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(Reuters) -- AMR Corp, the parent of bankrupt American Airlines, wants to slash 13,000 jobs and terminate employee pension plans as part of a cost-cutting strategy the carrier says is necessary to compete with rivals.
The cuts detailed by executives on Wednesday would be part of overall efforts to reduce operating expenses by more than $2 billion annually. Layoffs and other employee-related cuts would comprise more than half of the total savings.
"As you know, our major competitors have used the restructuring process to overhaul their companies and become more competitive in every aspect of their business," AMR Chief Executive Tom Horton said in a letter to employees.
"All work groups will have total costs reduced by 20 percent, including management," Horton said. "While the savings from each work group will be achieved somewhat differently, each will experience the same percentage reduction."
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AMR says it suffers from higher labor costs than its peers and filed for Chapter 11 protection from creditors in November in New York.
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Analysts and industry insiders believe the company's chief priority is to align labor costs, primarily from its heavily unionized work force, with rivals who cut thousands of jobs and pensions in bankruptcy several years ago.
"This is the same plan AMR was and has been pursuing long before the bankruptcy - with mostly the same senior management team - so it looks to us like the company still believes its main obstacle to success will be removed mostly by stunning cuts to labor," said Vicki Bryan senior high yield analyst at Gimme Credit, an independent research service on corporate bonds.
American said it lost $10 billion over the past decade and financed the red ink with debt. The period was marked mainly by industry downturns triggered by the 2001 hijack attacks, recession, and skyrocketing fuel prices.
Mergers and restructuring by United Airlines, Delta Air Lines, and US Airways between 2002 and 2010 have enabled them to now turn profits with oil prices near $100 per barrel. American, by contrast, lost $900 million in December, its first month in bankruptcy.
"The fact is, we're losing money every day," said Jeff Brundage, the airline's vice president of personnel.
American is restructuring debt and leases and planning to ground older planes as part of the cost-cutting strategy. But executives say that the labor component of that plan is the toughest to pull off. The company will try to negotiate cost changes with pilots, flight attendants and ground workers.
PROPOSED COST CUTS DETAILED
Horton said in a letter to employees that the carrier was aiming for $2 billion in total annual cost reductions, including $1.25 billion in employee-related expenses. American also plans to restructure debt and leases as well as ground older planes.
American also wants to generate $1 billion per year in new revenue through changes in its route network, fleet utilization and product improvements.
