USAir Deal Looks Possible, Analysts Say : Labor: The carrier and pilots are far apart but willing to talk about pay and a union plan to swap wage cuts for ownership.
USAir Group Inc. and its pilots union are further apart on wage concessions than expected, but a deal to rescue the troubled carrier from high labor costs still looks possible, analysts say.
Before the union issued a sweeping proposal early this month to restructure USAir in exchange for pay cuts, some analysts had seen the airline implementing labor cost savings by September.
That forecast now looks overly optimistic. “Our best guess is the deal will get done by the end of December,” said Michael Derchin, airlines analyst at NatWest Securities.
USAir is not under intense time pressure to make a deal, analysts said.
“There’s no deadline . . . USAir is not going to run out of cash, but it’s going to be a sick company. And the sicker the company, the harder it is to turn around,” said Glenn Engel, analyst at Goldman Sachs & Co.
Hounded by low-cost competitors in key Eastern markets, USAir has since 1990 lost money every year, including $350 million in 1993. It has said it expects to lose more than that this year.
“No company can drag on like this much longer,” said Vivian Lee, analyst at Smith Barney.
The nation’s sixth-largest carrier has said it is ready to talk with its pilots. “We will sit down and discuss their proposal with them,” spokesman Dave Shipley said in an interview last week.
He said the company feels “a certain urgency” but that no date for negotiations has been set. USAir has rejected key portions of the pilots’ plan but has also said it sees positive aspects in it.
Kelly Ison, spokesman for the Air Line Pilots Assn., said he expects talks to be scheduled in the next few days.
On Aug. 3, the USAir Master Executive Council of the Air Line Pilots Assn. said it would swap $750 million in wage cuts over five years for 25% ownership of USAir and $700 million in preferred stock for employees. The airline’s 39,000 other employees and managers would also grant $1.75 billion in pay concessions.
The pilots’ plan came in response to the airline’s proposal in July to cut annual operating expenses by $1 billion through an unspecified combination of labor and other cost reductions.
The union, which represents 5,250 USAir pilots, said last week that it plans to explain its proposal to members and other employees in open forums scheduled for eight cities. “The pilots have to go out on the road and talk to their people,” Derchin said.
Still, their plan as a whole is widely seen as unworkable. It “clearly can’t be accepted in today’s form,” Engel said.
British Airways, which has invested $400 million in USAir, immediately rejected the pilots’ call for further investment.
Two days after the proposal came out, Standard & Poor’s cut its ratings of USAir’s preferred stock and three debt instruments. Market price declines in USAir bonds followed.
USAir’s three other unions have not endorsed the pilots’ proposal. The Assn. of Flight Attendants called it a starting point on Aug. 5 but rejected key provisions.
The Transport Workers Union has no firm position on the proposal, a spokesman said. Officials at the International Assn. of Machinists could not be reached for comment.
The pilots’ proposal is “a huge step in the right direction,” said Engel, who added he does not have the sense that the pilots see their plan as a take-it-or-leave-it offer.
“If you view this as a first step in a negotiating process, then there is reason to be optimistic,” he said.