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Pilots Union Rejects Pay Cut

September 08, 2004|From Bloomberg News

US Airways Group Inc.'s pilots union rejected proposed pay and benefit cuts, threatening to derail the carrier's plan to wrest $800 million in labor concessions in time to avoid a second bankruptcy filing.

Leaders of the Air Line Pilots Assn., which represents 3,000 employees, decided Monday night not to send a company proposal to members for a vote. No talks are scheduled between the company and the union, said US Airways spokesman David Castelveter.

US Airways, the seventh-largest U.S. airline, faces a Sept. 15 deadline to make a $110-million pension payment and may be in violation of terms of a $1-billion loan at the end of the month.

An agreement for $295 million in pilot givebacks would help sway other unions to make concessions, said Robert Mann, president of R.W. Mann & Co., a Port Washington, N.Y.-based firm.

"The whole issue has been to create momentum by getting the pilot group to lead," said Mann, whose firm advises airlines and their unions. "The clock is running, and it's running out."

The labor concessions are part of the $1.5 billion that Arlington, Va.-based US Airways is trying to carve from yearly costs to compete with low-cost rivals like Southwest Airlines Co. The company, which has won $1.9 billion in concessions since 2001, has said it may have to file for bankruptcy if it can't reach new agreements with the unions.

The shares fell 30 cents to $2.05 in Nasdaq trading after touching $1.81 earlier. They've fallen 67% this year.

The U.S. airline industry has lost money each year since 2001, when terrorist attacks deepened a travel slump, followed by the Iraq war and the threat of an airborne respiratory virus. The growth of airlines with lower costs than US Airways has held down ticket prices as jet fuel prices climbed to records.

UAL Corp.'s United Airlines, the second-largest carrier behind AMR Corp.'s American Airlines, has operated under bankruptcy protection since December 2002. United told employees last month it might terminate its pension plans to lower costs, while Delta Air Lines Inc. is expected to disclose details of its plan to lower costs today in a bid to avert bankruptcy. US Airways first sought Bankruptcy Court protection in August 2002 and emerged in April 2003. The shares traded at $32 on Aug. 25, 2003.

The pilots union, whose members are the highest paid of the company's labor groups, declined to comment on reasons behind its leaders' decision.

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