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MEC CODE-A-PHONE UPDATE - December 3, 2002
This is Roy Freundlich with a US Airways MEC update for Tuesday, December 3, with two new items:
Item 1. The MEC reconvened its special meeting yesterday and today at the Key Bridge Marriott in Arlington, VA, and received updates, financial analyses and reports on the Company’s financial status from the Negotiating Committee, the Retirement and Insurance Committee, ALPA’s Financial and Economic staff advisors, and the MEC’s investment banker. The MEC also received a report from US Airways President and CEO David Siegel in closed session.
After considering an assessment of the Company’s financial situation from the MEC’s advisors, the MEC determined that US Airways is not achieving its financial requirements for maintaining debtor in possession (DIP) financing. This financing is dependent on the Company’s financial performance, which includes reaching revenue and cash balance targets, and receiving ATSB approval for a government loan guarantee prior to emerging from bankruptcy.
ALPA has determined that if the Company’s financial performance continues to fail to meet the obligations under the terms of the DIP financing with the Retirement Systems of Alabama, the financing under this arrangement may not be continued. The failure to maintain this financing, combined with a continued deterioration of the Company’s cash position, would prevent US Airways from emerging from bankruptcy by March 2003 and expose the Company to deeper risks in the bankruptcy process.
Management’s business plan under the current Restructuring Agreement was established last summer and projected an industry revenue recovery during the second half of 2002 and sustained in 2003 and beyond. Industry and US Airways revenue has significantly under-performed these projections, which is negatively affecting the Company’s cash burn rate, cash position and obligations under the terms of the DIP financing arrangement. To meet DIP financing and ATSB approval conditions, prior revenue assumptions contained in the Company’s business plan and ATSB
loan application have been revised lower, affecting the cost conditions of the application.
Management has taken the position that it cannot adequately enhance revenue to ensure US Airways’ success through the bankruptcy process (even with additional small jet code-sharing relief) and has requested an additional 200 million dollars in annual cost reductions from labor through productivity improvements and benefit changes, of which 101 million dollars would come from US Airways pilots, to compensate for the revenue shortfall. The MEC has not accepted management’s position that cost reductions be achieved strictly through productivity because of the impact this would have on pilot jobs.
ALPA has also determined that the pilots’ pension plan is at risk of being frozen or undergoing a distress termination, as a result of the Company only meeting minimum funding requirements and the negative performance of financial and equity markets. A return to normal market performance would not significantly help the Plan for many years. Therefore, modifications of the Plan’s benefits, including reducing the yearly multiplier going forward, total benefit calculation, and payment options, are being considered by ALPA to help the Company obtain funding deferments from the PBGC, which insures the Plan. Significant funding contributions to the Plan are required to remedy its current financial status and risks to the PBGC.
After careful consideration of the Company’s financial performance, management’s modified business plan, ATSB guarantee loan and DIP financing requirements, risks to the pilots’ pension plan, and management’s request for additional cost reductions, the MEC passed the following resolution:
MEC Resolution
WHEREAS airline revenue has failed to return to levels necessary to support required financial commitments and the ATSB Restructured Business Plan, and
WHEREAS the future of US Airways depends upon continued financing from RSA and the ATSB, as well as a funding waiver from the PBGC, and
WHEREAS the US Airways MEC negotiating committee and financial advisors have completed a study of the current situation and have concluded that additional cost reductions beyond those in the Restructuring Agreement are necessary to sustain the airline through bankruptcy and achieve ATSB approval for a loan guarantee, and
WHEREAS the MEC is committed to minimizing pilot job losses,
THEREFORE BE IT RESOLVED that the Negotiating Committee, supported by the MEC’s financial, R& I and legal advisors, is directed to enter into negotiations with management to develop a comprehensive program of additional cost reductions, including compensation, productivity, and pension modifications, in order to ensure US Airways’ emergence from bankruptcy and approval of an ATSB guaranteed loan, and
BE IT FURTHER RESOLVED that any such cost reductions be limited to those that are necessary and in the best interests of the US Airways pilots with minimum possible impact on pilot jobs, and
BE IT FURTHER RESOLVED that the participation of the US Airways pilots shall be contingent on participation of all labor groups and management in the comprehensive program of cost reductions, and
BE IT FURTHER RESOLVED that the negotiations include appropriate protections and returns, and
BE IT FINALLY RESOLVED that the negotiating committee will report regularly to the MEC on the progress of negotiations and will promptly report the reaching of any tentative agreement.
Item 2. MDA management has informed the MDA Negotiating Committee that it needs to suspend negotiations next week. US Airways has proposed to the MEC that MDA be structured differently than as required by the Restructuring Agreement.
Please remember we have 1,356 pilots on furlough, with 326 pilot furloughs scheduled for January 7, and 145 additional pilot furloughs anticipated through April 2003.
Thank you for listening.
This is Roy Freundlich with a US Airways MEC update for Tuesday, December 3, with two new items:
Item 1. The MEC reconvened its special meeting yesterday and today at the Key Bridge Marriott in Arlington, VA, and received updates, financial analyses and reports on the Company’s financial status from the Negotiating Committee, the Retirement and Insurance Committee, ALPA’s Financial and Economic staff advisors, and the MEC’s investment banker. The MEC also received a report from US Airways President and CEO David Siegel in closed session.
After considering an assessment of the Company’s financial situation from the MEC’s advisors, the MEC determined that US Airways is not achieving its financial requirements for maintaining debtor in possession (DIP) financing. This financing is dependent on the Company’s financial performance, which includes reaching revenue and cash balance targets, and receiving ATSB approval for a government loan guarantee prior to emerging from bankruptcy.
ALPA has determined that if the Company’s financial performance continues to fail to meet the obligations under the terms of the DIP financing with the Retirement Systems of Alabama, the financing under this arrangement may not be continued. The failure to maintain this financing, combined with a continued deterioration of the Company’s cash position, would prevent US Airways from emerging from bankruptcy by March 2003 and expose the Company to deeper risks in the bankruptcy process.
Management’s business plan under the current Restructuring Agreement was established last summer and projected an industry revenue recovery during the second half of 2002 and sustained in 2003 and beyond. Industry and US Airways revenue has significantly under-performed these projections, which is negatively affecting the Company’s cash burn rate, cash position and obligations under the terms of the DIP financing arrangement. To meet DIP financing and ATSB approval conditions, prior revenue assumptions contained in the Company’s business plan and ATSB
loan application have been revised lower, affecting the cost conditions of the application.
Management has taken the position that it cannot adequately enhance revenue to ensure US Airways’ success through the bankruptcy process (even with additional small jet code-sharing relief) and has requested an additional 200 million dollars in annual cost reductions from labor through productivity improvements and benefit changes, of which 101 million dollars would come from US Airways pilots, to compensate for the revenue shortfall. The MEC has not accepted management’s position that cost reductions be achieved strictly through productivity because of the impact this would have on pilot jobs.
ALPA has also determined that the pilots’ pension plan is at risk of being frozen or undergoing a distress termination, as a result of the Company only meeting minimum funding requirements and the negative performance of financial and equity markets. A return to normal market performance would not significantly help the Plan for many years. Therefore, modifications of the Plan’s benefits, including reducing the yearly multiplier going forward, total benefit calculation, and payment options, are being considered by ALPA to help the Company obtain funding deferments from the PBGC, which insures the Plan. Significant funding contributions to the Plan are required to remedy its current financial status and risks to the PBGC.
After careful consideration of the Company’s financial performance, management’s modified business plan, ATSB guarantee loan and DIP financing requirements, risks to the pilots’ pension plan, and management’s request for additional cost reductions, the MEC passed the following resolution:
MEC Resolution
WHEREAS airline revenue has failed to return to levels necessary to support required financial commitments and the ATSB Restructured Business Plan, and
WHEREAS the future of US Airways depends upon continued financing from RSA and the ATSB, as well as a funding waiver from the PBGC, and
WHEREAS the US Airways MEC negotiating committee and financial advisors have completed a study of the current situation and have concluded that additional cost reductions beyond those in the Restructuring Agreement are necessary to sustain the airline through bankruptcy and achieve ATSB approval for a loan guarantee, and
WHEREAS the MEC is committed to minimizing pilot job losses,
THEREFORE BE IT RESOLVED that the Negotiating Committee, supported by the MEC’s financial, R& I and legal advisors, is directed to enter into negotiations with management to develop a comprehensive program of additional cost reductions, including compensation, productivity, and pension modifications, in order to ensure US Airways’ emergence from bankruptcy and approval of an ATSB guaranteed loan, and
BE IT FURTHER RESOLVED that any such cost reductions be limited to those that are necessary and in the best interests of the US Airways pilots with minimum possible impact on pilot jobs, and
BE IT FURTHER RESOLVED that the participation of the US Airways pilots shall be contingent on participation of all labor groups and management in the comprehensive program of cost reductions, and
BE IT FURTHER RESOLVED that the negotiations include appropriate protections and returns, and
BE IT FINALLY RESOLVED that the negotiating committee will report regularly to the MEC on the progress of negotiations and will promptly report the reaching of any tentative agreement.
Item 2. MDA management has informed the MDA Negotiating Committee that it needs to suspend negotiations next week. US Airways has proposed to the MEC that MDA be structured differently than as required by the Restructuring Agreement.
Please remember we have 1,356 pilots on furlough, with 326 pilot furloughs scheduled for January 7, and 145 additional pilot furloughs anticipated through April 2003.
Thank you for listening.
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