Seeks to reject labor agreements, reduce retiree benefits, and
terminate defined benefit retirement plans
US Airways Group, Inc.
has filed a comprehensive motion with the U.S. Bankruptcy Court for
the Eastern District of Virginia to initiate proceedings for
rejection of collective bargaining agreements with the Association
of Flight Attendants (AFA), the Communications Workers of America
(CWA) and the International Association of Machinists and Aerospace
Workers (IAM), as well as to reduce retiree health benefits and
terminate the remaining defined benefit pension plans for US
Airways mainline employees.
US Airways President and Chief Executive Officer Bruce R.
Lakefield said the filing does not preclude the company from
obtaining consensual agreements with the three unions and other
interested parties. US Airways is in various stages of negotiations
with the AFA, CWA and IAM, and has already reached cost-savings
agreements with the Air Line Pilots Association (ALPA) and the
three units of the Transport Workers Union (TWU), all of which have
also been approved by the Bankruptcy Court.
"Our overwhelming preference is that we continue to negotiate
and reach agreements with all of our unions. We would also like to
avoid litigation concerning our retiree and pension benefits, but
in light of the financial issues facing the company early in 2005,
this filing is an unfortunate but necessary step to keep our
restructuring on track and allow us to implement permanent cost
reductions quickly," said Lakefield.
On October 15, Judge
Stephen S. Mitchell granted US Airways emergency relief in the form
of 21 percent pay cuts, reduction in pension plan contributions and
the temporary relaxation of other contractual provisions as they
relate to the AFA, CWA and IAM. Under the procedural rules
established for the company’s Chapter 11 restructuring,
issues can be heard before the court on 20 days notice. The
Bankruptcy Court has scheduled the proceedings on the application
to begin on Thursday, December 2, at 0930.
"We continue to implement those elements of our Transformation
Plan that we can control, including new operating and scheduling
efficiencies, reduced management headcount and related costs, and
more direct and online distribution, but we still need to obtain
the permanent relief to labor, pension and benefit costs," said
Lakefield. "Our financial partners have made it very clear that we
cannot expect their support and continued participation in our
restructuring without a competitive cost structure, and competitive
labor, pension and benefit costs are critical components of the
cost structure at every successful airline. Our negotiating
position is that we are seeking costs that are consistent with
those at low-cost carriers that have now become the defining force
in the marketplace."
The court filing seeks relief for the company in three
- Rejection of the collective bargaining agreements for the
airline’s flight attendants (represented by the AFA), airport
customer service and reservations agents (represented by the CWA),
and mechanics, airport ramp workers, aircraft cleaners, stock
clerks and maintenance training specialists (represented by the
IAM). If the request for rejection is granted by the court, the
company would then put in place its most recent offer and both
parties would still be obligated to continue to negotiate a new
agreement under the terms of the Railway Labor Act.
- Substantial reductions or elimination of company-paid retiree
health benefits for all employee groups, including management.
- Termination of the defined benefit pension plans currently in
place for employees represented by the AFA and the IAM mechanics
and related employees. In addition, the company would terminate the
defined benefit plan frozen in the early 1990s that covered
employees in the management, administrative, airport customer
service and reservations, ramp, crew scheduling, dispatch, flight
crew training instructors and flight simulator engineers work
groups. Following termination of the defined benefit plans, the
company would then work with the Pension Benefit Guaranty
Corporation in the administration of plan assets and benefits. US
Airways intends to only have defined contribution pension plans for
"We have not lost sight
of the hardships that furloughs, lower pay and reduced benefits
will mean for our employees and retirees, but we are faced with a
series of difficult choices as we work to restructure the company
and try to save thousands of jobs of veteran US Airways employees,"
said Lakefield. "We can complete this process more quickly and with
a much better outcome for employees if we can reach labor
agreements prior to going to court on this motion. This filing
represents a final request to union leaders to work with us, and to
convey to their members the serious predicament our company
The Communications Workers of America announced on Thursday that
its members had voted to authorize a strike "or other legal
work action" the union and the airline are unable to reach a "fair,
equitable" agreement. Eighty-six percent of the CWA-represented US
Airways employees voted to strike, after ballots mailed two weeks
ago were tallied. The CWA's primary concern is the intention of the
airline to outsource some 1,000 reservation agent jobs. Other
airlines have also outsources their reservation agent positions to
India and other countries.