By Steve
Halvonik
TRIBUNE-REVIEW
Tuesday, August 17, 2004
US Airways Chairman David G. Bronner said Monday he is prepared to lose his $240 million investment in the financially troubled airline -- a likely occurrence, he conceded, unless the company's 28,000 employees approve $800 million in wage and benefits cuts soon.
"We need all four unions to cooperate or we'll probably go under,'' said Bronner, chief executive of the Retirement Systems of Alabama, the largest investor in USAirways.
He also offered a glimmer of hope to Pittsburgh International Airport, saying that US Airways may explore new ways of utilizing the airport if it can successfully complete its $1.5 billion transformation into a low-cost carrier.
The possibility of federal bankruptcy protection gained new urgency when an investment banker hired by the pilots' union said last week that US Airways could collapse within a month without new labor agreements.
The pilots' union is cooperating with US Airways, but the other three labor units aren't moving fast enough, said Ray Neidl, an airline analyst with Blaylock & Partners in New York.
Bruce Lakefield, US Airways' chief executive officer, expressed frustration with the pace of labor talks.
"I think it's silly that we're wasting so much time when we could be working together to fight off the competition,'' he said in a recorded message to employees.
Bronner said US Airways' survival odds were 50-50, "and that may be optimistic.''
US Airways is required to make $68 million in contributions next month to the pension plans for the Association of Flight Attendants and the International Association of Machinists. Bronner called the payments "a huge cloud'' that could tip the cash-strapped company into bankruptcy.
Yesterday, US Airways announced it was asking the Internal Revenue Service for permission to reschedule the pension payments.
"This is an important step as we work to ensure our survival and future prosperity,'' said Jerry Glass, US Airways' senior vice president for employee relations.
Under Bronner's savvy investment touch, RSA's pension plans for teachers, police and other government employees are fully funded, with more than $25 billion in assets. RSA purchased a 37-percent stake and controlling interest in US Airways in March 2003 for $240 million, betting that the nation's seventh-largest airline was turning around.
Instead, shares have tumbled by more than 40 percent in the past week as bankruptcy fears grow larger.
The value of RSA's stock has plunged to less than $100 million. Bronner said he has accepted that all of his investment could evaporate in bankruptcy court, where shareholders' claims take a back seat to creditors.
If that should occur, it would be the pension fund's biggest loss in Bronner's 31-year stewardship -- but less than 1 percent of the pension funds' assets.
"No one wants to lose a quarter of a billion dollars,'' Bronner said, "but what bothers me more is when a guy loses his job. Because he has to go home and say to his family, 'How do we live?' ''
Bronner expressed frustration that the union representing mechanics and fleet-service personnel has refused to enter concession talks before the end of the month.
Robert Roach Jr., a vice president with the International Association of Machinists and Aerospace Workers, blamed any foot-dragging on the company. Roach said that IAM officials have been trying since February to get company executives to sit down and discuss the union's cost-savings suggestions.
According to Roach, the union's suggestions, if implemented, could eliminate $80 million to $100 million of waste.
"We've been very much concerned about what's going on at the airline,'' Roach said. "It's not fair for them to say that we are dragging our feet.''
Roach said the union couldn't begin bargaining until the end of this month because it still was compiling detailed information the company requested.
US Airways is reducing daily non-stop flights at Pittsburgh International by more than a third this fall as it ramps down hub operations. Last week, the airline said it would eliminate Pittsburgh's only non-stop European service -- to Frankfurt, Germany -- in November. US Airways' seasonal service to Gatwick Airport in England also ends in November, and there are no present plans to bring it back, spokesman David Castelveter said.
Even with the service reductions, US Airways will remain the airport's largest tenant.
Bronner called Pittsburgh International a "beautiful'' airport and said US Airways may take another look at operations here if it can survive September. Bronner said he had heard that Philadelphia's airport was crowded and that there might be some operations that could be transplanted to Pittsburgh, but he offered no details.
Steve Halvonik can be reached at shalvonik@tribweb.com or (412) 320-7993.
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