US Airways is asking judge to cut union workers' pay 23%

Airline not seeking same sacrifice from managers

September 25, 2004|By KNIGHT RIDDER/TRIBUNE

PHILADELPHIA - US Airways' chief executive officer said yesterday that the airline would, as expected, ask a bankruptcy judge to impose temporary pay cuts of 23 percent on its union workers to conserve cash during the slow fall travel season.

CEO Bruce Lakefield told employees in a recorded message that the filing was to be made yesterday.

The airline has refused to discuss the details of its request, but union leaders who received the request confirmed the cuts.

The airline has not asked its 2,300 executives and managers for the same sacrifice.

US Airways Group Inc. officials said management employees' pay has not been cut by the same amount because most nonunion employees already earn the same or less than their counterparts at the low-cost carriers that US Airways is trying to emulate.

Many US Airways nonunion employees could be asked to work for even lower salaries or have their benefits cut, but details of that plan aren't available yet, Senior Vice President Chris Chiames said.

"We've set management targets consistent with what we've asked from the unions," he said.

Union officials said they have been told that all airline employees will be seeing smaller paychecks if the reductions are imposed by U.S. Bankruptcy Court Judge Stephen Mitchell.

A leader of the Communications Workers of America, which represents ticket agents, said company officials have contended that they cannot make deep cuts in executive pay without creating a stampede of managers to other airlines or into other lines of work.

"Definitely, I think they should" take 23 percent cuts, said Tina Porter, president of the CWA Philadelphia local. "But they told us they can't afford to lose key people at a time like this. They said they want to retain key managers."

The company's goal is to recalibrate all employees' pay to be roughly equivalent to that of workers at low-cost carriers such as America West Airlines and JetBlue Airways.

US Airways already has trimmed jobs from its nonunion work force, including 50 jobs in recent weeks from its sales and marketing staff, spokesman David Castelveter said.

The No. 7 U.S. carrier has said its survival depends on reducing its annual labor costs by at least $800 million a year through pay cuts, layoffs or changes in work rules to make employees more productive. The Arlington, Va., company filed for Chapter 11 bankruptcy protection Sept. 12.

On Thursday, all but one of the company's five unions rejected the call for interim cuts, vowing to fight the company's emergency motion. The Transport Workers Union, representing 150 flight dispatchers, reached a tentative agreement on a cost-cutting contract a week ago.

The pay of managers and executives has been a point of contention for many workers, largely because of the compensation paid to previous management teams.

Former CEO David Siegel, who resigned in April, earned $664,000 a year and departed with a $4.5 million retirement package.

Even more upsetting to many employees, three former executives - Stephen M. Wolf, Rakesh Gangwal and Lawrence Nagin - received a combined total of more than $40 million in severance pay when they left the company in 2002. The airline's current phase of financial problems started in early 2001, when they were running the company.

Current CEO Lakefield, a retired Navy officer and Lehman Bros. investment banker, is paid $425,000 a year with no long-term compensation.

In contrast, America West Chief Executive Officer Douglas Parker received a salary of $550,000 and a bonus of $1 million last year. This year, his contract calls for a salary of $550,000 and a bonus of up to $880,000.

Lakefield could receive a severance package of three times his salary if he were forced to leave the company within two years, but would get nothing if he resigns voluntarily, according to previous company statements.

The Associated Press contributed to this article.

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