- The Washington Times - Friday, November 12, 2004

US Airways Group Inc. yesterday asked a federal bankruptcy judge to void labor agreements with three unions to help it slash costs and avoid liquidation.

In a 120-page filing, the Arlington airline also asked U.S. Bankruptcy Judge Stephen S. Mitchell to let it reduce health benefits for retirees and terminate its two remaining pension plans.

The bankrupt company threatened for weeks that it would seek court approval to void the contracts if it couldn’t come to terms on new deals with unions representing mechanics, flight attendants, baggage handlers and customer service agents.

US Airways President and Chief Executive Officer Bruce R. Lakefield said the company must scrap the contracts to survive.

“We have not lost sight of the hardships that furloughs, lower pay and reduced benefits will mean for our employees and retirees, but we are faced with a series of difficult choices as we work to restructure the company and try to save thousands of jobs of veteran US Airways employees,” he said.

Union leaders said the company’s request to void contracts did not come as a surprise, but the filing does place greater urgency to finish negotiations before a Dec. 2 hearing on the motion to scrap the labor agreements.

The airline is asking the judge to impose new labor contracts with pay cuts ranging from 6 percent to 27 percent.

Seeking court approval to void labor agreements could indicate that US Airways is nearing liquidation, said Alan Sbarra, vice president at San Francisco airline industry consultant Unisys R2A Transportation Management Consultants.

“This is not going to make labor happy, but it shows just how desperate things are. I think it shows they are getting closer and closer to liquidation,” he said.

US Airways, the nation’s seventh-largest carrier, is seeking to reorganize in bankruptcy for the second time in two years after filing for Chapter 11 protection from creditors Sept. 12. The company wants to cut annual operating costs by $1.5 billion a year and transform itself into a low-cost carrier like JetBlue Airways Corp.

Judge Mitchell helped the company achieve part of that goal when he ruled Oct. 15 that US Airways could cut wages of its union workers by 21 percent. The cuts remain in place through Feb. 15, but the company wants long-term wage concessions from members of the Association of Flight Attendants, Communications Workers of America and International Association of Machinists and Aerospace Workers.

US Airways has asked its 6,000 customer service agents to agree to slash wages and benefits by $137 million. It wants its 5,200 flight attendants to cut wages and benefits by $150 million, and the company wants its 9,100 machinists and baggage handlers to cut wages and benefits by $320 million.

In particular, the airline said it needs relief from the costs associated with its pension plans for machinists and flight attendants — an expensive retirement benefit that is not offered by the low-cost carriers. The pilots’ pension plan was terminated in the company’s first bankruptcy reorganization in 2002-03.

The airline wants to replace those pension plans with a 401(k) defined-contribution plan in which the employer would kick in 3 percent of an employee’s pay to the plan.

Terminating pension plans would save the airline $200 million a year, according to the filing.

Only the Air Line Pilots Association, which represents about 5,100 pilots, and Transport Workers Union, which represents about 220 engineers, dispatchers and flight crew instructors, have agreed to cut wages and benefits. Concessions by the pilots total $1.5 billion over five years. The concessions included an 18 percent pay cut.

US Airways continues to talk with reservation and gate agents, flight attendants, machinists and baggage handlers.

The filing sets off a lengthy legal process. Unions have 14 days to file responses. Either the company or the unions can ask for a seven-day extension. Then the judge has up to 30 days to decide the case.

If Judge Mitchell allows the airline to jettison labor contracts, the company will be able to set wages and establish new work rules, said Joseph Tiberi, spokesman for the machinists union.

That’s what the unions want to avoid, he said.

Mr. Lakefield said the company could avoid a court ruling on the labor agreements if labor and management negotiators wrap up talks quickly.

“Our financial partners are running out of patience and we are quickly running out of time. We can still avoid court action on the contracts, but we need to conclude negotiations now,” he said.

Union representatives said talks on new contracts are continuing.

“We’re focusing on trying to reach an agreement with the company,” Communications Workers of America spokeswoman Candice Johnson said.

Communications Workers members voted overwhelmingly this week to authorize a strike if negotiators can’t reach an agreement with the airline, but Mrs. Johnson said the union isn’t considering that option now.

US Airways employs about 34,000 people.

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