"US Airways Employees Skip Work Amid Strife"

Wednesday, October 13, 2004

US Airways Employees Skip Work Amid Strife
Judge Fears Pay Cuts Might Worsen Relations
By Keith L. Alexander
The Washington (DC) Post


US Airways Group Inc. is encountering an increased number of employees
calling in sick, and some workers are staging slowdowns as the airline
reorganizes its employee benefits and sick leave in bankruptcy court,
executives from the airline said yesterday. 

In a nearly eight-hour hearing yesterday at U.S. Bankruptcy Court in
Alexandria, David M. Davis, US Airways chief financial officer, testified
that some employee groups were participating in a "slowdown" and that an
entire cleaning crew in Chicago called in sick a few weeks ago. 
 
U.S. Bankruptcy Judge Stephen S. Mitchell postponed a decision on whether to
impose a requested 23 percent, or $38 million a month, across-the-board
employee pay cut for at least six months. Another hearing is scheduled for
tomorrow. Mitchell also did not rule on whether the airline could forgo
past-due payments to its mechanics' and flight attendants' pension funds. 

Mitchell expressed concern about whether implementing the pay cuts could
have an adverse effect on future labor relations, possibly jeopardizing the
airline's long-term reorganization plan. 

"If I grant these cuts, will it increase the risk of labor strife with
[employees] voting with their feet" to leave the company? Mitchell said. 

Davis acknowledged that if worker compensation decreased, "attrition could
increase among employees." 

Christopher L. Chiames, US Airways senior vice president of corporate
affairs, said employee absentees were up a "bit" this month, but no flights
were canceled or delayed because of the absences. Chiames said many of the
carrier's 28,000 workers were concerned about the future of their
accumulated sick days as the airline begins restructuring its employee
holiday and sick time to save money. 

In one bit of good news for the Arlington-based airline, its major lenders
agreed to extend terms of their financing arrangements through Jan. 14,
giving US Airways extra time to use its cash for operations. 

The airline's major lenders, the Air Transportation Stabilization Board, the
Retirement Systems of Alabama and Bank of America Corp., agreed to extend
their funding on the assumption that the airline will maintain a cash
balance of about $500 million. The airline must submit to its lenders weekly
reports of its cash levels and upcoming payments. The agreement is subject
to bankruptcy court approval. 

US Airways and its labor unions offered a stream of witnesses yesterday
arguing for and against the 23 percent pay cuts sought by the airline.
Airline consultant Daniel M. Kasper of LECG Corp., testifying on behalf of
US Airways, said the carrier's labor costs were the highest among major
legacy carriers such as American, Continental and Delta and had to be
reduced more in line with low-cost carriers such as Southwest, JetBlue and
AirTran. 

"US Airways is facing a crisis of potentially lethal proportions with a
limited amount of cash and liquid assets," Kasper said. "If it is to avoid
the very real threat of liquidation, it has to build up sufficient cash for
the winter months, which will give its suppliers and travelers confidence." 

Kasper said that the airline might have less of a problem with employees
calling in sick or threatening to quit if it had been able to reach
voluntary cost-cutting agreements with its workers. But now, "timing is a
factor and [the airline needs] relief urgently," he said. 

Attorneys for the flight attendants, mechanics and gate and reservation
agents had their own witnesses, consultants, economists and labor leaders
testify that US Airways was asking its workers to make unnecessary and
unfair financial sacrifices. 

US Airways filed for Chapter 11 bankruptcy protection last month for the
second time in two years, after it failed to reach $800 million in
cost-cutting agreements with its labor unions.


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