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Bankruptcy court shreds union contract at US Airways
Judge imposes pay cuts

By Lee Sustar | January 14, 2005 | Page 11

AIRLINE LABOR is taking a beating. The biggest blow yet came January 7 when U.S. Bankruptcy Court Judge Stephen Mitchell unilaterally cancelled contracts for mechanics at US Airways, imposing wage cuts ranging from 6 to 35 percent and eliminating 2,000 of 4,000 jobs.

Mitchell also terminated the pension plans totaling $2.4 billion that cover the company's machinists, flight attendants and nonunion staff. The plan will be taken over by the federal Pension Benefit Guaranty Corp. (PBGC), which pays substandard benefits.

All this is part of US Airways management's efforts to extract $1 billion in givebacks from unions in what is the third round of labor concessions at the company.

Adding to the pressure is the government's Air Transportation Stabilization Board (ATSB), which provided federal loan guarantees to US Airways on the condition that the company obtain labor concessions. The deal could leave some baggage handlers earning as little as $7 per hour.

The US Airways mechanics, members of the International Association of Machinists (IAM), will get to vote on a contract that includes the wage cuts and could strike against them January 21--but management is threatening to liquidate the airline if they do. The Association of Flight Attendants (AFA), however, has already accepted massive concessions at US Airways.

By desperately clinging to their role as "partners" with the airline management, the unions have only squandered one opportunity after another to fight back in what is the most unionized industry in the private sector. As Fred Reid, chief operating officer at Delta Airlines, said back in 2003, "We are at the very beginning of a multi-event, multi-year shakeout of the industry." Union leaders responded by attempting to help each company achieve profitability--accepting the cutthroat logic and chaos of the deregulated industry and furthering the demand for more labor concessions.

A coordinated fightback across different companies--starting with a one-day job action like that seen at US Airways on Christmas Day--could give the unions the leverage to demand a real government bailout of the industry, re-regulation to end the chaos, and ultimately, nationalization. Instead, the unions are surrendering decades of gains.

United Airlines--which has obtained more than $2 billion in concessions since the company filed for bankruptcy in 2002--is following US Airways example by threatening to have a judge abrogate labor contracts.

A federal bankruptcy judge gave United the authority January 6 to impose wage cuts of 11.5 percent for baggage handlers and customer service representatives through April 11 and cut pay for sick days to 70 percent until the company can reach an agreement with the IAM. The same judge threw out United's proposed contract with pilots that would have terminated their pension plan and created a 401(k) retirement plan, since the deal would have allowed the pilots to compel management to terminate other unions' plans as well.

Two other unions--the AFA (an affiliate of the Communications Workers of America) and the Aircraft Mechanics Fraternal Association (AMFA)--reached tentative agreements with United.

Terms of the proposed deal with the AFA weren't disclosed, but the union did say they had maintained work rules and medical and dental benefits--which indicates a steep pay cut. AMFA, which won an election to oust the IAM in 2003 on a "no concessions" platform, ended up making givebacks as well.

The union reported that its tentative five-year agreement includes a 5 percent pay cut for mechanics and a 10 percent wage reduction for utility workers, who would be eligible for a special severance package. Base pay will increase 1.5 percent per year from 2006 to 2009. This would make up for the reductions but leave wage growth far behind inflation--and wouldn't compensate for earlier pay cuts imposed on the IAM by a bankruptcy judge.

Other AMFA givebacks include a limit of 75 percent of pay for sick days, a reduction of holidays from 10 to six, and a cut of holiday overtime pay from 2.5 times regular pay to double pay. The contract also allows outsourcing of all fueling and computer technician work--this after the outsourcing of thousands of mechanics' jobs led to the closure of United's huge new maintenance facility in Indianapolis in 2003.

The experience of AMFA shows that there's no way for airline workers to vote their way out of this crisis by changing unions--or voting to accept concessions.

These latest cuts at United and US Airways have accelerated demands for similar concessions at other airlines--such as Continental, which wants $500 million in cuts from its unions. Delta--which has obtained $1 billion in concessions in November--has launched a fare war aimed at driving US Airways or another rival into liquidation.

The aim is to restore profitability by eliminating competitors--and imposing lower wages and benefits across the industry. Those attacks will continue until airline labor organizes to hold the line.

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