ALEXANDRIA, Va. (AP) - Critical negotiations between US Airways and its pilots' union over an underfunded pension plan have reached an impasse, the airline's lawyer told a judge Thursday.
The lawyer, John W. Butler Jr., also told the judge that bookings have dropped 20 percent in the past week and the airline is seriously considering implementation of a wartime emergency plan that lets the airline reduce its fleet size and cut wages of its unionized workers by 5 percent.
But a spokesman for the pilots' union said negotiations were ongoing and accused the airline of grandstanding.
US Airways is trying to emerge from bankruptcy by the end of the month. That's because the company is running out of cash, and it has $1.24 billion in financing available to it once it leaves bankruptcy.
Also Thursday, the airline indicated it had been unable to make two key financial payments. One payment involves a financial covenant with Retirement Systems of Alabama, which has loaned the airline $369 million; the other concerns 14 Airbus aircraft totaling approximately $27 million. The airline said it was in negotiations with creditors over both issues.
The pension issue is the only major obstacle preventing the airline's emergence. U.S. Bankruptcy Judge Stephen Mitchell ruled earlier this month that the airline's financial problems are severe enough that they warrant terminating the pilots' pension plan. But he ordered the airline to resolve the dispute through the collective bargaining process.
Under the existing plan, the airline estimates that it will have to contribute $1.6 billion over the next seven years to keep the plan solvent.
The company believes it can afford to contribute only about $850 million. They have proposed cancellation of the existing plan and using the $850 million to start a new, smaller plan.
Pilots, who generally receive pensions of $50,000 to $70,000 a year, estimate that their pensions could be cut in half under the airline's plan.
Roy Freundlich, a spokesman for the pilots union, said pilots have made a proposal asking the airline to contribute $135 million to $145 million a year to the new pension plan over the next seven years. That's only 11 percent to 19 percent more than the company's initial proposal.
He said the extra money would significantly improve the pension plan and "doesn't adversely affect a company with $7 billion a year in projected revenue."
The union "is still optimistic an agreement can be reached" but has been frustrated by management's negotiating tactics, he said.
"You wouldn't believe the future of the airline hangs in the balance by the way they're acting at the negotiating table," he said.
Butler told the judge that the union's proposal, rejected by management, would have resulted in a 50 percent increase in costs from the initial proposal.
Martin S. Zohn, a bankruptcy attorney with the Proskauer Rose law firm with expertise in airline cases, said he believes the airline's dire financial situation, and the real threat of liquidation if an agreement can't be reached, will force the two sides to compromise.
"I believe economic reality will bring them back together, and that the impasse is temporary," he said.
As for the 20 percent drop in bookings, Butler said other airlines are experiencing a similar dip.
"The reality is that most travel that is not essential is simply being suspended," Butler said.
Freundlich also said he was disappointed that the airline is already talking about wartime cuts.
"I don't believe they can make a judgment in two days of action about how war will affect their business," he said.
--