Airlines struggle to cut costs By Barbara DeLollis and Chris Woodyard, USA TODAY US Airways will seek changes in its employee work rules to save more money and United Airlines is trying to line up $2 billion in financing to be ready in case it decides to file for bankruptcy-court protection, as the airline industry struggles to regain profitability. US Airways, which plans to emerge from bankruptcy protection early next year, will try to shave costs by about $300 million a year in part by asking labor groups to increase their productivity, say sources close to the airline. Such changes could mean pilots fly more hours per month, for instance, sources say. The airline has already achieved about $1.3 billion in average annual savings, mostly from labor concessions, but last month said it needed to save more. It is trying to win approval of a $900 million federal loan guarantee when it emerges from bankruptcy. The effort shows how difficult it is to reorganize an airline during the worst travel slump in history. US Airways CEO David Siegel told employees in his weekly telephone message that the entire industry faces depressed revenue. "Cutting costs is really the only alternative for us to close the gap." Management has been meeting with union leaders over the past two weeks to describe the bleak outlook, though labor representatives say they did not receive formal requests for more concessions. "We all signed restructuring agreements," says pilots spokesman Roy Freundlich. "We all thought we were done. Now, they're coming back." The pilots, who previously ratified the largest concession package for the carrier, worth about $465 million a year, have hired professionals to examine finances. The mechanics union says its members thought they were done. "No one was expecting any additional requests," says union spokesman Joe Tiberi. US Airways says times changed. "When we reached agreements with our labor groups this summer, we said if economic conditions changed, that we would reserve the right to again sit down," says US Airways spokesman David Castelveter. "The economic conditions have changed." United aims to get $2B in financing ready The debtor-in-possession financing package is the latest in a series of moves that United is making to prepare for a Chapter 11 bankruptcy reorganization even as it hopes for federal loan guarantees that would avoid it. "It's important for our customers to know we are looking at all contingencies," says United spokesman Chris Brathwaite. "But first and foremost, we are trying to restructure outside of Chapter 11." CEO Glenn Tilton had already set a deadline of Dec. 2, when United has a $400 million loan payment due, to restructure the giant airline and obtain the loan guarantees. It was dealt a setback last week when the loan board made public a letter in which it outlined gaps in United's business plan. Brathwaite expressed confidence that the carrier's annual $1.1 billion reduction in labor costs and an expected $1.4 billion boost in revenue under its plan will lead to board approval of the guarantees. Observers say United is acting correctly by lining up post-bankruptcy financing. "I think it would be highly imprudent if they didn't do this," says airline consultant Morris Garfinkle. "This is just good business sense on their part to have a backup plan at worst and a front-line plan at best." Jon Schneider, a bankruptcy lawyer with the firm of Goodwin Procter in Boston, agrees. "No one would be thinking about bankruptcy without lining up (post-bankruptcy) financing," he says. United would continue flying, making it a good candidate for receiving the post-bankruptcy funds, he says. "There are certainly a bunch of valuable assets here." Sara Dela Cruz, a spokeswoman for United's flight attendants, says the union doesn't blame the airline for making bankruptcy preparations but that the focus should remain on obtaining the loan guarantees. The owner of Roger's Trinbago Site: Roj (Roger James) *************************************************** escape email mailto:ejames@escape.ca Trinbago site: http://www.tntisland.com CBC Website http://www.tntisland.com/caribbeanbrassconnection/ The Trinbago Site of the Week: (chgdev) http://www.chagdev.com/ (Chaguaramas Development Authority) courtesy of Roj Trinbago Website & TnT Web Directory Roj's Trinbago Website: http://www.tntisland.com TnT Web Directory: http://search.co.tt *********************************************************