WASHINGTON (Reuters) - US Airways (UAIRQ.OB) and its machinists union headed for a showdown in bankruptcy court on Thursday that could ground the airline permanently or improve its chances of survival.þþJudge Stephen Mitchell of the U.S. Bankruptcy Court in Alexandria, Virginia, planned to rule on the airline's motion to throw out the contract covering nearly 9,000 mechanics and related workers if the work group and the carrier failed to agree on a package of voluntary concessions.þþMitchell has not indicated which way he will rule, but he previously said he wanted the airline to survive. In October, he approved temporary pay cuts of 21 percent for most union workers at the seventh-biggest domestic airline.þþThe court's decision will be closely watched by heavily unionized industries as the case could set new labor law and bankruptcy precedents.þþAirlines, some of them insolvent, have billions of dollars tied up in labor contracts and are desperately trying to cut costs to remain competitive.þþFor instance, bankrupt United Airlines (UALAQ.OB) will begin hearings on Friday on its bid to throw out union contracts if it fails to win giveback agreements soon.þþThe workers represented by the International Association of Machinists are the only labor group at US Airways to not negotiate a new round of concessions to help the airline avoid liquidation.þþThe flight attendants approved a proposal on Wednesday for $94 million in annual givebacks that include 9 percent pay cuts and work rule changes. The pilots and reservation agents have also ratified deals. þþOTHER DEALS TIED TO LABOR CUTSþþUS Airways has sought more than $300 million in concessions from machinists as part of its drive for nearly $1 billion in savings from all labor groups. The airline says it needs the cuts immediately to avoid liquidation within weeks.þþTalks with machinists have gone on for months with little progress.þþThe two sides exchanged angry accusations over major travel disruptions over the holiday period the airline said was caused by hundreds of workers calling in sick, mainly at the airline's hub in Philadelphia. The machinists blame mismanagement by airline executives.þþA decision by Mitchell to allow the company to throw out the machinists contract would permit US Airways' to meet most of its labor savings target, which creditors demand before they finalize deals with the carrier to reduce crucial aircraft lease and debt payments.þþThe federal government, which has backed private bank loans serving as the only source of ready cash for US Airways operations, also wants the steep cost reductions in place before it will agree to extend the financing past mid-January.þþThe cuts are also needed for US Airways to attract an equity investment of at least $250 million, considered critical for its chances of long-term survival.þþAnother worry for US Airways is a veiled threat by machinists to strike if their contract is voided. The company planned to move in court to block any job action, which some industry experts believe would be fatal to the carrier.þþSeparately, decisions on Wednesday by East Coast rival Delta Air Lines (DAL.N) to permanently cut fares and by low cost power Southwest Airlines (LUV.N) to begin service from US Airways' long-time Pittsburgh base in 2005 put new and potentially damaging competitive pressures on US Airways. þþ
Source: NY Times
