to the morale of American flight attendants, gate agents, and pilots. “The last time they cut workers’ pay at American Airlines, they gave that same amount of money to all the administrators – it’s a very unfair practice,’’ Montgomery said.

American’s already shrunken drastically at Logan, falling from 20 percent of passengers and over 20 destinations served nonstop from Logan in the early 2000s to now barely 10 percent of passengers, and less than half as many nonstop destinations.
While right now may be a terrible time to be a worker at American, Boston University management professor and airline expert Allen Michel said it may actually be an increasingly good time to be a passenger on American, especially if you are looking for better deals on tickets.

“Surprisingly, bankruptcy is not always bad, and certainly not bad for an airline,’’ Michel said. Since the late 1990s, every major “legacy” airline – Continental, Delta, Northwest, United, and US Airways – has been through Chapter 11 bankruptcy reorganization. “When you take a look at all these other airlines, they’ve all had an opportunity to chop, chop, chop their costs. American hasn’t had that opportunity yet.’’

American CEO Thomas W. Horton said Wednesday that the company hopes to return to profitability by cutting $2 billion annually in spending while increasing revenue 20 percent by 2017. From a staff of 88,000 people, including about 1,300 based in Boston, American said it would cut 4,600 maintenance workers, 4,200 baggage handlers, 2,300 flight attendants, 1,400 management and support employees and 400 pilots. "We are going to use the restructuring process to make the necessary changes to meet our challenges head-on and capitalize fully on the solid foundation we've put in place," Horton said in a letter to employees made available to the press. But unions denounced the cutbacks as wildly excessive and said they will fight them in bankruptcy court.

American’s strategy calls for dropping virtually all flights that don’t head in or out of one of five hubs: Kennedy Airport in New York, Chicago’s O’Hare, Los Angeles International, Miami International, and Dallas-Fort Worth, and focusing on growing traffic and becoming more cost competitive on flights through those airports.

“For them, it makes a lot of sense,’’ airline expert Emily Fisher of Boston travel website said. “It might be a little frustrating for some of the smaller airports, and people might not have as many options for getting in and out.’’ But as a result of cutting costs through bankruptcy, Fisher said, “They’re not going to have as many built-in costs, so their airfare could come down, so that could be an opportunity for people that are traveling and people that are looking for deals, and where they do continue to fly, prices may become more competitive.”

With videographer Nik Saragosa

Tags: United, Peter Howe, bankruptcy, American Airlines, Foxborough, Delta, Continental, Logan International Airport, US Airways, tony gallo, Northwest, Darrah Montgomery, thomas w horton, kennedy airport, chicago o'hare, los angeles international, miami international, dallas-fort worth,, emily fisher
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