US Air presses final 2 unions on concessions

Machinists, agents asked to give up part of their pay

IAM reports progress in talks

CWA says members have already sacrificed

July 16, 2002|By Paul Adams | Paul Adams,SUN STAFF

After tentatively securing $465 million in annual savings from its pilots over the weekend, US Airways pressed its machinists and service employees yesterday for pay concessions that could help the airline avoid bankruptcy.

The International Association of Machinists, which represents 13,000 mechanics and related workers, and the Communications Workers of America, which covers 10,000 reservation agents and other service employees, are the only major labor groups that have yet to reach an agreement with management.

A spokesman for the Machinists union said talks were progressing, but no deadline has been set for completing negotiations. The airline is seeking $261 million in annual savings from the union.

The CWA is resisting management's call for more concessions, saying the union's members have sacrificed more than other employees. The service workers gave up pension benefits and endured a nine-year wage freeze during the 1990s, said Candice Johnson, a spokeswoman for the union.

"So that's a pretty high level of sacrifice that this group has already made and that needs to be in the equation," she said. The union has offered $17,000 in concessions per employee spread over the next eight years, but management wants more, Johnson said.

The Arlington, Va.-based airline also is seeking up to $300 million in concessions from various lessors, debt holders and suppliers as it strives to cut costs and restructure. If any of the agreements fall through, airline officials warn, bankruptcy is likely. In fact, the carrier remains vulnerable to debt holders even if all of the labor groups fall into line.

"As we have said before, Chapter 11 still is a possibility for our company," said David Castelveter, a spokesman for the airline.

Bankruptcy experts agree, saying it would take just one impatient creditor to push the airline into seeking Chapter 11 protection. The airline defaulted on certain public debt payments this month.

"Somebody could pull the plug on them pretty soon," said William Rochelle, a New York attorney who has been involved in airline bankruptcies.

So far, lessors appear to be cooperating. GE Capital Aviation Services, which leases planes to US Airways, continues to negotiate with the company.

"We're in ongoing discussions with the senior management team about ways we can help in their restructuring," said Eric Jones, a spokesman for the company.

US Airways got a boost last week when a federal board set up to administer loan guarantees to airlines hurt by the Sept. 11 terrorist attacks gave the carrier preliminary approval for a $900 million loan guarantee. But the airline must secure concessions from all of its labor unions and lessors in order to win final approval.

The pilots' agreement removes a major roadblock, since the union represents the largest share of the more than $900 million in annual savings the airline is seeking from employees. In exchange for a roughly 26 percent pay cut, the union will get a 19.3 percent stake in the carrier and a seat on the board.

The tentative agreement, which is subject to approval by the union's 4,800 members, also contains provisions that would protect the pilots against further concessions should the airline ultimately file for bankruptcy protection.

"There are many difficult issues in it that are reflective of the difficult times that the airline is having at this point," said Roy Freundlich, a spokesman for the pilots group. "It's a tremendous pay and cost reduction for our pilots to deal with."

In addition to making pay concessions, the pilots gave management immediate authority to enter into a domestic and international code-sharing agreement with another airline. Such agreements allow two airlines to share passengers, which increases sales for both carriers while giving passengers more options.

US Airways' management has been negotiating with several carriers, but has not decided which airline it will pair with, Castelveter said.

However, sources close to the situation have said that UAL Corp.'s United Airlines, which also is seeking a federal loan guarantee in the face of huge losses, is the leading candidate. A $12 billion merger between the two airlines was rejected by federal regulators last year.

"United is a big network carrier with a lot of nonstops in key markets ... that US Airways doesn't serve very effectively, so I would think that would be an important part of the plan," said Dan Kasper, an airline economics expert with consulting firm LECG LLC.

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