Airline, labor leaders to tackle cost-saving strategies
TED REED
Staff Writer
The next six days could determine whether US Airways flies or dies.
A week of crucial meetings with labor leaders will culminate with the service debut of low-fare leader Southwest Airlines at US Airways' Philadelphia hub on Sunday.
For US Airways, "this week is like the triple witching hour," said Dan Kasper, managing director of Cambridge, Mass., consulting firm LECG.
The rollout of the airline's survival plan begins today, when airline executives meet with newly named negotiators for the powerful pilots' union at the carrier's Arlington, Va., headquarters.
On Wednesday, executives hold a regularly scheduled monthly meeting with leaders from all the unions. On Thursday, they meet with flight attendant leaders. On Friday, they meet with leaders of the gate and ticket agents.
Today also marks the third and last day of an arbitration hearing on whether the carrier's contract with mechanics allows US Airways to contract out heavy maintenance on its new Airbus jets.
The carrier, which has its largest hub in Charlotte, faces increasing low-fare competition from Southwest and others.
To survive, it must wrest more cuts from labor. It has to slash costs by about $1.5 billion, much of that from workers, who have already made $1 million in cuts in two previous rounds of concessions.
Consider: Today, US Airways' highest one-way fare between Philadelphia and Fort Lauderdale, Fla., is $740. Starting Sunday, when US Airways will be forced to match Southwest's fare, the highest coach fare will be $379. Somebody has to make up the lost revenue.
Analysts say US Airways workers, most of whom are middle-aged, are likely to accept concessions because their job prospects elsewhere are limited. US Airways has 28,278 employees, including 5,736 in Charlotte.
"After two rounds of concessions, I'm not sure anybody has a lot to give," said analyst Helane Becker of Benchmark Capital. "But if it doesn't happen, the airline will surely fail. So I don't think there's much of a choice."
US Airways' labor chiefs, except for pilot leaders, have so far been nearly unanimous in indicating their reluctance to discuss more cuts.
Bill Pollock, chairman of the US Airways chapter of the Air Line Pilots Association, said pilots are committed to saving the carrier, but not by themselves. "Everybody will have to be in this together," he said. "Nobody should be expected to carry anybody else's share."
Pilots typically account for about 40 percent of an airline's labor costs. At US Airways, an average captain earns about $150,000 annually.
The International Association of Machinists says it has no intention of reopening its contracts, which cover both mechanics and fleet service workers, whose work includes baggage handling.
Talks with the mechanics could be the biggest barrier to an airline-wide settlement, observers say. "Mechanics are highly trained, they have a big responsibility, and they have a transferable skill," Becker said. "It will be tough."
Other unions have agreed to talk, but leaders have said they don't see any room for more cuts.
Steve Hearn, president of the Charlotte local of the Association of Flight Attendants, said he expects that at Thursday's meeting, the company "will lay it on the table and say we have to have this and we're going to get it one way or the other, with your cooperation or without it."
Hearn said it's too soon to say how the flight attendants will respond. Top pay for average flight attendants is about $39,000 annually.
Time is short because the terms of US Airways' $726 million in federal loan guarantees require that the carrier reduce its losses this year and make a profit in 2005.
On a conference call with analysts last week, newly installed chief executive Bruce Lakefield wouldn't divulge the carrier's internal cost-cutting timeline. But he noted that given the covenants, "If you put two and two together, we have to do it sooner rather than later."
US Airways' struggles reflect a transition that is under way throughout the airline industry. In 2001, established hub carriers hit the skids because of a slowing economy, the Sept. 11 terrorist attacks and an increased demand for low-fare travel.
The combination pushed US Airways into bankruptcy court. It emerged in March 2003, after cutting annual costs by $1.9 billion. Kasper said the cuts were steep, but US Airways started with the industry's highest costs.
"The other guys have been cutting, too," he said. "So despite all the pain, they haven't gained much."
Bill Pollock
Pollock, chairman of the US Airways chapter of the Air Line Pilots Association, said pilots are committed to saving the carrier, but not by themselves. "Everybody will have to be in this together," he said. "Nobody should be expected to carry anybody else's share."
TED REED
Staff Writer
The next six days could determine whether US Airways flies or dies.
A week of crucial meetings with labor leaders will culminate with the service debut of low-fare leader Southwest Airlines at US Airways' Philadelphia hub on Sunday.
For US Airways, "this week is like the triple witching hour," said Dan Kasper, managing director of Cambridge, Mass., consulting firm LECG.
The rollout of the airline's survival plan begins today, when airline executives meet with newly named negotiators for the powerful pilots' union at the carrier's Arlington, Va., headquarters.
On Wednesday, executives hold a regularly scheduled monthly meeting with leaders from all the unions. On Thursday, they meet with flight attendant leaders. On Friday, they meet with leaders of the gate and ticket agents.
Today also marks the third and last day of an arbitration hearing on whether the carrier's contract with mechanics allows US Airways to contract out heavy maintenance on its new Airbus jets.
The carrier, which has its largest hub in Charlotte, faces increasing low-fare competition from Southwest and others.
To survive, it must wrest more cuts from labor. It has to slash costs by about $1.5 billion, much of that from workers, who have already made $1 million in cuts in two previous rounds of concessions.
Consider: Today, US Airways' highest one-way fare between Philadelphia and Fort Lauderdale, Fla., is $740. Starting Sunday, when US Airways will be forced to match Southwest's fare, the highest coach fare will be $379. Somebody has to make up the lost revenue.
Analysts say US Airways workers, most of whom are middle-aged, are likely to accept concessions because their job prospects elsewhere are limited. US Airways has 28,278 employees, including 5,736 in Charlotte.
"After two rounds of concessions, I'm not sure anybody has a lot to give," said analyst Helane Becker of Benchmark Capital. "But if it doesn't happen, the airline will surely fail. So I don't think there's much of a choice."
US Airways' labor chiefs, except for pilot leaders, have so far been nearly unanimous in indicating their reluctance to discuss more cuts.
Bill Pollock, chairman of the US Airways chapter of the Air Line Pilots Association, said pilots are committed to saving the carrier, but not by themselves. "Everybody will have to be in this together," he said. "Nobody should be expected to carry anybody else's share."
Pilots typically account for about 40 percent of an airline's labor costs. At US Airways, an average captain earns about $150,000 annually.
The International Association of Machinists says it has no intention of reopening its contracts, which cover both mechanics and fleet service workers, whose work includes baggage handling.
Talks with the mechanics could be the biggest barrier to an airline-wide settlement, observers say. "Mechanics are highly trained, they have a big responsibility, and they have a transferable skill," Becker said. "It will be tough."
Other unions have agreed to talk, but leaders have said they don't see any room for more cuts.
Steve Hearn, president of the Charlotte local of the Association of Flight Attendants, said he expects that at Thursday's meeting, the company "will lay it on the table and say we have to have this and we're going to get it one way or the other, with your cooperation or without it."
Hearn said it's too soon to say how the flight attendants will respond. Top pay for average flight attendants is about $39,000 annually.
Time is short because the terms of US Airways' $726 million in federal loan guarantees require that the carrier reduce its losses this year and make a profit in 2005.
On a conference call with analysts last week, newly installed chief executive Bruce Lakefield wouldn't divulge the carrier's internal cost-cutting timeline. But he noted that given the covenants, "If you put two and two together, we have to do it sooner rather than later."
US Airways' struggles reflect a transition that is under way throughout the airline industry. In 2001, established hub carriers hit the skids because of a slowing economy, the Sept. 11 terrorist attacks and an increased demand for low-fare travel.
The combination pushed US Airways into bankruptcy court. It emerged in March 2003, after cutting annual costs by $1.9 billion. Kasper said the cuts were steep, but US Airways started with the industry's highest costs.
"The other guys have been cutting, too," he said. "So despite all the pain, they haven't gained much."
Bill Pollock
Pollock, chairman of the US Airways chapter of the Air Line Pilots Association, said pilots are committed to saving the carrier, but not by themselves. "Everybody will have to be in this together," he said. "Nobody should be expected to carry anybody else's share."
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