WASHINGTON — Airports will suffer from American Airlines' decision to lay off about 4,400 employees in the coming days because that action will "inevitably" lead to fewer flights and less revenue for the sector, Moody's Investors Service warned Monday.
American announced last week that it had sent layoff notices to 11,000 employees, though the airline said it intends to cut only about 40% of those notified. Federal law requires that notices be sent to any employee whose job might be eliminated.
Moody's said the move signals that American, which declared bankruptcy in November 2011, will "reduce its current system-wide flight offerings, which negatively affects the credit of U.S. airports."
The bulk of the layoff notices went to employees at American Airline's hub airports. About 3,000 employees at A1-rated Dallas-Fort Worth International received layoff notices, 1,200 employees at A2-rated Miami International, 1,100 at New York-area facilities, and 900 at A2-rated Chicago O'Hare. About 3,000 layoff notices also were sent to employees at American Airlines' maintenance base in Tulsa, Okla., Moody's said.
The rating agency, which has had airports on negative outlook since August 2008, has already seen American Airline's passenger volume drop a bit since it declared chapter 11, and the airline has already taken steps to reduce service.
"Through July, American Airlines carried 2.2% fewer passengers than over the same period in 2011," Moody's reported. "Since entering bankruptcy, the carrier has trimmed flight offerings at some airports, closed its American Eagle brand regional carrier operations in Los Angeles International Airport, and agreed to outsource some of its regional flying to SkyWest."
Overall, Moody's said, air carriers have seen total passenger volume drop 5% between 2007 and 2011.
The likelihood of reduced service from one of the airline industry's largest carriers comes as another blow to an airport sector already anxious about the possibility of a crushing impact from federal sequestration cuts. Airport revenues are heavily tied to passenger and freight volume, especially the passenger facilities charges that airports use to secure tax-exempt financing.
With the Federal Aviation Administration facing some $377 million in potential operations cuts in fiscal 2013 alone, airports are already concerned that flight volume might have to go down to compensate for a shortage of available security and air traffic control personnel.
Moody's said it expects further reductions in American's service, especially if the beleaguered airline merges with U.S. Airways. The two carriers have been in merger discussions since at least August. If the deal does go through, Moody's cautioned, that service will be consolidated and some "redundant" routes flown by both airlines will be canceled.