Steve Quayle News Alerts

Nov. 13, 004
TONY MECIA, Staff Writer
Charlotte Observer

Its cash dwindling and options running out, US Airways on Friday asked a bankruptcy judge to throw out labor contracts with three major unions and to terminate company-sponsored pension plans.

Friday's filing sets up a contentious courtroom fight Dec. 2 and 3 between the company and its unions representing flight attendants, mechanics and customer-service workers -- unless those labor groups first agree to deep wage and benefit cuts.

Without the cuts, the airline said, it will likely have to start shutting down by mid-January.

"These are drastic steps, and I wish we didn't have to take them," said US Airways CEO Bruce Lakefield in a recorded message to employees. "But to survive, the company must take these actions. Our financial partners are running out of patience, and we are quickly running out of time."

Asking a judge to reject labor contracts is a common tactic for airlines in bankruptcy court, and it can be a powerful incentive for unions to agree to cut pay and benefits. Unions and management typically reach consensual agreements before a judge has to rule.

The company's unions, which had anticipated Friday's motion, said they would not be bullied into signing bad deals with the Arlington, Va.-based company.

The airline is proposing to replace existing contracts with its latest offers to union leaders, which it says represent pay and practices consistent with low-cost competitors.

The offers differ by work group and include wage cuts of between 5.6 percent for mechanics and 27.2 percent for fleet-service workers, plus a host of work-rule and benefit changes unions find unacceptable. In some circumstances, the company has sought the right to contract out jobs to other firms if that work can be performed "more economically."

The airline's pilots, who last month ratified a contract that saves the company $300 million a year, are looking to their fellow workers to share in the sacrifice.

The givebacks from the pilots, combined with those listed Friday for the three reluctant unions, would save an estimated $1 billion a year.

Under bankruptcy law, a judge can void labor agreements if he finds unions have rejected company proposals "without good cause."

Some leaders of the three unions say they don't fear taking their chances with a judge.

"I don't see the point in shooting our own selves in the head," said Mike Flores, a flight-attendant union leader from Charlotte. "If the judge wants to do it, then so be it."

US Airways, the nation's seventh-largest airline, relapsed into bankruptcy protection two months ago, citing high costs and tough competition from low-fare carriers. Charlotte is the airline's largest hub and home to 5,700 of its 27,000 workers.

Union employees are already earning 21 percent less than they did a month ago, after U.S. bankruptcy Judge Stephen Mitchell ordered temporary cuts to save the company cash. Nonunion workers have also taken pay cuts of between 5 percent and 20 percent.

The cuts proposed Friday would permanently replace those temporary cuts.

In addition to those wage and work rules changes, the airline is seeking court approval of two retirement-related benefits.

It wants to terminate participation in remaining pension plans, a move that would save an estimated $200 million a year. It would turn the plans over to a federal agency, which would pay lower benefits to retirees than US Airways would have.

It is also proposing to slash retiree medical benefits to the tune of about $40 million a year. Retirees would see premiums increase by hundreds of dollars a month.

At the same time, the company is also looking for nonlabor savings.

In court documents, the airline said it would save $40 million from closing a maintenance facility. The company provided no further details. US Airways has heavy maintenance facilities in Pittsburgh and Charlotte.

The filing reiterated that the airline is falling behind its initial cash projections made two months ago, largely because of high fuel prices and lower-than-expected revenue. In recent weeks, the company said, it has fallen "uncomfortably close" to violating minimum cash requirements that are conditions of a loan backed by the federal Air Transportation Stabilization Board. If the airline falls below those minimums, the ATSB could demand immediate repayment of the loan, shutting the company down.

That agreement expires Jan. 15, and the company said that if permanent wage cuts are not in place by then, the ATSB is unlikely to extend it. That would leave the airline unable to use cash and would trigger a shutdown. The judge is expected to rule on the cuts by Jan. 1.

The changes the airline is seeking have been the topic of conversation at US Airways' Charlotte utility shop where Roger Sisson, 48, works.

Already feeling the effects of a pay cut, Sisson worries the company will outsource his job if it succeeds in rejecting his union contract. He commutes from Virginia to work in Charlotte during the week, but now he and his wife are planning to put their Roanoke house up for sale because they can no longer afford it.

"It puts a stress on your life and family, I tell you that," said Sisson, who cleans composite parts used to repair planes' wings, flaps and rudders.

The company said it is hopeful it can reach agreements with its unions before the proposed Dec. 2 hearing.

The airline seems to be close to an agreement with reservations and gate agents, who met with the company Friday. The two have agreed on many issues, including a new pay scale, but differ on the company's proposal to outsource certain reservations jobs. The company is scheduled to present a new proposal Tuesday.

The company and the flight attendants seem further apart. The union is presenting the airline with a new proposal this weekend and anticipates a counter-offer next week.

Discussions with the International Association of Machinists seem to be in their early stages. The two sides met this week.

But in court filings Friday, the airline said the IAM has been "simply seeking reams of data" and has "provided nothing more than last minute `face-time' at the bargaining table."

ON THE HORIZON

Ongoing: Company continues negotiating with unions on wage and benefit cuts, and with retiree committee on cuts to retiree medical coverage.

Nov. 25: Thanksgiving. Busy travel days.

Dec. 2-3: Court hearing on rejection of existing labor contracts and pension plans and cutbacks to retiree medical plans.

Dec. 25: Christmas. Busy travel days.

Jan. 1: Judge expected to rule by this date on company's motion.

Jan. 15: Agreement with lenders expires. Without cuts in place, airline unlikely to have access to cash.

Tony Mecia: (704) 358-5069; tmecia@charlotteobserver.com

http://www.charlotte.com/mld/charlotte/living/travel/10171057.htm