Yesterday the US Airways unsecured creditors committee was formed and US Airways briefed the group on the company’s business plan. It’s unclear what was discussed, but according to the Charlotte Observer, "These are challenging times and we have a challenge ahead of us," US Airways Chief Executive Bruce Lakefield said, addressing a gathering of about 150 creditors and lawyers in a hotel ballroom in Arlington, Va., where US Airways is based. Dealing with labor costs is "extremely painful," said Lakefield, according to Bloomberg News. He said negotiations are ongoing with the company's unions and US Airways is prepared to ask a bankruptcy judge to allow it to cancel labor contracts and restructure obligations to retirees if necessary.
US Airways gained an ally in bankruptcy court Monday, with the formation of a creditors committee that seems inclined to support the airline's efforts to keep flying, the Observer noted.
It is my understanding that the new business plan has two options: the “Transformation Plan†with approximately 280-mainline aircraft with a network carrier/LCC hybrid business model and a second plan with 150-aircraft that eliminates European flying and focuses on East Coast point-to-point flying the mimic JetBlue Airways. The network carrier/LCC hybrid business plan provides a 4% profit margin and the 150 aircraft plan provides a 8% profit margin.
US Airways’ September 10 proposal to ALPA eliminated much of the scope protection with elimination of fragmentation protection, contingent acquisition rights, the 279 minimum fleet count, and no furloughs due to productivity improvements.
US Airways’ September 20 proposal to ALPA rescinded all previous proposals and created more givebacks, which are now reportedly being required by the ATSB and the creditor’s committee. US Airways costs are increasing in bankruptcy to pay its advisors, guaranteed loan interest, and ATSB investment banker fees.
The September 20 proposal to ALPA increases the pay cut from 16.5% to 19.5%, reduces vacation from 42 to 21 days, and has further erosion of scope including out of seniority furloughs, no severance pay, and no displacement rights or bumping at MDA.
If the company is forced to implement the 150-aircraft mainline fleet plan by the creditor’s due to labor not voluntarily participating in the new business plan, it’s unclear what 150-aircraft could be kept. However, one idea would be to keep the A320 family and B757 aircraft. This could permit the furlough of all A330, B767, and B737 pilot’s; as well as permanently furlough or terminate all F/A’s on voluntary furlough.
Also noteworthy, US Airways then could take delivery of A322, A321, A320 aircraft to replace the B757s and go to one fleet type, which could eliminate virtually all of the maintenance department and create significant economies of scale.
If these two fleet types remain, this would permit the company to close the B737 overhaul facility in PIT, the CLT A330 heavy maintenance line, the Pittsburgh Reservations facility, and furlough these employee groups out of seniority too.
In regard to ALPA’s RC4 both Philadelphia Reps would be furloughed and the Pittsburgh Reps could be neutered as the base is reduced to about 200 pilots.
The company’s last proposal to ALPA was provided to the MEC chairman because there are no negotiations occurring between the Negotiating Committee and the Company. The parties are preparing for the anticipated S.1113(e) filing with the new proposal to the pilot's the basis for the company’s motion. It is expected that other unions will get similar proposals that further cut pay and benefits in response to ATSB demands.
The ALPA MEC is scheduled to reconvene today in Charlotte where these events will be addressed by the MEC.
When would now be a good time for all of the unions to reach consensual labor accords to possibly prevent the 150-aircraft plan to be implemented – that the creditors believe would provide US Airways with a higher profit margin? Separately, ALPA's advisors have predicted that every company proposal would get worse, which keeps occurring. Is the company's latest proposal to ALPA a "Club" to finally get the RC4's attention or is it the precursor to the 150-aircraft point-to-point flying mainline fleet plan?
Regards,
USA320Pilot
