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New York, Dec. 21: US Airways reached tentative agreements on concessions Friday night with unions representing its machinists and flight attendants, completing a package for an additional $ 200 million in wage and benefit cuts that the airline needed to avoid liquidation.
The moves came as US Airways prepared to file a reorganisation plan in US bankruptcy court. The plan, which a judge will consider at a hearing on January 16, was set to include proposals for returning the airline to profitability. It hopes to emerge from bankruptcy by spring.
However, the airline planned to withhold details of the proposal until Saturday morning, said David Castelveter, a spokesman for the airline, which is the country’s seventh-largest carrier.
The International Association of Machinists and the Association of Flight Attendants were the final two employee groups to agree to give US Airways additional cuts in pay and benefits, on top of an initial round of $ 850 million in concessions in the fall. The machinists originally refused to give more in concessions, while the flight attendants’ union had said it would agree to more cutbacks only after other unions at US Airways had done so.
The machinists’ union, representing 11,100 mechanics and other maintenance workers, said leaders at the airline agreed to cuts worth $ 59 million. A vote on the cuts was scheduled for early January. The flight attendants’ union, representing 7,500 workers, did not disclose the size of its concessions. It said its members would vote on the package by January 10.
Their concessions were part of a new round of cuts, worth a total of $ 200 million, that were sought by the airline over the last few weeks after its revenue fell short of the projections made when it filed for bankruptcy protection in August.
David G. Bronner, the chief executive of the Retirement Systems of Alabama, which is serving as the primary lender to the airline, threatened earlier this month to withdraw the debtor-in-possession financing he had extended to US Airways and seek liquidation if the unions did not agree to further concessions.
Scotty Ford, president of machinists’ District 131-M, representing the airline’s mechanics, alluded to Bronner’s threat in announcing the tentative deal on Friday night. “We believe the agreement affords US Airways the best opportunity to avoid liquidation and preserve our members’ jobs,” Ford said.
The Alabama pension system agreed in October to provide $ 500 million in financing in exchange for a 36 per cent stake and voting control of the US Airways board. It has already given the airline $ 300 million, with the remaining $ 200 million to be provided after US Airways emerges from bankruptcy protection. Bronner could not be reached for comment on Friday night.
This week, the pilots’ union agreed to its share of the new round of concessions, worth about $ 99 million. On Wednesday, the airline reached a tentative agreement on new wage and benefit cuts with the Communications Workers of America, representing gate agents and customer service representatives, as well as the Transport Workers Union, representing flight controllers. Neither group has scheduled a vote on the proposals. Specific details on the contracts were not available, although the communications workers said they had won a seat on the airline’s board after it emerges from bankruptcy protection.
US Airways has promised three of 13 seats on the board to employee representatives. Bronner, however, will appoint seven representatives to the post-bankruptcy board.
The airline has won provisional approval from a federal loan-guarantee board for $ 900 million in financing, but that, like the remaining $ 200 million in the Alabama pension system’s financing, cannot be drawn from until it emerges from bankruptcy protection.
US Airways has begun cutting costs extensively throughout its operations. In the coming year, it plans to reduce spending on food and beverage service on its flights by 25 per cent, according to a memorandum that was distributed to members of the airline’s flight crews.
“What is crystal clear is that we are in a tough position with our goal of emerging from bankruptcy at the end of the first quarter,” the memo said. “To assist in achieving this goal, cost savings measures have been announced. One of the most impacted areas is our on-board levels of service.”
The memo said that US Airways passengers ranked in-flight food service as only the fourth most important priority in choosing a carrier, behind personal attention, a hassle-free experience and reliable flight schedules.
Specifically, the memo said US Airways would eliminate meal tray service on all transcontinental flights, and would serve only sandwiches aboard flights lasting more than 3 hours and 15 minutes, the memo said.
International passengers will still receive hot meals. But by April, the airline plans to eliminate glassware on all its flights.
Among other amenities that have already been discontinued are printed menus for passengers on cross-country flights, along with souvenir pilots’ wings for young passengers, the memo said. Castelveter said he was not familiar with the memo, but said the airline was focusing on reducing its costs wherever possible.
US Airways announced on Friday that it had asked the Transportation Department to allocate six slots at Reagan National Airport in Washington so that it could begin regional jet service from there to three new cities — Mobile, Ala., Pensacola, Fla., and Savannah, Ga.
One of Bronner’s goals when he invested in US Airways last fall was to win new service to Alabama. Approval of the new route would accomplish that, although Mobile is about 160 miles from his office in Montgomery.