US Airways Mechanics OK Concessions

By Julie MacIntosh

NEW YORK (Reuters) - Mechanics at bankrupt US Airways Group <UAWGQ.PK> have approved $160 million in annual wage cuts and other concessions the airline says it needs to reorganize and win government backing for loans.

US Airways, based in Arlington, Virginia, asked its unionized employee groups in May to come up with $950 million of wage cuts and other sacrifices.

The government's Air Transportation Stabilization Board, which is granting loan backing to airlines that show cost-cutting fervor and a sound business plan, gave US Airways conditional approval in July for $900 million in loan guarantees, before the carrier filed for bankruptcy.

But the board said its final stamp of approval was contingent on broader labor-related expense reductions.

US Airways' mechanics and related workers were the only employee faction that had not reached a cheaper agreement with the airline in recent months.

About 8,000 active reservation agents and ticket counter workers, represented by the Communications Workers of America, ratified a deal on Tuesday that had been tentatively approved earlier this month.

About 6,800 mechanics followed suit late on Tuesday, with 57 percent voting in favor of the airline's proposal. Mechanics who are paid more than about $14.50 an hour will take a 7 percent wage cut.

SECOND TIME A CHARM

The mechanics rejected the very same package in late August. The International Association of Machinists (IAM), which represents the mechanics, said it held a new vote because some workers had taken earlier upbeat statements by US Airways Chief Executive David Siegel to mean that wage cuts were not necessary.

Some mechanics had also not known that if the proposal were rejected, US Airways would ask a bankruptcy court to let it void its current contracts with the workers, IAM General Vice President Robert Roach said last week.

That could have left the mechanics defenseless against court-approved layoffs -- and even steeper wage cuts -- during the airline's bankruptcy reorganization.

The provisions of the newly ratified contract will be honored during US Airways' bankruptcy, along with new agreements between the airline and its pilots, flight attendants, passenger service workers, and other groups.

Under the package approved on Tuesday, some lower-paid mechanics' wages will be frozen, while some paid lunches, holidays, and sick days will be eliminated.

In return for participation in the carrier's restructuring, the mechanics will be able to fill one seat on US Airways' board with a representative from their union, and the group will be able to work on the airline's advisory board.

The mechanics' "yes" vote brought the dollar amount of concessions by US Airways labor groups to more than $750 million.

That equals more than half of the $1.3 billion in expense reductions US Airways was looking to extract from workers, as well as lenders and creditors, before it filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code in July.

US Airways' pilots have agreed to sacrifice about $465 million annually, while flight attendants will give up $77 million.

US Airways' baggage handlers, another group represented by the IAM, have approved an 8 percent wage cut that should save the airline $65 million a year.