US Airways gets go-ahead to cut workers' pay

/ Source: The Associated Press

A bankruptcy judge granted US Airways authority Friday to immediately cut the pay of its union workers by 21 percent, saying the airline's situation is so dire that urgent action must be taken.

The 21 percent pay cut is nearly all of the 23 percent reduction the air carrier had sought.

"Basically what we have here is a ticking fiscal time bomb," U.S. Bankruptcy Judge Stephen Mitchell said in issuing the ruling.

The temporary pay cuts are in place until Feb. 15, 2005, one month less than what the airline had sought. Mitchell also granted the airline authority to reduce the size of its jet fleet.

Under the 21 percent cut, the average US Airways salary would drop from $59,509 to $47,012. That would put US Airways below the other five major traditional carriers as well as Southwest Airlines, but higher than JetBlue and America West, two carriers US Airways now seeks to emulate.

US Airways, a unit of US Airways Group Inc., employs 34,000 workers, of which 84 percent are represented by unions.

Brian Leitch, an attorney for the airline, said the pay cuts were necessary to keep the cash-strapped company from liquidating.

"We're twisting in the wind, we're airing our financial distress to the world," he said during closing statements before Mitchell on Friday. "We need to get some stability for a few months."

Still, Leitch acknowledged that the pay cuts alone won't prevent a liquidation, but simply give the airline a fighting chance for survival.

US Airways, he said, will need permanent cost-savings from its unions twice as large as though achieved by the temporary cuts.

Those savings, however, can be achieved without deeper salary cuts.

US Airways pilots, for instance, reached a tentative agreement on a deal that provides the airline the long-term savings it needs while only imposing an 18 percent pay cut, with additional savings through benefit reductions and work rule changes.

A ratification vote on the pilots deal will conclude Oct. 21. The 21 percent pay cut will only apply to the pilots if they reject the tentative agreement.