eolesen
Veteran
- Jul 23, 2003
- 15,940
- 9,371
Dear Colleagues:
Today we outlined a bold plan to address the urgent need to restructure our company. This requires decisive action, difficult changes, and an unwavering commitment to our future success. As Tom discussed in his message earlier today, we are seeking $1.25 billion in permanent annual cost reductions from all employee groups.
Nothing about this process is easy, but the alternatives are harder still. The fact is that we’re losing money every day. And every employee will feel the effects of this effort to address our challenges, from the leadership level to the frontline.
A successful restructuring requires that we reduce employee costs by significantly more than what was discussed in Section 6 negotiations. Our goal then was to reach agreements that would create greater financial flexibility as we worked to compete more effectively and avoid Chapter 11. Unfortunately, we ran out of time.
In restructuring, the bar to success is now higher. After losing $10 billion over the last 10 years, and financing those losses with debt, we must now prove to our creditors and the court that we can implement significant cost reductions, remove barriers to flexibility, increase revenue and ultimately be a consistently profitable company. If we don’t demonstrate the necessary plan for success, we risk failure or the possibility that others may try to step in and convince the court their way is better.
This afternoon we met with each of the unions and shared proposed changes to our current agreements to achieve the necessary cost reductions. Every workgroup – including management – must reduce its total costs by 20 percent in order to achieve this goal.
Across all workgroups, we are proposing to maintain base pay rates to the greatest extent possible. In some cases, that will mean the savings will come from increased productivity. In others, it will rely on outsourcing. And in all cases, the changes will be focused on creating a successful business.
One of the most difficult outcomes of this process is our need to reduce the size of our workforce to better align with our streamlined and more efficient operations. The business plan and our proposals outline a total reduction of approximately 13,000 employees across our company. Our proposals are consistent with the approach of other airlines and are fundamentally necessary for our long-term success. These include:
Outsourcing a portion of our aircraft maintenance work and seek the closure of AFW
Outsourcing some airport fleet service clerk work
Removing major structural barriers to operational flexibility, including restrictions on code sharing and regional flying
Introducing work rule changes to increase productivity
We also are putting in place changes to certain benefit programs for all employees that are necessary to reach our savings target and move us in line with other airlines and large companies. Among these, we will:
Seek court approval to terminate our defined benefit pension plans. If terminated, the plans would be replaced with a 401(k) plan with a company match.
Seek to discontinue company-subsidized retiree medical coverage for current employees, but will offer access to these plans if employees choose to pay for them.
Move to implement common active medical plans and contribution structures across all employee groups.
We’ll meet with representatives from the APA, APFA and TWU to negotiate the necessary changes through a formal process controlled by the court. We hope to reach consensual agreements with the unions in the next few weeks. Only if we can’t reach agreement would we ask the court to authorize our proposed changes that we believe are fair, equitable and necessary to a successful restructuring.
Specific changes affecting independent employees – Agents, Representatives, Planners, Management and Support Staff – will be influenced by employee feedback offered in conjunction with restructuring forums held throughout the system in recent weeks. That process is ongoing and we expect to complete those plans in the coming weeks. Additionally, to achieve the 20 percent reduction in management costs, we will launch a redesign of our management and support staff structure that will result, in part, in a 15 percent reduction of management positions. Our goal is to create a leaner leadership culture of accountability and high performance.
As part of this process, we also intend to provide all employee groups annual pay increases and a new, first-dollar profit sharing plan that matches the most generous plans in the industry – provisions we propose as part of a reaching consensual agreements with the unions. Just as our competitors that went through restructuring are now earning consistent profits, we believe there is a real opportunity for American’s employees to benefit when we emerge a stronger, more competitive company.
As part of our commitment to providing employees current information and facts on the restructuring process, we’ve created a new website, www.RestructuringAMR.com. Information will also be available later today on the Restructuring Resource Center on Jetnet. I hope you’ll visit these sites often as we move forward.
Today’s announcements are difficult news for our company and our people. But we must face this challenge head on and look to the future. We have done everything we can up to this point to cut costs and raise revenues with minimal impact on employees. And, as difficult as our proposals are for everyone, we believe that our plan is the best approach to making the changes necessary to a successful restructuring while saving as many good jobs as possible and acting in the long-term best interest of employees and all other stakeholders.
Sincerely,
Jeff Brundage
Today we outlined a bold plan to address the urgent need to restructure our company. This requires decisive action, difficult changes, and an unwavering commitment to our future success. As Tom discussed in his message earlier today, we are seeking $1.25 billion in permanent annual cost reductions from all employee groups.
Nothing about this process is easy, but the alternatives are harder still. The fact is that we’re losing money every day. And every employee will feel the effects of this effort to address our challenges, from the leadership level to the frontline.
A successful restructuring requires that we reduce employee costs by significantly more than what was discussed in Section 6 negotiations. Our goal then was to reach agreements that would create greater financial flexibility as we worked to compete more effectively and avoid Chapter 11. Unfortunately, we ran out of time.
In restructuring, the bar to success is now higher. After losing $10 billion over the last 10 years, and financing those losses with debt, we must now prove to our creditors and the court that we can implement significant cost reductions, remove barriers to flexibility, increase revenue and ultimately be a consistently profitable company. If we don’t demonstrate the necessary plan for success, we risk failure or the possibility that others may try to step in and convince the court their way is better.
This afternoon we met with each of the unions and shared proposed changes to our current agreements to achieve the necessary cost reductions. Every workgroup – including management – must reduce its total costs by 20 percent in order to achieve this goal.
Across all workgroups, we are proposing to maintain base pay rates to the greatest extent possible. In some cases, that will mean the savings will come from increased productivity. In others, it will rely on outsourcing. And in all cases, the changes will be focused on creating a successful business.
One of the most difficult outcomes of this process is our need to reduce the size of our workforce to better align with our streamlined and more efficient operations. The business plan and our proposals outline a total reduction of approximately 13,000 employees across our company. Our proposals are consistent with the approach of other airlines and are fundamentally necessary for our long-term success. These include:
Outsourcing a portion of our aircraft maintenance work and seek the closure of AFW
Outsourcing some airport fleet service clerk work
Removing major structural barriers to operational flexibility, including restrictions on code sharing and regional flying
Introducing work rule changes to increase productivity
We also are putting in place changes to certain benefit programs for all employees that are necessary to reach our savings target and move us in line with other airlines and large companies. Among these, we will:
Seek court approval to terminate our defined benefit pension plans. If terminated, the plans would be replaced with a 401(k) plan with a company match.
Seek to discontinue company-subsidized retiree medical coverage for current employees, but will offer access to these plans if employees choose to pay for them.
Move to implement common active medical plans and contribution structures across all employee groups.
We’ll meet with representatives from the APA, APFA and TWU to negotiate the necessary changes through a formal process controlled by the court. We hope to reach consensual agreements with the unions in the next few weeks. Only if we can’t reach agreement would we ask the court to authorize our proposed changes that we believe are fair, equitable and necessary to a successful restructuring.
Specific changes affecting independent employees – Agents, Representatives, Planners, Management and Support Staff – will be influenced by employee feedback offered in conjunction with restructuring forums held throughout the system in recent weeks. That process is ongoing and we expect to complete those plans in the coming weeks. Additionally, to achieve the 20 percent reduction in management costs, we will launch a redesign of our management and support staff structure that will result, in part, in a 15 percent reduction of management positions. Our goal is to create a leaner leadership culture of accountability and high performance.
As part of this process, we also intend to provide all employee groups annual pay increases and a new, first-dollar profit sharing plan that matches the most generous plans in the industry – provisions we propose as part of a reaching consensual agreements with the unions. Just as our competitors that went through restructuring are now earning consistent profits, we believe there is a real opportunity for American’s employees to benefit when we emerge a stronger, more competitive company.
As part of our commitment to providing employees current information and facts on the restructuring process, we’ve created a new website, www.RestructuringAMR.com. Information will also be available later today on the Restructuring Resource Center on Jetnet. I hope you’ll visit these sites often as we move forward.
Today’s announcements are difficult news for our company and our people. But we must face this challenge head on and look to the future. We have done everything we can up to this point to cut costs and raise revenues with minimal impact on employees. And, as difficult as our proposals are for everyone, we believe that our plan is the best approach to making the changes necessary to a successful restructuring while saving as many good jobs as possible and acting in the long-term best interest of employees and all other stakeholders.
Sincerely,
Jeff Brundage
