Collapse of Talks With Union Perils USAir-PSA Merger

Pacific Southwest Airline Inc.’s merger with USAir Group Inc. was thrown into doubt Thursday, two weeks short of the merger deadline, when PSA’s parent company, PS Group Inc., announced that its contract modification talks with Teamsters Airline Union Local 2707 have collapsed.

In a prepared statement, PS Group Chairman Paul Barkley referred to the talks as “recessed” and gave no indication when or if the talks would resume. Teamsters officer Marvin Griswold attacked the airline holding company’s action as “posturing” designed to wring concessions from the union, adding that any resumption of talks was up to the airline.

When USAir and PS Group announced their agreement to merge in December, USAir said a prerequisite of the $400-million merger would be for PS Group to negotiate changes in certain labor contract language signed by PSA’s four unions in 1984. Each of the unions except the Teamsters has since agreed to the modifications of the language which dealt with union employee protection in the event of a merger.

The Teamsters represent about 80% of PSA’s 4,000 union employees. The airline employs 5,000 overall.

In a prepared statement, PSA Group Chairman Paul Barkley blamed the collapse on the Teamsters’ insistence that certain benefits and work rules in effect before 1984 concessions by the union be “snapped back” or reinstituted after the merger.

Barkley also rejected the Teamsters’ demand that a $5-million severance pay and placement trust fund be set up for union employees who lose their jobs as a result of the merger or who refuse to accept transfers. PS Group proposed a $1.6-million trust fund.

Griswold said the Teamsters withdrew the “snapback” demand from the bargaining table on Tuesday, replacing it with a demand that PSA employees achieve immediate wage parity with USAir employees. USAir Chairman Edward Colodny has said PSA employees making less in the same jobs as USAir workers would gradually achieve wage parity.

Also unresolved is the Teamsters’ representational rights after the merger. Griswold said the Teamsters want employees to vote on union representation after the merger while USAir has demanded that all PSA employees join the unions already in place at USAir.

The two airline companies imposed an April 30 deadline on completion of the merger, after which time either party would be free to walk away from the deal. USAir spokesman Gene Anderson said Thursday that his company will “walk away” from the merger if not completed by then.

Trading in PS Group stock was halted on the New York Stock Exchange Thursday pending the announcement that the contract modification talks had collapsed. PS Group shares closed up $.50 at $33.50 before the halt. On Wednesday, PS Group shares fell $2 to close at $33 per share.