Bankruptcy

US Airways Agreement Expected

The airline has warned that without the cuts to a pension plan, part of a $1.5 billion restructuring, it is likely to file again for bankruptcy pro...
Ed ZwirnSeptember 3, 2004

US Airways Group Inc. and the Air Line Pilots Association are still locked in negotiations over the pilots’ pension plan.

The plan has already been diminished by the restructuring deal announced when the company last emerged from Chapter 11, in April 2003. Now it’s at the core of $295 million in wage and benefit cuts — part of $800 million in overall concessions — that the airline is seeking from its 28,000 employees.

As of late Thursday afternoon, according to press reports, negotiations were still continuing between the airline and the pilots’ union. PittsburghChannel.com, the website of a local news program, reported that according to a union spokesman, an agreement was expected within the “next 24 to 48 hours.”

The pilots were divided along generational lines, added the report; younger union members were more interested in guarding their salaries, and older ones were more concerned about preserving their already-cut pensions.

US Airways has warned that without the cuts — part of a $1.5 billion restructuring plan — it is likely to file again for bankruptcy protection as soon as the end of this month, noted the website, which added that the airline is calling upon unions to reach deals by September 15.

After emerging from Chapter 11 in 2003, the airline found that its costs were well above those of low-fare airlines, which were attracting an increasing share of passengers. Employees had allowed the company to make two rounds of cuts while it was in bankruptcy; the cuts by the pilots in 2002 and 2003 were worth a total of $566 million, reported The New York Times.

Last year, the airline shut down its pilots’ pension plan and replaced it with a less-generous retirement program. Changes to pensions were a condition of US Airways’ federal loan guarantee package, which allowed it to restructure. At the time, its pension plan was underfunded by more than $2 billion, according to the Times.

In a related development, on Thursday afternoon the beleaguered airline announced its appointment of James Schear as vice president in charge of restructuring. Schear, a former US Airways employee most recently employed by the Federal Aviation Administration, will report directly to president and chief executive officer Bruce Lakefield.