US Airways pilots tentatively agree to concessions
ARLINGTON, Va. (AP) – US Airways reached a tentative agreement Wednesday with its pilots for a second round of concessions that will save the company $100 million a year. The pilots’ concessions are key to the bankrupt airline’s plans to achieve an additional $200 million to $400 million in cost cuts that it says it needs to secure a federal loan guarantee and restore profitability when it emerges from bankruptcy.
The pilots had previously agreed to $465 million in wage concessions, which eliminated pay raises of 17 and 16 percent the pilots had received in 2001 and 2002, and made further cuts.
Overall, the airline said before Wednesday’s agreement that it had cut annual costs by $1.3 billion, with $840 million of that coming from employees.
The airline initially thought those cuts would be sufficient, but rising fuel costs, continued weakness in the overall industry and the threat of war with Iraq forced the company to change its estimates. It now says it needs cuts of $1.4 billion to $1.6 billion a year.
The company, which has major hubs in Philadelphia and Pittsburgh, lost $2.1 billion on revenue of $8.3 billion in 2001.
Jerry Glass, the airline’s senior vice president for employee relations, said the deal will likely save more than $100 million because of changes to the pension formula and other benefits that are more difficult to quantify exactly.
He said the airline is asking the other unions, including those representing flight attendants, mechanics and gate workers, to make additional concessions of about $100 million a year.
He said the pilots’ agreement should provide momentum to talks with the other groups.
“The pilots are the leaders of this airline,” Glass said. “when they step up and do what they did, all the other employees take notice.”
Glass also said the company can obtain $100 million to $200 million in cost cuts from groups outside of labor, including management, and cost cuts involving vendors and others who do business with the airline.
“We have not asked labor to fill in the hole completely,” he said.
US Airways president and chief executive David Siegel praised the union leaders for showing “tremendous leadership and a keen understanding of what was required in order to successfully complete our Chapter 11 reorganization.”
The airline had said the second round of cost cuts could be achieved without further wage cuts by improving productivity. But the pilots told management they preferred wage cuts to some of the productivity changes that would have resulted in job losses.
“They wanted to put more pilots out on the streets, and we were resisting that,” said union spokesman Roy Freundlich.
More than 1,800 of the airline’s 6,000 pilots are on furlough or scheduled for furlough, Freundlich said. The layoffs are so deep that pilots with 15 years of experience are being furloughed.
As part of the agreement, the airline agreed to raise its minimum fleet size from 245 jets to 279 jets. In addition, the company said its new regional jet division, MidAtlantic Airways, will be a division of US Airways. That means furloughed mainline pilots will have an easier time getting jobs flying the smaller regional jets. Pilots are paid less to fly regional jets than mainline jets.
“Our objective was to help the company secure the federal ATSB (Air Transportation Stabilization Board) loan,” Freundlich said. “We believe this agreement makes significant strides to ensuring the loan guarantee.”
The ATSB has given US Airways tentative approval of a $1 billion loan package, 90 percent of which is guaranteed by the federal government. But the approval is conditioned upon the airline implementing a successful business plan.
David Bronner, chief executive of the Retirement Systems of Alabama, which is in line to take a controlling interest in the airline when it emerges from bankruptcy, praised the agreement.
“The cooperation between labor and management and their long-term outlook to secure success for the airline were primary reasons for our decision to invest in the company,” he said.
The airline remains in talks with its other unions. It plans to submit a detailed reorganization plan to the bankruptcy court by Dec. 20 and hopes to emerge from bankruptcy by March.