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AirTran Cuts Wages To Defray Fuel Costs

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By MARY JANE CREDEUR

Bloomberg News

Published: July 3, 2008

AirTran Holdings, the low-fare airline that flies mostly in the eastern United States, is cutting wages by 5 percent for employees and by as much as 15 percent for officers to help reduce costs amid record fuel expenses.

The company needs a collective 10 percent reduction in wages, Kevin Healy, senior vice president of marketing and planning, said Wednesday. Orlando-based AirTran paid $451 million in wages last year.

The move comes on top of AirTran's decisions to trim capacity-growth plans by 15 percent and shrink its fleet by as much as 8 percent after jet-fuel prices jumped 88 percent in the past year. The pay cuts take effect in August, and wages will be reviewed again in six months, Healy said.

"Nobody wants to do this," he said. "I think people understand the business challenges, with fuel at the levels we're at. Our fuel bill is up 100 percent on a year-over-year basis. It is a step we have to take."

Most of AirTran's 8,900 employees will get a 5 to 8 percent reduction, and senior crew and directors will have cuts of 11 to 13 percent, Healy said. Top executives, including Chief Executive Officer Bob Fornaro, are taking 15 percent cuts.

Healy would not say whether the company will need to eliminate jobs or furlough union employees such as pilots. The company is "looking at everything" as part of a larger plan to cut costs, and "nothing is sacred," he said.

"This isn't the sort of thing you want to leave people in during a time of uncertainty, but you also don't want to provide a false sense of security," Healy said. "The main issue is that as we work through this analysis that we provide them with the best information we can as quickly as possible."
AirTran is also talking to its vendors and business partners to help reduce expenses, Fornaro said Wednesday in a memo to employees. He warned that "we may need to do more in the future" to reduce labor costs if fuel continues to rise.

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