US Airways has asked a U.S. Bankruptcy Court judge to let it spend as much as $55 million to try to keep its officers and managers from quitting while it discusses a merger with America West Airlines.
The airlines' parents, US Airways Group Inc. and America West Holdings Corp., have said they are in talks to combine the companies into what would be the nation's sixth-largest carrier but have provided no details of what a merged operation would look like.
Ray Neidl, an airline analyst with Calyon Securities in New York, said he expects developments "this week or early next week. I think there are serious talks going on."
US Airways said in its court filing late Monday and in a message to employees yesterday that it has been losing key management employees at a rapid rate because of its financial problems and its acknowledgment last month that it was talking to America West.
"Since US Airways filed for bankruptcy protection in September 2004, the level of voluntary turnover among management employees has reached an all-time high," the message to employees said. "In January 2005, the loss rate was 24.4 percent, compared with 10 percent the previous January."
Analysts say that if America West and US Airways agreed to merge, the largest job losses would be among officers and managers at the airlines' headquarters, but there also could be positions eliminated throughout the companies. There would probably be fewer layoffs among pilots, flight attendants, mechanics, baggage handlers and ticket agents, the analysts said.
America West, based in Phoenix, has 13,000 employees. US Airways, based in Arlington, Va., has 24,000.
In its filing with U.S. Bankruptcy Court Judge Stephen Mitchell in Alexandria, Va., US Airways said it wanted to budget $50 million for severance payments and $5 million for bonuses to key managers who stay with the company if a merger occurs. As much as $18 million would be set aside for severance pay for 25 officers, and $32 million for 1,873 other salaried employees who are not covered by union contracts, the filing said.
But US Airways estimates that it would need to spend only one-third of the $50 million, or about $16 million, because some officers and managers would stay with the new company and others would leave before a merger occurred.
Analysts said having a severance pay plan is common and necessary when merger talks in any industry become public.
"People see what's going on," said John V. Pincavage, an airline consultant in Westport, Conn. "People are rational when it comes to their paychecks. I'm surprised they didn't have something like this in place already."
Air Line Pilots Association spokesman Jack Stephan said the union would oppose the plan in court if it does not closely adhere to similar plans at other low-cost airlines.
Throughout negotiations last year with the pilots and other unionized employees, US Airways' management said its goal in lowering its labor costs with concessionary contracts was to match the pay and benefits at low-cost carriers, including America West.