USAir's short period of optimism, with its labour problems near resolution, its competitors at bay and its second quarter profit up 717 per cent, was only illusory.
The carrier returned to square one in its labour talks in July, Southwest is preparing to enter the Florida market, long a USAir stronghold, and USAir's costs per available set mile rose in the quarter, as the airline downsized.
The reversal of fortunes was triggered at the end of July when the airline ended a 16-month-old effort to gain $2.5 billion in voluntary concessions from its unions. Instead, it will seek to negotiate savings in contract talks over the next year-and-a-half.
'We worked hard to reach fair agreements that would benefit both the employees and the company, but some issues proved unsolvable,' says USAir chairman Seth Schofield. 'We still intend to achieve the labour cost savings we need, but it appears it will be by a more traditional route.'
In the voluntary talks, management had reached agreement with all the union leaders but the concessionary terms coupled with the airline's strong performance had made it difficult to sell the packages to their recalcitrant members.
In July, the flight attendants rejected their deal, leading the machinists to postpone their ratification process. Pilots union leaders then told management they needed better terms. Because all the agreements were linked, none of the unions could go forward alone.
'Our agreement was marginally acceptable, if that,' says David Morrow, a union spokesman and 14-year USAir pilot. 'But we are disappointed that we have to start all over.' The pilots felt they had made major sacrifices in accepting a 23 per cent pay cut in exchange for board representation as well as an ownership stake in the company.
Certainly, USAir seems a far stronger airline now than it did a few months ago. While its effort to trim $500 million a year out of its labour costs has gone nowhere, the airline has moved rapidly in efforts to trim the same amount from its non-labour costs. By the end of the year, it will have saved $400 million through more effective crew scheduling and maintenance procedures and by shedding unprofitable routes.
After losing $139 million in the first two months of 1995, USAir recorded four consecutive profitable months, resulting in a half year net profit of $16 million, compared with a loss of $182.8 million for the first six months of 1994.
While many industry analysts were disappointed by the change of tack in labour negotiations, most added that it would not kill the potential for concessionary cost savings. But the arrival of Southwest on USAir's home turf is going to make managing any further savings more difficult.
Source: Airline Business
