AIRLINE INDUSTRY US Airways' last holdout union approves cuts
A strike might have dealt a lethal blow to the airline.
MCLEAN, Va. (AP) -- Machinists at bankrupt US Airways' last holdout union voted Friday to approve pay and benefit cuts that will save the airline almost $270 million -- but cost thousands of union members their jobs.
Friday's vote by the machinists union gives the airline a reduction of more than $1 billion in its annual labor costs, the level management said was necessary to be viable in an increasingly cutthroat industry.
"The vote came down to choosing between bad and worse," said William O'Driscoll, president of International Association of Machinists District 142. "Let their decision end the debate about our members' commitment to US Airways."
Of the three groups voting Friday, 61 percent of the voting mechanic and related members, 62 percent of fleet service workers and 97 percent of voting maintenance training specialists voted to accept US Airways' final proposal.
The union's vote to accept US Airways' offer should eliminate the threat of a strike, which might have dealt a lethal blow to the airline. US Airways had been prepared to seek a preliminary injunction barring the union from going on strike had the contracts been rejected.
The union's decision to approve the deal had been expected. If the unions had voted against the contracts, the contracts would then have been canceled altogether by court order and the airline would have been free to impose harsher terms.
U.S. Bankruptcy Judge Stephen Mitchell had ruled earlier this month that the union's contracts could be canceled, saying it was necessary to give the airline any chance of survival.
Mitchell, in issuing his ruling, acknowledged that machinists were in a difficult position and "are essentially being asked to slit their own throats."
"No one likes making concessions, but the outlook for the US Airways is much brighter now that we have secured these new labor agreements and the public discussion about the airline is much more optimistic," US Airways Group Inc. Chairman David G. Bronner said.
The new contracts are expected to result in thousands of layoffs among the union's 8,800 members. One of the three bargaining units represented by IAM, which includes mechanics and aircraft cleaning crews, will likely lose half of its jobs under the new contract, as the airline seeks to outsource heavy maintenance of its aircraft along cleaning crews.
"The company has everything it needs from labor to succeed. The pressure is now on management to deliver," said Robert Roach Jr., IAM general vice president.
Machinists have been working for several months under a 21 percent pay cut imposed by the bankruptcy court. The new contracts, which call for pay cuts between 12.8 percent and 20 percent depending on rank and job classification, will take effect and supersede the 21 percent pay cut when they receive formal approval from the bankruptcy court.
The machinists were the last union to agree to a new contract during months of difficult negotiations. Collectively, unions workers agreed to roughly $800 million annually in cuts to pay and benefits. The company also saved an additional $200 million a year by terminating its pension plans and dropping health benefits for its retirees.
Where the cuts are
All of the cuts are on top of two rounds of concessions negotiated with the unions during US Airways' first trip into bankruptcy in 2002-03.
In addition, the airline has imposed $45 million in pay and benefit cuts on its non-union workers.
The biggest challenge now looming for the airline is finding an investor who will put up the $250 million US Airways will need to emerge from bankruptcy. US Airways is estimating that it will not turn a substantial profit until at least 2008.