Management Cuts
ARLINGTON (theHub.com) - US Airways will file with the U.S. Bankruptcy Court today the details of reductions in compensation, benefits and workforce for its management and non-union employees as part of their participation in the company’s Transformation Plan. In a letter to the affected employees, CEO Bruce Lakefield said most employees and functions in these groups are paid near market rates for their respective jobs and duties. Compared to the low-cost carriers, however, “US Airways has historically had a generous program in other parts of our compensation package, including health care coverage, vacation/sick leave policies, and pension and retirement programs that have been eclipsed by market changes,†he said.
The overall annual target for participation by management/non-union employees, including all officers, is $45 million (or more than 20 percent of total 2004 payroll costs). To meet the target, US Airways is taking the following actions that will have a direct effect on all management and non-union employees. These savings will be obtained through a combination of pay, pension and benefits changes that will be apportioned in the following way and are consistent with our projected status as a successful low-cost carrier:
Senior Officer team (including the company’s 10 most seniors officers -- executive vice presidents and senior vice presidents)
The company’s senior officers will take the largest cuts in keeping with the commitment to lead the way and transform the compensation of our executives to be similar to that at the LCCs. Effective Oct. 11, additional cuts will be made to the senior officers’ cash compensation. The total cuts to these senior officers’ W-2s will range from 15 percent to 20 percent and average 17 percent, consisting of a 10 percent salary reduction and a 25 percent reduction in the contributions to their existing retirement plans. Earlier this year, all officers, including the senior officers, waived their rights to a pay raise that had been approved in our previous plan of reorganization and was consistent with pay raises that both union and non-contract employees received. Along with cancelled pay raises, the total W-2 cuts for senior officers on average will exceed 20 percent.
Vice Presidents and Managing Directors
Effective October 11, all officers and managing directors will take a pay cut of 7.5 percent. Vice presidents have also foregone their pay raise this year. In addition, the total number of company officers has been reduced by 25 percent, from 35 to 26.
All other management/non-union employees:
Effective Oct. 11, other non-union employees will take a 5 percent pay cut.
Modification to Pension Plans
Effective with the payroll cycle beginning Oct. 11, US Airways will modify its defined contribution retirement plans for non-contract and management employees. Contributions to the Employee Pension Plan, known as the Base Account, will be set at 3 percent of salary for all employees regardless of age. Employee contributions to the 401(k) plan will not be affected, but the company match will be eliminated. Current vested balances will remain in place and unvested balances will continue to vest according to the Plan schedule. Investment options for both the 401(k) and Base Accounts will remain unchanged.
Workforce Reduction
We will reduce headcount by more than 10 percent from the total number of employees who were in place at the beginning of the year. Among the ways we have and will continue to reduce the workforce are not filling open and budgeted positions, outsourcing of work where appropriate, elimination and consolidation of positions, and in certain cases, outright reorganization of entire departments. We have already started this process and will have it completed by the end of October.
Paid Time Off (PTO) system
Effective Jan. 1, 2005, the current sick and vacation accrual system for management and non-union employees, including all officers, will be converted to a PTO system. All leave will be accrued under a single category and the number of paid holidays will be reduced. A summary of the new PTO system is presented below.
Service Paid Time Off Holidays Total
1 – 5 years 15 days 8 23
6 – 11 years 20 days 8 28
12 plus years 25 days 8 33
Holidays observed will be New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and two floating holidays. Additional details regarding the conversion from the current system to PTO will be available on theHub shortly.
Modification to Retiree Benefits
Effective Jan. 1, 2005, US Airways will make changes to retiree medical, dental, and life insurance benefits. Complete details regarding these changes will be forwarded to those who could be impacted and will be available on theHub.
Hiring Moratorium
Effective immediately, we will implement a hiring moratorium covering management, administrative, and crew scheduling employees. Only those positions deemed critical to the success of the Transformation Plan will be filled. All other open positions will be eliminated. Further replacements will be considered for backfill only after a complete justification has been approved by the senior officer team. No new positions will be created without an exception from the Chief Executive Officer. If we need to fill an approved position, we will focus our efforts on internal candidates. External hires will be permitted only if there are no fully qualified internal candidates.
Profit sharing
All employees will be offered an opportunity to participate in the profit sharing plan previously announced, subject to various approvals required by the bankruptcy process. We are also examining the possibility of providing some form of equity for employees who participate in the Transformation Plan. More details will become available as we move through the bankruptcy process and actively work toward emergence.
Regards,
USA320Pilot
