More job cuts are in the works for air carriers as the recession-induced slump in demand for travel and rising fuel prices force major players, including Delta Air Lines and American Airlines, to further reduce the number of unprofitable flights they conduct. With the traffic slump continuing, it was only yesterday that FTN Equity Capital Markets analyst Michael Derchin said he expects a loss at AMR, American's parent company. (See breaking news below)

What is particularly concerning is the dramatic and sustained drop in the international traffic carriers were counting on to help them. As in the domestic sector, they all began hefty international expansions in the last few years, repeating the overcapacity they had stateside. Now, they are targeting more international cuts. The route terminations come on top of U.S. capacity cuts over the past year aimed at offsetting the soaring fuel prices of last summer and the subsequent onset of the economic downturn.

Delta will scale back its foreign routes by 15 percent by the end of the year. Combined with a six percent cut in domestic capacity, the major air carrier’s total capacity will be ten percent smaller than it was a year ago.

"Customer demand for international travel has fallen significantly," Delta President Ed Bastian and CEO Richard Anderson told employees in a memo. "Accordingly, we plan to reduce our international capacity by an additional 5 percent from what we announced in March, for a 15 percent total reduction in international capacity.

“We are all seeing negative impacts from the global recession and rising oil prices not only in the news, but also in our communities and personal finances. Clearly, the airline industry is not immune. Industry passenger revenues have declined nearly 20 percent in the first four months of the year compared to the same period in 2008. That trend is expected to continue in the near term.

“On top of this, cost pressures from rising jet fuel prices - up more than 20 percent since the start of the year - coupled with softer travel demand due to the spread of the H1N1 virus, have created a difficult business environment. These forces that are affecting the industry are creating significant headwinds for Delta,” the memo continued.

The Delta executives told employees that the capacity cuts would require the airline to look at reducing the number of employees, although they said they hoped to avoid involuntary furloughs.

American will reduce mainline seating capacity by 7.5 percent in 2009 versus 2008, compared to previous expectations for a 6.5 percent year-over-year decline. These additional reductions represent a decline in mainline capacity for the second half of the year of about two percentage points beyond the company's previous guidance given in April of a decline of approximately one percentage point in domestic capacity and approximately 3.5 percentage points in international capacity.

As a result, in the second half of 2009, American expects mainline domestic capacity to decline by approximately 7.5 percent and international capacity to decline by 5.5 percent compared to the second half of 2008. With these latest changes, the company's second-half 2009 mainline domestic and international capacity will be down approximately 15.5 percent and 5.5 percent, respectively, compared to the same period in 2007.

"The cuts we implemented last year have been helpful, and as a result we did not make major changes to our summer schedule," said Gerard Arpey, American's chair and chief executive. "But looking forward, we think an adjustment to our fall schedule is warranted. So we are making additional cuts beginning in late August."

In a message to American employees, Jeff Brundage, senior vice president of human resources, said the reduction in flying will lead to elimination of about 1,600 jobs, including 1,200 flight attendants. "These are trying times in the airline industry and our economy," stated Brundage, "The recession has taken a disproportionate toll on airlines, and there is no easy way to announce yet more bad news."

AMR Corp. Chairman and CEO Gerard Arpey, speaking at the Bank of America-Merrill Lynch 2009 Global Transportation Conference, said "we are not sugarcoating the magnitude of what we -- along with every other airline -- are up against today in this economic climate. “

Just released U.S. airline employment figures confirm the downward trend in available airline jobs.

Overall employment at scheduled U.S. passenger airlines fell 5.5 percent in April from a year earlier, according to the Department of Transportation's Bureau of Transportation Statistics, as carriers continue to shrink capacity. The decline marks the 10th consecutive decrease for the industry.

Some low-cost airlines bucked the broader trend with a 2.2 percent increase in full-time employees, the second-straight monthly increase.

But the old-line network airlines, which still account for two-thirds of airline employment, reported a 6.5 percent drop. And regional carriers posted a 7.4 percent decrease.

All the legacy air carriers decreased employment from April 2008 to this past April as did low-cost AirTran Airways and Frontier Airlines. Regional carriers American Eagle Airlines, SkyWest Airlines, ExpressJet Airlines, Comair, Atlantic Southeast Airlines, Pinnacle Airlines, Horizon Air, Mesa Airlines, Air Wisconsin Airlines, Republic Airlines, Colgan Airlines and PSA Airlines also reported reduced employment levels compared to last year.

The seven network carriers employed 265,200 full-time workers in April, 67.5 percent of the passenger airline total, while low-cost carriers employed 16.3 percent and regional carriers employed 14.5 percent.

American Airlines had the most employees in April among the network carriers, Southwest Airlines had the fattest employee roster among low-cost carriers, and American Eagle employed the most workers among the regional carriers.

The workforce rosters at the group of seven network carriers decreased 6.5 percent in April 2009 compared to April 2008, the eighth monthly decrease from the same month of the previous year after 16 consecutive months of year-over-year growth.

United Airlines posted the biggest employee decline among legacy carriers at 13 percent, followed by Delta Air Lines (7.4 percent), Alaska Airlines (5.8 percent), US Airways (5.4 percent), American (4.3 percent), Continental Airlines (4.0 percent) and Northwest Airlines (3.3 percent).

Low-cost carrier employment overall increased 2.2 percent in April from April 2008. Five low-cost carriers reported year-to-year job hikes: Virgin America (80.5 percent), Allegiant Airlines (11.2 percent), Southwest (4.1 percent), Spirit Airlines (3.9 percent) and JetBlue Airways (1.2 percent). Only AirTran and Frontier reported year-to-year workforce declines. Virgin America continues to expand from its 2007 launch.

The number of workers at the nation’s regional air carriers slipped 7.4 percent year over year in April 2009. ExpressJet’s employee roster thinned the most, at 29.2 percent and PSA’s workforce was down 15.1 percent. On the other hand, Compass Airlines, up 61.0 percent, and GoJet Airlines, up 33.1 percent, reported the largest payroll increases in the group. Overall the regional carrier workforce rose from 56,574 in April 2005 to 56,778 in April 2009, an increase of 0.4 percent.


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