US Airways asks workers for sacrifices

Reaction is mixed to troubled carrier's plan on pay, benefits

Bankruptcy threat looms

U.S. loan guarantee of $1 billion to be sought

May 17, 2002|By Paul Adams | Paul Adams,SUN STAFF

US Airways Group Inc. said yesterday that it wants employees to give up about $1 billion in wages and benefits annually and allow the airline to fly up to 150 additional small regional jets in a sweeping restructuring plan aimed at staving off bankruptcy.

The new strategy includes restructuring routes to make more efficient use of the airline's three East Coast hubs and stimulating revenue growth by forming a strategic alliance with a major domestic airline.

To help finance the plan, the Arlington, Va.-based carrier will ask the federal government for a $1 billion loan guarantee to help it stay afloat while the new strategy is implemented, a US Airways executive said. Labor leaders, who have complained about a lack of input on the plan, were briefed on the new strategy yesterday.

"This is very difficult for everybody, but there is a plan that has this company surviving and eventually prospering," said Jerry Glass, the airline's senior vice president of employee relations. "This is a very doable plan - we haven't come up with pie-in-the-sky numbers."

With its cash reserves dangerously low, the airline said last week that it may have to file for Chapter 11 bankruptcy protection unless it is able to restructure and obtain the government-backed loan. The guarantees are part of a $15 billion industry bailout approved by Congress last fall to help struggling airlines recover from the Sept. 11 terrorist attacks. Airlines have until June 28 to apply for the loans, but some lawmakers have sought in recent weeks to curtail the program.

Federal officials have made it clear that winning approval for the loan guarantees will be difficult. America West Airlines - the only carrier to receive a guarantee so far - had to win concessions from employees and give the government warrants to buy up to a third of its shares.

"Anybody going in seeking a loan guarantee is facing an uphill battle," said Jim Burnley, a Washington transportation lawyer who helped craft the industry bailout.

US Airways officials are rushing to devise a revamped business plan that will satisfy the Air Transportation Stabilization Board, which was set up to review the applications. Glass declined to say when the airline would submit its application.

Labor, which accounts for about a third of US Airways' operating costs, will be asked to make about $700 million in wage and productivity concessions and give up about $300 million in pension, health and other benefits. Labor leaders had varying reactions to the news.

"We didn't get enough specifics to make a judgment on the plan," said First Officer Roy Freundlich, a spokesman for the US Airways unit of the Air Line Pilots Association.

The pilots' union is keeping an open mind, Freundlich said.

After years of resistance, the pilots recently agreed to allow the airline to double the number of small regional jets it flies from 70 to 140. Pilots are generally paid less to fly the smaller jets. Glass said management hopes to use an additional 150 small jets to feed passengers to its hubs in Philadelphia, Pittsburgh and Charlotte, N.C. The plan calls for more long-distance flying in the future and expanding service to key business centers from the Philadelphia hub.

Flight attendants were optimistic about the plan, saying it seemed like a workable business strategy. But the union said it is waiting to hear how much its members will be asked to give up in wages.

"The plan was not gloom and doom at all," said Karen Lascoli, president of the US Airways unit of the Association of Flight Attendants. "If anything, it had a ray of sunshine in it. The airline will grow, not be downsized."

The airline also is talking with its lenders and suppliers, who will be asked to make about $200 million in concessions in the restructuring, Glass said.

"We fully intend to talk with them and work with them," said Clay McConnell, a spokesman for airplane manufacturer Airbus Industrie, which has orders for 38 planes from US Airways.

Analysts also gave the plan mixed reviews, saying the airline needs to take bolder actions, such as eliminating one of its three hubs.

"Nobody else has three hubs on the East Coast," said Darryl Jenkins, executive director of the Aviation Institute at George Washington University. "That causes you to have too many planes and causes you to compete against yourself."

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