ALEXANDRIA, Va. - Objections to US Airways'' reorganization plan came from all levels Thursday, from a Weirton, W.Va, mechanic who had his retirement fund wiped out to a group of 12 former executives, including former CEO Seth Schofield, who had their supplemental pension plan terminated.
But a bankruptcy judge turned their objections aside, at least for now, and the airline remained on track to emerge from bankruptcy protection by the end of March, a mere seven months after filing for Chapter 11 protection in August.
The judge is expected to decide on Friday whether the airline''s reorganization plan can move forward. On Thursday, he dealt with numerous objections, including many from shareholders who will see their investments lost completely.
Ron Hirkala, 53, a mechanic who has worked with US Airways for 24 years at its Pittsburgh hangar, estimated that he has lost $75,000 to $80,000 out of his retirement fund because he was invested heavily in company stock.
I have no further retirement funds, and no trust in our company, Hirkala said.
But U.S. Bankruptcy Judge Stephen Mitchell said shareholders cannot be paid unless unsecured creditors collect their claims in full. And US Airways'' plan calls for unsecured creditors to be paid less than 2 cents on the dollar. Mitchell said he believes Congress should consider an exception to that rule for employees whose retirement plans are invested in company stock, but the law currently makes no such exception.
US Airways spokesman Chris Chiames said the company is sympathetic to the plight of employees like Hirkala, but he also said that US Airways employees were never required to hold company stock in their 401 (k) plans.
On the other end of the spectrum, the 12 former executives argued that they were being treated unfairly because the company is canceling a benefits plan that collectively paid annual benefits of about $840,000 a year. US Airways plan'' would reduce that amount to about $15,000 a year.
Philip Anker, a lawyer for the former executives, said the plan is unfair because current executives will continue to receive a healthy benefits plan.
Airline lawyer John W. Butler Jr. disputed that, saying chief executive David Siegel, for instance, has taken a pay cut of about 60 percent. Management as a whole will be given an 8 percent share in the reorganized company, a potentially lucrative amount, but Butler said that was necessary to retain a strong management team.
World-class management teams don''t work for free, Butler said. And world-class management, by its presence, creates value.
Butler also said it would be unseemly to pay former executives a big pension at a time when employees have collectively given back $1 billion a year in salaries and benefits to keep the company from shutting down entirely.
The airline, which has its largest hub in Charlotte, N.C., estimates in its reorganization plan that it will turn a profit of $127 million by fiscal 2004 and increase profits to $405 million by 2007. That is based on projections that revenue will increase from $7.2 billion in 2003 to $7.7 billion by 2007.
In 2001, a year marred by the travel industry''s slump after the Sept. 11 attacks, the company lost $2.1 billion on revenue of $8.3 billion. Since then, the company has laid off about 30 percent of its pre-Sept. 11 work force of 46,000 and cut back its schedule by a similar amount.
The plan filed Thursday does not address an unfunded pension liability of about $3 billion. The company is hoping congressional legislation will allow it some leeway. If not, the company will terminate the pension plan and it would be taken over by the federal Pension Benefit Guaranty Corp.
The PBGC would pay a maximum benefit amount of $28,000 a year, which is just a fraction of what some pilots would receive under their existing plan.
In a memo to pilots Thursday, Siegel said that even if the plan is terminated, the airline would implement a new plan for pilots, so they would receive the federal benefit and a new pension from the airline.
The other unions'' pension plans are not affected.
But a bankruptcy judge turned their objections aside, at least for now, and the airline remained on track to emerge from bankruptcy protection by the end of March, a mere seven months after filing for Chapter 11 protection in August.
The judge is expected to decide on Friday whether the airline''s reorganization plan can move forward. On Thursday, he dealt with numerous objections, including many from shareholders who will see their investments lost completely.
Ron Hirkala, 53, a mechanic who has worked with US Airways for 24 years at its Pittsburgh hangar, estimated that he has lost $75,000 to $80,000 out of his retirement fund because he was invested heavily in company stock.
I have no further retirement funds, and no trust in our company, Hirkala said.
But U.S. Bankruptcy Judge Stephen Mitchell said shareholders cannot be paid unless unsecured creditors collect their claims in full. And US Airways'' plan calls for unsecured creditors to be paid less than 2 cents on the dollar. Mitchell said he believes Congress should consider an exception to that rule for employees whose retirement plans are invested in company stock, but the law currently makes no such exception.
US Airways spokesman Chris Chiames said the company is sympathetic to the plight of employees like Hirkala, but he also said that US Airways employees were never required to hold company stock in their 401 (k) plans.
On the other end of the spectrum, the 12 former executives argued that they were being treated unfairly because the company is canceling a benefits plan that collectively paid annual benefits of about $840,000 a year. US Airways plan'' would reduce that amount to about $15,000 a year.
Philip Anker, a lawyer for the former executives, said the plan is unfair because current executives will continue to receive a healthy benefits plan.
Airline lawyer John W. Butler Jr. disputed that, saying chief executive David Siegel, for instance, has taken a pay cut of about 60 percent. Management as a whole will be given an 8 percent share in the reorganized company, a potentially lucrative amount, but Butler said that was necessary to retain a strong management team.
World-class management teams don''t work for free, Butler said. And world-class management, by its presence, creates value.
Butler also said it would be unseemly to pay former executives a big pension at a time when employees have collectively given back $1 billion a year in salaries and benefits to keep the company from shutting down entirely.
The airline, which has its largest hub in Charlotte, N.C., estimates in its reorganization plan that it will turn a profit of $127 million by fiscal 2004 and increase profits to $405 million by 2007. That is based on projections that revenue will increase from $7.2 billion in 2003 to $7.7 billion by 2007.
In 2001, a year marred by the travel industry''s slump after the Sept. 11 attacks, the company lost $2.1 billion on revenue of $8.3 billion. Since then, the company has laid off about 30 percent of its pre-Sept. 11 work force of 46,000 and cut back its schedule by a similar amount.
The plan filed Thursday does not address an unfunded pension liability of about $3 billion. The company is hoping congressional legislation will allow it some leeway. If not, the company will terminate the pension plan and it would be taken over by the federal Pension Benefit Guaranty Corp.
The PBGC would pay a maximum benefit amount of $28,000 a year, which is just a fraction of what some pilots would receive under their existing plan.
In a memo to pilots Thursday, Siegel said that even if the plan is terminated, the airline would implement a new plan for pilots, so they would receive the federal benefit and a new pension from the airline.
The other unions'' pension plans are not affected.
