US Airways views its crisis as life-or-death struggle

But annual meeting is told bankruptcy is not imminent

September 20, 2001|By Paul Adams | By Paul Adams,SUN STAFF

WASHINGTON - With revenues slashed in half and cash reserves dwindling at an unprecedented rate, US Airways Chairman Stephen M. Wolf told nervous shareholders and employees gathered at the airline's annual meeting yesterday that the company is no longer focused on profit and loss, but staying alive.

The airline's $1.2 billion cash reserve has shrunk since the end of the second quarter and is getting smaller by the day, underscoring the need for a proposed $17.5 billion financial aid package the airline industry is seeking from the federal government, Wolf said.

Several major airlines, including US Airways, already have announced tens of thousands of layoffs and drastic cuts in capacity in a desperate effort to conserve cash and avoid bankruptcy after last week's terrorist attacks in New York and Washington.

US Airways has been especially hard hit since the closing of Reagan National Airport in Washington, where it operates its coveted Washington-New York shuttle.

The airline is operating shuttle flights out of Dulles International Airport while federal officials consider whether to reopen National.

"The industry is no longer looking at itself in terms of a profit and loss perspective," Wolf said. "We look at ourselves solely in terms of cash conservation. The entire industry is losing cash on a daily basis at an alarming rate."

An American flag to his right and a red, white and blue ribbon pinned to his lapel, a somber Wolf opened the shareholder's meeting with a moment of silence to remember the victims of last week's attacks.

Minutes later, the meeting descended into an emotional give-and-take between Wolf, alarmed shareholders and labor leaders looking for answers to questions about everything from airline security to job security.

Wolf, looking beleaguered and oftentimes frustrated at the lectern, provided few new clues as to how the airline would raise more cash.

Analysts have estimated that US Airways has about 52 days of cash reserves left and a negative net worth of $1.8 billion, making it one of the most threatened of the nation's 10 biggest airlines.

US Airways, the sixth-largest airline, announced Monday that it would eliminate about 11,000 of its 46,000 jobs and cut capacity by 23 percent in response to a roughly 50 percent drop in bookings industrywide. The airline is the second-biggest user of Baltimore-Washington International Airport.

Where the cuts will occur remains uncertain, but Wolf said the first layoffs could come as early as this week.

In his remarks, Wolf made it clear that some of those employees may never be called back and that there are no guarantees that more layoffs won't be coming in the future.

However, Wolf assured investors that the airline's management team will not leave to take advantage of a lucrative severance package approved last year as part of its failed merger negotiations with UAL Corp., the parent of United Airlines.

Under their contract, Wolf, Chief Executive Officer Rakesh Gangwal and General Counsel Lawrence Nagin would be able to split $45 million in severance benefits if they leave during a 30-day window ending in November.

That news was welcome to the airline's labor leaders, who have often questioned the commitment of top executives at the airline and US Airways Group Inc., its holding company.

But employees remain critical of the airline's survival strategy, calling the layoffs draconian and rooted in an industrywide panic. Most unions at US Airways have no-layoff clauses in their contracts. But the company contends it has the legal ability to lay off union workers covered by those agreements.

"Is the best way to deal with this crisis a hastily assembled reduction plan that devastates the livelihoods of so many pilots and employees?" said Capt. Chris Beebe, a US Airways pilot and chairman of the Air Line Pilots Association's Master Executive Council. His remarks were part of a statement he read to the meeting.

Beebe said the union stands ready to help the airline, but advocates alternative measures developed in consultation with union leaders. The pilots group complains that it has been cut out of the process.

That sentiment was echoed by Lynn Lenosky, president of the US Airways unit of the Association of Flight Attendants. Her union is waiting to hear how many of the 1,100 Baltimore-area flight attendants will be out of work.

"Right after the incidents last week, it was several days before we got together with senior management, and the first thing they said was, `We need a pay cut,' " Lenosky said. "So it wasn't like we had a chance to sit down and say, `OK, tell us where you are, tell us what the problems are and let us help you find solutions.' "

Analysts largely side with management on the drastic measures, saying airlines are bleeding cash so quickly that there is little time for debate and discussion.

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