Judge cancels machinists’ contract with US Airways

Matthew Barakat

Thursday, Jan. 6, 2005 | 11:14 a.m.

ALEXANDRIA, Va. -- A bankruptcy judge today canceled a collective bargaining agreement between US Airways and its machinists union, providing hundreds of millions of dollars in annual savings that the airline says will prevent the need for a quick liquidation.

The judge also approved a request to terminate the pension plans for machinists and flight attendants, as well as a frozen pension plan that was still providing benefits to 28,000 retirees for a potential savings for the airline of $1 billion over five years.

U.S. Bankruptcy Judge Stephen Mitchell said that "at bottom, it is clear that the debtor's financial position is so precarious that even with the relief being sought, there will still be grave questions as to whether it can survive."

The termination of the contract with the International Association of Machinists would result in pay cuts for union workers ranging from 6 percent to 35 percent and the loss of thousands of union jobs. The costs savings are expected about $270 million.

The termination of the three pension plans will free U.S. Airways -- a unit of US Airways Group Inc. -- from nearly $1 billion in future pension obligations from 2005 through 2009.

There still is a chance, however, that the machinists union and the airline will agree on a new collective bargaining deal.

US Airways lawyer Brian Leitch said Thursday that the machinists union had agreed to send the company's best final offer to union rank and file for a vote. If the union accepts US Airways' offer on Jan. 21, the judge's action canceling the contract would be nullified.

The judge acknowledged the heavy job losses that canceling the machinists' collective bargaining pact anticipated but said, "Which is worse, that half of the mechanics lose their jobs or that all of the mechanics lose their jobs" when the company would be forced to shut down.