US Airways Pilots Reject Wage and Benefit Cuts

By MICHELINE MAYNARD
New York Times

Published: September 7, 2004

The future of US Airways' drive for $800 million in wage and benefit cuts from its employees is in doubt, after leaders of the pilots union rejected late Monday a bid to have pilots vote on a concessions proposal from the airline.

Support by the pilots for more cuts is critical for the struggling airline to win agreement from other unions on wage and benefit cuts it says are needed to avoid a second bankruptcy. But the pilots union is deeply split on whether to grant more cuts to US Airways, which is based in Arlington, Va.

US Airways has said that unless it gets concessions from its 28,000 employees by the end of September, it is likely to seek bankruptcy protection. The airline must make a contribution to its employee pension plans on Sept. 15, and had hoped to know by then if its unions would agree.

US Airways is seeking a third round of concessions from its employees, on top of two sets of cuts granted while the airline was in bankruptcy protection. US Airways, which emerged from bankruptcy in April 2003, is trying to transform itself into a low-cost airline so that it can compete with rivals like Southwest and JetBlue.

The airline, the nation's seventh largest, is seeking the largest portion of those concessions, $295 million, from its pilots union. Negotiators have met nonstop the past week on the airline's proposal, which would cut wages as well as reduce the company's contribution to the pilots' pension plan.

But pensions are a particularly thorny issue to the pilots. Before US Airways emerged from bankruptcy the last time, the airline terminated the pilots' retirement plan and replaced it with a less-generous program, combining a traditional plan with a 401(k) program.

That particularly angered senior pilots, many of whom are based at the airline's hubs in Pittsburgh and Philadelphia.

On Monday, members of the union's master executive council who represented pilots in Pittsburgh and Philadelphia voted to block the proposal from being presented to the union's 3,000 pilots for a vote. Although the council has 12 members, voting is weighted according to the number of pilots each member represents. So four pilots had enough clout to override the eight others.

The pilots' leaders, who met in Arlington, said in a statement early today that it was uncertain whether negotiations would continue with US Airways.

Today, the company said it was "profoundly disappointed that the actions of a few prevent our pilots from making their own decisions."

"Nevertheless, we remain firmly committed to reaching an agreement that is responsive to our pilot's needs, but also meets our required financial target," the company statement said.

A spokesman for US Airways, David Castelveter, said the airline was open to meeting with pilots when they decided to return to the bargaining table.

But he stressed the need by the airline to meet its financial commitments, which in addition to the pension payment include covenants of federally backed loans, which formed the basis of its restructuring. US Airways must also meet requirements of regional jet makers Bombardier and Embraer, as well as GE Capital Corporation.