US Airways and its pilots union agreed yesterday on a new labor contract a week after the Arlington carrier asked a bankruptcy judge to force court-ordered pay cuts on employees.
Airline officials said they expect the tentative deal to save them $300 million a year.
“This is a major step forward for our company, its employees, customers and all other stakeholders,” Chief Executive Bruce R. Lakefield said.
After the agreement was reached yesterday morning, the Air Line Pilots Association’s (ALPA) executive council met to decide whether to seek ratification from its 3,200 US Airways’ members. They were still meeting yesterday evening.
The pilots conceded the labor concessions are important to help the airline restructure, but complained about the sacrifice they would need to make.
“The US Airways pilots have already provided this company with more than $5 billion in concessions through previous restructuring efforts,” ALPA spokesman Jack Stephan said. “This new agreement, valued at more than $1.8 billion in aggregate cost savings over the life of the contract, would bring the total cost savings that the US Airways pilots have provided to nearly $7 billion.”
The agreement would cut pilots’ salaries by 18 percent, modify work rules to increase productivity and reduce the company’s contributions to a defined-benefit plan over the nine-year life of the agreement.
US Airways’ pilots earn between $120,000 and $150,000 per year. The industry average is $136,000 per year.
An agreement with the pilots union is crucial for the airline to reduce its losses enough to continue operating while it is in bankruptcy, US Airways said in court papers.
The airline also said in a bankruptcy court filing last week that it would need to liquidate by February unless a judge imposes a temporary 23 percent pay cut on all its union workers. An Oct. 7 hearing is scheduled in Alexandria.
US Airways wants $950 million in permanent annual cost concessions from its unions, the airline said in its court filings. Before it filed for bankruptcy protection Sept. 12, the company was asking for $800 million a year in labor cost reductions.
Without the cuts, airline officials said lenders are likely to withdraw financing as cash reserves that allow US Airways to continue operating fall dangerously low.
The airline has developed a “transformation plan” that would give it a business strategy and cost structure like low-cost competitors Southwest Airlines and JetBlue Airways, both of which have been steadily taking market share from US Airways. Lower labor costs are part of the transformation plan.
US Airways, the nation’s seventh-largest airline, employs 28,000 workers in mainline operations and 34,000 companywide. About 84 percent of its employees participate in union labor contracts.
Other unions also have agreed to new labor contracts to save US Airways money as the bankruptcy court considers more drastic action.
Dispatchers have ratified one new contract, while flight crew training instructors and flight simulator engineers have tentative agreements that await ratification from their members.
Flight attendants, machinists and members of the Communications Workers of America still are negotiating for new contracts.