US Airways Tries to Unload Its Baggage

The troubled carrier says business is back to normal following a holiday debacle of canceled flights and missing luggage.
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It is business as usual again at

US Airways

(UAIRQ)

, but the airline's Christmas weekend disruptions could have a lasting impact.

The airline was operating a normal winter schedule Tuesday, said spokeswoman Amy Kudwa, with just six of 1,100 scheduled flights canceled because of bad weather.

From Thursday through Sunday, US Airways canceled 455 flights as first, bad weather hit the Midwest, and then an unusually high number of flight attendants and ramp workers called out sick. Canceled flights left travelers stranded, while the airline mishandled some 10,000 pieces of luggage.

Late Monday, Norman Mineta, the U.S. transportation secretary, said he had ordered an investigation into the problems at US Airways and

Comair

, a regional carrier wholly owned by

Delta Air Lines

(DAL) - Get Report

, which canceled hundreds of flights.

In a message to employees on Sunday, Bruce R. Lakefield, the airline's chief executive, referred to the weekend's events as an "operational meltdown." He said flight attendant sick calls were almost three times higher than normal and calls from Philadelphia ramp workers were "abnormally" high.

"The weather challenges on Thursday caused by heavy snow in the Midwest put us in a hole that we could not crawl out of on Friday or Saturday because of severe staffing shortages," Lakefield said.

Spokeswoman Kudwa said many employees worked overtime or volunteered to help out in other jobs in an effort to deal with the crisis. "Ninety nine-percent of our employees stepped up to the challenge," she said.

It was unclear how big of a luggage backlog remained on Tuesday, Kudwa said, but the airline was making "significant progress" every day to reduce it. It has been ferrying bags to Charlotte, N.C., and Pittsburgh by airplane and truck for sorting, she noted.

The disruptions could not have occurred at a worse time for US Airways, which is struggling to emerge from its second trip through Chapter 11 bankruptcy protection in two years. A financing agreement the carrier announced last month with

General Electric

(GE) - Get Report

rests on the airline's ability to meet cost-reduction goals by mid-January.

US Airways continues to negotiate with three groups represented by the International Association of Machinists on possible labor concessions. It has secured concessions from its other unions, although rank-and-file members of the Association of Flight Attendants have yet to ratify theirs. The airline has asked the bankruptcy court to impose wage and benefit cuts on unions that fail to reach consensual agreements. Employees already accepted painful concessions before the current round.

Now, the airline faces the possibility that travelers will look elsewhere the next time they book trips.

"Nobody wants to have their vacation ruined," said Helane Becker, airline analyst at The Benchmark Co., a New York-based brokerage. (The Benchmark Company neither does nor seeks to do business with companies its analysts cover.)

"For many people who fly at Christmastime, it's the only time of the year they fly," added Becker. "They have no idea what to do when they're stranded. They're without Christmas gifts, because the Transportation Security Administration instructs passengers to check gifts if they're going to wrap them in advance. ... It makes a restructuring and recovery all the more difficult. It's not out of reach, but it's very close."

The effect of the weekend's disruptions were similar to what the flight attendants union had earlier threatened to do through its trademarked CHAOS, or Create Havoc Around Our System, strikes. The strike threat became a moot point, however, after the AFA reached its tentative agreement with management two weeks ago.

In a statement on the AFA Web site, Master Executive Council President Perry L. Hayes said flight-attendant absenteeism was not organized and blamed the weekend's disruptions on a "minority of employees" who apparently decided to take action against the company.

"AFA in no ways supports any member who calls in sick unless that person is actually sick," the statement said. "There are serious consequences to any such action and those consequences are outlined in our agreement. Sadly, the employees who took this action may ultimately cause the failure of the airline."

US Airways spokeswoman Kudwa said the airline didn't believe the worker absenteeism was an organized labor action. She declined to comment on whether the airline would punish employees who abused sick leave. "Our focus for today is getting through the remaining backlog of bags," she said.

The airline's shares traded down 2 cents, or 1.6%, at $1.24. The common stock is likely to be worthless if and when the company emerges from bankruptcy protection. The airline would likely cancel existing shares and issue new stock to creditors.