US Airways Asks Judge to OK Cost Cuts
US Airways Group Inc. asked a Bankruptcy Court on Thursday to impose wage and benefit cuts from its labor contracts to save money and survive, as the judge in the case said he wanted the airline to remain in business.
The No. 7 U.S. airline, under Chapter 11 bankruptcy protection for the second time in two years, also asked the court for flexibility to outsource maintenance and reduce the number of aircraft in its fleet, which could result in furloughs.
“If relief is not granted, there is a high probability [US Airways] won’t survive,” the company’s lead bankruptcy attorney Brian Leitch said at a hearing. “We’re at the part where there are not many options, it’s a simple reality.”
Separately, Bankruptcy Court Judge Stephen Mitchell of the U.S. Bankruptcy Court in Alexandria, Va., denied a request from the airline’s mechanics union to delay the proceedings, saying it was important to move forward in considering the airline’s request for court intervention.
“I want to do what’s right, I want to do what’s fair, I want to see this airline survive,” the judge said.
US Airways is seeking a court-ordered 23% wage reduction for all of its union employees and reduced pension costs. It is trying to cut deals with each of its unions to avoid court action but so far has only tentatively reached a deal for $300 million in givebacks from its pilots union.
Combined with nonunion cost cuts already in place, US Airways hopes to save $38 million each month and accumulate $200 million in cash over the next five to six months. The Arlington, Va.-based airline said in court papers it might liquidate in February if it fails to raise enough cash.
Because its assets are mostly tied up in financing from its previous bankruptcy, the airline has virtually no chance of borrowing or attracting new equity.
Earlier Thursday, Mitchell approved the company’s plans to make contributions to its employee pension plans on Oct. 15 and Jan. 15, 2005, but did not rule on union objections to the airline’s decision to skip $110 million in pension payments last month.
