- The Washington Times - Wednesday, December 1, 2004

The most significant hearings in US Airways’ bankruptcy begin today when the airline seeks approval to void labor contracts covering more than 20,000 workers and the pensions of 53,000 current and former workers and to cut the medical benefits of nearly 11,000 retirees.

The changes would save the nation’s seventh-largest airline nearly $1.08 billion annually and help it emerge from its second bankruptcy in 18 months.

But the Arlington company’s request to void its labor agreements has set up a showdown with high stakes.

The outcome of the hearing, which is scheduled to last through Dec. 17, could lead to a strike and potential liquidation.

“The judge has a big job ahead of him,” said Teddy Xidas, president of the Association of Flight Attendants Local 40, which represents 1,150 US Airways flight attendants based in Pittsburgh, and president-elect of the union’s master executive council.

Even if the carrier persuades U.S. Bankruptcy Judge Stephen S. Mitchell to approve the wage, pension and benefit changes, the company risks a ferocious backlash from at least two unions that say they are prepared to strike.

The Association of Flight Attendants, which represents about 5,400 workers, and the Communications Workers of America, which represents 6,000 reservation agents, are threatening to strike if their contracts are voided.

US Airways says the unions don’t have the right to strike immediately under the terms of the Railway Labor Act. But the Communications Workers of America contends a judicial decision to annul a labor agreement alters the legal landscape and gives the union the right to engage in a strike.

The airline also is trying to hammer out a new contract with the International Association of Machinists and Aerospace Workers, which represents more than 9,000 mechanics and baggage handlers. US Airways had 30,449 employees at the end of October.

While US Airways faces labor upheaval if union contracts are voided, the airline may face an equally dire future if they are not.

US Airways won’t be able to cut costs and compete with low-cost carriers unless Judge Mitchell voids union agreements, according to a bankruptcy court filing made late Tuesday by the committee of unsecured creditors.

“The committee … has come to the reluctant conclusion that absent an immediate reduction in [US Airways’] labor and pension costs … it will be impossible for [the company] to survive,” attorneys for the group wrote.

US Airways has renegotiated labor agreements with it pilots union and the Transport Workers Union, which represents engineers, dispatchers and flight crew trainers. Those cuts yielded about $340 million in annual savings.

US Airways hopes to secure another $154 million in savings from its flight attendants, $142 million from its reservation agents and $254 million from mechanics and baggage handlers, according to its bankruptcy filing. The company would save another $32 million by cutting medical benefits for retirees and $199 million by terminating pensions.

Union members already are working under a court-approved 21 percent pay cut, which is scheduled to stay in place until mid-February.

“My best guess is the judge is going to make the changes that management suggests,” said Vaughn Cordle, chief analyst at Airline Forecasts, an industry analyst in the District.

That could set in motion a chain of events leading to the company’s demise.

If contracts are voided and unions strike, US Airways would lose passengers and revenue and could be forced to liquidate, Mr. Cordle said.

Both labor and management representatives have said they want to reach agreements on new labor contracts rather than have Judge Mitchell wipe them out, giving the company unilateral power to set wages and work rules.

“If that happens, morale would be shattered,” Miss Xidas said.

Negotiators continued meeting yesterday. They are likely to exchange proposals on new labor agreements even while Judge Mitchell hears arguments over voiding contracts, pensions and benefits.

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