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US Airways has tentative $100 million deal with pilots

| Thursday, Dec. 12, 2002

Bankrupt US Airways reached a tentative agreement with its pilots union Wednesday that is geared to save about $100 million through changes to benefits, work rules and wages.

The pact amounts to half the critical expense reductions the airline seeks in order to finalize a reorganization plan that US Airways expects to submit to the bankruptcy court in Alexandria, Va., by the end of next week.

"This is a very significant agreement reached by the pilots, who showed real leadership," said Jerry Glass, senior vice president of employee relations.

US Airways continues to negotiate with unions representing aircraft mechanics, flight attendants, baggage handlers, customer-service and ticket agents and other workers. Management is requesting from those groups similar concessions worth about $100 million in operating savings.

"You have to pull out all the stops to make this (reorganization) work," said Mike Boyd, head of aviation consultants The Boyd Group, Evergreen, Colo.

The tentative pact with the Air Line Pilots Association should help persuade other work groups "to get this done in a quick manner," said Glass.

US Airways employs about 9,100 people based at Pittsburgh International Airport, including some 900 pilots. That compares with about 11,600 employees locally before Sept. 11, 2001.

The troubled airline this past summer reached labor agreements that cut operating costs by about $900 million. US Airways also was able to achieve roughly $400 million more in savings from aircraft lessors and other creditors.

But management returned to its workers' unions in late November, when it became apparent passenger revenue was still stymied by the weak economy and aftereffects of the terrorist attacks.

The downturn led US Airways' backer in bankruptcy — the Retirement Systems of Alabama — to call for more concessions or it would pull the money plug. The pension fund has pledged to provide $200 million more in credit — on top of $300 million provided already — and to invest $240 million for 37.5 percent of US Airways' post-bankruptcy stock.

US Airways and the Alabama pension fund want the added savings to bolster its reorganization plan headed for the bankruptcy court next week. That plan also is geared to win final approval for $900 million in loan guarantees from the government's Air Transportation Stabilization Board.

"As recently as last summer, we'd hoped (revenue) would change back to the way we were. But it didn't," Glass said. "The (industry) has changed fundamentally and permanently."

According to the pilots union, the pact generally would:

  • Change work rules to make pilot scheduling more rigid, which reduces head count.

  • Reduce vacation pay for mainline pilots and cut wages for pilot trainees. The pilots also would see a temporary reduction in regular wages.

  • Cut pension benefits to give US Airways time to erase a funding deficit stemming from the past two year's poor performing stock market. Benefits would float back up at some later point.

    "The tentative agreement seeks to ensure that US Airways successfully obtains the ATSB loan guarantee and takes an important stride to assuring US Airways emerges from bankruptcy," said ALPA spokesman Roy Freundlich.

    The pilots union's Master Executive Council was expected to take a ratification vote as early as last night. The pilots group has 1,356 of its members currently on furlough.

    As part of the agreement, the company will recast its newly formed MidAtlantic Airways as the regional-jet division of US Airways, instead of as a subsidiary.

    The change is intended to create jobs for furloughed mainline workers. They will be assigned to work MidAtlantic's regional jets at "competitive" wages and benefits, while allowing them to keep their seniority and letting management better coordinate staffing, the airline said.

    Based in Pittsburgh, MidAtlantic is supposed to begin flights next fall but has yet to acquire any of its regional jets, Glass said.

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