US Airways will ask the bankruptcy court to temporarily nullify its labor agreements and impose wage cuts if the carrier's unions do not agree on concessions by Friday, the chief executive told employees yesterday.
In a recorded message to employees, Bruce R. Lakefield said that if the carrier is unable to secure consensual agreements from its five labor unions, it would ask the bankruptcy court for permission to implement "immediate cost reductions, including pay cuts."
Lakefield did not disclose how much the airline would seek in cost cuts through the court. A hearing would have to be held on the matter.
US Airways also is likely to increase the amount it needs to slash from its operations beyond the $1.5 billion it originally sought before its bankruptcy filing Sept. 12, a source close to the airline said. It is unclear how much the increase would be, but any boost in proposed savings could mean steeper concessions from employees.
Fresh pressures on the airline have prompted the need for greater costs savings. US Airways is facing increased expenses in attorney and consultant fees from the bankruptcy, the source said. Also, jet fuel prices continue to climb. And last week, the airline lost its contracts for new regional jets after it filed for bankruptcy. The 100 50- to 70-passenger regional planes were a major source of potential revenue for US Airways and part of its overall transformation plan.
US Airways spokesman David Castelveter declined to comment on a possible increase in cost savings but confirmed that the airline's financial outlook has worsened since it proposed $1.5 billion in cuts earlier this year. Nearly half of those cuts were to come from employees' pay and benefits.
"As we have been telling our labor leaders all along, it would have been in everyone's best interest to reach agreements outside of bankruptcy," Castelveter said. "The environment has changed, and we're adjusting our transformation plan accordingly."
Benchmark Capital analyst Helane Becker wondered how much further the airline could cut without facing stiff resistance from the employees.
"I think they're fairly close to being maxed out in how much lower they can go in getting labor-cost savings," she said. "At some point, it gets to be ridiculous and the creditors could say they've had enough and it's time to liquidate."
US Airways executives said they still think the airline will emerge from bankruptcy protection a stronger carrier with its costs more in line with discount carriers such as Southwest, America West and JetBlue.
Recognizing a new urgency, leaders of the pilots union yesterday ordered their negotiating team to resume contract talks with the airline. Leaders of the union were split on the airline's contract proposal and refused to allow its members to vote on it.
Tuesday, the airline reached a tentative agreement with its 150 flight dispatchers. That agreement goes to the membership for a vote Sept. 30.
The carrier's unions were bracing yesterday for the possibility of steeper cuts. US Airways has been seeking about $122 million in savings from its telephone and airport reservation agents, said union spokeswoman Candice Johnson. She said the airline had not notified the group of any change, but she said further cuts would be "detrimental" to the workers. Under the proposal, the average two-week net pay of a reservation agent would decrease to about $436 from $866.