US Airways Contract Is Canceled by Judge
A Bankruptcy Court judge Thursday allowed US Airways Group Inc. to cancel its union contract with 8,450 mechanics, baggage handlers and other employees. The court also terminated three pension plans to help the airline avoid liquidation.
The carrier agreed to delay enforcing the judge’s ruling until baggage handlers represented by the International Assn. of Machinists vote on US Airways’ final offer. In turn, the workers agreed not to strike or take any other job action. Mechanics represented by the union continued talks with US Airways after the ruling.
The decision by U.S. Bankruptcy Court Judge Stephen Mitchell marks the first time a U.S. airline has been allowed to scrap a contract since bankruptcy laws were revised in the 1980s. If baggage handlers reject the company’s last offer, US Airways would throw out their contract. The machinists were the only union group that failed to agree to job, pay and benefit cuts.
“I think everyone understands what’s at stake here,” Mitchell said. “The question is whether there will be any jobs at all at the end of the day.”
The vote by baggage handlers is expected to conclude Jan. 21, US Airways said. The airline said mechanics and maintenance training specialists represented by the machinists also would vote on its last offer, contrary to the union statement that talks were continuing.
US Airways, the seventh-largest U.S. carrier, said it would proceed with ending the pension plans.
UAL Corp.’s United Airlines also won separate Bankruptcy Court approval to temporarily cut pay 11.5% for baggage handlers and customer-service and reservation agents.
Mitchell in October allowed US Airways to cut salaries 21% and reduce other benefits for four months. Those changes will remain in effect for baggage handlers until their vote. The Arlington, Va.-based airline later sought the permanent reductions for unions that didn’t agree to cutbacks.
Mitchell also allowed the termination of pension plans for the machinists, the Assn. of Flight Attendants and certain other nonunion employees. Minimum funding contributions for the plans from 2005 through 2009 was $987 million. The judge called that a “financial albatross” for US Airways.
“We hope we can do all the right things to make US Airways a profitable airline in the future,” Chief Executive Bruce Lakefield said in an interview after Mitchell’s ruling. “All of our employees are working with us through these very tough times.”
Some union members shouted expletives at Lakefield as he spoke with reporters outside the courtroom. US Airways had sought $298 million a year in concessions from the machinists.
The airline said in December that it might go out of business this month if it couldn’t cut pay and benefits for workers and retirees. The company wants to cut annual costs by $1.5 billion, including $950 million in concessions from workers.
