US Airways Pilots Approve $1.85B in Wage Cuts

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US Airways Group Inc. pilots approved a plan to cut pay and benefits $1.85 billion over five years to provide savings the airline said it needs to emerge from bankruptcy-court protection.


Union members voted 58% for the accord, which cuts pay 18%, reduces company pension contributions, and lets the airline change work rules to boost productivity, the Air Line Pilots Association said.


The accord must be approved by a bankruptcy judge who will review it at an October 26 hearing.


The approval may give the company leverage in its effort to win givebacks from unions representing flight attendants, mechanics, ground workers, and customer-service agents. The carrier is seeking $950 million a year in employee savings in a plan to slash costs by $1.2 billion annually and compete with lower-cost carriers including Southwest Airlines Co.


“The ability of the pilots and management to come together is a very significant thing,” said Phil Roberts, a vice president at Oakland, Calif.-based Unisys R2A Transportation Management Consultants, which advises airlines on planning. “The pilots are the lead labor group for US Airways, and this is a very positive sign.”


By ratifying the plan, the pilots will avoid a 21% pay cut that a bankruptcy court judge last week agreed to let the Arlington, Va.-based company impose on most workers for four months. The union, whose members are the airline’s highest paid, said 1,690 of the 2,926 members who cast votes backed the agreement, which would be retroactive to October 15.


The seventh-largest American airline filed its second Chapter 11 bankruptcy in two years on September 12 after failing to secure cost-cutting agreements with its unions.


US Airways is holding discussions with the flight attendants, mechanics and ground workers, and customer service and reservation agents on long-term agreements.


Spokesmen for their unions declined to comment on the pilot vote.


Union leaders for the company’s 3,290 pilots have split on whether US Airways needs a third round of concessions from workers since 2001. Some urged pilots to vote against the agreement, while others said cuts approved by the bankruptcy court would be more severe.


The airline said in a statement that the pilots “demonstrated their leadership” in supporting the agreement, and said “virtually every one of our legacy competitors” will confront similar labor cost issues.


Pilots in Philadelphia and Pittsburgh, the airline’s largest pilot bases, voted against the agreement by margins of 4 percentage points and 8 points, respectively. Pilots in four other cities approved it.


“This agreement did not come without tremendous sacrifices by our membership,” the union’s chairman, Bill Pollock, said in a statement. “This vote signifies that our pilots acknowledge the pain and sacrifice that is required to address the reality of our situation.”


Shares of US Airways rose 12 cents to $1.07 in over-the-counter trading.


Mr. Pollock, in a message to members on October 16, urged approval of the plan while acknowledging that it “is by far the worst set of working conditions we have ever seen at this property.”


Yearly savings under the five-year plans vary, although it will be a minimum of $300 million annually, said a union spokesman, Jack Stephan. US Airways previously terminated the pilots’ defined-benefit pension plan and replaced it with a plan that specifies contributions.


Three small employee groups represented by the Transport Workers Union have approved long-term concessions totaling $6.6 million a year. The company will cut about 10% of management and nonunion jobs and reduce pay by between 5% and 10% to produce annual savings of $45 million.


UAL Corp.’s United Airlines has been in bankruptcy court almost two years and Delta Air Lines Inc. has warned that it may seek Chapter 11 protection. Delta and Northwest Airlines Corp. are both seeking worker concessions, Continental Airlines Inc. has said it’s likely to ask for givebacks soon, and United is going back to workers for a second round of cuts.


The major airlines are being pressured by expansion of low-cost carriers that is holding down fares and damping revenue as record jet-fuel prices are pushing up costs.


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