Passengers with tickets shouldn't worry, as the airline will still fly, but customers should redeem their frequent flier miles.
By STEVE HUETTEL
Published September 11, 2004
US Airways made 11th-hour contract offers to the labor unions representing pilots and flight attendants Friday as airline experts predicted the ailing carrier was headed for a second bankruptcy filing, perhaps this weekend.
Chances of reaching cost-cutting deals appeared slim. Pilots union leaders got the offer Friday at a meeting in Pittsburgh that had been called by hard-line representatives who prevented a previous proposal from going to a vote of the airline's 3,000 pilots.
The Association of Flight Attendants had not responded to US Airways' offer by midafternoon and might not continue talks through the weekend, said AFA spokesman David Kameras.
US Airways had made no decision to file for bankruptcy Friday evening, but time is running out, said spokesman David Castelveter.
On Wednesday, the airline must decide whether to make $110-million in pension payments it could skip by filing for bankruptcy. On Sept. 30, US Airways must meet certain financial benchmarks to keep from defaulting on a federally guaranteed $720-million loan.
"We have very real deadlines facing us," said Castelveter. "We do not have the luxury of time."
The only choice left for US Airways is to file for bankruptcy reorganization and ask a judge to impose new contracts on employees, said Darryl Jenkins, a visiting professor at Embry-Riddle Aeronautical University in Daytona Beach. He expected a filing on Sunday.
Without lower labor costs in place, he said, investors won't come forward to fund the airline's reorganization in bankruptcy, forcing the airline to liquidate. "The situation is such that they can't go long without new labor agreements," he said.
Passengers traveling on US Airways in the coming weeks shouldn't worry, said Terry Trippler, consumer advocate for SideStep.com, a Web travel search engine.
Airlines keep flying as usual in a reorganization, as US Airways did two years ago and United continues to do. Tickets are "technically worthless" when airlines liquidate, although other carriers sometimes honor them, Trippler said.
US Airways customers should start redeeming their frequent flier miles, said Randy Petersen, publisher of Inside Flyer magazine. Those concerned about the airline's future should use the miles for tickets on United, which has a reciprocal agreement with US Airways.
US Airways has warned that a bankruptcy filing is possible as soon as mid-September without new contracts from labor unions. The airline wants $1.5-billion in annual cost reductions, including $800-million from reluctant labor groups.
The International Association of Machinists and Aerospace Workers, which represents mechanics and related workers, has refused to even discuss reopening its contract. Unions for flight attendants, gate workers and reservations agents have made little progress.
US Airways hoped a breakthrough with the pilots union would lead other labor groups to follow suit. But representatives from Pittsburgh and Philadelphia rejected company proposals for pay and benefit cuts and work rule changes aimed at saving $295-million annually.
On Monday, the Pennsylvania group to refused to send to pilots an offer that the Associated Press reported would have meant a 20 percent pay cut and a 50 percent cut in retirement-plan contributions.
In a recorded telephone message to employees Friday, US Airways chief executive Bruce Lakefield said the latest offer included the smallest possible pay changes by requiring pilots and flight attendants to fly more hours and consent to work-rule changes.
He had received hundreds of e-mails from pilots who agreed to a "balanced approach" to a new contract, Lakefield said.
Capt. Rick Mosley of Tierra Verde wasn't hopeful that the hard-line leaders would relent and help US Airways try to avoid the fate of famous failed carriers.
"It's like watching two guys flying into an airport with lightning and wind shear on the radar and you see crumpled planes on the ground with the names Eastern, Pan Am and Braniff," he said. "And these guys are talking about fishing."
