And now, to add insult to injury, here's another helping of corporate manure...
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SECOND SPECIAL JETWIRE FOR TUESDAY, FEB. 4, 2003
PLEASE POST ON ALL BULLETIN BOARDS
Hello, everyone, and thanks for calling. This is Don Carty with the hotline for Feb. 4.
As you know, in early 2001 - even before the Sept. 11 attacks - we began working on ways to solve what we saw as very serious financial problems on the horizon. Since Sept. 11, we aggressively have been working together to implement short- and long-term fixes to our business and to cut our costs dramatically through our restructuring plan. Those efforts paid off in the reduction of an unprecedented two billion dollars in permanent, annual operating costs from our company.
As a result of our plan, we are today operating our hubs differently and more efficiently, using automation more extensively, flying our schedule differently, altering our on-board product and changing things that used to be untouchable in a business like ours. We are also trying very hard to fix our revenue problems, although that, as you know, is a more difficult problem in today's intense low-fare environment.
Through all of this change, our employees have performed magnificently. We have continued to run a very good operation through enormous turmoil. I am incredibly proud of the individual and team efforts that led American to finish just two-tenths of a point out of first place in the DOT's year-end rankings for on-time dependability. Congratulations to everyone involved in the operation for this performance. I would have expected no less, and you did not disappoint.
As we have discussed before, our challenge now is to get our cost structure in a position where we can compete successfully with the low-cost carriers, including those who have lowered their costs through bankruptcy. We need to reduce at least $4 billion in permanent, annual operating costs - and with $2 billion already identified, we are at least $2 billion short of that mark. When we achieve these savings, we believe our long-term plan will allow American to be more competitive in the new and changing aviation marketplace.
And, as we have also discussed before, our strategic plan is really quite clear. We will continue to play to our strengths - our large network, a quality product, customer loyalty and dedicated people - but with costs that allow us to compete. There are no "silver bullets," no gimmicks. We already know what works: the largest domestic and international network going, with great people providing great service. That is our legacy. The challenge today is to do it with a cost structure that can sustain us for the long-term.
To help us reach our goal, we have been actively engaged with union leaders for the past several weeks, opening our books to them and explaining our situation in considerable detail. The unions' financial advisors have had the opportunity to confirm what we all inherently know: Our cost structure is simply not sustainable, we are losing millions of dollars every day, and we have borrowed money just to meet payroll and keep the operation running. We can't sustain that kind of spending much longer. It is abundantly clear that American's future cannot be assured until ways are found to significantly lower our labor and other costs.
So today, as a last resort, we are taking the difficult step of asking all of our employees to participate in American's recovery by working with us to deliver $1.8 billion in annual, permanent, steady-state savings this year. And we didn't simply toss together a set of numbers. We looked carefully at costs at our competitors, including mainline carriers. More importantly, we looked carefully at these savings in the context of the long-term future of American.
Importantly, as we work toward our recovery, you have our commitment that all employees will share in the opportunities any successful restructuring might provide.
There are savings targets for each work group, and they are broken out in detail in our news release, which you can find on Jetnet and in Jetwire. We'll be working with the unions in meetings later this week to help them understand how we reached each group's share of the total savings we need and to begin finding ways to reach these cost reduction goals.
Rest assured, management will continue to do its part. We are asking for additional cost reductions from management and support staff - on top of two years of frozen management wages and a 22 percent reduction in headcount - because we believe this must be a shared sacrifice across the board.
And, of course, we will approach other important stakeholders in the company as well - aircraft lessors, lenders and suppliers - to restructure our contracts and other agreements to achieve even greater cost savings.
Regrettably, there will be an impact on job totals as well. Today, unfortunately, we announced that we will be closing our Norfolk and Las Vegas reservations offices, meaning we've lost another 910 customer service jobs at American. That's on top of the additional 750 flight attendant layoffs we had to send WARN notices about last week.
Nothing gives me more pain and heartache than seeing the loss of jobs that has happened at American - and all across our industry - in the past two years. If we could restructure our company without that level of sacrifice, we would do so - but there is no way we can survive and be competitive for the long-haul without learning to operate in an environment with fewer people. It is by securing our company's future that we are able to protect and preserve tens of thousands of other jobs - hopefully for many, many years to come.
Now, it's only natural to resist change, to question why it's necessary, to wonder about the fairness of it all, and to want to protect those things that are yours.
But like an illness in the family, there is simply no way to keep things as they were, no way to turn back the clock. Ultimately, the only option is to do the things necessary to get the patient well again. None of it is easy - some of it may not seem fair - but all of it is essential and will be worth it if we can protect and preserve American Airlines for another 77 years.
We still have the opportunity to save our company - to protect the lives and careers that are entwined with the legacy of American Airlines. And I remain hopeful and confident that the people of this company will make the right decisions as we wrestle with these latest cost challenges and will do the right things to save our company.
