British Airways warns USAir about need to cut labor costs

May 24, 1994|By Suzanne Wooton | Suzanne Wooton,Sun Staff Writer

British Airways sent another strong message to USAir's labor unions yesterday, saying it may be forced to take a write-off against its $400 million investment in USAir if its U.S. partner fails to win cost-cutting concessions from its workers.

The warning came from Chairman Colin Marshall as he announced that pretax profits soared at British Airways PLC from $279 million to $454.5 million in 1993 as the carrier continued its own cost-cutting efforts.

"It is difficult for us to put an ultimate time scale on this, but we do expect USAir to get their house in order," John Lampl, a spokesman for British Airways, said later yesterday.

"It would take a disastrous scenario to write off the $400 million investment," he added. "We are hopeful that USAir will have a successful outcome to their restructuring program."

A write-off of all or part of British Airways' investment would under

score its lack of confidence in USAir, raising doubts about its willingness to go forward with the additional $450 million infusion it has proposed making by 1998.

But a spokeswoman for USAir, Andrea Butler, stressed that a write-down by British Air in its USAir investment would have no financial impact on the Arlington, Va.-based carrier.

She also responded to comments by Mr. Marshall that he expected to hear news about USAir's attempts to obtain labor concessions within 90 days.

"We have not set a public deadline for the labor negotiation because we do not want to draw a line in the sand," Ms. Butler said.

She did say, however, that Mr. Marshall's 90-day time frame was "probably not an unfair expectation for him."

The warning from Mr. Marshall, reported yesterday by Reuters from London, is seen as the second direct message to USAir labor unions that British Airways is not USAir's sugar daddy across the Atlantic.

In March, British Airways said it would not invest the rest of its promised $400 million unless USAir brings its losses under control.

"This is just reinforcing that message," Mr. Lampl said.

But yesterday, Kelly Ison, a representative for the USAir pilots union, downplayed the latest warning. "This is an internal accounting procedure for British Airways, and we consider it a nonissue, he said.

During the past four years, USAir has lost more than $2.2 billion, including $200 million in the first quarter this year.

The largest carrier at Baltimore-Washington International Airport, USAir is facing intense competition from discount carriers who are forcing USAir to lower its fares to money-losing levels.

In March, the airline asked its unionized workers -- including pilots, flight attendants, mechanics and some other ground workers -- for pay cuts and other concessions. The workers have been studying the plan, but no negotiations are taking place.

About half of USAir's 45,500 workers are represented by unions.

Although USAir's Ms. Butler reiterated the company's position that "Chapter 11 is not an option for USAir," some analysts have speculated that without labor concessions the carrier could be forced to file for Chapter 11 bankruptcy protection.

According to Reuters, Mr. Marshall told a news conference that if USAir filed for bankruptcy, it was possible British Airways would continue to benefit from the operating partnership.

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