Oil's Attendant Job Cuts Weigh at American

As flight attendant No. 17,702 at American Airlines (AMR - Cramer's Take - Stockpickr), Mary McAlee faces the very real possibility that she will be laid off next month. Because of her position at the bottom of the seniority list, McAlee has a clear view of the harsh realities of higher fuel costs on the airline industry.

To be sure, it is not just airline employees who are hurt by skyrocketing fuel costs. Investors have watched American shares plunge 65% this year. Executives are being forced to shrink the company they helped to build, and passengers must pay more as fares and fees climb.

As 2008 began, airlines did not anticipate such deep cutbacks. Although fuel costs were rising, industry leaders were suggesting that continued capacity discipline would see them through, and the Air Transport Association was anticipating a third consecutive year of profits.

Between 2001 and 2005, the six legacy carriers -- American, Continental (CAL - Cramer's Take - Stockpickr), Delta (DAL - Cramer's Take - Stockpickr), Northwest (NWA - Cramer's Take - Stockpickr), United (UAUA - Cramer's Take - Stockpickr) and US Airways (LCC - Cramer's Take - Stockpickr) -- shed $16 billion in annual operating costs, largely through bankruptcy. They cut 816 mainline jets from their fleets, a reduction of 23%. About 155,000 airline industry employees lost their jobs.

Those cuts, combined with a strong travel economy, led to industry profits in 2006 and 2007, following five consecutive losing years. But now, the industry's 2008 fuel bill is expected to reach $60 billion or more, up at least $20 billion from a year earlier.

American, the biggest airline, says it will cut about 8% of its workforce, an estimated 7,000 jobs, including 900 flight attendant jobs. McAlee, 50, is gone unless buyouts fill the quota.