USAir to take plea for cuts directly to pilots union board

Having failed to sway negotiators, it hopes to convince leadership


With time running out and its future on the line, US Airways Group will look to the leaders of the pilots union to do tomorrow what the union's negotiators refused to do over the weekend: accept the airline's demand for $295 million in pay and benefit cuts.

US Airways is seeking $800 million in cuts from its employees, the third round of concessions it has sought in the past two years. With critical financial milestones looming at the end of September, the airline is pressing the unions to come to terms by Sept. 15.

If the Air Line Pilots Association does not agree to concessions, it is unlikely that US Airways will be able to persuade other labor groups to go along.

Without the concessions, the airline would probably file for Chapter 11 bankruptcy protection as soon as next month. The airline's chairman and the financial advisers to the pilots union have said there is a good chance the company will be liquidated if it falls into bankruptcy again.

But despite the shaky outlook, the airline continues to look ahead. Yesterday, it announced plans to turn Fort Lauderdale, Fla., into a mini-hub next year for flights to 11 destinations in the Caribbean and Central America, tripling its service to the city.

The plan, which obviously depends on success in the talks between the airline and its unions, would be an attempt to challenge low-fare airlines such as JetBlue Airways and Spirit Airlines.

US Airways said it intended to cut fares on many flights to Fort Lauderdale from cities such as Boston and Newark.

Late last week, the pilots union signaled that a deal with US Airways was close, but Sunday afternoon, its bargainers rejected the latest proposal from the airline and broke off talks.

The union said that US Airways had dismissed "several significant proposals" by its negotiators and was continually raising its demands.

People who have been briefed on each side's proposals said yesterday that the airline was refusing to budge from its $295 million target for cuts in pilots' pay and benefits, while the union had expressed willingness to accept cuts only in the range of $175 million to $180 million, along with some work-rule changes.

US Airways then asked the union's leadership to review its latest offer. The union is "well aware of the need for us to implement a successful transformation plan as quickly as possible," said an airline spokesman, David Castelveter.

Phillip Baggaley, an industry analyst at Standard & Poor's Ratings Services, said the company's request may help break the impasse, by taking the union's negotiating team out of the picture.

There are several options available to the union's executive council, officials said. The council could endorse the airline's proposal and schedule a ratification vote by pilots; it could put the proposal before its members for a vote without making a recommendation; it could reject the proposal; or it could ask its bargainers to reopen talks and continue working.

Whether the leadership backs the proposal or not, a "yes" vote by the pilots would give some badly needed impetus to the airline's talks with other unions.

But there is no assurance that the pilots' leaders or the rank and file would accept the airline's proposal. Either a rejection or a decision to go back to the table could be problematic, Baggaley said. "There's not a lot of time left, and all sorts of interconnected bad things can happen," he said.

By Sept. 30, US Airways must be in compliance with the terms of its federally backed loans, the basis of the restructuring that helped it emerge from bankruptcy proceedings in April last year.

The airline is talking with the Air Transportation Stabilization Board about its situation. The board has already modified US Airways' loan guarantee once; had it not done so, the airline would have been in technical default on the loans earlier this year.

The airline also faces deadlines next month related to aircraft financing provided by two regional-jet builders, Embraer and Bombardier, as well as by GE Capital.

On Friday, before the latest developments in the talks with the pilots, Standard &Poor's lowered its debt rating for US Airways to CCC from CCC+, saying that there was an increasing risk that the labor talks would not wrap up in time.

The ratings agency has cut US Airways' rating three times since the airline emerged from bankruptcy with a B rating.

Last week, US Airways' chairman, David G. Bronner, who heads Alabama's pension fund, warned that lenders would be unlikely to come forward with fresh money if US Airways slips into bankruptcy again, and that a liquidation could result.

The airline's chief executive, Bruce R. Lakefield, later played down that possibility.

Even so, US Airways said that it would introduce new service to Guatemala City; Panama; Kingston, Jamaica; San Salvador; and other cities. It also plans nonstop service between Fort Lauderdale and the Bahamas, the Dominican Republic, Costa Rica and Puerto Rico.

But potential travelers on those routes may put off booking seats and buying tickets until they know whether the airline will be in business to fly them, according to Kevin P. Mitchell, chairman of the Business Travel Coalition, an advocacy group representing business travelers and corporate travel departments.

"The average person on the street has to be very confused" about US Airways' situation, Mitchell said, especially people who live in the airline's principal hub cities, Philadelphia and Charlotte, N.C. "They could wake up to a headline in October ... saying, `It's over.' "

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