- The Washington Times - Friday, December 17, 2004

US Airways Group Inc. made a final appeal yesterday for $1.08 billion in concessions from labor groups and retired workers to help it emerge from its second bankruptcy in two years.

U.S. Bankruptcy Judge Stephen Mitchell said he would decide as soon as Jan. 6 whether to grant the Arlington airline’s request to void labor agreements covering 20,000 workers, terminate pensions of 53,000 current and former workers, and cut health benefits of nearly 11,000 retirees.

Those cuts are the linchpin of the company’s plan to cut costs by $1.5 billion overall and transform itself into a low-cost carrier.

“There is a rare and limited opportunity to save US Air. The obituary of this company has been written on a regular basis. They might be right, but we are trying to prove them wrong,” said Brian Leitch, the company’s lead attorney in the bankruptcy case.

US Airways, the nation’s seventh-largest carrier, hopes to modify labor agreements, eliminate pensions and cut retiree medical benefits through court order or consensual agreements with its unions and retirees as soon as Jan. 14.

“It’s in the hands of the judge,” US Airways Chief Executive Officer Bruce Lakefield said at the conclusion of seven days of testimony on the company’s motion.

Mr. Lakefield had a bitter confrontation this week outside the Alexandria courthouse with a group of 22 retired US Airways workers who traveled from Philadelphia to protest the company’s plan to slash medical benefits for retirees. Yesterday he said bankruptcy is unfair to retirees, but current employees are being asked to make sacrifices, too.

“Personally, I feel it isn’t fair, but there’s nothing fair about this whole process. There’s nobody that goes unscathed here,” Mr. Lakefield said.

While Mr. Leitch argued that US Airways must be given authority to make all the cuts it outlined, labor lawyers countered that some elements of the vast $1.08 billion cost-cutting plan are unnecessary to ensure the company’s survival.

Sherwin Kaplan, an attorney representing a group of about 5,000 retired union and non-union US Airways workers, said eliminating medical benefits for that group would save $20 million annually.

“It’s a drop in the bucket,” he said.

More important, retirees have no leverage in negotiations with US Airways, so the judge should reject the airline’s request to eliminate their medical benefits, Mr. Kaplan said.

Judge Mitchell indicated he may have sympathy for the retirees’ predicament.

As Mr. Kaplan argued, “Retirees have nothing to give. The company’s position is ‘your benefits are over.’ When your position is ‘your benefits are gone,’” retirees have little recourse, the judge said.

Even while US Airways seeks annulment of union contracts, it is making progress with some groups on new contracts that include millions of dollars worth of concessions.

Its pilots union and the union representing dispatchers, engineers and flight crew trainers approved about $340 million in annual concessions.

The 6,000-member Communications Workers of America, which represents ticket and reservation agents, and the 5,200-member Association of Flight Attendants (AFA) have reached tentative agreements that could save the airline another $231 million annually.

Results from the CWA ratification vote will be tallied Thursday, but the AFA won’t know the results of its ratification vote until Jan. 5. If either union rejects their tentative contract, attorneys can make arguments against the company’s proposed cuts, the judge said.

US Airways continues to negotiate with the International Association of Machinists and Aerospace Workers, which represents almost 10,000 baggage handlers and machinists.

Sharon Levine, lead attorney for the IAM, said US Airways’ request from machinists and baggage handlers to eliminate jobs, cut wages, terminate pensions and cut retiree benefits is a proposal akin to “the four horsemen of the apocalypse.”

US Airways wants $100 million in concessions from baggage handlers and $254 million from machinists.

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