THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: WEDNESDAY, June 15, 1994 TAG: 9406150533
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY BERNIE KOHN, KNIGHT-RIDDER NEWS SERVICE
DATELINE: 940615 LENGTH: Medium
Chairman Seth Schofield specified a goal for the employee concessions for the first time Tuesday at a conference of transportation analysts in New York.
{REST} He said the company must cut personnel costs by at least $500 million a year to effectively compete with the low-cost, low-fare airlines that have invaded its key East Coast markets. USAir spent about $2.5 billion on personnel last year.
The cuts would come from a wage cuts, benefit reductions and relaxed work rules. The latter would require employees to work more hours for the same pay.
The average USAir employee makes about $51,000 a year, although that figure is somewhat skewed by the high salaries paid to pilots. USAir has about 46,000 employees, about one-fourth of them in North Carolina.
USAir also is the primary carrier at Norfolk International Airport.
Leaders of USAir's four unions are expected to make a counterproposal in the next several weeks. No one is saying what the unions will propose. But a respected Wall Street analyst believes the unions will offer more than $300 million a year in cutbacks in exchange for about one-third of USAir's stock.
The analyst, Glenn Engel of Goldman Sachs, based his estimate on stock-for-concessions swaps that unions offered to save Northwest Airlines from bankruptcy in 1993 and to bring Trans World Airlines out of Chapter 11 this year.
Negotiations would determine the final package.
All sides agree time is of the essence in negotiating a concessionary package. Without a deal, First Boston Corp. analyst Paul Karos said in an updated report Friday, USAir will be ``dangerously low'' on cash by winter.
One key union leader, Bob Gaudioso of the Air Line Pilots Association, said the $500 million goal is ``pretty close to what we expected'' from the company.
``Of course, you have to remember that what they put out in the press and what they get from us is sometimes quite different,'' said Gaudioso, of Charlotte, who is vice chairman of the union's USAir chapter.
Cuts would be implemented on nonunion employees when the first union reaches agreement with the company. The upcoming cuts would be permanent, unlike the temporary concessions employees took in 1992 and 1993.
USAir's personnel expenses are about 40 percent of its total expenses, the highest among major airlines. Unionized workers continue to get pay raises even though the airline has lost more than $1 million a day for the past five years.
Schofield told the analysts Tuesday that management wants the compensation cuts to make up about half of a previously disclosed target of cutting total expenses by $1 billion a year by 1996.
Schofield said the company has implemented or soon will implement changes that will save $175 million this year. Cost-saving measures on the way include:
Redesigning its service. USAir has kept tight wraps on what this will include, saying it doesn't want to tip off the competition. However, Schofield said Tuesday, ``I can assure our customers that it will be very exciting and clearly differentiates USAir from no frills and other carriers.''
Eliminating two, possibly three, aircraft types from the fleet to cut maintenance and training expenses. USAir uses eight types of aircraft from three manufacturers. Low-cost leader Southwest Airlines, by contrast, flies only Boeing 737s. USAir already plans to ground its remaining Boeing 727s by year-end.
More efficient scheduling of flight crews and aircraft.
Possibly contracting out the loading and unloading of drinks and meals, similar to what is being done with freight and mail handling.
Making some changes in how it sells tickets.
USAir already has confirmed it will conduct a limited test of automatic ticket machines this summer. Low-fare airlines have gone much further, in some cases eliminating paper tickets and boarding passes for entirely computer-based systems.
by CNB