American's top labor-relations executive told employees at a closed-door meeting about the expected job cuts, according to a source familiar with the situation.
American and parent AMR Corp. filed for bankruptcy protection back in November. The company has about 88,000 workers, including those at short-haul affiliate American Eagle.
CEO Thomas W. Horton said the company hopes to return to profitability by cutting spending by more than $2 billion per year and raising revenue by $1 billion per year.
"We are going to use the restructuring process to make the necessary changes to meet our challenges head-on and capitalize fully on the solid foundation we've put in place," Horton said in a letter to employees.
Horton said cost-cutting moves will include restructuring debt and aircraft leases, grounding older planes, and changing labor contracts. Jeff Brundage, AMR senior vice president for human resources, gave employees the estimate of job cuts, according to an official who asked not to be identified because the comment was made in a closed meeting.
If American and its three unions can't agree on labor cuts, the company could ask a bankruptcy judge in New York to impose changes on workers. But federal law requires the company to make a good-faith effort to negotiate agreements with labor first.
Employees have braced for bad news for weeks. Horton said in December that the company would emerge from bankruptcy with fewer workers.
"I expect dismay and outrage from our membership as details of the proposal are made public," said Laura Glading, president of the flight attendants' union.
More details about job cuts and the fate of AMR's pension plans are expected to be released later Wednesday, when company officials are scheduled to meet separately with the Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union.
The U.S. Pension Benefit Guaranty Corp. has been warning AMR for weeks that it will oppose an effort to end the pension plans, unless the company proves it can't survive any other way. If AMR terminates the plans, it will dump obligations for paying benefits on the PBGC.
Besides spending cuts, Horton said Wednesday that the company plans to ground older planes and go ahead with orders to buy hundreds of new aircraft. That would cut fuel use — high fuel costs have been a major drag on AMR and other airline companies. The bankruptcy judge hasn't approved those new orders, but he has allowed the company to take delivery of some new jets.
Horton said that as part of an effort to increase revenue, American will increase flights in New York, Los Angeles, Chicago, Dallas and Miami by 20 percent over the next five years.
AMR lost $884 million in the first nine months of 2011, and on Tuesday it disclosed a $904 million loss for December alone. It has lost more than $11 billion since 2001.
AMR is the latest of several large U.S. airlines to go through bankruptcy in an effort to reduce costs and debt — United, Delta and US Airways in the past decade, and Continental — now part of United — in the 1990s.
