Financially struggling US Airways Group Inc. is seeking $800 million in additional concessions from workers and wants to have the agreements in place by the end of September, executives from the airline said yesterday at its annual meeting here.
The cuts in pay and benefits would come on top of the $1.2 billion in concessions workers gave during the airline's bankruptcy reorganization. Most of the airline's labor leaders have said they would not agree to any more hardship for the rank and file.
The pilots union, representing the airline's highest-paid employees, is the only group that has agreed to enter into concession talks. The company is seeking $295 million in cuts from the pilots, according to Jack Stephan, spokesman for the US Airways chapter of the Air Line Pilots Association. "We are in the process of analyzing the figures," Stephan said. "We like the business plan, but now comes the hard part."
US Airways executives said the Arlington-based airline has to cut its costs by a total of $1.5 billion to remain competitive with rapidly expanding low-cost carriers such as Southwest and JetBlue.
Jerold A. Glass, head of US Airways employee relations, said the $800 million in employee cuts is the "minimum needed" for the airline to return to profitability. The other $700 million in cost savings would come from operational changes, he said.
In exchange for the worker concessions, US Airways executives said the airline is considering offering employees stock in the airline or creating a profit-sharing plan.
US Airways executives have backed away -- at least for now -- from any plans to sell off assets in order to raise cash. "The future is in the assets. If we start selling off the assets, then we have no future," said Bruce R. Lakefield, US Airways president and chief executive.
At the shareholders meeting yesterday, the board voted on a salary for Lakefield, who became chief executive after David N. Siegel was forced to resign a month ago. Lakefield will receive a base salary of $425,000, plus 760,000 US Airways shares vested over four years. Siegel was paid a base salary of $637,461 in 2003.
As another cost-saving measure, US Airways is trying to direct more travelers to its Web site to purchase tickets. Only 23 percent of the airline's tickets are sold on its Web site. Executives hope that figure will grow to 50 percent in the next year or so.
"My challenge is to change this company quick enough so the company can survive," Lakefield said. "The piggy bank is only so big. We can't keep losing money forever."
The carrier lost $177 million in the first quarter.
The shareholders meeting was Lakefield's first public appearance since he replaced Siegel. Employees said they had lost trust in Siegel and refused to negotiate with him.
"There was a huge chasm between management and labor. Now you have a normal human being trying to work out a problem, and it's a serious problem, and we're going to do our best from our side to meet them more than halfway," said US Airways Chairman David G. Bronner, head of Retirement Systems of Alabama, US Airways' largest shareholder. RSA is based in Montgomery, just outside this small town.
"The airline industry is a tough, tough row to hoe. We do know that this was on its deathbed when we got into the thing. And I'm just egotistical enough to think that public pension funds can make a difference and save 30,000 jobs," Bronner said.
Bronner picked Lakefield to join the board last year and chose him for the chief executive slot. The two have been friends for nearly 30 years.
US Airways emerged from Chapter 11 bankruptcy proceedings in March 2003 after having cut about $2 billion in costs. Earlier this month, the carrier said it might be forced to again file for protection from its creditors if it is unable to cut costs further.
Yesterday's hour-long board meeting was far different from previous gatherings, held in the ballrooms of Crystal City hotels. In the past, the audience was often packed with employees and stockholders. Yesterday only about 20 of the 200 seats at the Legends Hotel and Conference Center were filled.
One US Airways employee, Gene Blackshear, a parts specialist who has worked for the airline for 18 years, drove 14 hours from Charlotte to attend the meeting. Blackshear stood quietly at the back and held up banners that read, "26,000 Families Depend On You" and "No Golden Parachutes."
Blackshear, 55, said he would consider another round of pay cuts, as long as the airline did not agree to additional executive packages. Lakefield said he does not plan to accept a severance package, which he said would send the wrong message to employees. Siegel and Neal S. Cohen, the US Airways chief financial executive who retired earlier this month, had severance packages totaling about $7 million in cash and stock.
"How can I ask employees to make sacrifices if I'm not making sacrifices?" Lakefield said. "I'm here to bridge the gap from losing money to profitability."
Lakefield said he and his wife are living in a Pentagon City apartment and are contemplating buying a house in the Washington area. They own a house in New Jersey, where they lived before Lakefield was named chief executive.
US Airways has to show the Air Transportation Stabilization Board, the federal government unit that agreed to back $900 million in loans, that it has significantly reduced its costs this year, and it must report a profit in 2005. Without the labor agreements, US Airways could be in default of its covenants with the ATSB.