So Much Sacrifice, So Little in Return
As More Cuts Loom, US Airways Workers Grow Weary

By Kirstin Downey Grimsley
Washington Post Staff Writer
Friday, August 23, 2002; Page E01

Pam Terry, 52, and her husband, Don, 50 -- customer service agents for US Airways at Reagan National Airport -- say they already have sacrificed a lot over the years to help keep the company and its passengers aloft.

Both believe their previous marriages suffered and ultimately failed under the pressure of long hours, frequent relocations and the holidays they missed because they were needed on the job. They lost their standard pension plans when US Airways shifted to 401(k)s as it began struggling for survival a decade ago. They went 10 years without raises.

Then, in the mid-1990s, once the company appeared to be recovering, the Terrys put some of their 401(k) retirement savings into US Airways stock and watched $20,000 disappear as the share price tanked.

Now Arlington-based US Airways Group Inc., which filed for bankruptcy protection last week, has asked its entire workforce, including the Terrys, to accept hefty cuts in pay and benefits to help the company restructure its debts and emerge as a stronger airline.

For the Terrys, of Dale City, Va., with two kids in college and plenty of bills to pay, it feels like a lot to ask.

"We've continually sacrificed. We kept doing more and doing more," Pam said. "The company is appealing to our loyalty, and we've always done what the company asked for. But this time it shouldn't be on our backs. It must be fair and equitable."

US Airways' 7,200 customer service and reservation agents, who earn an average of $38,000 a year and are represented by the Communications Workers of America, are among the few groups to decline to accept pay cuts. The International Association of Machinists, with 12,000 workers, including mechanics and fleet-service workers, has been similarly reluctant to accept a cut.

"It's like standing on a cliff," said John Carr, 41, a baggage handler from Charlotte, N.C., who belongs to the machinists' union. "I've got to jump if I want to survive, but jumping might not mean I'll survive either."

US Airways executives say it is essential to reduce operating costs to restore the carrier to profitability. On Wednesday, the airline said it would cut 13 percent of its flights and an unspecified number of jobs in the coming months. Management intends to use the pay-cut agreements to help persuade its creditors to restructure its debt.

Executives have also pledged to protect workers with ratified labor agreements from additional wage cuts that could be required by creditors in a bankruptcy reorganization.

"We recognize the impact the sacrifices they are making will have on them and their families," said David N. Siegel, US Airways' president and chief executive, who joined the company in March. "In exchange for their participation, we have committed that this will be a labor-friendly Chapter 11 reorganization in which we will honor new agreements that have been ratified and provide labor with a voice in the company's governance through representation on the board of directors."

More than 2,700 US Airways employees live in the Washington area, including 1,500 who work at National, 800 at the company's headquarters in Arlington, 300 at Baltimore-Washington International Airport and 80 at Dulles International Airport.

Top managers will be among those feeling the pain this time around. All US Airways executives from the vice president level up will take 44 percent pay cuts, said company spokesman David Castelveter.

As a result, Castelveter's household is among many in the area where the pain will be doubled because both spouses work for the airline and will take pay cuts. His wife, Michelle, is a manager in the carrier's incentive sales group.

"Any reduction in compensation is painful," Castelveter said. "These are extremely difficult decisions to make, but given the alternative, it was the only decision we could make."

In addition to debts that exceed its assets, US Airways has several structural problems that make it difficult for it to compete with other airlines. Among them are the highest operating costs per seat mile of the major airlines, partly because of the carrier's many short routes in the East. Those routes are being challenged by low-cost rivals like JetBlue Airways and Southwest Airlines, while other major carriers with more long-haul routes can spread their operating costs over more miles.

Some of US Airways' major operations are in high-cost cities like Boston, New York and Washington. And its history of financial problems has led to hiring freezes, which means it has more older workers in higher pay grades and fewer young ones in low pay grades.

The pilots' and flight attendants' unions have already agreed to accept the wage and benefits cuts. The 4,400 pilots took the biggest hit -- 26.6 percent -- and the 7,600 flight attendants shouldered an 8.4 percent cut.

Average pay for captains will decline to $168,000 a year from $220,000. A flight attendant who makes the average wage, $36,000 a year, will take a $2,880 annual pay cut. Flight attendants also agreed to accept cutbacks in their paid vacation time and health benefits.

"It wasn't easy to swallow," said flight attendant Robert Kenia, 39, of Lorton. "The company wanted more, and could have asked for more from the bankruptcy judge. We weren't thrilled about it, but we saw it as the lesser of two evils."

Kenia said the pay decrease means he must eliminate the luxury items on his grocery list, such as the better cuts of meat that he enjoys. He said he expects he'll keep driving his old car rather than buy a new one, as he had hoped.

"I expect Christmas will be bleaker, too," he said.

Carr, the Charlotte-based baggage handler, said this latest request for voluntary pay cuts tops a decade of disappointment in US Airways management, which has changed over four times in the past decade.

In 1991, for example, Carr said, US Airways management told baggage handlers that if they accepted wage cuts and reductions in holiday pay, it would prevent painful layoffs.

"Then on Christmas," he recalled, "they came around and gave us pink slips."

In 1995, the baggage handlers voted to unionize and joined the International Association of Machinists. Even so, he said, US Airways "never returned anything . . . They took what they wanted, which is more than what they needed."

The hefty pay packages enjoyed by recent top management -- particularly former chairman Stephen M. Wolf and former chief executive Rakesh Gangwal -- added salt to the wound, Carr and other employees said.

Pam Terry recalled 1998 a low point, when Washingtonian magazine reported that Gangwal had purchased a multimillion-dollar house -- and the company sent around tins of chocolate-chip cookies as the Christmas bonus. She sent the cookies back, as did many of her co-workers, she said.

"All the while, these guys grew richer," Carr said. "They really prospered, Wolf and Gangwal. They prospered despite the performance of the company."

Like Carr, Pam and Don Terry will need to decide within the next week whether they will vote to accept the pay cuts. They said they are trying to take the measure of their new chief executive, Siegel, in making their decision. They want to know whether Siegel will be making a greater commitment to the company's ongoing success than some of its earlier leaders seem to have done.

"He seems like a smart man," Don said. "We used to give unconditional approval to our CEOs, but we've been burned. Actions speak louder than words."