US Airways: More cuts coming
CEO tells workers slashing costs, and quickly, needed to survive Southwest Airlines' entry to Philly hub
TED REED
Staff Writer
US Airways is fighting for its life, chief executive David Siegel told workers Wednesday, because Southwest Airlines is "trying to kill us and take our franchise away."
In an hourlong Internet broadcast, Siegel told the airline's 28,278 employees (including 5,736 in Charlotte) that he must cut costs again for the airline to survive. He must work fast, he said, because low-fare king Southwest will begin flying to Philadelphia, US Airways' most profitable hub, in May.
Siegel said everyone must participate. Formal talks with unions will begin in April, with new labor agreements needed by summer. More employees will be furloughed, he said, though he didn't specify a number.
US Airways will also revamp its Web site and study whether to remove first-class seats on all its planes, and Siegel himself will take a pay cut.
The cuts are part of a plan to reduce the nation's No. 7 airline's costs by 25 percent. Its cost to fly one seat one mile, now about 10 cents, must fall to about 6, and management wants about half the reduction coming from workers. The airline is still losing money despite having spent eight months in bankruptcy protection and cutting costs by about $1.3 billion annually, including $1 billion from labor.
"We're not going to do any temporary fixes," Siegel said. "We've tried small fixes. We know those don't work. Everybody's going to participate in this, no exceptions."
Siegel makes $650,000 annually in salary alone. He said he is prepared to take an unspecified cut to the level of a low-fare carrier's CEO, and he will not take advantage of a contract clause allowing him to walk away in April with a $4.5 million parachute.
In the webcast, Siegel said employees who find the cuts "too painful" should nevertheless approve them because without them there will be no airline.
In the International Association of Machinists Charlotte union hall, a half-dozen members stared cheerlessly at the screen showing Siegel's webcast. As Siegel strode back and forth, they clutched waters or soft drinks, and occasionally joked or cursed.
Afterward, the workers provided varying answers to the only question that really matters: Will you accept more concessions or will you let the airline shut down?
"I'd rather all of us walk out together with our heads held high," said Fred Coors, 50, a fleet service worker for 30 years. "I don't want them to dismantle the airline one person at a time."
Coors said he has already sacrificed. He once worked for California airline PSA, but moved his wife and four children from Burbank to Charlotte because USAir shut PSA down after buying it in 1988. Because he works Sunday through Thursday, he and his family must celebrate Thanksgiving on Friday.
In the past two years, Coors has watched his salary fall from about $50,000 to about $42,000 annually. He said that Siegel can afford a pay cut, but that cuts of $2 to $3 an hour for fleet service workers "won't save the airline."
Mike Christenbury, a 48-year-old veteran with 25 years as a fleet service worker, said he isn't sure what to think. He said he understands that the airline needs to reduce costs, but he doesn't think so much should come from employees. Even with 25 years of experience, Christenbury still doesn't have enough seniority to get Saturdays off.
Union leaders are in a difficult position, also. John Carr, vice president of Charlotte IAM Local 1725, said, "As a worker, I'm unwilling to take any concessions." But as a leader, Carr said, he has a moral obligation not to force a shut down.
Southwest will start in Philadelphia with four gates, with plans to expand to eight. "They go to eight and it's over," Siegel said, noting that with eight gates in St. Louis, Southwest was a principal contributor to the failure of hub carrier TWA. "I refuse to follow that same path," Siegel said. "I'm prepared to lead this fight against Southwest."
Past Cuts
Since 2001, US Airways' employment has fallen from 46,738 to 28,278. Workers have absorbed $1 billion worth of pay cuts, benefit cuts and work rule changes. Here are examples.
PILOTS
The salary for a Boeing 737 captain has fallen from about $180,000 annually to about $150,000. Because of cuts in the number of airplanes, many captains have become first officers, making about $100,000 annually. Pilot pension benefits have been cut sharply.
FLIGHT ATTENDANTS
Top pay for flight attendants has fallen from nearly $50,000 annually to between $37,000 and $42,000 annually.
TICKET AGENTS
In 2002 negotiations, agents kept their top pay at $20.05 hourly. But they gave up two paid holidays and 25 percent of vacation pay, while annual sick days fell to five from 12.
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Ted Reed: (704) 358-5150; treed@charlotteobserver.com