Pilots see resolution by end of march


Aug 20, 2002

Pilots see hope for US Airways deal

By Luisa Beltran, CBS.MarketWatch.com
Last Update: 7:08 PM ET March 19, 2003

ARLINGTON, Va. (CBS.MW) - The Air Line Pilots Association said Wednesday it believes that it can resolve issues with US Airways Group Inc. for the nation''s seventh largest airline to emerge from bankruptcy by the end of the month.

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ALPA is currently in negotiations with US Airways to resolve the company''s pilot pension plan. A bankruptcy court has approved US Airways distressed termination of its pilot pension plan, the union said.

The company can''t terminate the plan without having an acceptable follow on plan, said Roy Freundlich, ALPA spokesman.

The Pension Benefit Guaranty Corp., which is to become trusty of the plan and terminate it, has suspended any action until the matter is resolved with ALPA, a spokesman said.

But US Airways cannot terminate the plan without approval from its 6,000 active pilots, said Dan Bowen, a US Airways pilot for 25 years who retired in February. A ratification vote is expected to take place sometime by March 31, he said.

ALPA will be pushing pilots very hard that if they don''t vote to accept termination of the plan, US Airways will liquidate, Bowen said.

However, the follow-on plan, which is contribution based, is expected to severely impact senior pilots. Senior pilots are against the follow-on plan because it means they won''t have a pension, Bowen said.

US Airways won conditional approval late Tuesday for its plan of reorganization. Bankruptcy Judge Stephen Mitchell ruled Tuesday that all necessary requirements have been met to implement the plan. The airline will emerge from Chapter 11 on March 31, Chief Executive David Siegel said.

Whether we resolve issues by March 31 depends on how management reacts, ALPA''s Freundlich said. We think we will find a solution.

Last August, US Airways(UAWGQ: news, chart) was the first major U.S. airline to file for Chapter 11 following the Sept. 11 terrorist attack. United Airlines, a unit of UAL Corp.(UAL: news, chart), has since gone bankrupt while American Airlines, the world''s largest airline and a subsidiary of AMR Corp.(AMR: news, chart), risks filing Chapter 11 if it fails to cut labor costs.

With the nation on the verge of war and the economy impacted by geopolitical uncertainties, the court''s approval is absolutely critical to our efforts to complete our restructuring by March 31, US Airways President and Chief Executive David Siegel said.

David Bronner, head of the Retirement Systems of Alabama, expects the airline to survive the pending war with Iraq. The nearly 35,000 active employees of US Airways have already agreed to defer 5 percent of their pay for up to 18 months if there is a war. See full story.

US Airways, unlike United, walked into its bankruptcy with
a plan which is allowing it to emerge from Chapter 11, said David Boyd, president of the aviation consulting company, the Boyd Group. US Airways is the poster child of the way airlines can be reorganized, Boyd said. There''s been a lot of pain and suffering but the airline will be there in five years.

However, US Airways must still receive final approval of its reorganization plan. In addition to the ALPA issues, US Airways must meet all conditions for a $900 million loan guarantee from the government, which it will use to secure $1 billion in financing. The Air Transportation Stabilizing Board has conditionally approved the loan.

The airline must emerge from Chapter 11 before it can tap $240 million in financing from the RSA. This new injection of capital is essential so that we can ride out the impact of war and economic turbulence, and implement our new business plan, Siegel said.

Shares of US Airways dropped 2.9 percent to 9 cents while UAL ended flat at 84 cents. AMR''s stock surged 7.6 percent to $1.84.