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US Airways to Seek $1 Billion in Loans

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Nov 25, 2001
ARLINGTON, Va. (May 17) - US Airways will ask the federal government to back roughly $1 billion in loans and ask employees to accept wage and benefit cuts of $950 million a year as it fights to prevent bankruptcy.

Airline executives outlined the plan Thursday to union leaders, warning that the carrier would likely seek Chapter 11 bankruptcy protection if it could not get the labor concessions and the loan guarantees. The loan guarantees are available through the $15 billion industry bailout approved by Congress after Sept. 11.

Details of the labor cuts weren't discussed, but they alone would represent roughly 25 percent of the company's personnel costs in 2001. Jerry Glass, the airline's senior vice president for human resources, said US Airways would go from the highest paid employees in the industry to about sixth or seventh.

Glass said the specific terms of the loan proposal are not final, but he acknowledged that the airline will likely have to offer the federal government the opportunity to buy a stake in the company.

Overall, the company's plan calls for $1.2 billion in cost reductions annually, meaning employees are being asked to bear about 80 percent of the reductions.

``There are a number of costs you can't do anything about. Fuel, landing fees - you can't control,'' said Glass. ``There are only limited areas where you can get cost reductions.''

Glass said the airline has no plans to lay off more workers or further reduce its capacity. Last year, the airline reduced capacity by 23 percent and laid off 11,000 of its 46,000 employees following Sept. 11.

``We intend to try to keep everybody employed,'' Glass said. ``Over time we want to grow the business.''

The $1 billion in loan guarantees is roughly what analysts had anticipated. The only other airline to seek the government loan support, was America West, which received $429 million.

As part of its deal, America West gave the government the option to buy one-third of that airline at a price of $3 a share.

Despite the steep concessions US Airways asked of employees, Karen Lascoli, representing US Airways' unit of the Association of Flight Attendants,said the presentation was ``very positive.''

``We're committed to helping this airline survive. We're not exactly sure what will be asked of us, so we have to be careful to committing to anything. ... But they gave a very convincing presentation.''

Lascoli said she liked that the plan focused not just on cutting costs, but also on increasing revenues through a big increase in regional jets and alliances with domestic and international carriers that would take advantage of US Airways' strength on the East Coast.

The plan, Glass said, is to strengthen the airline's three biggest hubs in Charlotte, Philadelphia and Pittsburgh and revitalize its business in Washington's Reagan Airport, New York's LaGuardia Airport and Boston. The last three cities form the bulk of US Airways' shuttle business, which caters to lucrative business travelers. That market has suffered in recent months as travelers have opted for car or high-speed trains instead.

The company wants to add another 150 regional jets. The smaller planes, which seat about 50 passengers, could be used to feed the airline's hubs and replace turboprop planes, which are unpopular with passengers, or larger more expensive jets.

The regional-jet issue is one that divides flight attendants and pilots. Flight attendants support their use, but pilots are concerned that they would be paid less to operate those planes. the pilots union agreed last month to expand the number of regional jets from 70 to 140, after lengthy, contentious negotiations.

Roy Freundlich, a spokesman for the Air Line Pilots Association, said he was disappointed that the plan does not outline exactly what concessions will be asked of each employee group. that information will come next week.

``We're keeping an open mind, but we need to see more details,'' he said. ``Our position in general is that if this plan is an attempt at making the mainline airline larger in the long run, then we'll support it.''

US Airways lost $2.1 billion, or $31 a share, on revenue of $8.3 billion last year.
$$$$$$ from U

U has 35,525 employees (Mainline, AGL, PDT, PSA together)
so 950,000,000 per year is $26,742 per employee per year.

Ring Ring - Hi mom, How are you? Remember how you drove me to the airport as a kid for lessions, paid for my engineering degree, supported me with my first $500/month charter job and with the Air Guard. How you let me live at home as an F.O. to save and fly and finally how you helped me move out when I made Capt. and on my own - Well just one thing to ask, CAN I MOVE BACK IN? - I hope you didn't turn my room into that home gym you've talking about.

55, 000 or so as DHC-8 Capt. minus 26, 700 is 28, 300.

Ring, Ring - Hi Air Guard unit - got some extra flying?
Ring, Ring - Hi Taco Bell - I can make a mean soft taco
Ring, Ring - Hi Pizza Hut - I'm trusted with a multi million $ aircraft and pax lives, can I deliver your $8 pizza - I think I can handle the bread sticks too

Seriously - I have no problem giving some for the sake of the company but your not going to save this place by robbing the workers - Hey Dave do it right, don't take the easy way out. I plan on seeing/meeting you in PHL on the 28th for further discussion.

Take Care
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I take your point that the necessary concessions are painful, but I think you are overstating the impact on the $55k/yr pilot. Since the $950 million a year cuts represent about 25% of the labor expenses, I think the MOST cut that pilot would see would be between $13,000 and $14,000. In fact, since part of personnel costs are employer contributions to workman's comp, social security, etc., the impact would be less than that.

I make less than $55k, but I could absorb a 25% reduction by adjusting my savings without modifying my lifestyle. My saving plan would take a BIG hit, though.
I agree

We'll the 401k which has been going strong will take a hit and....

instead of the Citabria I was eyeing I'll have to build a model
instead of the 83 Porsche 911SC I'll get a matchbox car
and as for the boat an inner-tube will have to do. Anyone for tubing on the Delaware? Pure white trash fun.

OOPS - just got a reserve assignment - gotta go

Take Care
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