With its labor negotiations faltering, US Airways Group Inc. has begun consultations with bankruptcy advisers in anticipation of a filing, a source familiar with the talks said yesterday.
The Arlington-based carrier has retained Seabury Group, the restructuring and aviation consulting firm it used during its first bankruptcy two years ago. It also has entered talks with the law firm Arnold & Porter LLP, which will represent the airline in the event of a Chapter 11 filing.
US Airways spokesman David Castelveter declined to comment on the discussions but said it would be "prudent" for the carrier to talk with advisers because bankruptcy remains an option if the airline is unable to secure cost cuts from its workers.
The prospect of a bankruptcy filing increased Monday when talks between the Air Line Pilots Association and US Airways broke off after the leaders of the 3,400-member union refused to take the airline's latest cost-cutting proposal to its rank and file for a vote.
News of the talks' failure sent the airline's shares down nearly 13 percent, or 30 cents, yesterday to close at $2.05.
"It's not looking good. The company has very little time left to get these labor agreements in place," said Standard & Poor's analyst Philip Baggaley.
In a message to US Airways pilots yesterday, Bruce R. Lakefield, US Airways chief executive, said he was not prepared to "throw in the towel" and said the airline was committed to working through its conflict with the pilots union leadership. Lakefield also urged the pilots against relying on the union leaders and instead opt to vote on the proposal themselves.
"I am just baffled as to why a few of your representatives don't trust you to make the proper decision regarding our proposal," Lakefield said. "After all, we and your fellow employees trust you to fly our aircraft and protect our passengers, just as we trust you to make the right decisions about your careers."
A spokesman for the pilots said union leaders at US Airways' two largest operations, Pittsburgh and Philadelphia, rejected the airline's proposal. Bill Pollock, the head of US Airways' pilots union, said in a statement he was "disappointed" that members were not allowed to vote on the proposal, adding that the future of the talks was "unknown."
US Airways is seeking savings of about $295 million a year from its pilots, which would mean a pay cut of between 16 and 30 percent.
The nation's seventh-largest carrier is trying to secure $800 million in pay and benefit cuts from its labor groups, part of its $1.5 billion restructuring. US Airways executives said they need the cuts to be in place by the end of the month.
The carrier's employees already agreed to about $1.2 billion in cuts during the airline's previous bankruptcy reorganization.
The coming weeks are expected to be financially difficult for US Airways. It has a $110 million pension payment due next Wednesday, an outlay that would severely weaken its cash level. At the end of the month, the airline has to meet several cost-cutting agreements imposed by the federal government as part of an $800 million loan guarantee it received while in bankruptcy protection. Also, the airline continues to grapple with higher fuel costs as it enters the weak post-Labor Day travel season.
US Airways pilots were the first of the airline's four major labor groups to agree to concessions talks. The airline continues to meet with leaders of its flight attendants and passenger service workers unions. However, the International Association of Machinists, the group that represents the airline's mechanics, remained opposed to concessions.