May 16, 2002 By Matthew Barakat Ap Business Writer 3 min read

WASHINGTON (AP) – US Airways’ unions warned management Wednesday that they will cast a skeptical eye on the airline’s pending restructuring plan, which will likely seek significant pay concessions from employees. Airline executives offered only the broadest outline of their restructuring plan at Wednesday’s annual shareholders’ meeting: creating partnerships with other domestic and international carriers, seeking concessions from labor unions and lenders, and securing a federally backed loan to stave off bankruptcy.

Details of the plan are expected Thursday. But union leaders who spoke at Wednesday’s meeting said they want to see hard evidence of the plan’s viability before granting any concessions.

“It just seems like it’s not a long-range plan,” said Karen Lascoli, chairman of the Association of Flight Attendants’ US Airways unit. “It’s a quick fix and then we’re back to where we started.”

Chris Beebe, who represents US Airways’ pilots, said that “our pilots do not doubt that a guaranteed loan is needed, nor do we doubt that the company’s financial situation requires immediate attention. However, if we are asked to invest in a plan that shapes our future we must believe in it. We must know that it will be viable and faithfully executed.”

The airline industry suffered badly in 2001, especially US Airways. It entered the year with an offer from United Airlines to buy the company at $60 a share. Shares were up 9 cents at $2.94 a share in afternoon trading on the New York Stock Exchange. The company lost $2.1 billion, a whopping $31.48 per share. The Arlington, Va.-based airline reduced capacity by 23 percent and laid off 11,000 of its 46,000 employees after Sept. 11. US Airways suffered disproportionately following the Sept. 11 attacks – Reagan National Airport in metropolitan Washington, where it is the largest carrier, remained closed for several weeks. Also, because the company’s core strength is short routes along the East Coast, many customers had the option to travel by car or train.

On top of that, the airline has the industry’s highest labor costs. Most unions have contracts that guarantee parity with the nation’s four largest airlines, plus 1 percent. The company has said it cannot sustain such high rates, especially now that US Airways has dropped from the sixth- to seventh-largest domestic airline.

Last week, the company warned that it might have to file for bankruptcy if it cannot obtain federally backed loans that were a part of last year’s congressional bailout of the industry.

At Wednesday’s meeting, the company’s new president, David Siegel, said that seeking concessions from employees, lenders and others is “a painful process, nothing I like asking for. It’s a necessity to ensure our survival long term.”

Siegel received a vote of confidence at the meeting from the man who runs the company that now ranks as US Airways’ largest shareholder.

Jonathan Ornstein, CEO at Phoenix-based Mesa Air Group, said he worked with Siegel at Continental Airlines in the mid 1990s, and that Siegel played a major part in reviving that airline.

Ornstein, whose airline operates under the US Airways Express banner, said his company has continued to buy stock even as the price has plummeted.

“I don’t think there will be a bankruptcy filing,” Ornstein said. “The airline industry has a very sophisticated group of lenders. They realize it’s much better to do something outside of bankruptcy.”

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