Airline Sector Weakness Forces More US Airways Cuts

November 26, 2002 ( - Continued weakness in the airline sector has forced the ailing US Airways to lay off 2,500 more workers over the next 90 days. The airline, in which the Retirement Systems of Alabama holds a large stake, also said it will try to get further work rules and benefits changes.

If the company’s unions agree to the changes, US Airways officials said they plan to emerge from Chapter 11 reorganization in US Bankruptcy Court in March 2003. Tuesday’s announcement offered no specifics about the rule and benefit changes the company wanted to implement.

Included in the cost-cutting measures are the closing of a heavy maintenance hangar in Tampa and a reservations call center in Orlando. The Tampa maintenance hangar will be closed immediately, with work shifted to US Airways facilities at Charlotte and Pittsburgh.

The Orlando reservations center will be closed on January 10, 2003, with work moved to Pittsburgh and Winston-Salem, North Carolina offices. Non-management employees at the Tampa and Orlando facilities who hold seniority will be allowed to transfer.

David Siegel, US Airways president and chief executive officer, said that in light of the company’s lowering of fourth-quarter and 2003 industrywide financial performance estimates, US Airways has begun meeting with its labor union leadership to identify the work rule changes and other cost-saving initiatives.

“Cost-cutting and furloughs are an unfortunate and painful part of that process, and as difficult as these furlough decisions are, we must take these actions to ensure our successful restructuring and stay on plan to emerge from Chapter 11 protection in March 2003,” said Siegel.

The air carrier said it plans to file its bankruptcy reorganization plan around December 20, 2002, in time for the Bankruptcy Court to consider the adequacy of the disclosure statement at a scheduled January 16, 2003, hearing.

US Airways hopes to emerge from Chapter 11 with the help of Retirement Systems of Alabama, a pension fund that has agreed to invest $240 million in the company in return for a 37.5% equity stake. RSA also has provided $500 million in debtor-in-possession financing to help US Airways fund its operations while in bankruptcy proceedings. (See  Alabama Pension Fund Wins US Airways Bid ).

Since filing for Chapter 11 protection in August 2002, US Airways has already reduced its work force by almost 2,500.