- The Washington Times - Friday, September 10, 2004

Pilots for US Airways were meeting last night on the airline’s latest labor contract proposal to save it from another bankruptcy, which could occur as soon as tomorrow.

So far, pilots have refused the company’s demands for $295 million in concessions, putting US Airways on course for a second bankruptcy in two years, this time with less chance of emerging, according to industry analysts.

Unions for the airline’s flight attendants, mechanics and baggage handlers also have refused to accept US Airways’ demands for a total reduction of about $800 million in wage, pension and other benefit costs.

US Airways exchanged proposals and counterproposals with its pilots and flight attendants yesterday.

“Conditions facing the company have changed since negotiations began,” US Airways Chief Executive Bruce Lakefield said in a message to employees.

The company’s latest offers to pilots and flight attendants would keep their salaries close to current levels but require them to fly longer hours and make other work rule and benefit changes.

That would mean more furloughs. Almost 1,900 pilots are already on furlough, according to the union.

The International Association of Machinists and Aerospace Workers, which represents mechanics and baggage handlers, presented suggestions to management yesterday on reducing costs but reached no new agreement, airline officials said. The union is not negotiating a new contract.

The airline faces a Wednesday deadline to make $110 million payment to two pension funds. It faces a Sept. 30 deadline to meet financial goals for its federal loan guarantees.

US Airways also is trying to reduce non-labor expenses by $700 million to save $1.5 billion in annual costs.

“Absent our ability to reach our cost savings targets, we cannot rule out the possibility of a judicial restructuring,” US Airways spokesman David Castelveter said Wednesday.

US Airways has retained Washington law firm Arnold & Porter as legal counsel as industry analysts speculate that another bankruptcy would lead to liquidation of the company.

“You have to get labor cost concessions, there’s no alternative,” said Dan Kasper, managing director of the economic and financial consulting firm LECG. “If one of those unions won’t go along and says we’ll strike before we’ll do that, that’s when you can kiss US Airways goodbye.”

The union members would be hurting themselves as badly as their airline if they refuse to accept US Airways’ proposals, Mr. Kasper said.

“It’s unlikely they’re going to be working for another major airline soon,” he said, referring to labor problems throughout the airline industry.

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