Pay cuts won't hit US Airways management
Nonunion pay is already in line with low-cost carriers, it says

The Philadelphia Inquirer

PHILADELPHIA - While US Airways Group Inc. seeks to cut most employees' pay by 23 percent, the airline has not asked its 2,300 executives and managers for the same sacrifice.

US Airways officials said management employees' pay has not been cut by the same amount because most nonunion employees already earn the same as or less than their counterparts at the low-cost carriers that US Airways is trying to emulate.

Many US Airways' nonunion employees could still be asked to work for even lower salaries or have their benefits cut, but details of that plan aren't available yet, senior vice president Chris Chiames said.

"We've set management targets consistent with what we've asked from the unions," he said.

US Airways chief executive Bruce Lakefield said Friday the airline would, as expected, ask a bankruptcy judge to impose temporary pay cuts on its union workers to conserve cash during the slow fall travel season.

The filing had not occurred as of late Friday afternoon, but Mr. Lakefield told employees in a recorded message that the filing would be made Friday. Bankruptcy courts typically allow parties to file motions electronically after hours.

Union officials said they have been told that all airline employees will be seeing smaller paychecks if the reductions are imposed on the labor groups by U.S. Bankruptcy Court Judge Stephen Mitchell.

"We've been told everyone's taking a 23 percent pay cut," said Jack Stephan, spokesman for the Air Line Pilots Association.

But a leader of the Communication Workers of America, which represents ticket agents, said company officials have said they cannot make deep cuts in executive pay without creating a stampede of managers to other airlines or into other lines of work.

"Definitely, I think they should" take 23 percent cuts, said Tina Porter, president of the CWA Philadelphia local. "But they told us they can't afford to lose key people at a time like this. They said they want to retain key managers."

Eventually, the company's goal is to recalibrate all employees' pay to be roughly equivalent with workers at the low-cost carriers, including America West Airlines and JetBlue Airways.

US Airways has already trimmed jobs from its nonunion workforce, including 50 positions from its sales and marketing staff, spokesman David Castelveter said.

US Airways has said its survival depends on reducing its annual labor costs by at least $800 million a year. The Arlington, Va., company filed for Chapter 11 bankruptcy court protection Sept. 12.

The pay of managers and executives has been a point of contention for many workers, largely because of the compensation paid to previous management teams.

Former chief executive officer David Siegel, who resigned in April, earned $664,000 a year and departed with a $4.5 million retirement package.

Three former executives - Stephen M. Wolf, Rakesh Gangwal and Lawrence Nagin - received a combined total of more than $40 million in severance pay when they left the company in 2002. The airline's current phase of financial problems started in early 2001, when they were running the company.

Mr. Lakefield, a retired naval officer and Lehman Bros. investment banker, is paid $425,000 a year with no long-term compensation.

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Hearing set on request by US Airways for cuts

US Airways raised the specter of liquidation in court as it continued to seek wage reductions. Its unions said they would continue to oppose them.

BY MATTHEW BARAKAT
Associated Press

ALEXANDRIA, Va. - The US Airways Group has warned in a bankruptcy court filing that it may have to liquidate by February if a judge does not impose a temporary 23 percent pay cut on its union workers.

The airline asked a judge Friday to impose the pay cuts by Oct. 14. On Monday, U.S. Bankruptcy Judge Stephen Mitchell scheduled an Oct. 7 hearing.

Without the reductions, the airline's cash reserves would dip so low by February that its lenders would likely withdraw the financing that has allowed the company to operate while in bankruptcy.

If US Airways ''cannot accumulate cash during the next five months . . . there is a high probability that they will suffer irreparable harm to their asset base and ongoing business, resulting in material downsizing, massive layoffs and potential liquidation by mid-February 2005,'' lawyers wrote in their motion seeking the emergency cuts.

The filing also indicates in a footnote that the airline will now seek $950 million in permanent annual cost reductions from its unions. Before filing for bankruptcy, the company had sought $800 million a year in cost cuts.

Company officials have said greater cuts are needed because when it filed for bankruptcy the company lost financing to increase its fleet of regional jets, which it had hoped would be a strong source of revenue.

According to the filing, the average annual salary of US Airways employees would drop from $59,509 to $45,822. That would drop US Airways from third to seventh among major U.S. airlines, lower than the average pay for Southwest employees but higher than the average at JetBlue Airways.

To compete, the airline has said, it needs a cost structure in line with those at such low-fare carriers as JetBlue and America West Holdings. The average pay would drop for pilots from $155,000 to $119,000 and for flight attendants from $36,975 to $27,701, according to the motion.

The temporary relief would include reductions to pension and retirement plans and eliminate the requirement that US Airways maintain a fleet of at least 279 mainline jets -- possibly allowing for more layoffs.

The Air Line Pilots Association, representing US Airways' 3,000 pilots, has said that it will oppose efforts to impose temporary pay cuts but that it would continue to negotiate with the airline.