Bloomberg News

AMR Says $1 Billion Revenue Goal Hinges on Concessions by Unions

February 24, 2012

Feb. 21 (Bloomberg) -- American Airlines’ goal to find $1 billion in new annual revenue after leaving bankruptcy pivots on being able to win $2 billion in labor and other cost reductions, Chief Commercial Officer Virasb Vahidi said.

The AMR Corp. unit needs contract changes that would allow it to fly a broader range of planes and use airline partners for more domestic flights, Vahidi said in an interview today. Fort Worth, Texas-based American also wants to cut 13,000 jobs and end pensions after four annual losses for AMR.

American is seeking $1.25 billion in labor savings and can ask the bankruptcy court to impose new contract terms if talks with unions fail. Chief Executive Officer Tom Horton says paring costs to match those of U.S. rivals would help fund his strategy of updating planes and products to win more premium customers.

“A successful restructuring gives us the foundation to achieve the incremental revenue,” Vahidi said.

Proposed pilot contract changes would help American on the U.S. West Coast by widening a marketing accord with Seattle- based Alaska Air Group Inc., Vahidi said. A so-called code-share agreement with JetBlue Airways Corp. would let American collect more domestic fliers at its overseas hub at New York’s Kennedy airport, he said.

American is trying to win business customers from larger competitors United Continental Holdings Inc. and Delta Air Lines Inc. by expanding international routes and investing to upgrade service, including buying more fuel-efficient new planes. AMR filed for bankruptcy on Nov. 29.

Wide-body jets such as Boeing Co.’s 777-300 with more amenities such as improved lie-flat business-class seats will help attract a larger share of premium passengers, Vahidi said.

“While the number of these customers is small, they provide a disproportionate amount of revenue and are critical to our success,” he said in a letter to employees.

--Editors: Ed Dufner, Kevin Miller

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To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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