USAir pilots offer cost-cutting plan, concessions

August 04, 1994|By Suzanne Wooton | Suzanne Wooton,Sun Staff Writer

Calling for a "reinvention" of the airline, USAir pilots yesterday put forth a sweeping cost-cutting proposal that would give all employees a 25 percent stake in the company and four seats on the board.

The pilots' proposal, which includes $2.5 billion in worker concessions over the next five years, came in response to a plea from the financially struggling airline that its workers devise a plan to help bail the carrier out of its financial morass.

The proposal, however, hinges on significant cuts by the airline's other labor unions, which are expected to submit their own cost-saving plans.

Representatives of the 5,200-member pilots union conceded yesterday that they hadn't coordinated their complex plan with those 19,000 workers -- including flight attendants, machinists and other ground workers -- who are represented by other unions.

"They've had no specific response to this plan," said Peter Gauthier, chairman of the USAir Master Executive Council of the Air Line Pilots Association. "We're not trying to dictate to any other group what their investment in USAir should be."

In exchange for the $2.5 billion in concessions, the pilots' plan also calls for $700 million in preferred stock to be distributed to all employees.

While the pilots' proposal is considered a starting point for negotiations, it ran into an immediate snag by calling for British Airways to make a quick $450 million investment in USAir. The British carrier, which already has a $400 million stake in USAir, quickly rejected the idea.

"That's not possible," said John Lampl, a spokesman for British Airways in New York. "We're not going to put any more money in USAir until they have their house in order. This is strictly up to USAir. USAir is piloting its own future."

The Arlington, Va.-based airline, however, had little to say on the proposal. "The ALPA proposal raises serious concerns with respect to complex issues," USAir Chairman Seth E. Schofield said. The company refused to comment further until it has evaluated the proposal and discussed it with the pilots. No talks were scheduled, however.

For its part, the pilots said they're willing to take "hard-dollar reductions" of $750 million over the next five years if other employees and management agree to accept concessions worth billion over the same period.

The $750 million amounts to a 20 percent pay cut for pilots, who earn an average of $100,000 a year, the union said. The plan, however, calls for wages to return to current levels after five years.

Mr. Gauthier characterized the 20 percent pay cuts as "the wise, prudent and appropriate action," based upon the union's financial analysis of the company. The pilots did not suggest what concessions the other employees should make.

But the 25 percent stock ownership -- along with the 7 percent USAir employees already own -- would raise their stake in the company to nearly one third. And the proposal would give labor a far greater voice in the company.

The pilots recommended that a 15-member board of directors be established, with union members holding three seats and exercising an equal role with British Airways in selecting four other members. Currently, there are no union members on the airline's 16-member board.

The plan also calls for one nonunion worker to serve on the board. In addition, four directors would be voted on by stockholders, while the remaining three would be chosen solely by British Airways.

Under siege from low-cost, discount airlines, USAir, which accounts for half the daily traffic at Baltimore-Washington International Airport, has been cutting its costs sharply and revamping its operation. Still, its losses this year are expected to exceed last year's $350 million.

During the past 18 months, British Airways has invested $400 million in USAir, gaining a valuable link with the carrier's extensive East Coast network. The carrier had promised to invest another $450 million over the next eight years.

But in March, British Airways warned that it would withhold any further investment until USAir restructured the airline and got its costs -- the highest in the industry -- under control.

British Airways currently owns 22 percent of USAir's voting stock. Under U.S. law, a foreign entity can own no more than 25 percent of a U.S. airline. Representatives of the pilots union suggested yesterday that British Airways might accept nonvoting stock rights in exchange for an additional $450 million investment.

In another proposal not likely to please British Airways, the pilots jTC called for exchanging about $1 billion in outstanding preferred stock for a combination of preferred and common stock. That move would eliminate the payment of preferred dividends, which costs USAir about $77 million a year.

The carrier's entire investment in USAir thus far is preferred stock. Mr. Lampl refused to comment on that proposal yesterday.


Proposal by USAir Master Executive Council of the Air Line Pilots Association:

* $150 million in annual pay cuts for USAir pilots for five years.

* $350 million in annual cuts from other employees and management for five years.

* 25 percent common stock ownership by employees.

* $700 million in preferred stock ownership by employees.

* Accelerate investment of $450 million in USAir by British Airways.

* Eliminate dividend payments of $77 million a year by exchanging $1 billion in outstanding USAir preferred stock for new preferred and common stock.

* A 15-member board of directors with four directors elected by stockholders, four nominated jointly by the union and British Airways, three from British Airways, three from union and one from nonunion employees.

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