"US Airways a fiscal time bomb: judge"

Sunday, October 17, 2004

US Airways a fiscal time bomb: judge
The Associated Press


ALEXANDRIA, VIRGINIA - A bankruptcy judge on Friday granted US Airways
authority to temporarily cut the pay of its union workers by 21 percent,
comparing the airline's financial outlook to "a ticking fiscal time bomb."

The 21 percent pay cut is nearly all of the 23 percent reduction the air
carrier had sought.

"I have absolutely no doubt that wage cuts of this magnitude would and will
result in severe financial hardships," US Bankruptcy Judge Stephen Mitchell
said. But US Airways' financial situation is so unstable that "basically
what we have here is a ticking fiscal time bomb."

The pay cuts are in place until Feb. 15 next year, six weeks short of what
the airline had sought. Mitchell also granted the airline authority to
reduce the size of its jet fleet.

Also Friday, Delta Air Lines Inc, the nation's third-largest carrier, said
it was weeks away from being forced to file for bankruptcy because of
widening losses -- ranging from labor and pension costs to fuel expenses.
United Airlines, a unit of UAL Corp, said it would need even more labor cuts
than anticipated to get out of bankruptcy, and that it would seek the
court's help if it is unable to reach an agreement with its unions.

Friday's ruling means the average US Airways salary would drop from
US$59,509 to US$47,012, putting the airline below the other five major
traditional carriers as well as Southwest Airlines, but higher than JetBlue
and America West -- two carriers US Airways now seeks to emulate.

US Airways had projected that a 23 percent pay cut would save US$165 million
between now and March 4, when it feared it would essentially run out of
cash.

After Friday's ruling, the airline's chief executive, Bruce Lakefield, said
the company was still calculating the financial effect of the decision, but
he was pleased.

"Our mission here is to save as many jobs as possible. We are being attacked
on every front" by low-cost competitors, he said when asked about the
ruling's effect on workers.

The judge gave the airline authority to impose the cuts immediately, but
Lakefield told employees in a recorded message that a timeline will be
announced in the next few days.

Mollie McCarthy, leader of the Association of Flight Attendants'
Philadelphia-based local, said the pay cuts are devastating and particularly
galling given that management is not taking a similar hit.


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