By Kyle Peterson

CHICAGO (Reuters) - American Airlines parent AMR Corp <AMR.N> and US Airways Group <LCC.N> 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) <LUV.N> 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. Continued...