US Airways Clears a Hurdle in Bid to End Pension Plan
ALEXANDRIA (Bloomberg) -- US Airways Group Inc. cleared a hurdle in its bid to cancel a pension plan for more than 7,000 pilots, a move designed to help it slash $1.9 billion in costs and emerge from bankruptcy.
U.S. Bankruptcy Judge Stephen Mitchell approved a request by the seventh-largest U.S. carrier to terminate the plan. He said US Airways still must prove it has complied with its labor contract with the pilots, setting the stage for further talks between the two sides.
``I will approve the termination,'' Mitchell said. ``But that is subject to a finding under the mechanisms set forth in the collective bargaining agreement.''
The airline said last month it can't make $2 billion in benefit payments due retired pilots over the next seven years and asked a federal pension agency for permission to end the plan by March 31. The Arlington, Virginia-based company said it would commit $850 million over seven years to a replacement plan.
``We're disappointed with the judge's ruling that the company met the financial conditions for a termination of the pilot pension plan,'' said Air Line Pilots Association spokesman Roy Freundlich. ``We're gratified that the judge upheld our position on the contract and we are assessing all of our legal options.''
More Negotiations
Chris Chiames, a spokesman for US Airways, said Mitchell's ruling means the dispute is headed for more negotiations, mediation or arbitration. The carrier would prefer negotiation, he said.
``We're calling on ALPA to join us in immediate negotiations to resolve the remaining issues,'' he said in an interview. Mitchell's ruling ``keeps us on track'' to exit bankruptcy, he said.
US Airways says it must reduce pension liability to get $200 million in financing from the Retirement Systems of Alabama and a $900 million U.S. government loan guarantee to help it emerge from bankruptcy.
``US Airways is attempting to force pilots to bear an unacceptable and unjust burden that permanently harms pilots' retirement income,'' Captain Bill Pollock, US Airways master executive council chairman for the Air Line Pilots Association, said in a statement before Mitchell ruled. The union objected to the termination and said the question must be settled through arbitration under the Railway Labor Act, which governs airline contracts.
Cutting Back
The carrier has been cutting jobs and flights as it tries to adjust to lower demand that contributed to eight straight quarterly losses before the company's Chapter 11 filing in August. US Airways filed court papers seeking relief from the pension expense after Congress and a U.S. pension agency failed to approve a request to stretch the airline's obligations over a longer period.
Retirement Systems of Alabama has pledged a $240 million investment in addition to the bankruptcy financing and will get a 37 percent stake in US Airways after the carrier's reorganization. US Airways said last week that it's on track to emerge from Chapter 11 by March 31. A hearing on the company's bankruptcy recovery plan is scheduled for March 18.