Once again, airline workers are feeling the heat.
US Airways employees have already survived two rounds of cuts to salaries, benefits and in some cases, rank. Thousands have been laid off. The airline dramatically downscaled its hub in Pittsburgh.
US Airways managers said yesterday the combination of large payments due this week and the failure to achieve a third, $800 million, round of concessions from its labor unions led them back to bankruptcy court again. Only this time, the future is even more uncertain for the carrier's 28,000 employees.
In a statement yesterday, US Airways Group Inc. chief executive Bruce Lakefield delivered a stark view of what lies ahead. Workers must accept more cuts if the airline is to survive, he said. "The alternative is to have these jobs exported to a new generation of low-cost airlines, where any employees hired would start at entry-level wages and without seniority," he said.
It is that new generation of airlines that has made life difficult for US Airways and other traditional carriers. New carriers operate with lower costs because they generally employ younger workers, are not burdened by pension payments to retirees and do not have elaborate seniority-based compensation plans. Lower labor costs in part enable carriers like JetBlue and Air Tran Airways to make more money flying the same routes as older airlines. The discount carriers are moving into the older airlines' markets and forcing fares downward.
US Airways hopes to transform itself into a low-fare carrier like most of its competitors. Delta Air Lines Inc., which is also facing a Chapter 11 filing, and United, which is in Chapter 11, have similar plans and face the same hurdles with their labor groups.
The 2001 terrorist attacks accelerated an industry decline that forced older airlines to dramatically reduce costs, mostly through job losses and cuts in benefits and wages. But three years later the industry is still struggling from the arrival of low-fare carriers that have grabbed market share, increased competition and reduced profitability on some of the carrier's once-lucrative routes.
Delta said last week that it would cut up to 7,000 jobs and eliminate its hub at Dallas-Fort Worth International Airport as part of an effort to reduce $5 billion in costs by 2006. The carrier also warned that it could file for bankruptcy protection and it is seeking wage cuts from its labor groups, including $1 billion in cuts from its pilots.
"Other major carriers in the next five to 10 years will be in Chapter 11 at least once and a lot of them twice," said Darryl Jenkins, an aviation industry expert and visiting professor at Embry-Riddle Aeronautical Universityin Daytona Beach, Fla. "What US Airways is going through is a harbinger of things to come for the rest of the carriers."
Jenkins said the bankruptcy judge could impose his own labor contract on workers to keep the company operating. "If negotiations take a long time, we might see a judge intervening," he said. "They seldom do because they'd rather see the company and labor work out their own agreements. If the negotiations drag on, certainly I'd exercise that option."
Leaders of the US Airways' pilots and flight attendants unions said yesterday they were willing to continue negotiations with the company. But yesterday, before the Chapter 11 filing, the flight attendants union rejected the company's latest offer. A spokesman for the union called the proposal "a regressive counter proposal that would leave us worse off than with their earlier position."
"We've already provided $5 billion in concessions and wages and productivity in three previous restructuring agreements," said Jack Stephan, spokesman for the US Airways Air Line Pilots Association. "Eighteen months later, we're extremely disappointed that the fruits of that labor have not borne any profitability. Now, we have to go back to scrape up another $1 billion."
Stephan said it was unclear how many other parties, such as creditors and the judge, would become involved in the labor negotiations. The Chapter 11 filing "just makes it more complicated," he said. "Any time you want to convince more than one person, it's more difficult. Now we're dealing with other interests and other parties."