Your Money or Your Job
US Airways wants big concessions. The company, heavily concentrated in the eastern U.S., was hit hard by the aftermath of September 11, a tough competitive market, and the onset of recession in 2001. But it was made particularly vulnerable by years of spectacular mismanagement.
New CEO David Siegel arrived in March. Late in the month, he announced that US Airways’ union contracts “do not make a lot of sense in today’s airline industry environment.” Siegel unveiled his business plan: Apply for federal guarantee of a $1 billion loan to restructure the airline. Massively expand use of the lower-wage regional jet subsidiaries. Take $950 million a year from employees in wage, benefit, pension, and work rules concessions over the next seven years. An additional $950 million per year would be demanded of creditors, vendors, and companies that lease planes.
If any part of this plan fails, Siegel vowed, he will reorganize the company under Chapter 11 bankruptcy protection. On the other hand, if Siegel succeeds, he is eligible for a 440 percent bonus on his $750,000 base salary (or $3.3 million).
Employees were stunned by the massive concessions demands: $595 million from pilots (ALPA), $90 million from flight attendants (AFA), $261 million from mechanics (IAM), and the balance from reservations, gate, and ticket agents (CWA). Roy Freundlich of ALPA described it as “the largest concession request in the history of the airline industry.”
THE VIRTUAL AIRLINE
Though large cuts are proposed in wages and work rules, the biggest appear to be in health benefits. The current variety of health plans serving employees who live all over the U.S. would be replaced by a single national PPO. Sources say that out-of-pocket costs to employees could nearly quintuple in the next four years.
Key to the proposed restructuring is increasing the use of smaller regional jets (by hundreds!) at subsidiary and contracted low-wage US Airways Express carriers. Management also proposes international and domestic alliances with other airlines (Continental, most likely, domestically).
These, combined with elimination of no-furlough clauses and the dropping of grievances against the company’s violations of those clauses, raise the specter of further job cuts-beyond the 11,000 already laid off-and advancement of a management vision of a “virtual airline” model. At worst this would mean layers of competing contracted-out or subsidiary companies operated by a US Airways Group, Inc. holding company.
With the gun pointed at employees’ heads and the company offering the choice of concessions or Chapter 11, US Airways unions have commenced fast track negotiations. Given just a month to come to agreements, unions and rank and file are under tremendous pressure. Once the notion of some level of concessions was agreed upon, solidarity among employee groups all but evaporated, replaced by jockeying about which union will foot the bill the most.
There is some good news, though. The outrageous health cuts are “a deal breaker,” according to AFA spokesperson Jeff Zack. In fact, they are so bad that they are pushing the unions to coalition at least on that issue.
TONY SOPRANO LOAN SHARK
Under the Air Transport Stabilization Act (ATSA-a.k.a. the post-September 11 airline bailout), Congress appropriated $10 billion in federal loan guarantees. The guidelines for the guarantees require “a demonstration of concessions by…employees.” The airline bailout thus provides incentive and cover for airline managements desiring to slash wages and benefits, and US Airways is using the process to herd employees into footing the bill for the past ten years of management mistakes.
One customer service representative likened the Air Transport Stabilization Board to a “Tony Soprano loan shark.”
It is true that US Airways is in severe financial trouble and may run out of cash as early as October. And the sharks are circling in the halls of Congress. In May, lobbyists for Delta and American Airlines, salivating at the prospect of gobbling up US Airways’ slots, found common ground with members of Congress who were looking for budget lines to raid for war appropriations; they tried to gut the ATSA. US Airways unions found themselves in the ironic position of mounting a massive lobbying effort to defend the very legislation management is using to corral them into concessions.
That lobbying stopped the raid on the loan guarantee money, but now the crunch is on. It seems certain the unions will offer staggering concessions. Time will tell whether history will be bucked and if this time concessions will save jobs.
Will sped-up, low-wage jobs with intolerable health benefits be worth saving? How long before other airlines demand similar concessions in order to compete with a low-cost US Airways? What should union activists do in the face of the sadistic choice between concessions and bankruptcy?
One union benefits consultant pointed out at one union meeting, “Sometimes it is better to be forced to do something than to agree to do it.” Would it be better to stand our ground and weather Chapter 11 bankruptcy reorganization?
Rodney Ward is a laid-off US Airways flight attendant.