US Airways asks court for 23% wage cuts
Financial Times
By Caroline Daniel in Washington
Published: October 7 2004 21.53 | Last updated: October 7 2004 21.53

US Airways on Thursday sought to persuade the bankruptcy court in Virginia to impose interim 23 per cent wage cuts on its employees in an effort to start generating enough cash to avoid liquidation by February.

If the relief is granted, it would give the airline time to try to forge consensual agreements with its unions over permanent cuts in wages, pension plans and work rules that could enable it to emerge from bankruptcy for a second time.

In an interview with the Financial Times, Bruce Lakefield, 60, chief executive, who came out of retirement five months ago to run the airline after heading Lehman Brothers International from 1995 to 1999, said: "I can't believe how competitive the industry is compared with Wall Street. If we do get the transformation plan in place, we will be a very competitive airline. We would be the first legacy carrier to make the transformation to a low-cost carrier."

He added: "The choices are pretty straightforward. It is not for me to make those choices. Our labour deals are important. The quicker they come, the quicker we can come out of bankruptcy. Without labour deals we don't have a very long shelf life. In the next five months we would not be in a good place."

The airline, which filed for bankruptcy for the second time last month, has asked the court to approve wage cuts that would help save $38m each month. However, it is also seeking permanent wage cuts of $950m a year to enable it to be competitive with low-cost carriers. It must also persuade the federal body that gave it a $900m loan that by October 15 it will have a credible transformation plan.

People are in a different state of denial," Mr Lakefield said. "People are porpoising. One day they feel good. One day they feel bad. But everyone understands the plan."

The unions have filed motions arguing against the request for interim relief. Mr Lakefield acknowledged the resistance. "If I cut salaries by 23 per cent, are you going to welcome me with open arms and big hugs, or say are you kidding me?"