KAREN WALKER / WASHINGTON DC
Fears continue to grow for the future of American Airlines and United Airlines as desperately needed cost cuts at both airlines remain slow in coming.
Speculation that American could follow United into Chapter 11 bankruptcy protection later this year were further fuelled last week by a leaked study, apparently conducted on behalf of the carrier's pilots' union, saying American may run out of cash by the end of May. The Allied Pilots Association (APA) and American dismiss the report. However, the airline has lost $5 billion over two years and continues to lose $5 million a day, a situation chief executive Don Carty admits is "unsustainable".
While American says negotiations with labour groups aimed at saving an additional $1.8 billion are "going well", the carrier must act fast to avoid bankruptcy.
United, meanwhile, is wading through the Chapter 11 process. Negotiations with union groups continue to be difficult, prompting some in the financial community to speculate that the carrier might ultimately be liquidated.
Some welcome the prospect, highlighting that United's liquidation would be a windfall for American. "While a Chapter 7 filing [for liquidation] by United will not solve all the airlines' problems overnight, it could put them on a path to recovery," says JP Morgan's Jamie Baker.
A union-leaked document purporting to be United's restructuring plan, called the Plan For Transformation, calls for the creation of a low-cost carrier competing head-to-head with Southwest Airlines and operating 134 narrowbody aircraft.
It also aims for several billion dollars more cost savings through additional labour concessions and renegotiated contracts with regional affiliates, and scrapping current pilot scope clauses.
US Airways pilots may strike if the bankrupt carrier replaces its current pension account with a less expensive plan. The airline aims to eliminate the current pension plan, which is underfunded by $1.6 billion, and invest $850 million in an alternative plan over the next seven years. The carrier insists it needs to resolve the problem to receive crucial financing and emerge from bankruptcy at the end of March. The Air Line Pilots Association (ALPA) says such a move "would give us the right to strike". US Airways responds that the union was "woefully misinformed". US bankruptcy court judge Stephen Mitchell is expected to rule on the pension plan issue within days.
Additional reporting by Mary Kirby in Washington DC
Source: Flight International