Down-to-the wire talks to keep airlines afloat

The next few days will be crucial in determining whether one of the nation's major airlines goes out of business altogether.

Two bankruptcy court judges - one in Philadelphia, the other in Chicago - could decide whether to abrogate key union contracts. Such a move has not been made in aviation since 1984. If it happens, it could result in wildcat strikes at US Airways and United sending both financially struggling carriers into liquidation.

Both airlines have said they need as much as $1 billion more in concessions to emerge from bankruptcy as lean competitors. While they've reached agreements with most employees, at this writing unions representing baggage handlers, mechanics, and some flight attendants are still negotiating.

The unions contend that their workers - who have already taken pay cuts as high as 30 percent - can't sacrifice more without having to mortgage their homes, if they haven't already sold them. These workers blame management for squandering givebacks they've already made.

Management, on the other hand, notes that labor is the airlines' biggest cost, and unlike the price of jet fuel, it's one they have some control over.

Both sides say publicly that it's in the best interest of the airlines, employees, and customers that they come to a negotiated settlement. But it remains to be seen whether that's possible.

"The airlines have to make an offer that workers are willing to accept, and that offer has to be low enough so they can still stay in business," says Douglas Baird, a professor at the University of Chicago's law school. "It's unclear whether doing both things simultaneously is going to be possible for either United or US Airways."

The union representing US Airways baggage handlers in Philadelphia claims their wages have already been cut so much - to as low as $7 an hour - that they're severely short-staffed. This week, the union publicly blamed US Airways management for the infamous Christmas baggage meltdown. They argued that the staffing problem - they're short 80 baggage handlers - has plagued the airport for more than a year, and that no more baggage handlers than called in sick than last Christmas.

"It's a longstanding problem that we've tried to address collectively without success. But it's one more of those issues that is in both of our interests to resolve," says Frank Larkin, a spokesman for the International Association of Machinists and Aerospace Workers, which represents the baggage handlers.

The long-term baggage problems were so well known in Philadelphia that some local US Airways customers simply FedExed their baggage. Kevin Mitchell, who is chairman of the Business Travel Coalition, is one. It cost him $250 extra, but his luggage was waiting for him and his wife at the hotel in Florida. And when their plane landed in Philadelphia on the return flight home, they simply walked by the mountains of lost and unclaimed bags, knowing theirs would be safely delivered a day or two later.

That may have been a sensible way around the labor problems, if not how to run an airline. And Mr. Mitchell is concerned that the tension with labor is "boiling up" to such a point that airlines may have indeed reached a wall in terms of making further progress in pay cuts.

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