AMR Corp. Accrues $1.27B in Costs
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American Airlines parent AMR Corp. will record costs of $1.27 billion to reduce the value of parked aircraft and pay severance to workers who lose their jobs as it cuts flights in response to record fuel costs.
AMR expects to eliminate about 8% of its total workforce, or 6,840 jobs, when it reduces capacity in the fourth quarter, the company told workers at American and American Eagle in a message yesterday. The job cuts would be the most among those announced this year by American carriers.
American, the world’s largest airline, and other American carriers are cutting flights and jobs as a near doubling of fuel prices over the past year erodes profits. Before yesterday, the biggest airlines had said they would cut 11,850 jobs and park 431 aircraft later this year.
“Everybody is going to be taking these charges to adjust the accounting,” an analyst with Calyon Securities in New York, Ray Neidl, said in an interview. “It’s going to be big.”
AMR will have a non-cash charge of about $1.2 billion in the second quarter to reduce the value of Boeing Co. MD-80s and Embraer 135 regional jets, the company said in an American regulatory filing yesterday. Employee-related costs will be $70 million.
