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 areas:

• 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 all employees.

"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 faces."

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.

FMI: www.usair.com, www.cwa-union.org/