Oil's Attendant Job Cuts Weigh at American - TheStreet

As flight attendant No. 17,702 at

American Airlines

(AMR)

, 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) - Get Report

,

Delta

(DAL) - Get Report

,

Northwest

(NWA)

,

United

(UAUA)

and

US Airways

(LCC)

-- 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.

An Eager Worker Grows Anxious

For 26 years, McAlee was a flight attendant at TWA and Ozark Airlines, which TWA acquired in 1986. American was seen as a savior when it acquired faltering TWA in 2001. But in downsizing, it furloughed all of the 3,000 TWA flight attendants who had migrated.

In 2007, American began recalling flight attendants. Eventually, about 810 TWA flights attendants returned. Also that year, embracing a never-say-die fight by ex-TWA flight attendant Roger Graham, Sen. Claire McCaskill (D-Mo.) mediated a deal extending the group's recall rights -- which were set to expire -- by two years.

"When I got recalled in March, there was never any question I would go back," McAlee says. "I loved the job. I grew up in the airline industry -- my dad was a pilot at Ozark, my husband was a pilot at Ozark, TWA and American, and I loved meeting the people."

After being laid off in 2003, McAlee drifted, attending one school to become Microsoft certified, then attending another to be certified as a paralegal, before ending up as a gas station cashier. The job had these advantages: It was just a mile and a half from her home in Defiance, Mo.; she enjoyed talking with customers, and flexible hours enabled her to spend more time with her family.

A problem, however, was that the gas station was beneath a Lambert Field flight path. "It was hard being on the ground and watching airplanes fly over and knowing that I wasn't on them," McAlee says.

On her return, she was posted at a Washington Reagan National crew base. McAlee joined seven other flight attendants, six from Ozark, to lease an apartment in Crystal City, Va., near the airport and the vacated former headquarters of US Airways.

"We decided we were all in our 50s, too old to suffer any more," she says. "We got a very nice apartment, with cable TV and Wi-Fi, and each of us paid $285 a month." She flies 75 hours a month and is paid about $45 hourly, or roughly $40,000 a year. In her best year at TWA, she earned $28,000.

Now, she hopes the buyout package will lure others. For senior flight attendants, the package offers $15,000 and various levels of insurance discounts and pass travel, says Frank Bastien, spokesman for the Association of Professional Flight Attendants.

"We're excited because it is something that didn't exist before, and there is a lot of interest," Bastien says. "We are hopeful we can whittle the number

of forced layoffs down to zero." He said most of the 900 flight attendants at the bottom of the list are from TWA.

Earlier this month, McAlee had CEO Gerard Arpey on her flight. "He was sincere and friendly; it was like talking to your neighbor," she says.

"He said he was sorry about the furloughs that were coming, but it was the price of oil dictating those decisions, and he would do everything he could to get me back sooner rather than later," she recalls. "And I said 'You can furlough me as many times as you want, but I will keep coming back until I need a walker.'"