US Airways Group Inc. intends to slash its executive payroll by 20 percent, reducing the pay and benefits for its 3,000 managers and eliminating some positions, sources familiar with the plan said yesterday.
The airline is expected to announce details of the plan in coming days as it prepares for a bankruptcy hearing next Thursday. At that hearing, the Arlington-based airline will ask U.S. Bankruptcy Judge Stephen S. Mitchell to impose a temporary 23 percent pay cut on all of its labor groups in an effort to reserve cash and avoid liquidation.
Christopher L. Chiames, US Airways senior vice president of corporate affairs, confirmed the airline plans to cut about $45 million of its $201 million management payroll. But he declined to offer more specifics or detail how much the airline will try to save through pay and benefit cuts, and how much through other methods such as eliminating jobs.
"Management is going to be participating in the cost restructuring. We will announce those changes when we're ready to announce them," he said.
US Airways' move to trim management costs comes as Delta Air Lines Inc., in hopes of avoiding a bankruptcy filing, announced yesterday a 10 percent pay reduction for its executives and supervisory, administrative and front-line workers.
In a memo to employees, Gerald Grinstein, Delta's chief executive, also outlined plans to increase the shared costs of health-care coverage and cut the amount of vacation to five weeks a year from six.
The Atlanta-based airline also plans to eliminate its subsidy for retiree and survivor health care coverage at age 65 and older, effective for those employees retiring after Jan. 1, 2006.
Grinstein also announced that he plans to give up the remaining $125,000 of his 2004 salary.
Delta, the nation's third-largest carrier, has been struggling to control rising costs as it fights to stay competitive. Earlier this month, the airline announced plans to eliminate as many as 7,000 jobs and downsize its hub at Dallas-Fort Worth International Airport.
Airline industry consultant Darryl Jenkins, visiting professor at Embry-Riddle Aeronautical University in Daytona Beach, Fla., applauded Delta's management cuts and said the move puts greater pressure on other airlines to cut the pay and benefits of managers, not just those of hourly employees.
"You lead by example," Jenkins said. "You cannot go and ask other people to live in a world of poverty when you're living in a world of plenty."
Bill Pollock, chairman of the US Airways pilots union, said workers would be more inclined to agree to wage cuts if managers and executives also made such sacrifices.
Before filing for bankruptcy protection earlier this month, US Airways was unsuccessful in seeking about $800 million in wage and benefit reductions from its workers to bring its costs more in line with low-fare carriers such as JetBlue Airways Corp. and America West Holdings Corp.
"A lot of this transformation is about fairness and comparing us with the so-called low-cost carrier model. Through the eyes of the employees, it's important we see management embraces that same role as well," Pollock said.
During the early weeks of its Chapter 11 bankruptcy proceedings, UAL Corp.'s United Airlines obtained pay cuts from managers of between 3 and 11 percent, depending on salary. United, which has been operating under bankruptcy protection for nearly two years, said recently it needs to cut an additional $1 billion in costs in an effort to emerge from protection.
Also yesterday, Delta's pilots union ratified an agreement that allowed the airline to bring in retired pilots on temporary contracts to address staffing shortages that may be caused by early retirements.
Pilots have been retiring sooner than expected in order to preserve their pension payments in the event the airline files for protection from its creditors.
As part of the agreement, Delta managers promised that even if the carrier filed, executives wouldn't shut down the pension plan until February at the earliest.
Delta also continues negotiating with its pilots to secure $1 billion in pay and benefit cuts.