FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported)
February 23, 2000
US Airways Group, Inc.
(Commission file number: 1-8444)
and
US Airways, Inc.
(Commission file number: 1-8442)
(Exact names of registrants as specified in their charters)
Delaware US Airways Group, Inc. 54-1194634
(State of incorporation US Airways, Inc. 53-0218143
of both registrants) (I.R.S. Employer Identification Nos.)
US Airways Group, Inc.
2345 Crystal Drive, Arlington, VA 22227
(Address of principal executive offices)
(703) 872-5306
(Registrant's telephone number, including area code)
US Airways, Inc.
2345 Crystal Drive, Arlington, VA 22227
(Address of principal executive offices)
(703) 872-7000
(Registrant's telephone number, including area code)
Item 5. Other Events
On February 23, 2000, US Airways, Inc. (US Airways), a
wholly-owned subsidiary of US Airways Group, Inc. (US Airways
Group or the Company), issued a news release (see exhibit 99.1)
and sent an internal communication to its employees (see exhibit
99.2).
Item 7. Financial Statements and Exhibits
(c) Exhibits
Designation Description
- ----------- -----------
99.1 News release dated February 23, 2000 of US Airways
99.2 Internal communication to employees from Chairman
Stephen M. Wolf and President and CEO Rakesh Gangwal
of US Airways Group and US Airways
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned hereunto duly authorized.
US Airways Group, Inc. (REGISTRANT)
/s/ Anita P. Beier
Date: February 23, 2000 By: --------------------------------
Anita P. Beier
Vice President and Controller
(Chief Accounting Officer)
US Airways, Inc. (REGISTRANT)
/s/ Anita P. Beier
Date: February 23, 2000 By: --------------------------------
Anita P. Beier
Vice President and Controller
(Chief Accounting Officer)
Exhibit 99.1
US AIRWAYS RESPONDS TO FLIGHT ATTENDANT
UNION'S THREAT TO CONDUCT CHAOS CAMPAIGN
ARLINGTON, Va., Feb. 23, 2000 -- US Airways said today that
it intends to continue to negotiate with its flight attendants'
union to reach a fair and equitable contract, but that if no
agreement is reached, the company "is left with no choice but to
shut down the airline immediately after a 30-day cooling-off
period."
In a letter mailed to more than 40,000 employees' homes, US
Airways Chairman Stephen M. Wolf and President and CEO Rakesh
Gangwal said the Company "simply cannot risk losing our
customers' confidence" in the face of labor action by the
Association of Flight Attendants (AFA), which represents about
10,000 employees.
The National Mediation Board, which has been assisting in
negotiations between US Airways and the AFA, declared an impasse
in the talks on Feb. 18 and offered binding arbitration to the
parties. The AFA rejected arbitration, which triggered a 30-day
cooling-off period that ends at 12:01 a.m. Saturday, March 25.
Under labor law, no strike or other work stoppage can take place
during that 30-day period. Additional negotiations can take place
during the cooling-off time, and US Airways will continue to
operate normally in the interim.
The AFA had publicly threatened that, if a contract is not
reached by the end of the cooling-off period, it would conduct an
organized campaign it has trademarked as "CHAOS" (Create Havoc
Around Our System). This involves randomly striking flights to
disrupt service and strand customers throughout the US Airways
system.
"If US Airways were to try to operate a schedule under such
conditions, in which we would not know from hour to hour which
flights the AFA would strike, our customers would lose all
confidence that they can rely on US Airways to provide them
reliable service," the letter said. "AFA's intent is to pressure
the company with financial harm by systematically eroding the
confidence of our customers and demoralizing the other employee
groups," the letter added.
-more-
US AIRWAYS RESPONDS TO FLIGHT ATTENDANT
UNION'S THREAT TO CONDUCT CHAOS CAMPAIGN
Page Two
Feb. 23, 2000
The AFA is the only union at US Airways to reject a
guarantee that employee pay, benefits and work rules will be at
parity plus one percent with US Airways' four largest competitors
- -- American, Delta, Northwest and United. Instead, the union has
demanded that it maintain certain uncompetitive aspects of its
current contract, and be paid higher than the flight attendants
at the other major carriers.
"If the AFA does not reconsider its position, we do not see
how US Airways can justify paying more to our flight attendants,
as able as they are, because it would make the airline
uncompetitive in the marketplace," Wolf and Gangwal wrote.
Among the other unions that have reached contracts that
guarantee parity plus one percent are the Air Line Pilots
Association, representing 5,600 pilots; the Communications
Workers of America, representing 9,700 passenger service
employees; the International Association of Machinists,
representing 7,700 mechanics and related workers and 6,700 fleet
service employees; and the Transport Workers Union, representing
160 flight crew training instructors and 200 dispatchers.
US Airways cannot make an exception for the flight
attendants, Wolf and Gangwal said, because it would be unfair to
all the other employee groups who have agreed to guaranteed
parity plus one percent.
"If the flight attendants were paid above parity plus one
percent, other employee groups could rightfully ask for the same
treatment, and the Company would again return to significantly
uncompetitive labor costs across the board. This would put
US Airways right back where we started four years ago --
shrinking the airline and selling assets to support an
uncompetitive cost structure. Ultimately, this strategy would
result in the airline going out of business," the letter said.
A shutdown of operations may ultimately result in the
furlough of many US Airways employees. "In the event that the
Company does cease operations, it will continue to pay all
employees, other than AFA-represented employees, for as long as
financially feasible," the letter said.
-30-
NUMBER: 3841
Exhibit 99.2
February 23, 2000
Dear Fellow Employees:
We are writing to you today to inform you of the unfortunate
position in which US Airways finds itself in the negotiations
with the Association of Flight Attendants (AFA) - the union
representing our flight attendants. As you know, negotiations
with the AFA have reached an impasse and today the National
Mediation Board has approved a 30-day cooling off period which
begins tomorrow. We want to apprise you of the seriousness of
this situation and the implications for the Company.
Unlike all the other unions with which US Airways has
successfully negotiated contracts over the past three years, the
AFA has thus far refused to embrace the concept of guaranteed
parity plus one percent. If the AFA does not reconsider its
position, we do not see how US Airways can justify paying more to
our flight attendants, as able as they are, because it would make
the airline uncompetitive in the marketplace.
When we joined US Airways in 1996, we described a vision to
become the "Carrier of Choice" and, if successful, become a
world-class global carrier in the process. We put in place a
business plan to achieve that objective. While all of us
together have made significant progress toward that goal, we have
yet to completely attain a fundamental element of the business
plan - achieving a competitive cost structure.
Historically, as we all know, US Airways had labor costs
well above the competition, and it was clear from the outset to
all of us who work here and to the financial community that US
Airways could not effectively compete or grow without bringing
these costs in line with its competition. In 1997, we outlined
for all employee groups the concept of guaranteeing parity, plus
one percent, with the wages and productivity levels of the four
top airlines in the country - American, Delta, Northwest and
United. We specifically stated that we would not seek the lower
levels of wages and benefits at the other carriers that US
Airways also competes with, such as Air Tran, America West,
Continental, Southwest and TWA.
Since we outlined this concept, US Airways has achieved
parity plus one percent agreements with the Air Line Pilots
Association, representing 5,600 pilots; the International
Association of Machinists representing 7,700 mechanics and
related workers and 6,700 fleet service employees; the
Communications Workers of America, representing 9,700 passenger
service employees; and the Transport Workers Union, representing
160 flight crew training instructors and 200 dispatchers. And
while we have not yet signed an agreement with the TWU covering
55 flight simulator engineers, they have embraced the concept of
guaranteed parity plus one percent. US Airways has also provided
guaranteed parity plus one percent to our non-union employees.
In fact, every employee group has embraced this concept except
the AFA.
During the negotiations with the AFA, they have demanded
that they maintain certain uncompetitive aspects of their current
contract, and that they be paid higher than the flight attendants
at the other major carriers.
It would perhaps seem easy for US Airways to look the other
way with this, the last major contract negotiation, and agree to
a high cost contract with the AFA. But, would it be right? We
believe it would be unfair to all the other employee groups who
have already agreed to guaranteed parity plus one percent. If
the flight attendants were paid above parity plus one percent,
other employee groups could rightfully ask for the same
treatment, and the Company would again return to significantly
uncompetitive labor costs across the board. This would put US
Airways right back where we started four years ago - shrinking
the airline and selling assets to support an uncompetitive cost
structure. Ultimately, this strategy would result in the airline
going out of business.
US Airways now finds itself in a position where we have few
alternatives. In the event that we are unable to reach an
agreement with the AFA within the 30-day cooling-off period, the
union has publicly stated its intention to unleash a well-
organized work stoppage campaign that is trademarked as "CHAOS"
(Create Havoc Around Our System). This involves randomly
striking certain flights to disrupt service and strand customers
throughout the system.
If US Airways were to try to operate a schedule under such
conditions, in which we would not know from hour to hour which
flights the AFA would strike, our customers would lose all
confidence that they can rely on US Airways to provide them
reliable service. This is exactly what the AFA's CHAOS campaign
is designed to do. The union has stated on its web site that
its intent would be to "drive away wary passengers" to
competitors and to maximize costs for the company. "US Airways
will have to pay the expense of preparing for a strike, while
experiencing reduced bookings from the threat of a strike.," the
union said on its web site. AFA's intent is to pressure the
Company with financial harm by systematically eroding the
confidence of our customers and demoralizing the other employee
groups.
All of us have been working hard to win our customers back
and to get our operation back on top after last year's clearly
unacceptable operational performance. At the same time, the
Company has made a conscious decision not to embark on a
marketing or promotional program to win back customers because of
the uncertainty surrounding the AFA negotiations. US Airways
simply cannot risk losing our customers' confidence again. If US
Airways were to try to operate with an AFA CHAOS program going
on, it would risk losing large numbers of customers permanently.
While US Airways will continue to negotiate to reach a fair
and equitable agreement, if no agreement is reached with the AFA,
US Airways is left with no choice but to shut down the airline
immediately after the 30-day cooling off period. We sincerely
hope that we are not forced to take this step.
The Company can ill afford to shut down operations. US
Airways had net losses of $85 million in the third quarter of
1999, and $47 million in the fourth quarter (moreover, the fourth
quarter had an additional $34 million net loss from non-recurring
and unusual events), and the Company has said to the financial
community that it expects to lose money in the first quarter of
2000 as well. Yet, in our opinion, the alternatives to a shut
down are worse - either the AFA subjects our customers to bear
the brunt of the union's CHAOS program, or the Company fails to
achieve a competitive cost structure, abandons its business plan,
and, we believe, ultimately is driven out of business by the
competition.
A shutdown of operations may ultimately lead to the furlough
of many employees. We recognize that you have all done your part
in meeting the Company's goal of becoming cost competitive, and
we want to minimize the financial hardship that a shutdown may
cause for you and your family. In the event that the Company
does cease operations, it will continue to pay all employees,
other than the AFA represented employees, for as long as is
financially feasible. We will provide you with more information
as we get closer to the end of the 30-day cooling off period.
We regret that the Company finds itself in this situation,
but as many of you have expressed to us, US Airways needs to
remain unified in maintaining fairness across all employee groups
to enable the Company to compete and to grow.
Sincerely,
Stephen M. Wolf Rakesh Gangwal
Chairman President and CEO
