- The Washington Times - Thursday, January 6, 2005

A bankruptcy judge in Alexandria yesterday canceled a union contract between US Airways and its mechanics to spare the airline from liquidation.

Although the decision could save US Airways about $270 million in wages, it would result in pay cuts for union workers ranging from 6 percent to 35 percent and the loss of thousands of jobs.

After the ruling, Arlington-based US Airways reached an agreement with the International Association of Machinists (IAM) to hold off on the pay cuts until union members have a chance to vote on a new labor contract. The proposed contract, which would include pay and benefit reductions, is scheduled to be completed by Jan. 21.

Union officials acknowledged that a job action still is possible by the airline’s nearly 9,000 mechanics and baggage handlers.

“They will be taking a strike vote at the same time” [as the contract ratification vote], said Joe Tiberi, IAM spokesman.

US Airways argued in court that a walkout would violate the Railway Labor Act, which prohibits transportation strikes without first trying to resolve disputes through federal mediation. The union argued the act’s prohibition no longer applies after a labor agreement is voided.

If the union ratifies the proposed contract, US Airways has said it would let the new agreement determine pay and benefits rather than the federal judge’s ruling yesterday.

“Regrettably, we cannot save every job and every function and these employees, like all other work groups, must share in the changes that the company needs to make,” said Jerrold A. Glass, US Airways vice president for employee relations. “But we are quite hopeful that our employees will see these proposals as viable alternatives and they will quickly be ratified.”

However, airline officials said they plan to go ahead with pension reductions allowed by the court regardless of the union vote.

The judge approved a US Airways request to terminate the pension plans for machinists and flight attendants, as well as a frozen pension plan that provided benefits to 28,000 retirees. The airline expects to save $1 billion over five years by getting rid of the pension plans.

U.S. Bankruptcy Judge Stephen Mitchell said that “at bottom, it is clear that the debtor’s financial position is so precarious that even with the relief being sought, there will still be grave questions as to whether it can survive.”

Although US Airways officials say the ruling will allow them to continue operating, some industry analysts are unconvinced.

“You have an airline that has now been managed to the point where you have a certain proportion of your employees in a mutinous situation,” said Michael J. Boyd, president of the Boyd Group, an airline consulting firm. “You can’t run an airline like that.”

As Bruce R. Lakefield, US Airways’ chief executive officer, spoke with reporters outside the courthouse, he was confronted by angry union members who asked him what kind of pay cuts he would take.

The judge’s ruling follows by one day approval of a labor contract by the Association of Flight Attendants that cuts its members’ pay at US Airways by nearly 10 percent, saving the airline about $94 million. The union represents more than 5,000 US Airways workers.

US Airways has said it would begin liquidating assets if it did not receive labor contract concessions by mid-January.

Termination of the pensions will shift responsibility for the retiree payments to the federal Pension Benefit Guaranty Corp. (PBGC), which insures failed pensions. Historically, the PBGC has paid most of the benefits due under failed pension plans.

After the judge’s decision to terminate the pensions, Rep. John A. Boehner, Ohio Republican, issued a statement saying, “It is critical that Congress take action in the coming months to reform and strengthen the defined benefit system to protect the interests of workers, retirees and taxpayers.” Mr. Boehner is chairman of the House Education and the Workforce Committee.

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