US Air Aims for Unity

US Airways was the first legacy airline to file for bankruptcy after Sept. 11, 2001, the first to emerge, and the first in five years to complete a merger.

Now it's the first to try negotiating a pilot contract after getting out of Chapter 11.

The outcome of the talks will be closely watched, because they will likely set a precedent for the three legacy carriers that followed US Airways into bankruptcy. United Airlines emerged this year, while Delta Air Lines and Northwest Airlines expect to follow in 2007.

Since the terrorist attacks nearly five years ago that triggered a dramatic restructuring of the airline industry, pilots at the former US Airways have made $7.8 billion in concessions that include lost jobs, salaries and benefits, says Jack Stephan, chairman of the 2,500-member US Airways chapter of the Air Line Pilots Association.

Now the carrier is showing signs of success, including a second-quarter profit of $305 million, following a 2005 merger with America West Airlines. Still, Stephan says, "management is quick to forget who brought them to the dance."

While the US Airways pilots' contract doesn't open for amendments until the end of 2009, the agreement covering pilots at the former America West became eligible in June. The airline could benefit from unifying the two pilot groups, and it's seeking a single, joint contract.

However, that could be costly. America West pilots, among the industry's lowest paid, want a raise. US Airways pilots, meanwhile, are paid even less. In other words, to lift the pay of both groups, the unified US Airways would have to prepare for a significant increase in pilot compensation.

Even though the airline says it would like a single contract, it doesn't have to have one.

On a July conference call, US Airways CEO Doug Parker discussed both pilot and flight attendant contracts. "Management's objective is to put those two contracts together without increasing the cost to the firm at all," he said, but he added that nothing "requires us to get to consolidated contracts."

Whether the pilot groups can stick together in negotiations is anybody's guess, because there is clearly dissension within their ranks. America West pilots are meeting today to determine whether to negotiate their contract separately or to continue in the joint process.

Additionally, there have been repeated pronouncements by J.R. Baker, chairman of the 1,900-member America West ALPA chapter, on the difficulties of merging seniority lists with US Airways pilots.

"Our efforts have been met with a smile and handshake from [US Airways pilots], followed up by their political mandates that attempt to extract everything out of the AWA pilots while furthering their own goals," Baker said in a message to pilots this month. "This environment makes it difficult for us to stand together as a unified group."

Baker resigned Monday. He couldn't be reached for comment, but in another message to pilots, he said that very few people in his position serve a full term, owing to the difficult and multiple responsibilities of the post.

To be sure, the pilot groups have a multitude of differences. The average US Airways pilot is in his or her mid-50s and has spent 20 years or more with the airline and its predecessors. Pay and benefits have fallen precipitously, and their careers will end fairly soon, because federal regulations prohibit commercial flying after a pilot turns 60. These pilots might be thinking that the next contract they sign will be their last.

On narrow-body aircraft like the Boeing 737 and the Airbus A320, a captain earns $124,000 annually, down from $160,000. First officer's pay is $82,000, down from $110,000. About half the pilots have gone from the rank of captain to first officer, union spokesman Arnie Gentile says. Also, many pilots saw their pensions reduced to about $28,000 annually from around $100,000, as the government's Pension Benefit Guaranty Corp. took over their company plan, Gentile says.

The average America West pilot is in his mid-40s. That pilot has less than 10 years at the airline, which started flying in 1983. Captains on all aircraft earn about $142,000.

"We have a proud heritage, too," says John McIlvenna, vice chairman of the AWA pilots. "We are the only airline founded in the immediate post-deregulation of the 1980s world that is still around today, and we have worked hard to make that happen."

Besides the internal conflicts, the pilots are also skirmishing with the company.

Last December, US Airways pilot leaders banned negotiators from flying to the airline's headquarters in Phoenix for contract talks. The move came after the airline stopped providing confirmed seats to other union representatives flying on union business, such as to attend a grievance hearing.

"It's hard enough for a volunteer to fly somewhere on his off day to represent a member, and now he can get bumped off his flight," Gentile says.

Recently, pilots objected after securities filings indicated that several executives cashed in on the rapid run-up in the airline's stock since the merger. Parker exercised options that enabled him to sell 272,250 shares for a pretax gain of $9 million. In June, four other officers exercised options, generating a combined pretax gain of $8.8 million.

"Our guys see what happened to us in bankruptcy, and then they see this," Stephan says. "It's a fairness issue. "

Nevertheless, a round of negotiations last week was the most successful yet, he says. The company agreed to provide extra pay of a few dollars an hour for Caribbean flying, a benefit that was lost during bankruptcy, and to improve pay for "deadheading," or required flying to or from a work assignment.

"After nine months of Draconian tactics, the company finally started to make some moves to recognize that things aren't all going to be cost-neutral," Stephan says. "We were heartened to see it."



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