rotornut
15th Oct 2004, 23:45
'Fiscal timebomb' for US airlines
United Airlines and US Airways are cutting deep into staff benefits in an attempt to survive.
Both are keeping creditors at bay with bankruptcy, as are many of their peers.
United now says it will have to rip up staff contracts on top of $15bn in cuts, while a judge has given US Airways permission to cut pay by 21%.
At the same time, Delta Airlines warned of huge losses ahead, an announcement which triggered a fall of more than 20% in its share price.
In a day of dire news for the US aviation business, American Airlines - the country's biggest airline - said the high price of oil meant it was raising its fuel surcharge.
Its customers will now have to pay a $50 fuel feel for trans-Atlantic or trans-Pacific return flights, up from $30.
Three years of misery
Fuel costs are only the latest headache to hit US carriers.
Three years ago, the flight freeze following the 9/11 attacks triggered widespread bankruptcies, as an industry which had failed to keep a lid on costs found itself unable to adjust to more straitened times.
Now many of the carriers are back before the bankruptcy courts, as low-cost outfits strip them of customers and fuel bills soar.
The judge now controlling US Airways' fate did not mince words about the airline's situation when he agreed the across-the-board pay cut for union workers - making up 84% of the firm's 34,000-stron workforce - on Friday.
"Basically, what we have here is a ticking fiscal time bomb," bankruptcy judge Stephen Mitchell said as he issued the ruling.
US Airways had said it might be forced to close if it did not get the swingeing cuts approved.
Similar language was used by United in its attempt to get its own cuts agreed - cuts which it said it needed by January and which go way beyond even the closing of its employees' pension plans.
The "stark financial reality in the entire industry" had forced its hand, lawyer James Sprayregen said.
Its own unions are likely to cry foul, having already agreed to $2.5bn in annual cuts for the next six years.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/3748464.stm
Published: 2004/10/15 22:47:22 GMT
United Airlines and US Airways are cutting deep into staff benefits in an attempt to survive.
Both are keeping creditors at bay with bankruptcy, as are many of their peers.
United now says it will have to rip up staff contracts on top of $15bn in cuts, while a judge has given US Airways permission to cut pay by 21%.
At the same time, Delta Airlines warned of huge losses ahead, an announcement which triggered a fall of more than 20% in its share price.
In a day of dire news for the US aviation business, American Airlines - the country's biggest airline - said the high price of oil meant it was raising its fuel surcharge.
Its customers will now have to pay a $50 fuel feel for trans-Atlantic or trans-Pacific return flights, up from $30.
Three years of misery
Fuel costs are only the latest headache to hit US carriers.
Three years ago, the flight freeze following the 9/11 attacks triggered widespread bankruptcies, as an industry which had failed to keep a lid on costs found itself unable to adjust to more straitened times.
Now many of the carriers are back before the bankruptcy courts, as low-cost outfits strip them of customers and fuel bills soar.
The judge now controlling US Airways' fate did not mince words about the airline's situation when he agreed the across-the-board pay cut for union workers - making up 84% of the firm's 34,000-stron workforce - on Friday.
"Basically, what we have here is a ticking fiscal time bomb," bankruptcy judge Stephen Mitchell said as he issued the ruling.
US Airways had said it might be forced to close if it did not get the swingeing cuts approved.
Similar language was used by United in its attempt to get its own cuts agreed - cuts which it said it needed by January and which go way beyond even the closing of its employees' pension plans.
The "stark financial reality in the entire industry" had forced its hand, lawyer James Sprayregen said.
Its own unions are likely to cry foul, having already agreed to $2.5bn in annual cuts for the next six years.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/3748464.stm
Published: 2004/10/15 22:47:22 GMT