NEW YORK -- The world's biggest air carrier American Airlines said on Tuesday it plans to axe 7,000 jobs and reduce its fleet as part of a radical overhaul.

"American will reduce between now and March 2003 an estimated 7,000 jobs in order to realign its workforce with the planned fall capacity reductions, fleet simplification and hub restructurings," the company said in a statement.

Chairman and Chief Executive Officer Donald J.

Carty said the overhaul was aimed at reducing costs by focusing on popular services, AFP reported.

He said the changes had been made necessary by a sluggish economy and changes in customer behavior, an apparent reference to the September 11 terrorist attacks that prompted millions of frightened travellers to spurn air travel.

"We believe that our future lies in continuing to operate as the world's leading network carrier -- but we must get our costs down in order to compete and must focus on the products our customers want and are willing to pay for," Carty said.

"Our decisions going forward will be framed around those objectives and geared toward positioning American to succeed and be profitable," Carty said.

Under the plan, American intends to reduce capacity by nine percent by November compared with mid-2002 and will speed up the withdrawal of its nine TWA 767-300 aircraft to Novemner 2002.

It would also improve the efficiency of scheduling at its largest hub airport at Dallas/Forth Worth from November 1.

The carrier also said it would defer 35 aircraft deliveries in 2002 and withdraw its 74-jet Fokker 100 fleet, furthering a simplification drive that had previously cut fleet types from 14 to seven.

"Once fully implemented the initiatives announced today coupled with those already implemented will result in structural annual operating savings of more than 1.1 billion dollars, independent of capacity reductions," the statement said.

The announcement comes a day after competitor U.S. Airways won approval from a bankruptcy court to borrow 75 million dollars and stay in the air.

U.S. Airways is the first major U.S. carrier to file for Chapter 11 bankruptcy protection since the September 11 hijackings.