USAir asking for wage concessions Company plans to pare expenses by $400 million

October 15, 1991|By John H. Gormley Jr.

A chart accompanying an article about USAir Group Inc. appearing in yesterday's Business section incorrectly stated the wage concessions sought by the airline from its employees. Under the company's plan, no wage reduction would apply to the first $20,000 of base pay. A 10 percent cut would apply to the next $30,000, 15 percent to the next $50,000 and 20 percent to salary above $100,000.

The Sun regrets the error.

USAir Group Inc., the struggling company that is Baltimore's chief air link with the rest of the country, unveiled a $400 million cost-cutting program yesterday based on wage concessions it says are necessary to save the airline.

James T. Lloyd, the airline's executive vice president and general counsel, said during a news conference at Baltimore-Washington International Airport yesterday that the wage concessions and other cost-cutting measures are necessary for the company to return to profitability.


"We've got to get our costs in line with the Big Three," he said, referring to United, American and Delta airlines. "We cannot continue to lose half a billion dollars year after year. This company needs profits, obviously, to survive."

The company's announcement was buttressed by the latest in a string of gloomy earnings reports, this one showing a $81.4 million loss for the third quarter. USAir lost $454 million last year and has projected a loss of $500 million for this year.

In working out the cost-saving plan, Mr. Lloyd said, the company assumed the economy would remain in recession for another year and that USAir would continue to lose money through the first quarter of 1993. The company has not reported a profit since it reported a $101 million gain in the second quarter of 1989.

The keystone of the cost-cutting program is a wage concession package that has yet to be approved by the company's unions. The plan sets up a sliding scale similar to a graduated income tax. The higher an employee's pay, the greater the percentage of income he or she would be forced to forgo. The sliding scale will be applied to company officers at the beginning of next year. The cuts would apply to non-union employees only if the plan is accepted by at least one of the three major unions, which represent pilots, flight attendants and mechanics.

The cuts would be enforced for 15 months, starting at the beginning of next year, if the unions agree. The wages lost would eventually be made good under a profit-sharing plan if the company returns to profitability.

USAir's operations are concentrated in the Northeast, prompting Wall Street analysts to suggest the airline has too many hubs too close together. Mr. Lloyd repeated assurances yesterday that USAir does not plan to drop its Baltimore hub as part of a general restructuring of its operations. "We're not going to walk away from that market," he said.

But he cautioned that he could not guarantee Baltimore will continue to have the same level of service it has now.

The airline previously announced schedule changes that will cost Baltimore 11 daily flight at the beginning of the year. The airline now has 127 jet flights a day from BWI. Those changes will mean the loss of about 80 USAir jobs at BWI. Currently USAir employs about 2,600 people at its BWI hub.

Mr. Lloyd said that USAir hopes to get the unions to agree to the concessions by January. "Whether that's possible, I don't know," he said. "There's no question there's personal hardship in some elements of this program."

It is unclear what response USAir will get from its unions. One pilot at BWI, who asked not to be identified, expressed some skepticism of the need for wage concessions. "In reality there are lots of ways we can trim fat without going into employees pockets. Pay cuts have never proven in general to produce anything but animosity," he said.

But he said that a reasonably good climate exists between the airline and labor that should make it possible to consider the merits of the proposal. "These people do seem to be interested in running an airline and making it good," he said.

Three months ended 9/30/91

Revenue ... ... ... ... ... Net ... ... ... ... ... Share

'91 ... 1,598,824,000 ... (81,405,000) .. ... ... (2.06)

'90 ... 1,644,424,000 ... (120,294,000) .. .. ... (2.87)

% change ... -2.8 ... ... .. N/A ... ... ... ... ... N/A

Nine months ended 9/30/91

Revenue ... ... ... ... ... Net ... ... ... ... ... Share

L '91 ... 4,845,346,000 ... (306,889,000) ... ... .. (7.40)

L '90 ... 4,894,930,000 ... (233,388,000) ... ... .. (5.79)

% change ... -1.0 ... ... ... N/A ... ... ... ... .. N/A

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