American Airlines layoffs likely to ripple through area economy

BY KYLE ARNOLD World Staff Writer
Sunday, February 05, 2012
2/05/12 at 4:40 AM

See previous stories about American Airlines and its Tulsa operations.

Each weekday just before noon, Milad Al-khouri's Christy's BBQ restaurant fills up with hungry aerospace workers from nearby Spirit Aerosystems, NORDAM and American Airlines.

Now he wonders if change is on its way.

"At least 20 or 25 percent of everyone who comes in here is from American Airlines," Al-khouri said. "It's scary for us, too, because it puts our business in jeopardy."

The future of Al-khouri's business got a little hazier after Wednesday. That was the day American Airlines parent company AMR Corp. outlined plans to cut nearly $2 billion in costs and 13,000 employees, including at least 2,100 of the 7,200 positions at the 56-year-old Tulsa maintenance base.

Tulsa Metro Chamber president and CEO Mike Neal said American Airlines maintenance base employees are spread across the region and contribute important spending to retailers, car dealers, hospitals and other local businesses.

"They are well-paid positions, and they are involved in all aspects of the economy," Neal said. "These jobs are vitally important."

The average American Airlines maintenance worker makes about $65,892 in salary and wages, according to data collected by the Airline Data Project, a research group based at the Massachusetts Institute of Technology.

Those 2,100 potentially lost jobs at American Airlines support 400 additional jobs in the Tulsa area with a value of $22.4 million, chamber estimates suggest.

The layoffs could also impact real estate prices and home sales, particularly in neighboring cities with large concentrations of American Airlines employees, said Rodger Erker, president of the Greater Tulsa Association of Realtors.

"If people are losing their jobs, it puts the dent on the economy and that would affect the price of homes," Erker said. "We are hoping that anyone that is laid off won't have to move. But they may end up in lesser-paying jobs, and they might have troubles keeping their mortgage payment."

The average manufacturing worker in the Tulsa metro area earns about $39,400 a year, 38 percent less than the average American Airlines mechanic, according to December 2011 data from the Bureau of Labor Statistics.

In the past six months, area home sales have begun to rebound with growing confidence in the economy, Erker said. But a sudden layoff of 2,100 high-paying positions could slow down that recovery.

"It's supply and demand," he said. "When the supply is above demand, it affects sales and prices."

However, Erker said Tulsa and American Airlines avoided a worst-case scenario - a total maintenance base closure.

Ripple effect

Even with 22 years of experience, 58-year-old American Airlines mechanic Lou Howell doesn't know if she'll be one of the 2,100 who could lose their jobs at American.

"Nobody is sure at the moment about anything," the Bixby resident said. "With the way they are talking to us, it doesn't sound very good."

If Howell does manage to hang on to her job, many of the friends and colleagues she's made over two decades will be gone and looking for a new way to support their families.

The job losses come at a fragile time for the Tulsa economy. Lost payroll revenue and contracts to local suppliers would ripple across the local economy in ways that few mass layoffs have done before.

Chamber estimates show that the layoffs would cost employees a combined $180 million in wages and benefits and result in a $308 million loss to the local economy, including $5 million in city and county sales taxes.

Small businesses, manufacturers and real estate professionals say 2,100 fewer jobs, and well-paying jobs, could hamper the area's economic recovery and affect thousands more workers throughout the region.

"Aerospace jobs pay twice the average salary of other jobs in Oklahoma," said Mary Smith, executive director of the Oklahoma Aerospace Alliance.

The losses hit hardest bedroom communities such as Owasso and Collinsville, where nearly 1,000 American Airlines mechanics live, according to figures provided to the Tulsa World by the Transport Workers Union.

About 3.3 percent of all adults in living in Owasso are mechanics for American Airlines. In Collinsville, 7.5 percent of all adults work as mechanics for the company.

Another 1,449 American employees live in Tulsa, 854 in Broken Arrow and 585 in Claremore. Based on the company's latest proposal, more than 30 percent of those workers will lose their jobs.

Management and support positions at American, which are also in jeopardy, contribute even more jobs to each city.

"There's going to be an impact on Tulsa and every other nearby city," said Howell, who said she is fortunate her children are grown. "I live in south Bixby, and we'll feel it there, too."

Outsourcing work

American's maintenance base is the largest manufacturing employer in the Tulsa region, and dozens of small and medium-sized manufacturers depend on the airline and other air carriers and airplane builders.

"Aerospace is vital to manufacturers in this area," said Curtis Evans, who gathers data and consults with area companies as an extension agent with the Oklahoma Manufacturing Alliance. "Really after the energy industry, aerospace creates a lot of the jobs."

NORDAM, one of Tulsa's largest aerospace customers, is watching the situation closely to see what happens at American.

"We'll be monitoring the situation as they decide what their business will look like while they are emerging from this," NORDAM CEO Meredith Siegfried said. "We've had a long relationship with American; they're a valued customer, and we will support them in whatever they decide to do."

Many manufacturing company owners and managers say American has cut back on outsourcing in recent years in favor of doing work in-house.

American Airlines officials said they plan to reverse that trend and start using more contractors to complete maintenance work. However, it is unclear whether outsourced work will stay in Tulsa or head elsewhere in the United States or outside the country.

Local business officials hope that outsourcing work stays in Tulsa and provides new job opportunities for displaced American Airlines mechanics.

Power Dyne Inc. president and owner Dan Hilsheimer said he would hope to pick up any contracting opportunities from American Airlines but that it will be hard to match the kind of salaries and benefits offered to mechanics at the maintenance base.

Hilsheimer said his company hasn't done much work for American Airlines in recent years but has been kept busy by a growing oil and gas sector.

"We used to do more work for American Airlines, but any aerospace work is probably less than 5 percent of our business now," Hilsheimer said.

Mingo Aerospace general manager Dave Potter said the entire manufacturing sector is hoping American decides to keep its contracting work in Tulsa.

"If they do offload some work, we'll definitely take all that we can if it fits into our business," said Potter, who worked for American for 32 years before retiring.

AMERICAN AIRLINES AT A GLANCE

AMR Corp. announced its restructuring plan Wednesday. American Airlines is the second-largest non-government employer in Tulsa, behind St. Francis Health System (7,600). Here is information about AMR and its restructuring proposal:

Headquarters: Fort Worth, Texas

Total employees: 87,000

Company layoffs: 13,000

Tulsa employees: About 7,000

Tulsa layoffs: About 2,100

Pension: Four defined benefit plans eliminated

Labor cost reductions: $1.2 billion per year

Total cost reductions: $2 billion per year

Revenue goal: $1 billion increase per year by 2017

Total assets: $22.87 billion

Total liabilities: $30.08 billion

December loss: $904 million

Note: The December loss, total assets and total liabilities were included in AMR's monthly bankruptcy filing in January.

Original Print Headline: AMR's blast zone

Kyle Arnold 918-581-8380
kyle.arnold@tulsaworld.com

Associated Images:

Milad Al-khouri of Christy's BBQ poses at lunch Friday with customers. His restaurant gets about a quarter of its business from workers at the nearby American Airlines maintenance facility. After AMR's announcement to cut about 2,100 workers at the 56-year-old Tulsa base, Al-khouri expressed the thoughts of many in the area: "It's scary for us, too, because it puts our business in jeopardy." STEPHEN PINGRY/Tulsa World