US Airways Group Inc. is encountering an increased number of employees calling in sick, and some workers are staging slowdowns as the airline reorganizes its employee benefits and sick leave in bankruptcy court, executives from the airline said yesterday.
In a nearly eight-hour hearing yesterday at U.S. Bankruptcy Court in Alexandria, David M. Davis, US Airways chief financial officer, testified that some employee groups were participating in a "slowdown" and that an entire cleaning crew in Chicago called in sick a few weeks ago.
U.S. Bankruptcy Judge Stephen S. Mitchell postponed a decision on whether to impose a requested 23 percent, or $38 million a month, across-the-board employee pay cut for at least six months. Another hearing is scheduled for tomorrow. Mitchell also did not rule on whether the airline could forgo past-due payments to its mechanics' and flight attendants' pension funds.
Mitchell expressed concern about whether implementing the pay cuts could have an adverse effect on future labor relations, possibly jeopardizing the airline's long-term reorganization plan.
"If I grant these cuts, will it increase the risk of labor strife with [employees] voting with their feet" to leave the company? Mitchell said.
Davis acknowledged that if worker compensation decreased, "attrition could increase among employees."
Christopher L. Chiames, US Airways senior vice president of corporate affairs, said employee absentees were up a "bit" this month, but no flights were canceled or delayed because of the absences. Chiames said many of the carrier's 28,000 workers were concerned about the future of their accumulated sick days as the airline begins restructuring its employee holiday and sick time to save money.
In one bit of good news for the Arlington-based airline, its major lenders agreed to extend terms of their financing arrangements through Jan. 14, giving US Airways extra time to use its cash for operations.
The airline's major lenders, the Air Transportation Stabilization Board, the Retirement Systems of Alabama and Bank of America Corp., agreed to extend their funding on the assumption that the airline will maintain a cash balance of about $500 million. The airline must submit to its lenders weekly reports of its cash levels and upcoming payments. The agreement is subject to bankruptcy court approval.
US Airways and its labor unions offered a stream of witnesses yesterday arguing for and against the 23 percent pay cuts sought by the airline. Airline consultant Daniel M. Kasper of LECG Corp., testifying on behalf of US Airways, said the carrier's labor costs were the highest among major legacy carriers such as American, Continental and Delta and had to be reduced more in line with low-cost carriers such as Southwest, JetBlue and AirTran.
"US Airways is facing a crisis of potentially lethal proportions with a limited amount of cash and liquid assets," Kasper said. "If it is to avoid the very real threat of liquidation, it has to build up sufficient cash for the winter months, which will give its suppliers and travelers confidence."
Kasper said that the airline might have less of a problem with employees calling in sick or threatening to quit if it had been able to reach voluntary cost-cutting agreements with its workers. But now, "timing is a factor and [the airline needs] relief urgently," he said.
Attorneys for the flight attendants, mechanics and gate and reservation agents had their own witnesses, consultants, economists and labor leaders testify that US Airways was asking its workers to make unnecessary and unfair financial sacrifices.
US Airways filed for Chapter 11 bankruptcy protection last month for the second time in two years, after it failed to reach $800 million in cost-cutting agreements with its labor unions.