MEC CODE-A-PHONE UPDATE
February 24, 2003
This is Roy Freundlich with a US Airways MEC update for Monday, February 24, with two new items:
Item 1. The U.S. Bankruptcy Court hearing on the Company’s motion to distress terminate the pilots defined benefit plan reconvened today. Approximately 60 active and retired US Airways pilots attended today’s hearing.
Direct examination of CFO Neil Cohen continued this morning on the Company’s historical rendition of restructuring efforts. Testimony on the pilots pension issues included the labor restructuring agreements, small jet financing, DIP requirements and other financial issues, and management compensation issues.
· The Company has taken the position that ALPA agreed to the termination of the defined benefit plan on December 13, 2002, in the letter that the MEC required the Company to execute to ensure that the Company would not pocket the restoration funding money in the event the plan were terminated by the PBGC. The Company is attempting to have the court rule that the termination is agreed to--despite the fact that the letter does not state this, nor would ALPA have required such a letter--in order to avoid bankruptcy code 1113 proceedings to modify our contract.
· Cohen stated that he was against the 12/13 letter that committed the Company’s restoration funding to a pilot follow on pension plan in the event the defined benefit plan was terminated. Cohen stated that he was against committing that much money on short notice, but was overruled.
· The Company believes that because the IRS and PBGC said no to restoration funding that the 12/13 letter was no longer confidential on January 9, 2003, even though the letter requires plan termination before confidentiality release so as not to interfere with a legislative solution. Recall that President and CEO David Siegel testified at the first senate hearing on this issue that he would be working with ALPA on an alternative pension plan that matched the economics of the restoration funding in the 1/03 ATSB business plan, per the 12/13 letter, which violated the confidentiality of the letter and effectively torpedoed the legislative effort for restoration funding.
· On cross examination ALPA and other objector attorneys pointed out that in no subsequent documents after January 9, or in the company’s POR disclosure statement did the Company claim to have reached an agreement with ALPA on the distress termination of the pilots defined benefit plan. The Company also never told the creditors committee in subsequent meetings that it had reached an agreement with ALPA on the distress termination of the pilots defined benefit plan. It is only in the Company’s motion to terminate the plan that this claim being made by management.
· On cross examination from ALPA, Cohen testified that Stephen Wolf and Rakesh Gangwal received 15 million dollars each in non-qualified payments and Larry Nagin received 5 million dollars in non qualified payment just before the Company went into Chapter 11 bankruptcy. Cohen further testified that the Company was not seeking recovery of this 35 million dollar payout even though the bankruptcy code contains provisions to get the money back to US Airways. US Airways cash position is currently at 450-470 million dollars and is expected to worsen over the next few weeks.
· Cohen also testified that the Company fell 30 percent short (70/100 million dollars) on its cost reductions with other employee groups during the second restructuring negotiations and obtained no benefit decreases in other employee pension plans. ALPA and the US Airways pilots provided the Company with 100 percent of the requested cost reductions ($101 million) and pension benefit reductions that saved the Company 500 million dollars over seven years to preserve the pilots pension plan.
· Cohen testified that the Company is planning to furlough another 55 pilots this year.
· On cross examination Cohen claimed to not be familiar with the percent of pilot payroll to all employee payroll. He claimed to not be familiar with his own compensation package that was in effect prior to bankruptcy or what it would be in the future, just that his salary is $391,000. And as CFO, he claimed to not know and could not estimate the cost of management’s compensations package, which is expected to be released to the court on February 27.
The hearing recessed at approximately 6:00 p.m. and is scheduled to reconvene at 9:30 a.m. on Friday, February 28. The hearing has been progressing slowly due to the amount of time it is taking for the company to complete its direct examination of its witnesses and the multiple objector cross-examinations. The Company is scheduled to call John Luth of the Seabury Group consulting firm, Mark Duncan of Towers Perrin, the Company’s actuarial firm, and US Airways President and CEO David Siegel before completing its presentation of its motion. ALPA’s objection to the Company’s motion is expected to be heard on Friday.
Item 2. The Company has posted Permanent Bid 03-03. The effective month of the bid is May 2003.
The drivers of the bid include:
· Vacancies and displacements resulting from attrition, contingency openings and retirements.
· One Captain (Age 60) retirement for the A330, that will occur in June 2003.
A copy of the bid is available on the Pilots Only section of the MEC web site at usairwayspilots.org.
The bid will close at 2330 Eastern Time on March 2.
Please remember we have 1,827 pilots on furlough.
Thank you for listening.
February 24, 2003
This is Roy Freundlich with a US Airways MEC update for Monday, February 24, with two new items:
Item 1. The U.S. Bankruptcy Court hearing on the Company’s motion to distress terminate the pilots defined benefit plan reconvened today. Approximately 60 active and retired US Airways pilots attended today’s hearing.
Direct examination of CFO Neil Cohen continued this morning on the Company’s historical rendition of restructuring efforts. Testimony on the pilots pension issues included the labor restructuring agreements, small jet financing, DIP requirements and other financial issues, and management compensation issues.
· The Company has taken the position that ALPA agreed to the termination of the defined benefit plan on December 13, 2002, in the letter that the MEC required the Company to execute to ensure that the Company would not pocket the restoration funding money in the event the plan were terminated by the PBGC. The Company is attempting to have the court rule that the termination is agreed to--despite the fact that the letter does not state this, nor would ALPA have required such a letter--in order to avoid bankruptcy code 1113 proceedings to modify our contract.
· Cohen stated that he was against the 12/13 letter that committed the Company’s restoration funding to a pilot follow on pension plan in the event the defined benefit plan was terminated. Cohen stated that he was against committing that much money on short notice, but was overruled.
· The Company believes that because the IRS and PBGC said no to restoration funding that the 12/13 letter was no longer confidential on January 9, 2003, even though the letter requires plan termination before confidentiality release so as not to interfere with a legislative solution. Recall that President and CEO David Siegel testified at the first senate hearing on this issue that he would be working with ALPA on an alternative pension plan that matched the economics of the restoration funding in the 1/03 ATSB business plan, per the 12/13 letter, which violated the confidentiality of the letter and effectively torpedoed the legislative effort for restoration funding.
· On cross examination ALPA and other objector attorneys pointed out that in no subsequent documents after January 9, or in the company’s POR disclosure statement did the Company claim to have reached an agreement with ALPA on the distress termination of the pilots defined benefit plan. The Company also never told the creditors committee in subsequent meetings that it had reached an agreement with ALPA on the distress termination of the pilots defined benefit plan. It is only in the Company’s motion to terminate the plan that this claim being made by management.
· On cross examination from ALPA, Cohen testified that Stephen Wolf and Rakesh Gangwal received 15 million dollars each in non-qualified payments and Larry Nagin received 5 million dollars in non qualified payment just before the Company went into Chapter 11 bankruptcy. Cohen further testified that the Company was not seeking recovery of this 35 million dollar payout even though the bankruptcy code contains provisions to get the money back to US Airways. US Airways cash position is currently at 450-470 million dollars and is expected to worsen over the next few weeks.
· Cohen also testified that the Company fell 30 percent short (70/100 million dollars) on its cost reductions with other employee groups during the second restructuring negotiations and obtained no benefit decreases in other employee pension plans. ALPA and the US Airways pilots provided the Company with 100 percent of the requested cost reductions ($101 million) and pension benefit reductions that saved the Company 500 million dollars over seven years to preserve the pilots pension plan.
· Cohen testified that the Company is planning to furlough another 55 pilots this year.
· On cross examination Cohen claimed to not be familiar with the percent of pilot payroll to all employee payroll. He claimed to not be familiar with his own compensation package that was in effect prior to bankruptcy or what it would be in the future, just that his salary is $391,000. And as CFO, he claimed to not know and could not estimate the cost of management’s compensations package, which is expected to be released to the court on February 27.
The hearing recessed at approximately 6:00 p.m. and is scheduled to reconvene at 9:30 a.m. on Friday, February 28. The hearing has been progressing slowly due to the amount of time it is taking for the company to complete its direct examination of its witnesses and the multiple objector cross-examinations. The Company is scheduled to call John Luth of the Seabury Group consulting firm, Mark Duncan of Towers Perrin, the Company’s actuarial firm, and US Airways President and CEO David Siegel before completing its presentation of its motion. ALPA’s objection to the Company’s motion is expected to be heard on Friday.
Item 2. The Company has posted Permanent Bid 03-03. The effective month of the bid is May 2003.
The drivers of the bid include:
· Vacancies and displacements resulting from attrition, contingency openings and retirements.
· One Captain (Age 60) retirement for the A330, that will occur in June 2003.
A copy of the bid is available on the Pilots Only section of the MEC web site at usairwayspilots.org.
The bid will close at 2330 Eastern Time on March 2.
Please remember we have 1,827 pilots on furlough.
Thank you for listening.
20 AM PITbull wrote: 
