US Air pilots want restructuring scaled back
Friday February 28, 6:50 pm ET
By John Crawley
ALEXANDRIA, Va., Feb 28 (Reuters) - Pilots at US Airways Group Inc. (OTC BB:UAWGQ.OB - News) said on Friday they want the bankrupt airline to scale back its restructuring proposal to save their pension program or negotiate changes to the retirement plan.US Airways has said it can no longer afford the pilots retirement plan and wants to replace it with one that would offer $850 million over seven years. The carrier says resolving the $1.6 billion pension liability is the last major hurdle it faces in Chapter 11 reorganization.
The Air Line Pilots Association disagrees with the company's assertion that it has signed off on the proposal and expressed skepticism on a March 31 target set by the airline to emerge from bankruptcy protection.
"Our position is that it is a timeline to terminate our pension plan," Roy Freundlich, the airline pilots' union spokesman, told reporters.
The union, in a presentation to be made on Saturday in bankruptcy court, wants the company to scale back its plan to invest between $3 billion and $4 billion over the next several years to dramatically expand its regional jet program.
Short of that, the pension plan issue should be decided in head-to-head negotiations instead of bankruptcy court, Freundlich said.
US Airways Chief Executive Officer David Siegel has called the regional jet program the cornerstone of the company's future and said meeting the deadline was crucial to survival.
"If we delay past March 31, we run an extremely high risk of never emerging," Siegel told Judge Stephen Mitchell of the U.S. Bankruptcy Court for the Eastern District of Virginia on Friday.
The airline needs Mitchell to agree that it can legally terminate the pilot pension program and the judge could decide the matter immediately after he hears both sides.
The U.S. Pension Benefit Guarantee Corp., a self-funding government agency that backs corporate pensions, must also approve the plan.
The issue is the last obstacle blocking the company's restructuring by the March 31 time frame, but pilots oppose such a move because it would cost some members as much as 75 percent of their retirement income.
About 1,100 US Airways pilots are retired and receiving benefits averaging about $36,000.
US Airways has said it must emerge from Chapter 11 bankruptcy protection from creditors by the end of March under its deal with its credit card processor National Processing Co., a unit of National Processing Inc. (NYSE:NAP - News)
After that date, the airline said it would no longer have a credit card processor to handle transactions.
US Airways must also resolve the pension issue before it can get $200 million in emergency financing from its biggest investor, and final approval for a $1 billion loan mostly backed by the government.