AA eyes maintenance bases
The carrier looks at its shop operations in Tulsa, Fort Worth and Kansas
City, Mo.
By Staff and Wire Reports
Tulsa World
3/11/2009

American Airlines is considering the futures of its three main maintenance
bases as it seeks to pare operating costs by an additional $130 million
this year.

The Fort Worth-based carrier, a unit of AMR Corp., is reassessing its needs
as it pulls 100 aircraft from its fleet.

American has major maintenance bases in its home city, with 2,200 workers;
in Tulsa, with 7,000; and in Kansas City, Mo., with 650.

"We'll be thinking about right-sizing all of our assets," Chief Financial
Officer Thomas Horton said Tuesday at a JPMorgan Chase & Co. transportation
conference in New York. "With our fleet the size it is today, we may not
need three maintenance bases."

Horton's comments in a question-and-answer session with analysts came after
American said in November that it was eliminating about 460 jobs at the
Kansas City base, the smallest of the three. The reductions were part of
about 6,840 positions American said it would cut as it scaled back capacity
in 2008 and this year.

Horton first mentioned that American was considering maintenance base
cutbacks during a second-quarter earnings call with analysts last July.

After American announced it was parking its oldest and least fuel-efficient
aircraft in response to a surge in fuel prices last summer, Horton said the
airline, as a smaller company, might need to resize its maintenance
footprint.

Horton's statement was the first time a company executive confirmed
base-closing rumors that have circulated among the ranks of American
aircraft mechanics since the company narrowly averted a bankruptcy filing
in 2003.

On Tuesday, Horton was asked how long American could remove "incremental
costs" from its business without doing something "way more radical."

"Well, your point is a real challenge, not just for us but for the whole
industry, which is as you pull down capacity in a high fixed-cost business,
it's hard to get the cost out commensurate," Horton said. "And so it's
created unit cost pressure around the industry. I think had we not pulled
the handle hard on capacity, we'd be looking at a big mess in the industry
right now. Right now, we're looking at a medium-size mess.

"So I'm glad we did it. I'm glad we got in front of it. We've gotten as
much cost as we could in the short term. In the longer term, our motto is
'all costs are variable.' It's just a question of what the time horizon is.
And so we'll be thinking about right-sizing all our assets.

"We've got, for example, three maintenance bases today. Well, with our
fleet the size it is today, we may not need three maintenance bases. So
there is the potential for a step change in costs there.

"One of the unit cost challenges has been as everybody has pulled down
flying in the industry, the airport assets and the infrastructure don't
shrink. They just get spread over fewer airplanes. So, that has tended to
drive unit costs for things like facility rent and landing fees. But over
time, if the system really does remain smaller, you could see ways to
rationalize some of that as well."

Horton also reiterated American's plan, first announced in January, to trim
capacity in its mainline jet operations more than 6.5 percent this year,
including drops of 9 percent in domestic seating and 2.5 percent on
international flights.

American said last week that traffic, in miles flown by paying passengers,
fell 12.6 percent in the first two months of the year and that the average
rate of seats filled on its planes dropped 2.9 points from a year earlier
to 73.8 percent.