Deal Maybe???


Aug 20, 2002
Updated 07:27 PM EST, Mar-21-2003

Despite posturing to the contrary, US Airways Group Inc. and its pilots union closed in on an agreement that would allow the company to emerge from bankruptcy as scheduled, sources representing the sides said Friday, March 21.

Counsel for the Arlington, Va.-based airline told a U.S. Bankruptcy Court judge Thursday that the carrier had reached an impasse in talks with the pilots union on reducing the company''s pension costs. With negotiations continuing, however, the parties said they expect a resolution within days, with an agreement possible as early as Saturday.

US Air has said it needs to exit Chapter 11 bankruptcy by the end of March to access funding to survive a war-related travel slowdown. The airline has received final confirmation for its reorganization plan, but Judge Stephen Mitchell ordered it to negotiate with the Air Line Pilots Association on a replacement for the pilots'' pension plan, which the company is scrapping as part of the reorganization.

The airline seeks to assemble a plan that would require it to contribute about $120 million a year to the pilots'' retirement fund. Company officials claim the unions have countered with a plan that would require US Air to spend about $180 million annually, which has caused the standoff.

But in an interview Friday, US Airways pilot and ALPA spokesman Roy Freundlich said the union''s plan would cost the airline only about $135 million a year, and he expressed optimism that the two sides are close to a deal.

Talks are continuing, and they are moving towards the final stages, he said. I would expect we will have an agreement shortly.

Freundlich said he was uncertain why US Airways claimed the parties were at loggerheads. From our standpoint we don''t see any major obstacles, he said.

A source involved in the company''s reorganization backed Freundlich''s claim, saying the pension issue is not going to ruin US Airways'' chances of emerging from bankruptcy on schedule. Other US Airways officials and a spokesman did not return calls requesting comment.

Separately, US Airways said it might invoke the force majeure provision in its labor contracts, which would allow the company to defer 5% of employee pay for up to 18 months in a wartime situation. US Airways said that passenger bookings dropped 40% March 19, compared to the prior week''s bookings. The airline expects total traffic to fall 20% in the near term.

Our short-term survival and long-term success after we emerge from Chapter 11 are conditioned on our taking decisive, proactive steps to limit the airline''s financial exposure from the war, US Airways CEO David Siegel said in a statement. The entire airline industry is facing a dramatic drop in demand that will only further erode the financial standing of the major carriers.

Freundlich attacked US Airways'' claim that it may need to defer salaries, calling it completely unproductive in resolving differences with labor. The invasion [of Iraq] is young, and no one knows how long it will last, he said. This is not really an issue at this point that would require the airline to devastate itself.

US Airways also said it has notified its sponsor, the Retirement Systems of Alabama, that it violated terms of its debtor-in-possession facility. The company failed to make payments totaling $27 million on 14 Airbus aircraft. Under the DIP, the RSA could cancel its commitment, although sources say that is unlikely.

The airline has drawn down $369 million of the $500 million DIP facility and is in discussions concerning the remaining money. US Airways has previously missed payments totaling $67 million, but in those cases it was able to draw down DIP funding and make the payments before the end of the applicable cure periods.


Aug 20, 2002
It is amazing what happens when Daddy tells his two children to take a time out and get things resolved. Good luck to both.