Washington acts to avert USAir crisis

THE UNITED STATES government is trying to restart cost-cutting talks that could save USAir, the airline 24.6 per cent owned by British Airways, from seeking Chapter 11 protection against creditors.

A Department of Transportation official will meet representatives of the Air Line Pilots Association (Alpa) this week in an attempt to bring it back to the table with the management.

Alpa walked out of talks earlier this month after USAir said it proposed to sell 37 aircraft, including all the 767s currently flying the Atlantic in BA livery. 'We thought that was a terroristic negotiating ploy,' a union spokesman said.

USAir, which last week announced a higher-than-expected dollars 180m (pounds 112m) loss for the third quarter, has said it needs to cut dollars 1bn in annual costs to compete with low-cost rivals such as Southwest Airlines and Continental Lite. It has never recovered from a merger with Piedmont Airlines in the late 1980s, which was not followed by the rationalisation needed, and has lost dollars 2.8bn in the past four years.

Half the cost cuts must come from labour savings, the airline has said, and in July Alpa suggested all employees should take a 20 per cent pay cut in exchange for a 25 per cent shareholding and other benefits. Other airlines, including United, have already traded a union stake for pay cuts, but USAir rejected the proposal and talks finally broke down a month ago.

Analysts believe USAir will survive, whether or not it goes into Chapter 11, but say that BA's stake will be diluted. Either the unions will be given equity, or a wholesale restructuring will inject extra capital. Both are likely to lead to lower wages for the staff: it was a Chapter 11 restructuring that allowed Continental to launch its low-cost 'Lite' operation. Glenn Engel, analyst with Goldman Sachs in New York, does not believe the airline will reach Chapter 11, however. 'There is too much at stake for them not to come to terms,' he said.

BA has invested dollars 400m in USAir since the beginning of 1993, but said last week that it would not contribute the extra dollars 450m it had planned for this year until a satisfactory restructuring had been arranged. Last month USAir said it was postponing the dividend it paid its two key preference shareholders, BA and the investor Warren Buffett.

Apart from its financial problems, the airline's reputation has been undermined by two plane crashes in July and September, which killed 159 people.

Despite the series of disasters, BA says the USAir link-up has brought it the operating benefits it wanted, including pounds 70m in extra revenues and reduced costs, and that its plans to become the world's first global airline have barely been affected. The 'code sharing' arrangement allows BA to sell one ticket that will take a passenger from London to any USAir destination.

It has similar shareholdings and arrangements with other airlines, including Qantas of Australia and TAT of France, and aims to provide worldwide coverage through a network of link-ups.

BA originally wanted to take a 44 per cent stake in USAir. This was blocked by the US government, which demanded greater access for American carriers into Heathrow. Ian Wild, analyst with BZW, says that a restructuring could reduce its stake to below 15 per cent, but that it will build it back up as soon as it can. 'British Airways would still like to get to 40 per cent plus,' he said.

(Photograph omitted)

Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
art
News
Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features staging of a playground gun massacre
Travel
travel
PROMOTED VIDEO
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
News
i100This Instagram photo does not prove Russian army is in Ukraine
News
Morrissey pictured in 2013
people
Sport
sportVan Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
Life and Style
Martha Stewart wrote an opinion column for Time magazine this week titled “Why I Love My Drone”
lifeLifestyle guru Martha Stewart reveals she has flying robot... to take photos of her farm
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
filmReview: Sometimes the immersive experience was so good it blurred the line between fiction and reality
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
i100
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Environment
Tyred out: should fair weather cyclists have a separate slow lane?
environmentFormer Labour minister demands 'pootling lanes' for women cyclists
News
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices