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News > Fortune 500
US Airways reaches deal with pilots
Bankrupt No. 7 airline says it will save $300M a year under terms of tentative labor pact.
October 1, 2004: 11:17 AM EDT

NEW YORK (CNN/Money) - Bankrupt airline US Airways announced Friday it reached a tentative concession deal with union negotiators for its pilots that will save the company about $300 million a year in labor costs.

U.S. Airways

The nation's No. 7 airline, which in September filed for bankruptcy court protections a second time in two years, would not give details of the wage and benefit cut in the agreement.

Ratification by 3,200 rank and file members of the Air Line Pilots Association is still needed. The union was reserved in its comment on the deal. It posted a notice for its members saying that the executive council at its US Air unit would be meeting to consider the deal struck by its negotiating committee.

The airline said the agreement is a key step towards a reorganization of the carrier to allow it to compete with low-fare, low-cost airlines.

"Ratification by ALPA's members is essential to our transformation and would demonstrate their continuing commitment to making our airline stronger and more competitive," said a statement from US Airways CEO and President Bruce Lakefield.

The bankruptcy court has the power to void existing labor agreements and impose lower-cost wage and benefit packages, a fact that gives management tremendous leverage in its negotiations with the unions.

The company continues negotiations with the Association of Flight Attendants and Communications Workers of America. Talks with the International Association of Machinists are scheduled to resume next week. It has won some agreements from smaller unions at the airline, including those representing dispatchers, flight crew training instructors and flight simulator engineers.

But even with lower labor costs US Airways faces significant challenges in its effort to remake itself and survive. It entered bankruptcy court without the so-called debtor-in-possession financing that typically funds operations during a reorganization. While the company said it has the resources it needs to restructure, some analysts and even its own chairman have questioned whether it will be able to find the financing and infusion of investment dollars it'll need to emerge from bankruptcy.

The airline filed for bankruptcy protection in August 2002, less than a year after the Sept. 11 terrorist attack, and emerged from bankruptcy in March 2003 with the help of federal loan guarantees offered to airlines in the wake of that attack.

But the airline was losing money well before the attack. The high fuel costs this year, the airline's No. 2 cost after wages and benefits, and increased competition from low-cost carriers such as Southwest Airlines killed its chances to return to profitability without another trip to bankruptcy court.  Top of page

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