NEW YORK (CNNfn) -

AMR Corp., the world's largest airline company and owner of both American Airlines and Trans World Airlines, became the latest carrier to announce deep staff reductions as it cut 20,000 employees Wednesday.

The carrier said that the reduction is due to the 20 percent cut in its schedule for the foreseeable future in the wake of last week's terrorist attacks. Two American Airline jets were hijacked and crashed into the World Trade Center and the Pentagon, resulting in a shutdown of the total U.S. air transportation system for two days and a sharp drop in new ticket purchases by the public.

AMR (AMR: unchanged at $20.00, Research, Estimates) said the cuts apply to American, TWA, and feeder airline unit American Eagle. The company had a total of 138,350 employees, meaning the cut represents a 14 percent reduction in staff.

"I have declared a state of emergency at American Airlines," said Donald Carty, CEO of AMR in a letter to employees. "This declaration is an official recognition that – hard as it may be to accept - our company's very survival depends on dramatic change to our operations, our schedule, and worst of all our staffing levels."

The company also made an Securities and Exchange Commission filing Wednesday that said unless Congress limits the company's liability in last Tuesday's attacks to the passengers on the planes rather than the destruction caused on the ground, its liability could exceed its resources. A limit on liability is one element of the $17.5 billion bailout package being sought in Congress by the airline industry.

The staff cuts, which were widely expected, were announced immediately after the market close. Shares of AMR closed Wednesday trading unchanged at $20. Airline stocks plunged in value Monday when trading resumed for the first time after the attack, then posted a slight rebound Tuesday, then were mostly slightly lower Wednesday.

AMR had already warned of wider than expected losses four days before the terrorist attack, citing the sharp decline in business travel. As a whole, the industry was on target for about $3 billion in losses this year before the attack, and it lost an estimated additional $1.4 billion last week alone due to the attack.

Before the attack the airline industry had been basically free of layoffs despite the mounting losses. But AMR's announcement made it the latest in a string of airline staff cut announcements, pushing the total of announced or reported cuts in the last five days to 70,000.

The number is likely to cross the 100,000 threshold in the coming days, airline executives told Congress in testimony about the proposed bailout package. They said the layoffs will not be averted even if the industry gets the help it is seeking.

The 70,000 layoff figure does not include several major airlines, including No. 3 Delta Air Lines (DAL: Research, Estimates) and No. 4 Northwest Airlines (NWAC: Research, Estimates). Both have said they will cut their schedule of flights by 20 percent, but that they are still weighing staffing levels. They have 135,000 employees between them, so a 20 percent cut in staff would result in an additional 27,000 job cuts. And Leo Mullin, CEO of Delta, told a congressional hearing Wednesday the airlines have no choice but to cut staff in line with reduction in capacity.

The 70,000 cuts to date also do not include cuts of 20,000-to-30,000 employees by the end of next year announced by aircraft maker Boeing Co. (BA: Research, Estimates) Wednesday, saying it was seeing a sharp drop in orders for new commercial aircraft.

-- PHO (owennos@bigfoot.com), September 19, 2001

Answers

I hope all these layoffs do not cripple Boeing to the point where they will be unable to make military aircraft.

-- Askmolly (askmolly@webvest.net), September 19, 2001.