US Airways Group Inc cleared a hurdle in its bid to cancel a pension plan for more than 7,000 pilots, a move designed to help it slash US$1.9 billion in costs and emerge from bankruptcy.
US Bankruptcy Judge Stephen Mitchell approved a request by the seventh-largest US carrier to terminate the plan. He said US Airways still must prove it has complied with its labor contract with the pilots, setting the stage for further talks between the two sides.
"I will approve the termination," Mitchell said. "But that is subject to a finding under the mechanisms set forth in the collective bargaining agreement."
The airline said last month it can't make US$2 billion in benefit payments due retired pilots over the next seven years and asked a federal pension agency for permission to end the plan by March 31. The Arlington, Virginia-based company said it would commit US$850 million over seven years to a replacement plan.
"We're disappointed with the judge's ruling that the company met the financial conditions for a termination of the pilot pension plan," said Air Line Pilots Association spokesman Roy Freundlich. "We're gratified that the judge upheld our position on the contract and we are assessing all of our legal options."
Chris Chiames, a spokesman for US Airways, said Mitchell's ruling means the dispute is headed for more negotiations, mediation or arbitration. The carrier would prefer negotiation, he said.
US Airways says it must reduce pension liability to get US$200 million in financing from the Retirement Systems of Alabama and a US$900 million US government loan guarantee to help it emerge from bankruptcy.
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