Fighting bankruptcy, American Airlines struggles to hit cost reduction goalsAs American Airlines battles insolvency, the airline is struggling to carry out cost reduction initiatives, according to reports.

AMR, the parent company of American Airlines, filed for bankruptcy protection late last year, the latest of the nation's major airlines to fall victim to surging fuel prices and an uneven economic recovery. Since the airline industry was deregulated in the late 1970s, carriers have fought to improve profitability, but their efforts have been hindered by increased competition and slim operating margins.

American Airlines, one of the nation's most iconic carriers, is endeavoring to avoid the fate of others within the sector, but company executives are facing mounting challenges as they seek to implement business cost reduction plans, NPR reports. The carrier asked a federal bankruptcy judge in New York City this week to allow it to cut its workforce by more than 13,000, a move that would help it bolster earnings.

However, the carrier's unions have strongly criticized American Airline's efforts, and are ratcheting up their opposition as officials weight the cost reduction measure. For its part, American Airlines said trimming its payroll by such a figure would help lower its overall costs for years. If the judge ultimately approves the company's petition, it could help increase the carrier's competitiveness, executives say.

"The fact is that our labor costs are the highest in the industry," according to Bruce Hicks, a spokesperson for American Airlines. "While other airlines have gone through the same restructuring process over the last 10 years and are all sustainably profitable now, we continue to be the only major airline losing money. We've lost $10 billion in the last 10 years."

The airline's unions are vehemently opposing the job cuts, though, arguing American Airlines' failure to improve its financial standing is the result of poor management, not an inflated payroll. In 2003, the company's pilots, mechanics and flight attendants returned more than $1.8 billion in wages and profits in a move aimed at preventing layoffs. However, union officials expressed outrage after the carrier's executives took home hefty bonuses the same year.

Moreover, American Airlines' unions also noted that Southwest Airlines is the most unionized carrier in the U.S. Unlike American, however, Southwest has managed to continually post gains in profitability over the better part of the past decade. American Airlines executives, however, contend that there are major differences between the two carriers that are affecting the divergent fiscal results.

"Southwest has a number of great advantages, particularly on their work rules and productivity side," Hicks told the news provider. "As well as a single fleet type. They're a terrific airline with great results, but that's not the contracts that we have."

Now, U.S. Airways has complicated the debate, as the carrier has increasingly expressed an interest in acquiring American, The New York Times reports. U.S. Airways is aggressively courting American's unions. Company chief executive Doug Parker recently laid out to American's unionized employees where they could expect in terms of benefits and salary should the two carriers merge.

U.S. Airways is continuing to drudge up support for a potential merger, and Parker recently contended combining the two companies would help bolster earnings over the long-term, Bloomberg reports.

"We are eager to demonstrate to the creditors of AMR that our plan would result in higher returns than the AMR stand-alone strategy," Parker said. "We're highly confident the value created by our two companies is very large relative to the value of a stand-alone AMR."

Still, formal meetings between the two carriers have not been held. While a merger could materialize over the next few months, some industry analysts questioned whether executives at both firms would be able to orchestrate a deal, especially as American's labor dispute continues to play out.

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