USAir has started a campaign that will result in a downsized fleet and employee roster. This is even with a $2.5 billion concessionary package that has been tentatively worked out with three of its four contract employee groups, an agreement that, sources say, if finalised could still leave the airline with the highest costs in the US industry.
The Arlington-based company has been negotiating on and off with its unions for the better part of a year. It was not until late 1994 that serious progress was made towards an employee concessions-for-equity swap. The agreement could be made official by March, and will see employees give up $2.5 billion over five years and receive a 20 per cent stake in the carrier as well as board representation.
A significant obstacle to navigate, however, is the reluctance of flight attendants to join the pilot-led agreement. While the position is similar to the United Airlines buyout last year, the USAir deal is different in that it will not work unless all unions are in accord.
The flight attendants are central to the proposal. Cabin crew wages account for 15 per cent of the payroll, giving potential concessions worth an estimated $315 million over five years. Moreover, as employees with the most customer contact, their goodwill must be secured.
Part of the problem is that wage concessions can only take the flight attendants so far in reaching their contribution goal. Also sources say that so many flight attendants have left USAir that the airline is now hiring, mitigating the potential of furloughs.
Perhaps more troubling for USAir is that even with an agreement worked out, the airline could still be saddled with the highest unit costs in the industry. One source believes that even the best deal for the company will leave costs per available seat mile at 10 cents. That is above the average of 9.5 cents for other US majors, and well above the likes of ValuJet, the short-haul airline with costs of 6.7 cents and a new mini-hub in USAir territory at Dulles International. A spokesman for USAir says the target of cost reductions will be 9.5 cents per asm.
Not taking any chances with negotiations, USAir is speeding up a fleet reduction programme that started last May, when USAir put off delivery of 40 737s until after the year 2000. At the end of January, when he announced a group net loss of close to $685 million in 1994, company chairman Seth Schofield said USAir is deferring indefinitely delivery of eight 757s scheduled for 1996. The airline is also cutting its fleet by 37 aircraft.
Besides waiting for agreement on concessions from its employees, USAir is also hopefully anticipating the 17 March deadline for the US Department of Transportation to decide on whether it will extend its approval over the BA-USAir codesharing alliance for another year.
Besides waiting for agreement on concessions from its employees, USAir is also hopefully anticipating the 17 March deadline for the US Department of Transportation to decide on whether it will extend its approval over the BA-USAir codesharing alliance for another year.
Source: Airline Business
