US Airways said yesterday that it would reduce its costs by $1.8 billion a year after it emerges from a bankruptcy reorganization through employee wage and benefit concessions, expanded use of regional jets and changes in the way it uses its routes.
The airline added that its chief lender, the Retirement Systems of Alabama, would control eight of 15 seats on its board after it emerges from Chapter 11 bankruptcy protection. The Alabama pension fund would have the largest stake in the airline, 36.6 percent, after agreeing in October to pay $240 million and to provide $500 million in financing.
But the airline said that its employees would control 31.2 percent and receive four board seats, up from the three promised when US Airways envisioned a 13-member board. The federal government would hold a 10 percent stake, after US Airways receives final approval for its application for $900 million in loan guarantees.
The disclosures came in a restructuring proposal filed late Friday night with the U.S. Bankruptcy Court in Alexandria, Va. The airline, based in Arlington, Va., released details of the plan yesterday, hours after it reached agreement with its machinists and flight attendants unions on additional wage and benefit concessions that are a linchpin of its recovery plan.
The company's chief executive, David N. Siegel, said the airline, a unit of the US Airways Group, hoped to come out of bankruptcy as soon as March.
"As the entire industry grapples with restructuring, our efforts will ensure that we emerge from Chapter 11 protection as a very efficient airline with competitive labor, fleet and operating costs," Siegel said in a statement released by the airline.
David G. Bronner, chief executive of the Retirement Systems of Alabama, said yesterday that he was impressed by the actions of management and unions in agreeing to additional concessions. Two weeks ago, Bronner had threatened in an interview to withdraw the financing he had provided the airline and to liquidate it if union members would not accept further wage and benefit cuts.
The tentative deals with the machinists and flight attendants followed similar agreements between US Airways and its pilots, customer service agents and its flight controllers. Pilots have approved their plan, while the other unions must still vote. In all, US Airways unions have tentatively agreed to a total of $1.04 billion in wage and benefit concessions through 2008, including the latest round of $200 million.
Those agreements "demonstrate to us that there is a dedicated work force that will pull the company through and who will benefit from the future success of their airline," Bronner said in a statement released by the airline.
The airline said additional layoffs would occur, but it did not provide specifics on reductions in its work force of 38,800.
US Airways, the nation's seventh-biggest carrier, sought bankruptcy protection in August, after its business, which is largely on the East Coast, failed to rebound in the wake of the Sept. 11 attacks. Siegel, who joined the airline last March, tried to stave off the filing with an extensive cost-cutting program. The airline had won provisional approval from the federal Air Transportation Stabilization Board for $900 million in loan guarantees, but has yet to obtain final approval, which is expected after it emerges from bankruptcy.
US Airways disclosed in the bankruptcy filing, however, that it will have a $3.1 billion shortfall in its pension plan during the next seven years that it is required to address before the loan-guarantee board can complete action on its application. The airline said that it was searching for ways to do so.
In the bankruptcy filing, US Airways' business plan was decidedly modest, reflecting the heated competition in the industry and the struggle for airlines to regain business. It projected a loss of $229 million for next year, and a profit of $587 million in 2009, after it has achieved cost savings and restructured both its fleet and its route system. The company has not reported a profit since 1999.
The filing does not predict any widespread reduction in service or aircraft. Indeed, since filing for bankruptcy in August, US Airways has eliminated just one city, Saginaw, Mich., from its routes, which serve 86 airports. It has cut its fleet to 279 planes from 311 in August, and said that it expects to maintain that number of aircraft.
The biggest change in the next few years will come in the airline's wider use of regional jets. It disclosed in the bankruptcy filing that it will replace the fleet of turbo-prop planes deployed by its regional carriers, and expand its fleet of regional jets from 70 to 300 by 2006.