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Airline officials targeted by unions
"We have seen absolutely no accountability from management for the tremendous investment we have already made, yet we keep hearing their tired refrain that they need labor costs like those at Southwest Airlines," Bill Pollock, chairman of the airline's Airline Pilots Association bargaining unit, said in a statement that also called for the replacement of Chief Financial Officer Neal Cohen.
"The concession window is closed for this management team."
Siegel in recent months has repeatedly said the airline needs to cut more costs to compete with such discount carriers as Southwest and JetBlue.
Siegel told Wall Street analysts last month that management will seek between $200 million and $300 million in annual cost savings for 2004. That equals a 2.4 percent to 3.6 percent reduction from this year.
International Association of Machinists Locals 141 and 141-M took a stand similar to the pilots union, saying the "concession stand is closed." Machinists suggested that if Siegel cannot make the airline profitable, new management should be appointed.
In his weekly message to employees on Friday, Siegel said the company's restructuring plan is working, but the airline continues to lose money because its costs still are higher than those of low-fare competitors.
The company trimmed its losses in the quarter ended Sept. 30 to about $90 million, compared with $335 million in the year-ago quarter.
US Airways exited Chapter 11 bankruptcy protection March 31 after shedding $1.9 billion in annual costs. About $1 billion of that came from staffing cuts and wage and benefits reductions.
Siegel said when Southwest begins offering service to Philadelphia International Airport in May, US Airways' fares on competing routes will have to drop by 30 percent to compete. Philadelphia is a US Airways hub.
Converting to a Southwest-type model of point-to-point service, instead of US Airways' hub and spoke system, would require the airline to fire 80 percent of its remaining employees, drop service to 100 cities and eliminate 60 percent of its aircraft, Siegel said.
Airline analyst Bob Mann Jr. said the disadvantage to US Airways' relatively quick emergence from bankruptcy is that the concessions from labor didn't go far enough.
Even after restructuring, Mann said, US Airways' costs remain high.
Mann agreed with the pilots' contention that the airline's labor rates are comparable with low-cost carriers.
"(US Airways) has among the lowest labor rates, but not costs because the business model is still very complicated," he said. "They didn't go to the extent United did to restructure work rules. All these things stack up."
Pilots' spokesman Jack Stephan said it's a coincidence that the union's statement came the same day as the airline's management meeting.
"This is something (we've) been deliberating a long time," Stephan said. " We don't think this will come as a shock to Siegel. We have lost our patience dealing with this management team. Instead of aggressively attacking the competition, their knee-jerk response is, 'Let's attack labor for more money.' "
Mann said Siegel needs to respond by laying bare the company's restructuring plan to labor groups. He also warned the unions that they don't know whether they would do any better with a new management team.
Worrying about a successor to Siegel isn't likely to be an issue. US Airways Chairman David Bronner, executive director of the Retirement Systems of Alabama, the airline's largest shareholder, issued a statement yesterday defending Siegel's work.
"Over the last year, this team has successfully emerged from Chapter 11, secured a federal loan guarantee to enhance the company's liquidity, implemented a business plan that has achieved the greatest revenue and cost improvements in the industry, and financed a significant regional jet order," Bronner said. "To accomplish these goals, Dave Siegel and his team have had to earn the confidence of investors, government agencies, and the banking and financial community."
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