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TheStreet Open House

US Airways Cuts Union Deal

Updated From Sept. 26

US Airways' (UAIRQ) management wants to kiss those nasty labor contracts goodbye.

The struggling airline Sunday reached a tentative contract agreement with Transport Workers Union Local 547. The airline said the deal, which covers several dozen flight crew instructors, would cut costs and expects it to be closed within two weeks. Although the new deal helps somewhat, the vital issue remains settling with pilots, mechanics and flight attendants.

On Friday, U.S. Airways asked the court overseeing its bankruptcy case to impose a 23% pay cut on pilots and slash pension obligations, among other measures. The move would allow the cash-strapped carrier to temporarily sidestep negotiations on wage concessions and dictate terms to employees.

US Airways' decision could help the carrier conserve enough money to stay in compliance with its credit agreements. But the move also raises the possibility of further clashes with the airline's deeply divided pilots union.

The gambit comes a day after the pilots union agreed to return to the negotiating table to discuss the company's latest proposal for wage concessions. That package offered even deeper cuts than the one the union rejected two weeks ago. But with the potential for court-ordered wage cuts looming -- as well as liquidation -- the union remains hopeful it can reach consensus on concessions.

"While ALPA plans to oppose the motion in court, ALPA remains committed to reaching a permanent solution with management that will return the airline to sustainable profitability through engaging in earnest discussions with management on a comprehensive, consensual agreement," said Jack Stephan, spokesman for the pilots.

On Friday, US Airways' management planed to file a motion under section 1113(e) of the bankruptcy code that would allow it to temporarily impose work rules and new pay scales on all employees.

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