A bankruptcy judge on Friday granted US Airways authority to temporarily cut the pay of its union workers by 21 percent, comparing the airline's financial outlook to "a ticking fiscal time bomb."
The 21 percent pay cut is nearly all of the 23 percent reduction the air carrier had sought.
"I have absolutely no doubt that wage cuts of this magnitude would and will result in severe financial hardships," US Bankruptcy Judge Stephen Mitchell said. But US Airways' financial situation is so unstable that "basically what we have here is a ticking fiscal time bomb."
The pay cuts are in place until Feb. 15 next year, six weeks short of what the airline had sought. Mitchell also granted the airline authority to reduce the size of its jet fleet.
Also Friday, Delta Air Lines Inc, the nation's third-largest carrier, said it was weeks away from being forced to file for bankruptcy because of widening losses -- ranging from labor and pension costs to fuel expenses. United Airlines, a unit of UAL Corp, said it would need even more labor cuts than anticipated to get out of bankruptcy, and that it would seek the court's help if it is unable to reach an agreement with its unions.
Friday's ruling means the average US Airways salary would drop from US$59,509 to US$47,012, putting the airline below the other five major traditional carriers as well as Southwest Airlines, but higher than JetBlue and America West -- two carriers US Airways now seeks to emulate.
US Airways had projected that a 23 percent pay cut would save US$165 million between now and March 4, when it feared it would essentially run out of cash.
After Friday's ruling, the airline's chief executive, Bruce Lakefield, said the company was still calculating the financial effect of the decision, but he was pleased.
"Our mission here is to save as many jobs as possible. We are being attacked on every front" by low-cost competitors, he said when asked about the ruling's effect on workers.
The judge gave the airline authority to impose the cuts immediately, but Lakefield told employees in a recorded message that a timeline will be announced in the next few days.
Mollie McCarthy, leader of the Association of Flight Attendants' Philadelphia-based local, said the pay cuts are devastating and particularly galling given that management is not taking a similar hit.
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