Court OKs US Airways pay cuts.

Byline: Lou Whiteman

US Airways Group Inc. received some vital financial support Thursday, Jan. 6, when a bankruptcy judge cleared the way for the airline to cancel its labor agreement with its mechanics, a move that would buy the company time to complete its reorganization.

Judge Stephen Mitchell of the U.S. Bankruptcy Court for the Eastern District of Virginia authorized the airline to void its collective bargaining agreements with the International Association of Machinists and Aerospace Workers if the mechanics do not approve a new deal in the coming weeks.

US Airways said Thursday that the IAM has agreed to send the company's last offer to its membership for a vote. That deal, if accepted, would give the company about $300 million in pay and benefit givebacks and allow the struggling carrier to outsource much of its maintenance work.

The union expects to complete its vote on the plan by Jan. 21. The judge also approved US Airways' request to terminate the pension plans of its mechanics and flight attendants, which would free the airline from $1 billion in future obligations. The airline has said it needs the cuts to avoid a near-term liquidation. US Airways has a deal in place with creditor General Electric Co. to provide it with $140 million in much-needed liquidity, but that deal requires the carrier to cut its costs by midmonth.

US Airways received more good news when its flight attendants late Wednesday voted to approve a deal that would cut their pay by about 10%. Still, the company faces significant challenges. The airline, only weeks removed from an employee sick-out that forced it to cancel more than 400 flights over the Christmas weekend, risks further alienating employees, who are being forced to take their second pay cut since 2002.

It remains to be seen whether the mechanics will vote in favor of the deal. Should the airline impose a ...