The article below from NYTimes.com has been sent to you by psa188@xxxxxxxxx /--------- E-mail Sponsored by Fox Searchlight ------------\ I HEART HUCKABEES - OPENING IN SELECT CITIES OCTOBER 1 From David O. Russell, writer and director of THREE KINGS and FLIRTING WITH DISASTER comes an existential comedy starring Dustin Hoffman, Isabelle Hupert, Jude Law, Jason Schwartman, Lily Tomlin, Mark Wahlberg and Naomi Watts. Watch the trailer now at: http://www.foxsearchlight.com/huckabees/index_nyt.html \----------------------------------------------------------/ US Airways Chief Steps Up Pressure for Concessions August 19, 2004 By MICHELINE MAYNARD The chairman of US Airways, David G. Bronner, said yesterday that its employees must agree to a third round of wage and benefit cuts worth $800 million in the next 30 days or the airline could be liquidated. Separately, the chief executive of another troubled airline, Delta Air Lines, told employees that it planned to cut jobs, pay and benefits as part of its restructuring plan. But in a memorandum late yesterday, the executive, Gerald A. Grinstein, also said employees would be offered a share in the airline and other compensation as the airline reinvents itself. Absent a deal with US Airways' unions, Mr. Bronner, who runs Alabama's pension fund, said he would not invest any more money to rescue the airline. The Alabama fund is the largest shareholder in US Airways. Mr. Bronner's comments came as US Airways made a new contract proposal to its pilots' union, the only labor group in formal talks with the airline. Other unions, notably the International Association of Machinists and Aerospace Workers, have been reluctant to grant more cuts on top of the two rounds made while the airline was in bankruptcy. US Airways emerged from bankruptcy last year, financed in part with $240 million invested by the Retirement Systems of Alabama. Some analysts have speculated that the Alabama fund would come up with new capital rather than have the airline seek a second Chapter 11 filing. But in an interview yesterday, Mr. Bronner disputed that thinking. "Why would you put new money in, if they won't make a deal?" Mr. Bronner asked. Mr. Bronner said agreements with the airline's unions were needed well before Sept. 30, when US Airways faces a series of covenants in its federally guaranteed loans, which secure its arrangements with aircraft lenders. To be assured that cost cuts will be coming, unions have about 30 days to draw up agreements, he said. In response, the pilots union said yesterday that it would not be pushed into making a quick deal. "We know where we are, and we know where we need to be," said Jack Stephan, a spokesman for the Air Line Pilots Association. Robert Roach, a machinists' union vice president, reiterated his union's willingness to help US Airways save money, short of reopening its contracts, and said the two sides would meet Aug. 31. But in an interview, Mr. Roach said that Mr. Bronner, whose fund had not invested in airlines before taking the controlling stake in US Airways, did not "fully appreciate or understand this industry." Mr. Bronner said many union members thought the airline was acting like Chicken Little, falsely proclaiming that the sky was falling. These people believe that US Airways "can go into Chapter 11 again and try to find somebody willing to throw so much money at it and see what drain it goes down," he said. "Good luck." He said union members were mistaken to think that successful reorganizations were commonplace. "What most people don't understand is that when companies go into bankruptcy, they don't come out," he said. The debate at US Airways came as Delta's management presented the first pieces of a restructuring plan to its directors yesterday. In his memo to employees, the chief executive, Mr. Grinstein, said Delta was striving to carve out "new and previously uncharted network airline territory," which he did not specify. He said the plan would include both pain and gain as the airline becomes a leaner competitor. "Regrettably, one of the consequences will be fewer jobs and additional changes to pay and benefits for all our employees as we make operational changes to achieve the necessary cost savings," Mr. Grinstein said. But he promised the airline's employees would share in a combination of equity, profit sharing and payments tied to productivity improvements. Delta executives are set to meet with pilots' union leaders today to discuss the airline's latest offer. The pilots have offered concessions worth as much as $705 million; Delta insists its pilots, who are the best paid in the industry, must agree to cuts worth a minimum of $1 billion. The airline, which posted its biggest loss in a quarter-century during the second quarter, has warned it may be forced to seek bankruptcy protection unless it can reduce costs and renovate its balance sheet. Delta has retained the Blackstone Group, a private investment firm often involved in debt restructurings, as an adviser but has not discussed efforts it plans to take. At US Airways, Mr. Bronner said he agreed with a report by the pilots' union's financial adviser, which warned last week that the airline was in danger of a second bankruptcy filing and could end up going out of business unless it can reduce costs and adopt a new business model similar to that of low-fare airlines. Mr. Bronner said he and other investors would potentially be better off with the airline in liquidation, where they could snap up its planes, gates and routes at fire sale prices but not have to take on labor contracts. "It's a whole lot cheaper for me to have the assets and start over than to have the liabilities," Mr. Bronner said. He jokingly said that he could use the remains of US Airways to start a new carrier named for his home state: "Bama Air." Mr. Bronner acknowledged, however, that such a dire situation would be tragic for the airline. "I don't know why anyone would want to do it," he said. "That's terrible for the employees. It's what you want to avoid." Mr. Bronner has raised the prospect of a Chapter 7 bankruptcy liquidation before as a tool against US Airways' unions. In December 2002, Mr. Bronner, who had then proposed becoming the airline's biggest investor, warned unions that he would not make his investment if the labor groups did not grant a second round of concessions. "What's the alternative? If they don't want to do this, we'll Chapter 7 it," Mr. Bronner said at the time. Ultimately, unions gave in and Mr. Bronner's pension fund took a 37 percent share of the airline, gaining voting control and 8 of 15 seats on the airline's board. One of those directors, Bruce R. Lakefield, became chief executive last spring, after his predecessor, David N. Siegel, was unable to persuade unions to grant wage and benefit cuts. Mr. Bronner's liquidation threat is "the only card he's got," said Robert W. Mann Jr., an industry analyst based in Port Washington, N.Y. "He's the investor of last resort. He'll ultimately decide whether he wants to go forward." But Mr. Roach at the machinists' union said such threats could easily backfire on the airline by scaring customers away. "How do they say to passengers, 'Fly US Airways' and then say it may not be in business next month?" Mr. Roach said. Despite the airline's problems, Mr. Bronner said he did not regret his investment. He said the pension fund, which has assets of about $25 billion, lost $300 million in two days last week when the stock market dropped, more than he has put in the airline. "I've made a lot of dumb mistakes," he said. http://www.nytimes.com/2004/08/19/business/19air.html?ex=1093920667&ei=1&en=e2ce2025745b2d68 --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! 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