US Airways' tentative agreement with its pilots paves the way for it to begin a low-cost operation that could force down fares on the East Coast and add significantly more discount flights at Baltimore-Washington International Airport.
In a last-minute deal Tuesday night, the airline and its pilots agreed to devote 23 percent of US Airways' service to a new division that would compete with rapidly expanding discount carriers such as Southwest Airlines and Delta Express.
The company has repeatedly said that BWI, a relatively uncrowded airport, would be pivotal to such a discount operation. That could offset the cuts US Airways has made there since 1990, downsizing from 180 daily flights to 75, while bringing low fares to Baltimore-area travelers.
Pilots in the airline's proposed low-fare operation, dubbed US2, would take a 24 percent cut although increased flying hours and greater opportunities for promotions, the company said, would offset much of that.
The five-year tentative contract, which must be ratified by the airline's 4,800 pilots, includes concessions that will help the nation's sixth largest airline bring its costs -- the highest in the industry -- in line with those of United, American, Delta and Northwest.
In exchange, the Arlington, Va.-based airline promised its pilots a minimum level of growth, early retirement for 300 pilots, a "no-furlough" clause and a recall of 386 furloughed pilots. Pilots also are expected to receive roughly $350 million in stock options but would not gain a seat on the company's board of directors.
The deal was reached less than an hour before US Airways' deadline to affirm its $14 billion order for 400 new aircraft with the European aircraft manufacturer, Airbus Industrie.
Ratification by the rank and file could take several weeks, but the company said yesterday that Airbus has agreed to extend the deadline pending ratification.
Yesterday, both sides praised the tentative agreement, the result of nearly 18 months of difficult negotiations. `Our pilots have demonstrated both wisdom and leadership in helping us to begin the process of putting in place the ability for US Airways to NTC grow and develop its full potential," US Airways Chairman and CEO Stephen M. Wolf said.
The company will now try to conclude agreements with its flight attendants, machinists and other ground workers and begin talks with its new 10,000-member passenger service agents union.
The deal with the pilots, the company said, will enable the airline to reverse years of downsizing and implement plans to become a global carrier. Since 1990, the company has sold aircraft and eliminated hundreds of flights.
Company officials said they could not borrow money for the Airbus order without the pilots' cost-cutting agreement. Without the deal, the airline would have been forced to become a regional carrier, they said.
Pilots' leaders yesterday predicted that the agreement would be ratified. "It meets a lot of needs for more than 50 percent of the pilots," said Mike Oakey, a spokesman for the US Airways Master Executive Council of the Air Line Pilots Association. "As a whole, the package is pretty decent."
The deal reflects confidence by the pilots' executive council that Wolf, who took over just 18 months ago, will be able to turn the carrier into a global airline. "He says he's going to do it, and you know how he prides himself in doing what he says he will," Oakey said.
Wall Street also appeared to express confidence over the airline's future, sending its stock up $2 yesterday to $43.125.
Plans to establish a low-cost division could pay off handsomely for BWI. As it struggled to reduce costs and overlapping service, US Airways has diminished BWI's role, long ago abandoning it as a hub. Nearly a year ago, though, US Airways President Rakesh Gangwal said BWI would play a pivotal role in the airline's proposed low-cost operation.
It is not clear how many discount flights USAir would operate at BWI or whether it would offer low fares in markets where it currently faces little competition.
Pub Date: 10/02/97