US Airways and its pilots union reached agreement early yesterday on a replacement for the pilots' pension plan, ending a dispute that threatened to block the airline's emergence from bankruptcy at the end of the month.
The replacement plan was approved by the master executive council of the Air Line Pilots Association, which represents US Airways' pilots, after negotiations with the Arlington, Va.-based airline. Financial details of the plan, which will affect 4,700 pilots, including 3,600 active pilots and 1,100 retired pilots, were not made public.
US Airways, a unit of the US Airways Group and the United States' seventh-largest carrier, filed for Chapter 11 bankruptcy protection last summer. Contending that it could not afford to pay $1.6 billion in pension obligations during the next seven years and still return to financial viability, US Airways asked the federal Pension Benefit Guarantee Corp. for its approval to terminate the plan and replace it with one paying $850 million.
The pilots sued, claiming that US Airways was required to negotiate with it on such a move. Judge Stephen S. Mitchell of U.S. Bankruptcy Court in Alexandria, Va., who oversees the US Airways case, ruled March 1 that the airline had the right to replace the plan but urged the two sides to negotiate a solution.
The compromise plan requires the pension board's approval. In a message on its Web site, the pilots union said that the pension board would consider the plan this week but that its decision could take up to five days.
Last week, Mitchell approved US Airways' restructuring plan, subject to resolution of the dispute with the pilots. US Airways wants to emerge from bankruptcy by March 31.
If the pension board approves the replacement plan, it would take effect April 1, a day after US Airways sought to terminate the existing plan.
Resolution of the pension shortfall was necessary for US Airways to obtain $900 million in federal loan guarantees from the Air Transportation Stabilization Board, and to win a final $200 million in financing from its primary lender, the Retirement Systems of Alabama. The Alabama fund will have eight of 15 seats on the US Airways board, along with 70 percent voting control, when the airline emerges from bankruptcy.
Though pilots at US Airways will end up with less in retirement benefits under the new plan, they were better off reaching agreement with the airline than seeing their plan wiped out, said Robert W. Mann Jr., an industry consultant based in Port Washington, N.Y. "Something's better than nothing," Mann said.