A bankruptcy judge will be asked to approve a temporary cut of 23 percent to build reserves.
By STEVE HUETTEL
Published September 25, 2004
US Airways chief executive Bruce Lakefield said Friday the airline would ask a bankruptcy judge for a temporary cut in pay for union workers, so the company can survive through the slow fall travel season.
The airline hadn't filed the request by early Friday evening. But Lakefield told employees in a recorded message that US Airways would do in order to preserve cash and build reserves the company needs to remain viable.
US Airways wants to cut pay 23 percent through next spring, or until new contracts are negotiated with unions or imposed by the judge, the airline said in letters to the unions.
"I fully understand the difficulty this change will cause for many of you, and I truly regret the fact that our company's financial conditions put us in this unhappy situation," Lakefield said.
Many of the airline's 28,000 workers wondered Friday about their own financial conditions, especially after two rounds of pay cuts during the airline's last trip through bankruptcy.
Gene Harris, a maintenance utility worker in Charlotte, N.C., said he would cut out activities for his 8- and 10-year-old daughters, call waiting on his phone and premium cable channels. His hourly pay would drop $4 to $13.45 under the proposed pay cut.
"The little amenities we have left would be cut back - the girl's gymnastics, swimming, guitar lessons," said Harris, who moved from Tampa after US Airways closed its maintenance hangar at Tampa International Airport in 2002 during the last bankruptcy.
Pilot Dennis Condon put his waterfront home in Palm Harbor on the market this week. He plans to move his family, including two teenagers, into a nearby house off the water that's worth half as much. "I've got two colleges and a wedding to pay for," Condon said.
US Airways filed for bankruptcy Sept. 12 after failing to get labor unions to agree to $800-million in annual concessions the airline said it needed to survive.
Bankruptcy courts can impose temporary emergency pay cuts on union workers if a company proves it needs the changes to survive or avoid "irreparable damage." The judge must hold a hearing before ruling on the request. Workers don't get to vote on the cuts.
Lakefield said Friday that US Airways needs the pay reductions to keep its cash balance from dropping too low.
The airline is operating on cash reserves under a financing agreement with the federal Air Transportation Stabilization Board. The board has first claim on US Airways' assets as security on a package of loans it guaranteed for the airline in the last bankruptcy.
Under the agreement, US Airways must keep cash balances above certain levels in September and October. Also, customers could stop buying tickets if the airline's cash dipped so low that they became concerned US Airways couldn't keep flying, Lakefield said.
Bankruptcy law allows companies to request that judges throw out labor contracts and impose permanent contracts with less pay and fewer benefits. After such a filing, companies get 60 days to negotiate with unions for new contracts. If deals aren't struck, the judge can then impose contract terms.
Lakefield said the airline wants to continue negotiations with unions on temporary cuts and new, permanent contracts. Sessions are scheduled Monday with the Air Line Pilots Association and the Communications Workers of America, which represents reservations agents and other passenger service workers.
But the pilot union said it would oppose temporary cuts in court. Dave Kamaras, a spokesman for the Association of Flight Attendants called the pay cuts "excessive and inequitable."
The airline's request would reduce annual pay for a flight attendant with 14 years' experience who worked 75 hours a month from $36,945 to $28,449, he said.
During the previous bankruptcy, employees gave the airline concessions worth $1.2-billion a year. US Airways emerged from bankruptcy court protection in April 2003 but slid back into financial crisis because of fierce low-cost competition and skyrocketing fuel prices.
Information from the Associated Press was used in this report. Steve Huettel can be reached at firstname.lastname@example.org or 813 226-3384.