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Court OKs US Air Labor, Pension Requests

A bankruptcy court judge approves the carrier's request to terminate its contract with machinists.
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Updated from 12:44 p.m. EST

A federal bankruptcy court judge has approved

US Airways'


request to terminate its labor contract with its mechanics.

Judge Stephen Mitchell of the U.S. Bankruptcy Court for the Eastern District of Virginia also approved termination of the airline's three remaining defined benefit-pension plans, US Airways confirmed in a news release. The airline terminated its pilot pension plan in 2003.

US Airways had requested labor contract cancellation under Section 1113(c) of the U.S. bankruptcy code, which allows a court to reject a bankrupt company's contracts if management and unions can't agree to new terms.

The International Association of Machinists and Aerospace Workers (IAM), which represents more than 4,000 U.S. mechanics, is the airline's last major labor group without a new agreement. Pilots, flight attendants and customer service workers recently approved concessions. US Airways is in Chapter 11 bankruptcy protection for the second time since August 2002.

The IAM noted the judge's order in a statement. US Airways did not return a phone call seeking comment.

In the wake of the judge's decision, the IAM said it would allow its members to vote on the company's final contract offer, although union leaders declined to endorse it.

"There was no way our negotiators could endorse an agreement that outsources our members' jobs," said Randy Canale, president of the IAM unit representing US Airways' mechanics. "While we would have preferred a different outcome, voting provides our members with an opportunity to avoid termination of their agreements. The final decision will rest in the hands of the members, where it belongs."

Should IAM members approve the offer, their decision would supersede the court's termination of the existing contract.

After US Airways terminates the three pensions plans, the federal Pension Benefit Guaranty Corp. would assume responsibility for them. The PBGC, which functions like an insurance company, has estimated that the resulting claim would be $2.1 billion.

US Airways shares were up 17 cents, or 15.9%, at $1.24.