Management Positions Most at Risk
By Keith L. Alexander
Washington Post Staff Writer
Saturday, May 21, 2005
US Airways Group Inc. executives yesterday told their Washington area employees that it was too early to say how many would lose their jobs once the airline merges with America West Holdings Corp., but that a majority of workers would be retained.
The airlines announced the merger Thursday, but they were unable to offer specifics on how many of the area's 1,970 jobs might be eliminated. As part of the merger, the airline plans to reduce its combined flights by 12 or 13 percent. The new airline -- which would retain the name US Airways -- would be based in Tempe, Ariz., America West's hometown. America West's president and chief executive, W. Douglas Parker, would run the airline. Bruce R. Lakefield, US Airways president and chief executive, would serve as the airline's vice chairman.
Christopher L. Chiames, a US Airways spokesman, said the new airline planned to retain a majority of its existing flights in the region and would need most of the 1,370-workers based at the airline's three local airports, Reagan National, Dulles International and Baltimore-Washington International. The airline also plans to use its pilots and flight attendants based here.
The biggest impact locally, however, could be felt in many of the 600 management and corporate jobs at the airline's Crystal City headquarters. While the airline is expected to retain some of its management jobs in Washington, it is likely many of the jobs would be consolidated with those in Tempe.
"The opportunities for management employees at both airlines are still to be determined," the airline said on a telephone recording to workers. "In the meantime, it is business as usual for both companies and their employees."
The airlines hope to mesh their frequent-flier programs and flights by the fall, but they don't expect to merge their workforces and employee job contracts for at least two to three years. That's partly because the airlines have to merge seniority lists that include current and furloughed union workers; the lists determine who gets preference in work assignments and job security.
Labor leaders from both airlines said they plan to closely monitor the merger to ensure jobs are protected.
Teddy Xidas, president of US Airways' union that represents 4,400 flight attendants, said the group had few concerns about job security because its members tend to have more seniority than those who work for America West. She said the union was looking forward to a "new management team and a new kind of culture."
Jack Stephan, spokesman for US Airways' pilots union, said that group, too, expects no layoffs. But he said the pilots are forming a merger committee as well as hiring an outside attorney to help oversee the deal.
The airlines hope to have most of their deal completed by the fall, an aggressive schedule given that they must win over labor unions and secure approval from a host of interested parties, including antitrust regulators, the U.S. Bankruptcy Court, US Airways creditors and America West shareholders.
"They have to move quickly to stop the bleeding at US Airways," which is operating under bankruptcy protection, said Mike Boyd, an airline consultant with Boyd Group.
In 2000, Justice Department officials blocked a merger between United Airlines and US Airways. Officials said the deal would have resulted in less competition and higher fares.
But America West and US Airways have fewer routes in common than United and US Airways had, leaving some industry observers to speculate that the America West deal might be less objectionable to antitrust officials.
Still, some experts said it might be difficult for the America West-US Airways plan to win clearance from Justice officials by fall. Gina Talamona, a Justice Department spokeswoman, could not give an estimate of how long the review might take. "We're looking at the competitive effect of the airline transaction. You have to look at this as a case-by-case basis," she said.
The airlines also have to secure approval from the Air Transportation Stabilization Board, the federal unit that pledged government money to back more than $1 billion in loans for both airlines immediately following the Sept. 11, 2001, terrorist attacks. A spokeswoman for the board said the group was reviewing the merger proposal.
Executives boasted that the combined airline would be one of the industry's strongest with about $10 billion in annual revenue and $2 billion in cash. The deal would save the combined airline about $600 million, the executives said.
Most of the $1.5 billion in financing for the deal came from outside investors, most of whom have vested interests in the new airline's success. Investment firms including ACE Aviation Holdings, parent company of Air Canada; Boston-based PAR Investment Partners; Virginia-based Peninsula Investment Partners; and Eastshore Aviation Holdings, which is owned by Air Wisconsin Airlines Corp. and shareholders, contributed $350 million. European aircraft manufacturer Airbus invested $250 million in exchange for the airline becoming a launch customer of the upcoming Airbus A350.
Both airlines need the deal in order to survive and preserve jobs, airline experts say. Despite cutting more than $2 billion in costs as a result of its two Chapter 11 reorganizations since 2002, US Airways officials say the airline needs to combine with America West to expand and to fend off growing low-cost competitors such as Southwest, JetBlue and Air Tran Airways.
America West, which was on the brink of filing for bankruptcy protection in 2001 until it received a government loan, also needs the deal in order to expand into the more lucrative East Coast market.
US Airways, the nation's seventh-largest carrier, with nearly 30,000 employees, is twice the size of America West, the nation's eighth-largest airline, with 14,000 employees. Its routes are primarily on the East Coast, while America West concentrates its service in the Midwest and West.