Blame it on labor costs. That's been the mantra for many struggling airlines this year. As expected, unions haven't taken the shots lying down, arguing instead that management incompetence is the source of their woes. Frankly, it doesn't really matter who is right. Jobs are being lost, and salaries are coming down. Again.
Last Friday, US Airways (OTC BB: UAIRQ) asked a bankruptcy court to immediately approve 23% across-the-board pay cuts for its union employees. The nation's seventh-largest carrier said in a filing that it has $260 million in debt and lease payments due in January and February. Without the cuts, it may be impossible to make the payments, forcing a liquidation.
Sure, this isn't good news, especially for US Airways' 28,000 employees. But in writing about the company in recent weeks I've received email from a few different employees who say CEO Bruce Lakefield is a good guy in an unsalvageable situation. They don't appear to blame him for trying anything to save the airline.
They easily could, though. US Airways, like AMR Corp's (NYSE: AMR ) American, Continental (NYSE: CAL ) , Delta (NYSE: DAL ) , and UAL Corp's (OTC BB: UALAQ) United, didn't foresee that low-cost carriers such as Motley Fool Stock Advisor pick JetBlue Airways (Nasdaq: JBLU ) would permanently change the economics of the industry.
Still, I like the company's fight. While the liquidation timeline appears a threat to labor, it's also a clear line in the sand -- an outcome that everyone in the company can unite to avoid. And it probably helps that US Airways agreed to cut some management and administrative positions by the end of next month. Contrast that with the ongoing ambiguity that has plagued United in its troubled relations with labor.
Having worked for two companies that ultimately went under, I can attest to the fact that nothing is more painful, or more important, than hit-me-between-the-eyes honesty in troubled times. US Airways' management appears to have come to grips with that reality, but, unfortunately, probably a little too late for it to matter.
For more Fool coverage of US Airways and the not-so-friendly skies:
- With all the bad news, fellow Fool W.D. Crotty is compelled to ask why anyone would buy stock in a legacy airline.
- Fool Bill Mann wonders when Delta will crater. I just wish it'd choose what it wants to be.
- It was two weeks ago when US Airways was grounded for a second time.
- And, finally, maybe it's not too late for the carriers to learn lessons from another Stock Advisor pick, Dell (Nasdaq: DELL ) .
Dell and JetBlue are two of David Gardner's recommendations forMotley Fool Stock Advisorsubscribers. He's at it again with a new newsletter for investors seeking growth stocks, Motley Fool Rule Breakers. A free trial of Rule Breakers is yours for the asking.