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USAir may be willing to give pilots stake in return for wage cuts


ARLINGTON, Va. -- Stressing the urgency of talks with labor unions, the chairman of USAir Group Inc. said yesterday the airline is "open-minded" about giving its pilots an ownership stake in return for wage cuts.

With low fares now a permanent fixture in the airline industry, USAir can't rely on the current boom in passengers to generate )) the money it needs, Chairman Seth E. Schofield told the company's annual meeting here. Discount leisure travel, he said, is growing faster than business travel, which historically has been USAir's bread and butter.

And the Arlington, Va.-based airline, which once dominated the East Coast market, is likely to face even more competition from new, discount carriers in the future, he said.

"Clearly, low fares are here to stay," Mr. Schofield said. "We recognize that fundamental changes in the industry are permanent, andfundamental changes are required at USAir."

As a result, he said, USAir -- which accounts for half the traffic at Baltimore-Washington International Airport -- must cut $1 billion a year from its operating costs. It is seeking half of that from its employees.

"Without the $1-billion-a-year solution, the long-term viability of the company is in jeopardy," Mr. Schofield said. "There is a real sense of urgency to move forth with the negotiations with labor unions."

Earlier this week, USAir's 5,000-member pilots union said it will offer the carrier $750 million in wage concessions, over five years, in exchange for part ownership. The pilots also will seek representation on the airline's board of directors.

A full proposal is expected to be made soon to the company.

"We're asking for full value for our sacrifice and a clear role for all employees and labor groups in guiding and governing USAir in the future," Kelly Ison, a spokesman for the Air Line Pilots Association, saidyesterday.

The pilots' pay represents 30 percent of USAir's entire payroll, Mr. Ison said, and the concessions offered are in proportion to that percentage. "We're giving our share of the $500 million they need," Mr. Ison said.

Whether that will be enough, however, hinges on what cuts the two other unions, representing flight attendants and machinists, are willing to accept. Representatives for those unions could not be reached for comment yesterday.

"They've agreed there's a need to chip in," Mr. Ison said.

Unlike workers at United Airlines, USAir employees are not expected to seek a controlling stake in their company. Two weeks ago, employees at the Chicago-based airline secured a majority interest in United in exchange for givebacks.

"Control has never been an issue," Mr. Schofield said yesterday. Mr. Ison, however, refused to comment about how large a stake the pilots would seek. Employees at USAir own about 7 percent of the airline's stock.

During the past four years, USAir has lost more than $2.3 billion. In March, company officials asked its labor unions to come up with a giveback plan. Then, two weeks ago, in an effort to speed the unions' response, USAir called for labor cost cuts of $500,000 a year.

Saddled with the highest costs of any domestic airline, USAir is seeking to reduce the cost of flying a passenger one mile from 11 cents to 9 1/2 cents.

Last week, the company announced second-quarter earnings of $13.81 million, an $8 million increase over results for the same period last year. The improvement surprised many analysts.

After the payment of preferred dividends, however, USAir reported a per-share loss of 9 cents, compared with a loss of 23 cents a year earlier. And, with first-quarter losses near $200 million, the company is expecting a loss this year that will exceed last year's $356 million.

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