How US Airways Defied the Odds

In the past week, five high-ranking current and former US Airways executives spoke with the Charlotte Observer about the airline's path in the last year and a half.

Talks with the pilots started moving, but the airline's three other major unions fought back in court, arguing that the proposed cuts were unnecessary and excessive.

At one point, Glass recalls heading home after work and telling his wife, "We're not going to make it." There seemed like too much to do in too little time: get the unions on board, keep enough cash to continue operating -- and then somehow find an investor.

"I just didn't think we were going to get there," he says.

Yet in the end, under the threat of court-mandated cuts, all four labor groups agreed to new contracts that called for wage cuts, new work rules and the elimination of thousands of jobs. Later, a judge agreed to eliminate pension plans.

Bill Pollock, leader of US Airways' pilots' union, credits management with sharing internal information, which he says allowed the union to make better decisions.

"The pilots respect the truth, as brutal as it may be," he says.

Asked if he had any regrets, Glass shook his head, no.

Then he clarified: "I regret everything that had to be done, but it had to be done."

Hope from a dark moment

In a pile on his desk at US Airways' headquarters, Chris Chiames kept a page clipped from a public-relations trade magazine. It listed 10 signs the company you work for is in crisis. On it were things like "mass layoffs or plant closings," "unplanned change in company leadership" and "significant court/legal action."In more than two years at US Airways, Chiames, the company's senior vice president for corporate affairs, figured the airline had hit all 10.

Some of the worst publicity came over Christmas, when staffing problems led the airline to cancel more than 400 flights. National TV news showed lost bags piling up. Angry passengers vented to newspapers and threatened never to fly the airline again.

"It was so penalizing to the airline," says Ben Baldanza, a senior vice president who left in January. "We couldn't have the veneer of `this isn't affecting out customers' any more."

But other leaders couldn't understand why problems with about 15 percent of their flights, principally out of Philadelphia, was receiving top billing in the news over the other major Christmas weekend story, the tsunami that killed more than 100,000 people.

Executives initially blamed the problems on workers for calling in sick. Later, a Transportation Department report blamed management for failing to plan for large numbers of sick calls.

To US Airways' executives, though, the big story coming out of Christmas was not the stranded passengers and the missing bags. It was the response from employees, who volunteered at airports to deliver bags and help travelers.

A few of the top leaders turned out, too. Pilot Bob Vendley of Davidson recalls seeing Chiames, wearing casual slacks and a jacket, helping push bags on rollers. Sweat poured down his face, Vendley says.

"That was a great vote of confidence by the people in this company," Lakefield says. "It gave us every reason we could to find a solution and change the way we operated."

Competitors try to strike

In January 2005, US Airways faced yet another dilemma: How would it find the cash to survive?

Yes, it had made deep cuts. But given its track record and financial projections, it still looked like a poor investment.

Other airlines were sniffing around but seemed interested only in pieces of US Airways' carcass, such as its coveted takeoff and landing slots at congested airports.

Chiames says he received word one day through "back channels" that JetBlue CEO David Neeleman was headed to Washington and wanted to meet with Lakefield to discuss buying assets. The company refused the meeting, Chiames says.

A year earlier, the company had rejected an overture from Virgin Atlantic to buy takeoff and landing slots and gates at East Coast airports. Executives had also met with counterparts at United to discuss a merger -- rekindling flames from the failed merger of the two in 2001-- but those talks failed to bear fruit.

The airline turned to John Luth, CEO of the Seabury Group, which specializes in raising money for airlines.

"The wisdom out there was it couldn't be done," Luth said in an interview this summer.

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