- The Washington Times - Friday, January 21, 2005

Another labor union at US Airways Group Inc. yesterday agreed to eliminate thousands of jobs in an attempt to help the airline emerge from its second bankruptcy in two years.

Changes approved by the International Association of Machinists and Aerospace Workers (IAM) will save the Arlington airline $346 million annually, the union said.

More importantly, concessions by the IAM could save the airline from what appeared to be certain liquidation four months ago when it filed for bankruptcy.

“US Airways management must utilize the advantage our members have provided, not squander it as they have done in the past. The company has everything it needs from labor to succeed. The pressure is now on management to deliver,” said IAM General Vice President Robert Roach Jr.

The IAM is the fifth and final union to consent to deep cuts intended to save US Airways more than $1 billion annually in labor costs as it tries to transform itself into a low-cost carrier in the mold of profitable carriers like JetBlue Airways and Southwest Airlines.

Concessions by the 8,800 members of the IAM arguably represent the greatest sacrifice made by any of the labor groups at US Airways.

By approving changes to their contract, the airline’s 4,600 mechanics agreed to let US Airways eliminate up to 2,000 of their jobs — more than 40 percent — and cut wages for those whose jobs are salvaged. Mechanics at the top of the pay scale will see their wages cut by 14 percent.

But not approving a contract with job and wage cuts could have pushed the company into insolvency and eliminated all jobs, union officials said.

“The vote came down to choosing between bad and worse,” said William O’Driscoll, president of IAM District 142, which represents mechanics at US Airways.

The airline plans to outsource the 2,000 mechanics’ jobs.

US Airways also plans to outsource some of the 4,200 baggage handlers’ jobs and cut their wages by up to 20 percent. The airline has not defined the number of baggage handling jobs it will eliminate, but it reserves the right to make job cuts in 21 cities.

Wages of the airline’s 4,600 mechanics are dictated by one contract; 4,200 baggage handlers have a separate labor agreement. A group of 34 maintenance training specialists, also represented by the IAM, approved changes yesterday that will save US Airways about $1 million annually.

The agreements were approved by 61 percent of the mechanics group, 62 percent of baggage handlers and 97 percent of maintenance training specialists.

Concessions from unions representing pilots, engineers, dispatchers and flight crew trainers have led to about $340 million in annual cuts. Ticket and reservation agents agreed to $137 million in annual concessions, and flight attendants approved changes to its labor agreement that will save US Airways $94 million annually.

With another $346 million in savings through changes to IAM contracts, direct savings from labor amounts to $917 million annually.

“All employees have made tremendous sacrifices and now we will work in unity to improve relations, transform our business and emerge as a stronger airline,” US Airways Senior Vice President Jerrold Glass said.

US Airways also will save money through termination of pensions of 50,000 current and former employees. U.S. Bankruptcy Judge Stephen Mitchell said funding the pension plans would have cost US Airways $987 million from 2005 through 2009, and on Jan. 6 he ruled that US Airways no longer had to fund them.

US Airways still faces a significant challenge before it can emerge from bankruptcy, which it must do by June 30, under the terms of agreements it has with creditors.

The company must come up with $250 million in financing.

Concessions by the IAM may buy US Airways time to find money, but the union’s conciliatory gesture doesn’t ensure the airline’s survival, said Robert Mann, president of Port Washington, N.Y., airline industry analyst R.W. Mann and Company Inc.

“I don’t think anyone believes that USAir is anything but a lifeboat with a lot of holes in it,” he said.

The airline’s problems are compounded by recent fare wars that started this month when Delta Air Lines cut some fares, and by Southwest’s decision to begin flying to Pittsburgh, long regarded as US Airways’ home turf.

“US Airways now has the opportunity to find financing, but I think it’s going to be exceedingly difficult,” Mr. Mann said.

In addition, low-cost carrier JetBlue will take delivery of regional jets later this year and plans to deploy them along the East Coast in cities where US Airways flies to, said Ron Kuhlmann, vice president of Unisys R2A Transportation Management Consultants, an aviation industry analyst in Oakland, Calif.

“Things are fairly well stacked against them,” he said. “I think there’s a certain inevitability [to their demise]. The timeline is what’s hard to predict.”

US Airways also has deep debts. US Airways still owes about $646 million on a $900 million loan backed by the Air Transportation Stabilization Board.

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