American Airlines parent AMR Corp and US Airways Group said they would cut jobs and tweak their operations to better match the travel market, which struggles to recover from the economic recession.

AMR said on Wednesday it will eliminate up to 700 jobs as it downsizes its maintenance and engineering operations.

US Airways plans to cut 1,000 jobs and shift its focus to four key cities and its shuttle service.

The airlines are taking needed action for a likely weak holiday travel season, especially considering the recent run-up in oil prices, said Morningstar equity analyst Basili Alukos.

I would not be surprised to see Southwest (Airlines) make similar cuts, since I don't think the firm has cut enough of its labor force, he said. As for the others, I think more cuts would be prudent.

The airline industry has been battered in the last 12 months as the recession eroded travel demand. Carriers responded by slashing capacity, although industry leaders have reported tentative signs of a rebound in demand for business travel.

AMR, in a letter to employees, said it would resize and reshape its maintenance and engineering operations to better meet the needs of its smaller fleet.

The company said it would wind down all operations at its Kansas City Maintenance Base next year after it closes the location in September. The changes will affect operations in other locations throughout its system, including the St. Louis line operations, which will be downsized.

Unfortunately, these changes will cause a reduction of up to 700 positions, both management and union, in the M&E and supporting departments' workforce, Carmine Romano, AMR's senior vice president of maintenance and engineering, said in the letter.

The 700 job cuts represent about 5 percent of AMR's 12,700 M&E employees systemwide. The company said it would offer voluntary separation options for its unionized workforce.

US Airways, meanwhile, said it would cut is staff by 1,000, or 3 percent, to concentrate on its network strengths, which are its hubs in Charlotte, Philadelphia and Phoenix, as well as Washington D.C. and its shuttle between New York, Boston and Washington.

The airline said it would reduce service in Las Vegas and end service in Colorado Springs and Wichita. The company said it would reposition its crew bases in Philadelphia, Charlotte, Phoenix and Washington, D.C. by closing bases in Boston, LaGuardia and Las Vegas.

The Las Vegas and LaGuardia bases are expected to close on January 31, and Boston will close on May 2, 2010, the airline said.

The staff reductions will occur in the first half of 2010, US Airways said.

Airline shares were broadly weaker on Wednesday with the Arca airline index <.XAL> down 4.6 percent. AMR shares were down 9.2 percent at $5.36 on the New York Stock Exchange. US Airways shares were 2 cents lower to $3.12, also on the NYSE.

(Reporting by Kyle Peterson; Editing by Tim Dobbyn)

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