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Now US Airways Announces Cuts

Sun Sep 16, 2001 3:32 am

Yet another nasty ripple through the industry. This time it's US Airways. Here is an article printed in the Charlotte Observer today.

Latest airline crisis buffets US Airways

Company asks workers in MetroJet division to take pay cut today

Staff Writers

The airline industry's looming crisis has led US Airways to ask workers in its low-fare MetroJet division to take a 25 percent pay cut by 5 p.m. today.

The company said last month it would retire 18 of the 42 jets used in the division, which flies between the Northeast and Florida, if employees didn't agree to lower costs. It had not set a timetable.

Spokespersons for US Airways and its labor unions declined to comment. Labor leaders consider it impossible to respond so quickly to the demand, which was made Friday, a source said.

The airline's pilots took pay cuts for MetroJet flying in 1997 and are not involved in the talks. Few believe cuts at MetroJet will be sufficient to ease US Airways' plight.

The proposal comes as the airline industry faces the worst crisis in its history, with Tuesday's terrorist attacks expected to cause a sharp decline in travel and billions of dollars in losses.

In response, U.S. lawmakers Friday night were debating a $15 billion package of aid, loans and tax breaks for the beleaguered industry.

In the short term, reduced schedules, intensive cost-cutting and reduced work forces appear to be
near certainties. On Friday, Northwest Airlines told pilots it is considering a layoff, given "current industry conditions."

Roy Freundlich, a spokesman for the US Airways chapter of the Air Line Pilots Association, said the industry crisis could provide US Airways executives with "an opportunity to demonstrate leadership and solidarity with employees, but they are blowing it."

Bill Mastoris, managing director of research for BNY Capital Markets, a subsidiary of Bank of New York, said layoffs at US Airways are likely because of the poor outlook for the industry.

"We're going to have a frightened public, airport security that will slow the flow of traffic and the poor economy," he said. "The impact will be pronounced."

Credit rating agencies are taking notice: Moody's Investors Service downgraded US Airways and America West Airlines Inc. Friday, a day after Standard & Poor's said it was considering ratings cuts for all domestic airlines. Moody's said it expects the two airlines, and possibly the entire industry, to suffer significant losses. Lower credit ratings make borrowing more expensive.

US Airways is the dominant airline at the East Coast airports most directly affected by the terrorist attack and its aftermath: Boston Logan, New York La Guardia and Washington's Reagan National.

Travelers may be reluctant to use those airports, and security could be unusually high. By late Friday, the Federal Aviation Administration had not allowed National Airport to reopen.

However, US Airways benefits from a lack of international flying, which is expected to drop steeply, and from a large cash reserve. The airline has a cushion of more than $1 billion in cash at the end of the second quarter, as well as a revolving credit line of $440 million.

Even before Tuesday, the Arlington, Va.-based airline was hurting.

Its plan to merge with United Airlines was scrapped by regulators in July and its stock price has dropped 70 percent this year and closed just above a 52-week low Monday at $11.62.

The airline's annual meeting is set for Wednesday in Washington. A closely watched issue is whether Chairman Stephen Wolf, President Rakesh Gangwal and General Counsel Lawrence Nagin will seize an unusual opportunity to cash out for $45 million.

The opportunity arose because the attempted United merger, even though it failed, led to a "change of control" in the company that could benefit the top executives.

Wolf, 60, could get about $16 million, while Gangwal, 48, could get about $21 million. But Mastoris doesn't expect the pair to take the money.

"Wolf's moral fabric is such that he's not going to walk away and leave tens of thousands of employees stranded on a gulag," he said. "He may prefer the challenge: to get them up and healthy and then hand over the reigns to Rakesh."

Mastoris said management could seek to work with employees to jointly reduce costs.

Pilot spokesman Freundlich said, "We are willing to work with senior management to ensure US Airways is not defeated by this attack on our company or our industry, but we are concerned that management is using the crisis as an opportunity to create new threats to already-shaken employee groups."

Airline loads, or the percentage of seats filled, could dip below 50 percent in the next few months, Mastoris said. The major airlines filled a more typical 77 percent of their seats in August.

Arlington, Va., aviation consultant Morton Beyer, a veteran of 53 years in the industry, said he has never seen worse conditions.

Beyer said the severe financial picture could lead to a government bailout of the airline industry or to bankruptcies by some airlines.

Some analysts have suggested the decline could reach 50 percent of the shares' value. Prices on airline bonds plunged, a troubling preamble to Monday's planned stock-market reopenings in New York.

Propping up hopes for airlines was the House bill introduced Friday. It proposes $2.5 billion in subsidies for domestic airlines. It also would offer $12.5 billion in loans and possible tax breaks.

The money would come from the $40 billion Congress approved for recovery from Tuesday's attacks. Two Republican Senators also are drafting a bill to protect airlines from mass class-action lawsuits that could result from Tuesday's hijackings.

Also Friday, the company's largest shareholder, a New York-based investment fund, said it will begin distributing its US Airways shares to its stockholders.

Tiger Management LLC, which managed $21 billion at its peak, owns 24.8 million shares of US Airways, about 26 percent of the company. As it shuts down, it has been dividing its holdings and distributing them to the thousands of Tiger shareholders, said Tiger spokesman Fraser Seitel.
Posts: 6032
Joined: Sat Dec 02, 2000 9:40 am

RE: Now US Airways Announces Cuts

Sun Sep 16, 2001 3:37 am

Its just horfible what we are going through.
Fly the Flag!!!!

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