Beleaguered carriers press for more employee concessions in latest attempt to win US government loan guarantees

Financially troubled United Airlines and US Airways are pressing their employees for hundreds of millions of dollars' worth of wage concessions in their latest effort to win government loan guarantees. The move comes as Wall Street projects mounting US airline losses this year with no sign of a turnaround in the industry's fortunes 12 months on from the terrorist attacks on New York and Washington DC.

US Airways' plans for restructuring suffered a setback on 28 August with the rejection by its 6,800 mechanics of a proposal that would have cut wages by 8%. The sixth-largest US carrier is seeking to slash costs by up to $1.3 billion, and has already secured salary cuts from its pilots, flight attendants, baggage handlers and other ground staff.

"We're extremely disappointed by our mechanics vote," says US Airways president David Siegel, adding: "We regrettably must pursue changes to the mechanics' contract through the bankruptcy court if we are unable to quickly reach a new agreement." The cuts are required for approval of a $900 million government loan guarantee.

United Airlines, which many observers say could soon follow US Airways into Chapter 11 bankruptcy protection, is similarly pressing its employees for a 10% cut in salaries. This comes ahead of the second-largest US carrier's submission of a revised application to the Air Transportation Stabilization Board (ATSB) for a $1.8 billion loan guarantee.

Meanwhile, Goldman Sachs says US airline losses by the end of the year could exceed last year's record $6 billion, with the company lowering earning expectations for all carriers. "We cannot determine whether the weak bookings reflect a downturn in leisure demand or caution ahead of the 11 September anniversary," says Glenn Engel, Goldman Sachs analyst.

Another financially stricken US carrier, National Airlines, said during its bankruptcy hearing last week that it is close to securing a $30 million private loan subject to a new guarantor being found. This follows the ATSB's refusal to provide a $50.5 million guarantee to the Las Vegas-based airline, which has been in Chapter 11 since late 2000.

But local aviation officials have questioned whether the carrier will be able to survive, pointing to its $6 million of arrears in airport rental charges.

Source: Flight International