US Airways - Managerial Retention $$$

[Kip Powick]

US Airways, concerned that its management ranks are "dangerously thin," said yesterday it is prepared to spend as much as $55 million to retain key officers and salaried workers as it negotiates a merger with America West Airlines.

The introduction of new severance agreements and retention incentives for 1,900 of the company's 25,000 workers had union officers fuming yesterday, even though such packages are usual for a company in bankruptcy.

"I am very, very angry," said US Airways flight attendant president Teddy Xidas.

Union-represented employees have given back more than $2 billion over two years to keep the nation's seventh-largest airline in the air. Since 2001, more than 7,000 jobs have been cut in the Pittsburgh area alone, and a hub was eliminated at Pittsburgh International Airport.

All the cutting and turmoil has made it tough for US Airways to hold onto top officers and managers.

Within the past year, it lost two chief financial officers, an executive vice president and four vice presidents. The company currently has 320 open positions among the salaried ranks of financial planners, accountants, purchasers and human resource workers -- more than twice the number of vacancies cited when it filed for its second bankruptcy last September.

"Additional departures will not cut through fat, but muscle and bone," the company said in a recent bankruptcy filing.

US Airways will ask a bankruptcy judge to approve the new retention-and-severance packages at a hearing next week.

The retention aid is being sought in part to ease the potential sting of a merger with America West, which could result in the elimination or relocation of as many as 1,562 US Airways managerial and salaried jobs, the bankruptcy documents say. The two airlines are thought to be nearing an accord.

In a worst-case scenario, a merger would cost US Airways as much as $18 million to pay the severance of all 25 senior executives and another $32 million if all other salaried workers lose their jobs after the combination. Most salaried workers would receive amounts ranging from three months to a year's salary.

US Airways said it is more likely that about one-third of officers and employees would be forced to leave, resulting in about $16 million in severance payouts.

Regardless of the final number, US Airways Executive Vice President Jerry Glass said yesterday the company needs the severance agreements in place to keep top talent while merger discussions continue with America West.

"The combination of sustained industry losses, a competitive job market and public speculation about the company's future has resulted in a situation where our already thin management team is leaving at a rapid pace, often enticed by offers from other employers seeking to lure qualified candidates," he said.

All of the company's top officers, except Chief Executive Officer Bruce Lakefield, are receiving new employment agreements as a result of the severance arrangements.

Lakefield, who makes $425,000 a year, gets to keep a clause that allows him to make three times his salary, or $1.27 million, if he loses the job as the result of a merger. The company's other top nine officers are guaranteed two times salary in the event of a merger and a job loss -- as opposed to the three times salary they would have received under current contracts.

As an added incentive for its salaried workers, US Airways also wants to give Lakefield access to a $5 million fund he can use to provide "discretionary retention payments" ranging from $2,500 to as much as $50,000.

US Airways spokesman David Castelveter reiterated yesterday that the money for the retention-and-severance program is already there, in the form of savings from management positions not replaced over the last year, and that the payments would not jeopardize the company's fragile recovery from bankruptcy.

But union officers were not convinced yesterday that program made any sense.

"They didn't earn that money," said reservation agent Chris Fox, who runs the local office of the Communications Workers of America. "If we were making money right now, I would say they earned it."

"Since we are losing money, I don't see it," Fox said.

To Xidas, the news arrived like salt in a wound.

Xidas claims she has been after the company for months to give flight attendants six months more medical coverage in the event of an injury or pregnancy but was told the added benefit would be too expensive. She claims the coverage would have cost $700,000 to $800,000 a year. Speaking of Lakefield, Xidas said: "He can find the money [for medical coverage] in the same well he found retention bonuses for managers.

"Who is more important in the equation of customer service delivery, the rank and file or the manager?" she asked. "That is the question Lakefield has to ask himself."