US Airways Payments Anger Pilots
Workers Say 3 Former Officials Should Return $35 Million

By Keith L. Alexander
Washington Post Staff Writer
Friday, February 28, 2003; Page E02

US Airways' pilots union wants three former top executives to return $35 million in retirement benefits they received on their departures from the airline.

The Arlington-based carrier paid its chairman, Stephen M. Wolf, $15 million when he stepped down as chief executive last year. Former president and chief executive Rakesh Gangwal also received $15 million when he resigned in November 2001. Lawrence M. Nagin, formerly general counsel and a vice president of the airline, was paid $5 million.

The pilots union was incensed over the payments, reported earlier in the Pittsburgh Post-Gazette, particularly because the pilots have made steep concessions to help the airline emerge from bankruptcy. US Airways is also trying to terminate the pilots' pension plan, which is underfunded by about $2 billion.

David Castelveter, a spokesman for US Airways, said the payments " were part of the agreements that were negotiated to bring these executives to the company."

Pilot spokesman Roy Freundlich said, "We modified our contracts to help the airline survive," referring to the $646 million in pay, benefit and work-rule concessions the pilots agreed to last year.

"What the company is saying to us now is that they're going to honor management contracts with three individuals who received $35 million while thousands of pilots sacrificed much, if not all, of their pay. It's completely unfair, inexcusable and incomprehensible," Freundlich said.

The pilots also may be forced to accept a new pension plan that could reduce their future retirement payments by about 50 percent. US Airways said it has to terminate the current pension fund to obtain a $900 million loan guarantee from the government and emerge from bankruptcy by March 31.

Any decision to recoup the payments to the former executives would have to come from U.S. Bankruptcy Court Judge Stephen S. Mitchell, bankruptcy experts said.

The airline or its creditors committee would have to file a lawsuit and prove that the payments were unfairly made as the airline was preparing to file for bankruptcy, said William J. Rochelle III, a lawyer with New York-based Fulbright & Jaworski LLP. Rochelle, who has worked on bankruptcies at United, Continental and America West airlines, said proving such allegations is often difficult.

A source close to the US Airways creditors committee, which includes the carrier's pilots, said its attorneys were "looking into the allegations."

The controversy arises as US Airways' president and chief executive, David N. Siegel, and its chief financial officer, Neal S. Cohen, are scheduled to testify at the airline's bankruptcy hearing today in Alexandria.