Attempting to ward off a second bankruptcy filing, management and pilots of US Airways (Nasdaq: UAIR ) took discussions of concessions that might keep the airline afloat through this past weekend. But yesterday, the pilots left the bargaining table.
US Airways Chairman David Bronner said in a New York Times interview last week that the airline needs to secure $800 million in salary and benefit cuts in the next 30 days or face liquidation. US Airways had been seeking to obtain roughly $300 million of that total from its pilots. Now that doesn't seem likely.
According to a Reuters report, leaders of the Air Line Pilots Association accused US Airways of dismissing several of its proposals and "piling on" demands. As of this writing, no further meetings are planned.
Frankly, I can't see how this ends well for US Airways. Not only has the airline been languishing for some time but also history suggests liquidation is likely. After all, it was the inability of union and management leaders to broker a truce that ultimately sank Eastern Airlines. And that was with an experienced airline executive at the helm in Frank Lorenzo. Bronner has no apparent history in the airline industry and is beholden to an entire state through the Alabama pension fund, which he runs.
Indeed, in an interview published recently in the Mobile Register, a local Alabama paper, Bronner lamented the fact that the $240 million of pension money he invested in US Airways could have provided great returns and served as a "promotional tool" for his fund. Huh? Hey, Dave, what about US Airways' employees?
Bronner told the Register he wants to save their jobs, but he won't save many of them. The paper reports that his signature plan is to scrap the airline's traditional hub-and-spoke structure and reinvent US Airways as a low-cost regional carrier a la Southwest (NYSE: LUV ) , Frontier (Nasdaq: FRNT ) , AirTran (NYSE: AAI ) , or Motley Fool Stock Advisor pick JetBlue (Nasdaq: JBLU ) . Such a plan probably would include revising work rules, cutting benefits, and engaging in massive layoffs. No wonder the pilots are steaming.
Yet Bronner's plan may be the only other option besides shutting off the engines for good at US Airways. In the interview with the Register, Bronner predicted that if the airline went into bankruptcy a second time, it wouldn't come out. History backs him up on this point. Continental (NYSE: CAL ) is the only major carrier in recent memory to successfully reorganize twice.
So, will US Airways crash, or can it return to cruising altitude? Probably the former, but that's not really the story here. Instead, it's that a national carrier has finally admitted what so many have long surmised: that in the airline industry, bigger is not only worse but also no longer sustainable.
For more Fool coverage of the airline industry's troubles:
- US Airways remains off-course after poor earnings put the airline in a tailspin.
- Employee concessions are no magic elixir for the airlines.
- Delta's (NYSE: DAL ) discord isn't reassuring.
- Southwest keeps the pressure on.
What do you think? Is the airline industry as we know it done for? Or will US Airways and others find a way to regain altitude? What about the small carriers? Will they come to dominate the industry, or will they, too, go the way of the dinosaur? Debate all this and more at the Airlines discussion board. Only at Fool.com.