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American Airlines, a subsidiary of parent company, AMR Corporation has sent layoff notices to 11,000 employees, of which they expect roughly 40% or 4,400 workers to lose their jobs.

The layoff warnings were send mainly to mechanics and ground workers, including 3,000 in the Dallas-Fort Worth area, 3,000 in Tulsa, Okla, 1,200 in Miami, 1,100 in New York and 800 in Chicago. As many as 1,800 flight attendants and 800 ground staff have quit the company voluntarily for bonuses promised by management.

American Airlines resorted to the layoff action as it tries to revive under bankruptcy protection filed in November 2011. In the last few days, the airlines also received federal bankruptcy judge’s approval for three union contracts to cancel their old contracts and introduce new working terms and conditions.

Beside the layoff, the company will also take other stringent measures including retirement benefits reduction, increase in maximum working hours for pilots, termination of supplement retirement plan, and closing of a maintenance hub in Texas. All these actions are expected to save roughly $1 billion annually for the company.

Apart from cost reduction efforts, American Airlines is also working toward increasing its revenue base without the need for spending on flight additions. The company is relaxing revenue-sharing terms with other airlines, especially to boost outsourcing.

The current Zacks Consensus Estimate for the third quarter of 2012 is 22 cents, representing a year-over-year growth of 145.8%. Estimates for 2012 and 2013 are ($1.08) and 79 cents, reflecting annual growth of 67.2% and 173.1%, respectively.

AMR Corporation currently bears a Zacks #3 Rank, implying a short-term (1-3 months) Hold rating. The company's prime competitor Delta Air Lines Inc. (DAL - Analyst Report) has a Zacks #4 (Sell) rating and United Continental Holdings, Inc. (UAL - Analyst Report) holds a Zacks #5 (Strong Sell) rating.

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