"US Airways Sets Deadline for Concessions"

Thursday, September 23, 2004

US Airways Sets Deadline for Concessions
By MICHELINE MAYNARD
The New York (NY) Times


US Airways yesterday gave its unions until tomorrow to agree to emergency
contract concessions. 

Otherwise, the airline said, it would ask a federal bankruptcy court to
impose temporary pay cuts and other cost-saving steps aimed at generating
much-needed cash.

The ultimatum was contained in a bulletin last night from the chief
executive, Bruce R. Lakefield, to the airline's 28,000 employees.

It came shortly after leaders of the airline's pilots union voted yesterday
to resume negotiations with the airline.

The airline did not say how much it was seeking in emergency relief from the
unions, or whether it was more than the $800 million in concessions that it
had initially sought.

On Sept. 12, US Airways sought bankruptcy protection for the second time in
two years, after its workers declined to grant $800 million in concessions.
They had granted two sets of concessions worth $1.9 billion a year during
the company's first bankruptcy filing, from which it emerged last year.

In the bulletin, Mr. Lakefield said the airline had presented proposals for
emergency relief to unions representing its pilots, flight attendants,
customer service agents, dispatchers and mechanics. 

The airline needs to raise cash because it could not arrange
debtor-in-possession financing, a feature of most bankruptcies. 

Its assets, including its cash, are pledged to secure the balance on $900
million in loan guarantees granted in 2003 by the Air Transportation
Stabilization Board.

As a result, the airline is operating on cash made available by the loan
board, as well as revenue from ticket sales and other services.

Yesterday, Mr. Lakefield said the airline had "a duty and an obligation" to
build cash for the fall and winter, traditionally the slowest time for
airlines, except for the holiday periods.

If the airline did nothing, Mr. Lakefield said, "the drain on our cash
reserves would jeopardize the company and everyone's job."

Mr. Lakefield said the unions had until Friday to respond. If they do not
grant the cuts, he said, the airline will seek emergency relief from the
Federal Bankruptcy Court in Alexandria, Va. 

Federal bankruptcy code permits companies to seek emergency pay cuts and to
ask to replace their labor agreements with less-expensive contracts.

For interim relief, a judge does not require that a company and its unions
negotiate before imposing temporary cuts. 

Once a request is made, the judge schedules a hearing.

If the airline subsequently moves to set aside its labor contracts, which is
a more serious matter, the two sides have 60 days to reach an agreement.
After that, if no deal has been reached, the judge can impose concessions. 

Labor experts say it is better for unions to negotiate deals than to have
cuts imposed because negotiations give them the opportunity to protect the
most important parts of their contract. 

Mr. Lakefield said US Airways would continue to negotiate with its unions,
no matter what action it takes, and said the airline preferred to reach
agreements without seeking court action.

"These are not measures that we take lightly," he said, "but absent labor
agreements, we must take them to ensure continued customer confidence,
continued access to cash, and continued paychecks and benefits to each of
you."

Yesterday, the master executive council of the Air Line Pilots Association
said talks would go on even if US Airways sought court action. 

The pilot leaders' decision came after a two-day meeting in Charlotte, N.C.,
one of US Airways' three hubs. 

On Labor Day, pilot leaders opposed to concessions blocked members from
voting on an offer from the company for $295 million a year in cuts. 

The leaders, representing pilots in Pittsburgh and Philadelphia, its other
two hubs, were upset with the airline's plans to reduce retirement benefits,
which were cut during the previous bankruptcy.

However, yesterday's vote on resuming contract talks was unanimous, the
union said. 

The leaders also removed restrictions on the negotiators that had prevented
them from discussing revisions to parts of the contract.

Earlier this week, US Airways made a new offer to the pilots that the union
said called for more concessions than the $295 million in the rejected
offer. 

A union spokesman, Jack Stephan, declined to discuss the details of the
offer, except to say that it was "north" of what the company previously
requested.

Mr. Stephan predicted that US Airways would probably push for more than the
$800 million in cuts it initially sought.

"We've learned from previous bankruptcies that sometimes companies
underestimate" the size of cuts they need, he said. "It's fair to assume
things could get more expensive for all the unions."

The pilots' decision to resume talks came a day after the airline reached a
tentative agreement with the Transport Workers Union on a proposal for $4.5
million in annual cuts. 

The union, which represents 150 flight dispatchers, was the first to reach a
deal with the company. Despite the tentative deal, the dispatchers could be
included in US Airways' bid for emergency relief.


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