Pa. Senators Blame Unions, Executives for US Airways Bankruptcy

September 15, 2004 (PLANSPONSOR.com) - Both Senators from Pennsylvania, the state in which more then a third of US Airways employees work, are pinning blame for the air carrier's situation on both stubborn pilot unions and former executives who accepted 'golden parachutes.'

Senators Rick Santorum and Arlen Specter, following meetings with US Airways chief executive Bruce Lakefield, both had vocal musings on the companies second foray into bankruptcy, according to the Associated Press (AP).

“It seems to me that you have just a very small group of people in the pilots union, unfortunately from Pittsburgh and Philadelphia, four people who ultimately decided that they were going to take this airline down into bankruptcy,” Santorum said after a 35-minute meeting Tuesday afternoon with Lakefield, according to the AP.

Specter, while refusing to blame the unions for the bankruptcy, stated that there were “high levels of anxiety” at US Airways, and that much of the blame should be placed upon former executives who took large severance pay upon resignation. “[They] left a lot undone, no question about it,” Specter stated, according to the AP.

The pilots union denied Santorum’s charge that four Pennsylvanian union executive committee members, representing the majority of the pilots, caused the airline to go into bankruptcy. In a statement released Tuesday, the pilot’s union stated that “the pilot group has already provided US Airways management with $5 billion dollars in previous restructuring efforts, and we have been in discussions with the company in an effort to yield at least $1 billion more in concessions. Sen. Santorum has ignored these facts in an effort to pin blame on the only labor group that has produced real results for US Airways.”

The nation’s seventh-largest airline, US Airways declared bankruptcy Sunday after the Air Line Pilots Association refused to consider a contract proposal that would have cut pilots’ pay and retirement plans (See  US Airways Returns to Bankruptcy Court ). This would have saved the company an estimated $295 million annually, according to the AP.

In 2002, the first time the Arlington, Virginia air carrier ducked into bankruptcy court, the Retirement Systems of Alabama (RSA) invested $240 million in restructuring financing in exchange for a 36% stake in the carrier and eight seats on its board (See  US Airways Reaches Tentative Agreements with Unions, RSA ). RSA Chief Executive Officer  David Bronner assumed the role of chairman. Bronner acknowledged the Alabama fund could lose its entire investment, which amounts to less than 1% of the fund’s portfolio.

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