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October 15, 2004 |
BANKRUPTCY UPDATE
Describing US Airways as a "fiscally ticking time bomb", US Judge Stephen Mitchell ordered a 21% pay cut, effective immediately on members of AFA, ALPA, CWA and the IAM. The pay cut will remain in place until February 15, 2005 or until replaced by a comprehensive new agreement reached between the union and the Company. The Company will also be allowed to increase the monthly flying obligation 5-10 hours at their discretion. The ability, if forced by creditors in the next four months, to reduce fleet size was also granted. The Company stated they have no intention of reducing the current fleet. No other changes to our current agreement were included in the court order.
Obviously this is huge blow that will disadvantage all of us. Despite compelling arguments by union attorneys the Company was able to convince the court of the financial deficit it faces in the coming months. The Company maintains that absent immediate pay reductions it will simply run out of money during the first quarter of 2005 and be forced to liquidate. The Company insisted to the court that America West pay rates/Jet Blue work rules would have to apply in order for us to be competitive. AFA attorneys argued that a 21% pay cut would put us at the BOTTOM of the scale in terms of pay. Effectively a 21% pay cuts puts us 12% to 15% below America West. If US Airways were to liquidate, Company attorneys argued, we would start out at the bottom of another airlines pay scale, thus we are better off. AFA attorney and analysts testified that the Company has stalled negotiations with AFA either through unavailability or by increasing their demands with each proposal. The judge did shorten the time frame of the interim relief order in an effort to get the parties to reach consensual long term agreements.
The Company' last offer to us requested a 15% pay cut. Obviously that would be better than 21% pay cut so why didn't we take it? The last proposal also included a 50% cut to vacation, freezing our pension, 50% reductions to premium pay, continuation of LTO reserve system. Work rule changes that included "resignation" for low block hours and the elimination of retiree medical were also part of the last proposal. Perhaps the best way to frame it is that the value placed on this proposal was in excess of $140 million, far above the $116 million the Company initially asked for. We did not believe that proposal was made in good faith and thus could not agree that it was a tentative agreement. In any case that proposal could certainly not be termed a "consensual agreement".
Today's ruling is not good news for any of us. Neither were statements made in court last week by Company officials testifying that "employees at US Airways should not expect to keep current retirement benefits. I fully expect the Company to try to terminate our pension plan in court. That is the only way they can get it and I believe they are going to try.
Rather than deal with revenue issues and building a solid business plan this Company continues to use labor costs as their ONLY means of survival. The judge agreed that in order to keep the Company flying the pay cut, while "devastating", is necessary.
Court testimony this week also revealed that most management personnel were only taking a 5% pay cut. Company attorneys argued that while true, it was a necessary action, "because attrition rated are very high in management." The Company claims managers are being hired away by other airlines at higher salaries. I guess they don't have to start out at the bottom of the pay scale of another carrier. I am still having trouble believing any other carrier is trying to lure our "talent" away.
The Company has chosen the path we are on. They have given every indication that they want to change every facet our careers. They are intent on reducing our contract to an industry low. They are on record wanting to terminate our pensions. They claim these extremes are necessary for the opportunity to implement their transformation plan. I have heard about this plan since April but have yet to see any of it implemented. They don't need contract changes to do more point-to-point flying. They don't need contract changes to "de-peak" the hubs. They don't need contract changes to sell more tickets on a "new" web site. What they are doing is trying to run a high-cost airline offset by low-cost labor.
Our focus now is to reach a long term agreement with a much lower pay cut. We all know that will mean trading off other things to offset the loss to our w-2s. I believe there are limits and we will continue to protect as much as we can without running the Company out of business or ourselves out of our homes.
Thank you,
Mike Flores
LEC President Council 89
AFA-CWA AFL-CIO
704-527-0325 OFFICE
704-576-3174 CELL
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