This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx Chief Sees More Changes for US Airways March 31, 2003 By EDWARD WONG Although US Airways plans to emerge from bankruptcy today, it still needs to cut costs and consider retooling how it makes money, given the bleak market for air travel and the war with Iraq, the company's chief executive said yesterday. American Airlines, which is struggling to stay out of bankruptcy court, said yesterday that it had reached tentative agreements on labor concessions with six small work groups in its largest union, the Transport Workers Union. American, a unit of the AMR Corporation, is also reviewing concession packages from pilot and flight attendant unions. It is still in negotiations with mechanics. David N. Siegel, the chief executive of US Airways, said in an interview yesterday that the airline needed to cut $100 million to $200 million a year in costs. That is the remainder of $300 million to $400 million in cost cuts that the airline had set as a goal at the start of this year. Mr. Siegel also said US Airways might have to invoke what is known as a force majeure clause in its contract with the pilots' union to bring the number of planes it operates below 279. Force majeure clauses allow airlines to make drastic changes outside contract terms because of war, terrorist attacks or acts of God. Some carriers used such clauses to lay off tens of thousands of workers after the 9/11 attacks. "We're going to have to continue to look at every facet of our business," Mr. Siegel said. "The industry is absolutely in a force majeure situation." On Saturday, US Airways said that it was forcing its workers to take a 5 percent pay deferral for up to 18 months. A spokesman for the pilots' union said yesterday that it was a large sacrifice and that the union was opposed to any further cuts. "If they start wanting to cause more harm to employees by invoking force majeure, it would be a slap in the face," said Roy Freundlich, a spokesman for the Air Line Pilots Association. "They'll have to get to a point where they stop being bean counters and start being leaders and start treating the employees with some respect." Since filing for bankruptcy protection last August, US Airways has made cost cuts equaling $1.9 billion a year, 63 percent of that from labor. Of the total savings, $550 million came from renegotiation or rejection of aircraft leases, Mr. Siegel said. With the permission of the pilots' union, US Airways brought its number of large-body aircraft down from 421 before 9/11, to 311 going into bankruptcy, to 279 now. In bankruptcy, the airline reduced its number of seats in the air by 12, to 13 percent. It also trimmed flight frequency from its hubs. As US Airways increases its use of regional jets, Mr. Siegel said, it could add service to several cities in Alabama, including Mobile, Montgomery and Birmingham. The Retirement Systems of Alabama, the state pension fund, was US Airways' main lender in bankruptcy and will have control of the board. Mr. Siegel also said the industry would have to find a different revenue model because business travelers were spurning the astronomical walkup fares that became common during the dot-com boom. US Airways has said it does not expect to turn a profit this year or next. American Airlines is grappling with its own woes. It said yesterday that it had reached tentative agreements over the weekend with six of eight labor groups at the Transport Workers Union, representing 2,500 workers, though the company declined to give details. Last week, it reached a tentative agreement with the 16,300 baggage handlers represented by the T.W.U. But yesterday afternoon, the company had yet to reach an agreement with the 16,200 mechanics in the union. On Saturday night, the Allied Pilots Association offered a cost-cutting package to American totaling $660 million. American is evaluating the package. The union said it would like a response as soon as possible so its leaders can vote on the final proposal by tonight. American is trying to wring $1.8 billion in annual labor concessions from its workers. It is also trying to put together more than $1.5 billion in financing in case it must file for bankruptcy protection, bankers have said. That could come as early as this week. http://www.nytimes.com/2003/03/31/business/31AIR.html?ex=1050121088&ei=1&en=bdd25e66949b4b82 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2003 The New York Times Company