Greater pressure directed at US Airways unions

October 23, 2004

By Dan Fitzpatrick, Pittsburgh Post-Gazette

Bankrupt US Airways is giving flight attendants, machinists and passenger service workers three weeks to reach consensual cost-cutting pacts before the airline asks a judge to reject the unions' collective bargaining agreements.

The nation's seventh-largest carrier made that disclosure in documents filed with U.S. Bankruptcy Court late Thursday, saying that it would file a so-called 1113(c) motion by mid-November and at the same time ask the court to approve reductions in medical benefits for 10,800 US Airways retirees.

The court can reject existing union contracts if labor groups "refuse" to accept a company cost-cutting proposal "without good cause" and if the rejection is fair to all parties, according to section 1113(c) of U.S. bankruptcy law.

The judge has to set a hearing 14 to 21 days after the motion is filed and then rule within 30 days of the hearing. If existing contracts are rejected, the judge can impose new agreements for a temporary period and order the two sides back to the negotiating table again.

The motion, if filed, would be a "drastic" measure, said Cohen & Grigsby bankruptcy attorney Bill Kelleher.

To exit bankruptcy and ensure its survival, US Airways is seeking $950 million in union concessions as part of a $1.5 billion comeback plan. So far, it has $310 million, counting ratified agreements from the pilots, dispatchers, flight crew training instructors and flight simulator engineers.

It gave flight attendants and passenger service agents new cost-cutting proposals this week, and it intends to discuss a new offer with the machinists on Monday.

All three unions are currently operating under a set of temporary concessions imposed last week by Alexandria, Va., Bankruptcy Judge Stephen Mitchell. The cuts, good through Feb. 15, reduce pay at all three work groups by 21 percent, giving the company more of a cash cushion as it enters the lean winter travel season.

Any long-term agreements reached now between the company and the unions would supersede the interim cuts. But if the two sides are not able to resolve their differences and the collective bargaining agreements are thrown out, Mitchell could always extend the length of the temporary concessions past Feb. 15.

In court documents filed this week, US Airways also spelled out its intent to "modify" or terminate health benefits for 10,800 retirees. US Airways estimates it will pay $69 million in retiree medical expenses in 2005 and $72.6 million in 2006.

The court next week will determine who will negotiate the cuts on behalf of the retired pilots, flight attendants, passenger service agents, dispatchers, flight crew training instructors and flight simulator engineers. The International Association of Machinists and Aerospace Workers has agreed to represent the machinists, baggage handlers, cleaners and stock clerks.

If the retiree committee and the company can not agree on cuts, US Airways can again turn to the bankruptcy judge to enforce the changes.

Source: Pittsburgh Post-Gazette