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US Air Locked in Down-to-Wire Talks on Cuts With Its Pilots
By MICHELINE MAYNARD
Published: August 31, 2004
US Airways was locked in tumultuous bargaining yesterday on wage and benefit cuts with its pilots' union, whose backing is critical if the airline is to avoid another bankruptcy filing.
US Airways, which wants to reposition itself to compete with low-fare airlines, is asking its major labor unions for contract concessions worth $800 million as the crucial component of that plan.
Over all, the airline, part of the US Airways Group, is striving to cut $1.5 million in annual costs. The talks are being held in Arlington, Va., where US Airways is based.
The concessions would be the third round granted in the last two years by the airline's four major unions. They agreed to two rounds while US Airways was operating under bankruptcy protection, which it sought in August 2002.
US Airways emerged from bankruptcy in April 2003, only to find that its costs were still higher than those of its leanest competitors.
The airline wants to have agreements on cuts from its pilots, flight attendants, mechanics and gate agents by Sept. 15 so it can meet a series of financial deadlines at the end of the month.
It is required to be in compliance with the covenants of its federal loan guarantees, which were the basis of its restructuring plan. And it faces deadlines with aircraft makers and lenders, including two makers of regional jets, Embraer and Bombardier.
Without the cuts, the airline has said it is likely to seek another bankruptcy filing as soon as next month.
US Airways has been adamant that as part of its overall plans it needs cuts worth $295 million from the pilots' union, a figure the union has resisted.
Until last week, the pilots were offering cuts worth $100 million to $115 million less, along with some changes in work rules, according to people briefed on both sides' offers.
But yesterday, leaders of the Air Line Pilots Association sent signals that they were softening their resistance to US Airways' demands.
On Friday, the union's 12-member master executive council decided to send bargainers back to the negotiating table for the first time since talks broke off the previous Sunday. Then, on Saturday, the union made a new proposal to the company. US Airways countered that with its own offer on Sunday.
In a statement to union members, the pilots' union said its leaders had unanimously rejected that offer as "unacceptable."
Nonetheless, they authorized bargainers to continue negotiations, using their own offer made on Saturday as the basis for negotiations. They said that restrictions placed on them over the weekend had been removed, but the union did not specify what that meant.
The pilots were expected to make another offer yesterday. In a statement, the airline said it was willing to work all night in the resumed negotiations.
The resumption of talks in earnest yesterday came after a long and apparently contentious meeting on Sunday of the pilots' leadership group, made up of pilots from the airline's major hubs and other key cities.
The group is said to be split between pilots resisting more concessions and those willing to consider a third round to rescue the airline. The conclusion that a rescue is needed is based in part on the dire forecast in a report prepared by the pilots' financial adviser, Glanzer & Company, an investment banker.
The report warned that without cuts, the airline would wind up seeking bankruptcy protection and was in danger of liquidating, a prospect that has also been raised by US Airways' chairman, David G. Bronner.
At one point on Sunday the exhausted pilots could not even agree on what time to resume meeting yesterday.
"This is not our finest hour," the chairman of the pilots' union, Bill Pollack, said in a statement issued at 1:30 a.m. yesterday. He went on, "We are running out of time and wasting opportunities."
But Gary L. Chaison, professor of industrial relations at Clark University in Worcester, Mass., said the internal squabbles were actually healthy, given the stakes involved.
"They were faced with what was the most difficult decision that this union has to make," Professor Chaison said, "they didn't know how to deal with it, and they had to argue it out."
The pressure is heightened by the fact that US Airways cannot expect cuts from other unions unless the pilots lead the way, he added. "It's almost as if they are negotiating for everybody. And it's scary because they are going right up to the edge," Professor Chaison said.
US Airways is also negotiating with its flight attendants' union, but those talks are considered to be far from any conclusion.
Talks are set to begin today between US Airways and the International Association of Machinists and Aerospace Workers, which represents the airline's mechanics.
The machinists are refusing to reopen their contract but say they are willing to talk to the company about cost-cutting ideas. Joseph Tiberi, a spokesman for the machinists union, said those discussions would take place regardless of the outcome of the talks with the pilots.
By MICHELINE MAYNARD
Published: August 31, 2004
US Airways was locked in tumultuous bargaining yesterday on wage and benefit cuts with its pilots' union, whose backing is critical if the airline is to avoid another bankruptcy filing.
US Airways, which wants to reposition itself to compete with low-fare airlines, is asking its major labor unions for contract concessions worth $800 million as the crucial component of that plan.
Over all, the airline, part of the US Airways Group, is striving to cut $1.5 million in annual costs. The talks are being held in Arlington, Va., where US Airways is based.
The concessions would be the third round granted in the last two years by the airline's four major unions. They agreed to two rounds while US Airways was operating under bankruptcy protection, which it sought in August 2002.
US Airways emerged from bankruptcy in April 2003, only to find that its costs were still higher than those of its leanest competitors.
The airline wants to have agreements on cuts from its pilots, flight attendants, mechanics and gate agents by Sept. 15 so it can meet a series of financial deadlines at the end of the month.
It is required to be in compliance with the covenants of its federal loan guarantees, which were the basis of its restructuring plan. And it faces deadlines with aircraft makers and lenders, including two makers of regional jets, Embraer and Bombardier.
Without the cuts, the airline has said it is likely to seek another bankruptcy filing as soon as next month.
US Airways has been adamant that as part of its overall plans it needs cuts worth $295 million from the pilots' union, a figure the union has resisted.
Until last week, the pilots were offering cuts worth $100 million to $115 million less, along with some changes in work rules, according to people briefed on both sides' offers.
But yesterday, leaders of the Air Line Pilots Association sent signals that they were softening their resistance to US Airways' demands.
On Friday, the union's 12-member master executive council decided to send bargainers back to the negotiating table for the first time since talks broke off the previous Sunday. Then, on Saturday, the union made a new proposal to the company. US Airways countered that with its own offer on Sunday.
In a statement to union members, the pilots' union said its leaders had unanimously rejected that offer as "unacceptable."
Nonetheless, they authorized bargainers to continue negotiations, using their own offer made on Saturday as the basis for negotiations. They said that restrictions placed on them over the weekend had been removed, but the union did not specify what that meant.
The pilots were expected to make another offer yesterday. In a statement, the airline said it was willing to work all night in the resumed negotiations.
The resumption of talks in earnest yesterday came after a long and apparently contentious meeting on Sunday of the pilots' leadership group, made up of pilots from the airline's major hubs and other key cities.
The group is said to be split between pilots resisting more concessions and those willing to consider a third round to rescue the airline. The conclusion that a rescue is needed is based in part on the dire forecast in a report prepared by the pilots' financial adviser, Glanzer & Company, an investment banker.
The report warned that without cuts, the airline would wind up seeking bankruptcy protection and was in danger of liquidating, a prospect that has also been raised by US Airways' chairman, David G. Bronner.
At one point on Sunday the exhausted pilots could not even agree on what time to resume meeting yesterday.
"This is not our finest hour," the chairman of the pilots' union, Bill Pollack, said in a statement issued at 1:30 a.m. yesterday. He went on, "We are running out of time and wasting opportunities."
But Gary L. Chaison, professor of industrial relations at Clark University in Worcester, Mass., said the internal squabbles were actually healthy, given the stakes involved.
"They were faced with what was the most difficult decision that this union has to make," Professor Chaison said, "they didn't know how to deal with it, and they had to argue it out."
The pressure is heightened by the fact that US Airways cannot expect cuts from other unions unless the pilots lead the way, he added. "It's almost as if they are negotiating for everybody. And it's scary because they are going right up to the edge," Professor Chaison said.
US Airways is also negotiating with its flight attendants' union, but those talks are considered to be far from any conclusion.
Talks are set to begin today between US Airways and the International Association of Machinists and Aerospace Workers, which represents the airline's mechanics.
The machinists are refusing to reopen their contract but say they are willing to talk to the company about cost-cutting ideas. Joseph Tiberi, a spokesman for the machinists union, said those discussions would take place regardless of the outcome of the talks with the pilots.
