US Airways Pilots Deal Halfway "There"

December 11, 2002 ( - US Airways Group Inc and its pilots union have reached a tentative agreement on $100 million in annual cost savings - half of what the company needs to avoid bankruptcy liquidation.

According to a Reuters news report, the pilots’ package tentatively agreed upon includes changes in productivity and work rules, temporary wage cuts, and unspecified savings on benefits and pension plans. The group of about 6,000 pilots has already ratified $465 million in annual wage cuts and other concessions.

The Arlington, Virginia air carrier has already secured $1.3 billion in annual savings, but it approached unions for more concessions after it started falling short of revenue targets in September, Reuters said.

The Pressure Builds

The Retirement Systems of Alabama, US Airways’ primary bankruptcy financing partner, stepped up the pressure on workers  last week . Its Chief Executive, David Bronner, made it clear he could refuse to fund the airline if it didn’t secure another $200 million in labor-related cost-cuts to help it meet requirements for its financing.

The loss of that money, which is currently keeping US Airways’ planes in the air, could ruin the airline’s ability to emerge from bankruptcy, Reuters said.

But Bronner said in an interview that the pilots’ agreement dramatically reduced the chance that US Airways would liquidate.

“That’s the first great step to be taken — it’s fantastic for the future of the airline,” Bronner told Reuters. “If they can come to an agreement with their other unions, I think we can make it go.”

Pilots Deal Could Help With Other Unions

US Airways expects to emerge from bankruptcy in March, provided it can win final approval of an application for $900 million in government backing on its loans. The airline’s request was conditionally approved before it filed for bankruptcy protection in August, and the government restated that conditional approval after the filing.

The deal – the first announced by any of the airline’s labor groups – could help clear a path for deals with machinists, communications workers and flight attendants.  US Airways is already in talks with the International Association of Machinists and the Communications Workers of America. Its flight attendants’ union has refused to start negotiations until other labor groups reach agreements and the airline’s management shoulders more cuts, Reuters said.

US Airways said that in exchange for the pilots’ wage cuts and productivity improvements, it would raise the minimum number of aircraft in its mainline fleet, offering more protection for pilots’ jobs.  It would also make MidAtlantic Airways, its new regional jet subsidiary, a division of US Airways, a move that would help secure more jobs for pilots who have been furloughed.

The union said 392 pilots were scheduled to be furloughed on Janueary 7, and another 79 would be furloughed through April, Reuters reported.