Sun, Oct 03, 2004
Airline may garner $300M a year in savings from
tentative labor pact
US Airways announced on
Friday that it has reached a tentative agreement with its pilot's
union that, if ratified, should result in some $300 million in
savings for the airline, which is currently going through its
second bankruptcy filing in as many years. Details of the agreement
were not available.
The airline's 3,000-plus pilots still need to ratify the
agreement, and the union hasn't made too many comments about the
content of the deal, which it said is under consideration. The
airline management, on the other hand, wasted no time to emphasize
the importance of reaching a deal a key step in the progress of
reorganization. The cost cuts are also critical for US Airways to
be able to compete against its low-cost counterparts in the
"Ratification by ALPA's members is essential to our
transformation and would demonstrate their continuing commitment to
making our airline stronger and more competitive," said US Airways
CEO and President Bruce Lakefield.
The union is against a
rock and a hard place -- the bankruptcy court has the power to
dissolve any and all labor agreements and simply impose a new wage
and benefit structure. This fact has given many airlines, not just
US Airways, leverage in its negotiations with labor unions.
American Airlines used the same strategy of emphasizing the
consequences in order to convince both its pilots as well as its
flight attendants that it was in their best interests to accept the
deal they were being offered by management.
US Airways, however, continues to negotiate with both the
Association of Flight Attendants as well as the Communications
Workers of America, and next week the talks with the International
Association of Machinists are scheduled to resume. Other smaller
labor groups within the airline have already reached agreements
with the management.
There still remain significant doubts as to whether or not US
Airways can emerge from bankruptcy, even if agreements are reached
with all the employees organized under labor union agreements. The
company went into this second bankruptcy without a key item that
they had in the first one -- debtor-in-possession financing.
Because of the lack of this key cash flow tool, the company must
use it own cash reserves while it works to reorganize. There are
plenty of analysts who doubt that the airline will have the
resources to accomplish this lofty goal. Only time will tell if US
Airways can pull it off.
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