ALEXANDRIA, Va. - Airline workers' woes are piling up as carriers seek to cut costs amid higher fuel prices and a new round of price competition.
Machinists at US Airways, the nation's seventh-largest carrier, were facing pay cuts of up to 35 percent and the loss of thousands of union jobs after a bankruptcy judge on Thursday - for the first time in U.S. airline industry history - unilaterally terminated a union collective bargaining agreement.
Fifth-ranked Continental Airlines also said in a regulatory filing Thursday that it needs $500 million in wage and benefit reductions by Feb. 28 or it will face a liquidity crisis. And while pilots at No. 2 United Airlines ratified a new cost-cutting contract, the carrier's push to lop $725 million off annual labor costs by mid-January is heading to a court showdown today unless other unions approve new contracts.
US Airways, Continental, United and other so-called legacy carriers are struggling to cope with a combination of higher fuel costs, relentless price competition typified by Wednesday's announcement by Delta Airlines Inc. of a new lower-fare structure, and the growth of low-cost carriers.
The Air Transport Association estimates, based on Department of Transportation data, that all U.S. carriers spent an additional $6 billion for jet fuel in 2004, an almost 40 percent increase.
Pressuring workers for concessions is about the only way to save large chunks of money in an industry where many of the costs, like aircraft leases, fuel and landing fees are essentially fixed, with little room to haggle. In US Airways' case, it is in the midst of seeking a third round of concessions from its unions in less than three years.
The industry also faces fundamental problems of excess capacity and too many hubs, meaning "it's not clear whether all these cuts are going to be enough" to keep ailing firms afloat, according to Bill Swelbar, president of Eclat Consulting in Reston, Va.
At bankrupt US Airways Group Inc., based in Arlington, Va., airline management had warned that it would likely have to liquidate beginning next week if did not receive roughly $800 million in annual cost cuts from its labor unions. Every union but the International Association of Machinists had ratified contracts.
U.S. Bankruptcy Judge Stephen Mitchell on Thursday abrogated IAM's collective bargaining agreements with the airline, freeing US Airways to impose pay cuts ranging from 6 to 35 percent. The ruling also will likely lead to the elimination of thousands of jobs as the airline outsources heavy maintenance on certain jets and other jobs like the cleaning of aircraft cabins.
Mitchell said he had to decide "which is worse - that half of the mechanics lose their jobs or all of the mechanics lose their jobs? ... The ultimate question is whether there are going to be any jobs left at the end of the day."