- The Washington Times - Thursday, December 16, 2004

US Airways Group Inc. overcame hurdles in court and at the negotiating table yesterday, giving the Arlington airline more hope that it can emerge from bankruptcy.

The nation’s seventh-largest airline reached a tentative agreement with its flight attendants yesterday afternoon that would save it $94 million annually, and it won court approval on a financing deal with General Electric Co. that gives it access to $140 million.

The labor agreement with the Association of Flight Attendants is the fourth union contract the company has renegotiated with workers since filing for Chapter 11 bankruptcy protection from creditors Sept. 12.

The airline still is seeking to modify labor agreements, either through court order or negotiations, with mechanics and baggage handlers, represented by the International Association of Machinists and Aerospace Workers.

US Airways spokesman Chris Chiames said outside a courtroom at U.S. Bankruptcy Court in Alexandria that the new agreement with flight attendants is an encouraging sign that the company can reach agreements with all its unions.

“We’re absolutely encouraged,” he said. The flight attendants “came up with a lot of creative solutions to address the issues of their members.”

The union would not discuss details of the tentative deal while its executive council considers it.

The agreement between US Airways and units of General Electric gives the airline access to cash and reduces debt.

“This relief is critically important” to US Airways and its ability to emerge from bankruptcy, said Michael Canning, an attorney for the airline.

The day also included a brief but contentious encounter between US Airways Chief Executive Officer Bruce Lakefield and angry retirees outside the courthouse.

Gerald Baltuskonis, 64, and Paul Illian, 62, waved signs in Mr. Lakefield’s face and screamed at him to keep in place medical benefits for retirees.

US Airways is trying to save $1.08 billion through concessions from unions, cuts to some medical benefits for retirees and active workers, and by eliminating pensions.

Mr. Baltuskonis, who retired in 1991, and Mr. Illian, who retired in 1993, were part of a group of 22 retirees who traveled from Philadelphia to express their displeasure.

Mr. Lakefield couldn’t avoid them outside the courthouse as he made his way to a bus that shuttles US Airways managers from its corporate headquarters to the courthouse, and the ugly encounter seemed to unsettle him.

“I’m sorry I even took this job,” he shot back.

In addition to providing US Airways with a $140 million loan, the financing deal with General Electric allows the airline to defer lease payments on planes from GE that would be due over the next six months.

Mr. Lakefield said during a break at the bankruptcy hearing that the deal is significant because the airline leases 159 of its 281 aircraft from General Electric.

The deal also helps US Airways transform itself into a regional carrier.

Under the terms of the deal, US Airways will return 25 of its larger aircraft to General Electric and replace them with 31 regional jets. Some seat 70 passengers and some seat 90 passengers.

The GE agreement “will allow us to restructure the fleet with more [regional jets], which is what we think we need to do” to be successful, Mr. Canning said.

US Airways also agreed to issue General Electric’s Capital Aviation Services division a 15-year convertible note worth from $125 million to $216 million after it emerges from bankruptcy.

The financing deal also is important because it keeps in place US Airways’ access to loans backed by the Air Transportation Stabilization Board, the agency created to oversee a $15 billion bailout of the airline industry.

The ATSB awarded US Airways a $900 million loan guarantee last year.

If the airline had not received court approval of the GE financing package, it risked violating minimum cash requirements that are conditions for the ATSB loan guarantee. Once the airline falls below the minimums, the ATSB could demand immediate repayment of the loans, which would shut down the airline.

US Airways still owes about $650 million on its ATSB-backed loans.

The tentative deal with the 5,200-member flight attendants was still under consideration yesterday by the group’s master executive council, a six-member group that must approve the proposal before passing it on to union members for a ratification vote.

“There are going to be huge concessions,” said Bob Kenia, president of the Association of Flight Attendants Council 41, which represents about 420 US Airways flight attendants in the Washington area.

Ratification would eliminate the union’s strike threat.

If the union approves the agreement, US Airways would have pried about $571 million in annual concessions from four labor groups. Concessions from pilots, engineers, dispatchers and flight crew trainers have led to about $340 million in annual cuts. Ticket and reservation agents are scheduled to complete voting next week on a new labor agreement that includes $137 million in annual concessions.

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