Mitchell put a 21% emergency paycut on all US employees in the second chapter 11 case and abrogated the Mechanic and Related Contract.
And terminated all the remaining pensions, I was in the courtroom during the emergency hearings and the 1113 C trial.
And terminated all the remaining pensions, I was in the courtroom during the emergency hearings and the 1113 C trial.
Judge Allows US Airways Pay Cuts
By MICHELINE MAYNARD and KRISTEN A. LEE
Published: October 15, 2004
bankrupt US Airways today won most of the emergency pay cuts it said were critical to avoid liquidation, and the airline industry's other bankrupt company, United, said it wanted to terminate its labor contracts and would seek deeper cuts from its employees.
The moves by the industry's two insolvent companies underscored the crisis facing the nation's airlines. All told, the carriers are expected to lose close to $5 billion this year, on top of losses of $30 billion since the year 2000.
US Airways, the nation's seventh-largest airline, filed for its second bankruptcy protection in two years on Sept. 12, after employees would not grant $800 million in wage and benefit cuts sought by the airline. United, the second-largest airline, sought court protection in December 2002.
Judge Stephen S. Mitchell of Federal Bankruptcy Court in Alexandria, Va., said US Airways could impose cuts of 21 percent over the next four months, through Feb. 15. The airline had sought cuts of 23 percent for six months.
Lawyers for US Airways' unions argued that the cuts were too severe, given that employees granted the airline two rounds of cuts worth $1.9 billion a year during its first bankruptcy.
"We don't want the company to fail, but we don't think you need to slash and burn tomorrow," said Sharon L. Levine, a lawyer for the International Association of Machinists and Aerospace Workers.
The unions' lawyers also pointed out that salaried employees had taken cuts of 5 percent to 10 percent, and that the airline's chief executive, Bruce R. Lakefield, was not taking a pay cut.
But the airline's lawyers maintained that US Airways could cease operating by mid-February unless the cuts were granted. "This company will fail. There is no doubt that it will fail," Brian Leitch, US Airways' lead bankruptcy lawyer, said.
Judge Mitchell said he "reluctantly" agreed with US Airways' arguments. But he reduced the size and duration of the cuts and said that they "should not be an end run" around talks between the company and its unions on permanent cuts.
"I believe and understand this will represent a severe financial hardship" for US Airways employees, said Judge Mitchell, who presided over US Airways first bankruptcy case.
After the court hearing, Mr. Lakefield said, "Our mission here is to save as many jobs as possible."
He reiterated that he had taken the equivalent of a pay cut because his $425,000 salary was less than his predecessor, David N. Siegel, had earned. Mr. Lakefield replaced Mr. Siegel in April.
In the United case, airline lawyers said that they would ask a federal bankruptcy court in Chicago to void the airline's labor agreements, so that they could be replaced with less-expensive contracts.
United said it would file the motion, under Section 1113 of the bankruptcy code, sometime next month. The airline was granted cuts of $2.5 billion a year from its unions 18 months ago. United said it hoped to negotiate replacement contracts by mid-January.
United also said that it was "likely" to ask for the termination of its traditional employee pension plans, which it has said it wants to replace with 401(k) programs.
But the airline said the Association of Flight Attendants and the I.A.M. had agreed to drop efforts to appoint a trustee to run the airline, a move that in essence would have unseated United's chief executive, Glenn F. Tilton. The terms of the agreement were not disclosed.
