On September 12, US Airways filed for Chapter 11 bankruptcy reorganization for the second time in two years after workers refused to bow to the company’s demand for $800 million worth of cuts in wages and benefits. The company first filed for bankruptcy protection in August 2002 and emerged the following April with a $900 million gift in the form of a loan from the government’s Air Transportation Stabilization Board.

Feigning concern for the company’s 28,000 employees, Judge Stephen Mitchell in Alexandria, Virginia, said he “reluctantly” agreed with the airline. He ruled that the owners could impose a cut of up to 21 percent in wages over the next four months. The company sought approval for a 23 percent reduction over six months, reported the New York Times. The judge also ruled that the company may reduce or eliminate its contributions to employee pension fund plans.

US Airways was also released from an agreement it made in its first bankruptcy filing to keep at least 279 planes in its fleet. That will likely result in additional layoffs.

Attorneys for the unions said the cuts were too severe given that employees granted $1.9 billion in concessions in the first bankruptcy. They also said salaried employees had taken cuts of only 5 to 10 percent and US Airways’ chief executive, Bruce Lakefield, was not taking a pay cut. Lakefield responded that he had already taken an equivalent reduction because his $450,000 annual salary was less than his predecessor, whom he replaced in April.

The cuts will take effect immediately except in the case of the airline’s pilots, who are expected to approve a concession agreement that will reduce salaries by 18 percent along with cuts in pension and health-care benefits.

Lakefield and airline chairman David Bronner praised the tentative agreement with the pilots. “Originally we were after a little less than that,” Lakefield said, alluding to the company’s first demand for a 16 percent cut.

On the same day that Judge Mitchell cleared the way to impose cuts on workers at US Airways, United Airlines announced that it will ask the bankruptcy court to sanction voiding its contractts with the unions so that the owners could impose wage and benefit cuts. This would be the second round of concessions imposed by United, which started bankruptcy proceedings in December 2002. The union gave up $2.5 billion in concessions in the spring of 2003 after the company threatened liquidation. Despite the concessions and a $1.8 billion federal government loan guarantee the company went into bankruptcy anyway.

United also repeated its threat to terminate current pension plan agreements with the unions and replace them with 401(k) plans. In August attorneys for the bosses told a bankruptcy judge that the company would be within its rights to terminate retirement benefit agreements with the union. In response to that threat, officials of the Association of Flight Attendants and the International Association of Machinists asked the judge to replace United chief executive Glenn Tilton with a court-appointed trustee.

After the company’s latest pronouncements threatening to tear up pension plan agreements and the contracts in their entirety, the union officials dropped their demand to replace Tilton.  
 
 
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