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US Airways seeks to delay payments

By MATTHEW BARAKAT
The Associated Press

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The airline said it would ask the Internal Revenue Service for permission to defer about $68 million in funds for those plans, making those payments over the next five years, rather than the next 18 months.

The airline said the move, if approved, would not affect the monthly payments due to pensioners.

In a memo to employees, the airline said only the machinists and flight attendants are being targeted because they are the only two unions that still have a defined-benefit pension plan. Other unions, including the pilots, have a defined contribution, 401(k)-style plan.

Jerry Glass, the airline's senior vice president of employee relations, said that "rescheduling these payments will help US Airways to conserve its cash so that we have sufficient liquidity to operate the airline. This is an important step as we work to ensure our survival and future prosperity."

The memo to employees warned of "temporary, substantial business hardship" if the airline is required to make the payments on time.

US Airways has been asking its unions for new labor deals that would cut costs by $800 million a year as part of an overall plan to cut costs by $1.5 billion a year. Management says the cuts are necessary to avoid bankruptcy, but several unions have been slow or unwilling to negotiate, citing $1 billion in annual cost cuts accepted by the unions as part of US Airways' first trip into bankruptcy in 2002 and 2003.

Joe Tiberi, a spokesman for the machinists, said union lawyers are still reviewing the airline's proposal, but that it does not appear to violate the company's collective-bargaining agreement and will not affect union members' benefits.

"I don't see any cause for great alarm," Tiberi said.

He said the situation is different from that at United Airlines, where the bankrupt airline said last month it would stop all pension-plan payments while it remained in bankruptcy. United machinists have gone to court to compel the payments, and the issue has inflamed employees.

US Airways has warned it could default on a $900 million federally guaranteed loan if it doesn't meet certain financial benchmarks by the end of September, possibly triggering bankruptcy.

A study by the pilots union released last week warned that bankruptcy could come as early as mid-September without some type of financial relief.

Copyright © 2004 The Seattle Times Company

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