US Airways - possible liquidation

[Kip Powick]

US Airways faces a "high probability" of liquidation by mid-February if the temporary pay cuts it requested are not approved by the U.S. Bankruptcy Court.

It was the first time since the Arlington-based airline filed for Chapter 11 bankruptcy protection on Sept. 12 that it publicly gave a time frame for a possible liquidation. This possibility was raised in a filing Friday.

The airline also Friday sought across-the-board pay cuts of 23 percent from its employees, equaling about $38 million a month. Without the cuts, the carrier told the court, the airline predicted "massive layoffs" and "potential liquidation."

In another development, US Airways said yesterday that it reached a tentative cost-cutting agreement with its 65 flight crew training instructors who make up part of the airline's Transport

Workers Union Local 547. The agreement, details of which were not released, is subject to ratification by the group's members and must be approved by the bankruptcy court. The agreement is only the second such accord between the airline and its labor groups. Last week the airline reached a $4.5 million cost-cutting agreement with its 150 flight dispatchers, who also are part of the Transport Workers Union.

"Our members recognize the need to implement meaningful efficiency gains and other cost-saving steps in order to keep US Airways alive and well. While these actions are very difficult for us, we recognize that our livelihood depends on the successful restructuring of this airline," said Bill Gray, president of the union local. "Our employees have too much time and effort invested in this fine company to just stand by and watch it fade into the annals of aviation history."

The airline, which employs about 28,000 workers, still has not reached agreements with the larger unions that represent its pilots, flight attendants, mechanics, reservation agents and simulator engineers.

US Airways Group Inc. filed for Chapter 11 bankruptcy protection after failing to achieve $800 million in concessions from its labor groups as part of the airline's $1.5 billion cost-restructuring plan.

US Airways, the nation's seventh-largest airline, also acknowledged in the filing that it was increasing to $950 million the concessions it seeks in pay, benefits and work rules from its employees.

The increase is $150 million more than it originally sought from its workers before the Chapter 11 filing.

In its filing Friday, US Airways said it was concerned about being able to make $260 million in aircraft debt and lease payments due in January and February.

The airline also said it faces reduced passenger revenue during the slower winter season, which the carrier said would drain needed cash and leave it unable to operate.

The airline also outlined plans aimed at reducing some of its non-labor costs in the coming months, including cutting some management and administrative positions by the end of October.

During the airline's first Chapter 11 bankruptcy filing in 2003, workers accepted $1.2 billion in cuts as part of the airline's nearly $2 billion in cost reductions.