ARLINGTON, Va. – US Airways (search) announced plans Tuesday to cut $45 million a year in pay and benefits to roughly 3,700 management employees, a move the airline hopes will convince its union employees to collectively accept $950 million in annual cost cuts.
An airline source who briefed reporters Monday on condition of anonymity said the planned cuts will include hundreds of layoffs and shed at least $45 million off the $201 million collective payroll for its management workers.
The source acknowledged that proportionately, management workers are facing less severe cuts than the airline is seeking from its union workers.
But the source said the bankrupt airline's transformation plan seeks to get US Airways' costs in line with those of low-fare competitors like JetBlue Airways Corp. (JBLU) and America West (search). When measured against that yardstick, management employees are often already at or below the necessary targets.
The company's 10 most senior officers will receive a 10 percent pay cut and a 25 percent cut to retirement benefits. Vice presidents and managing directors will take a 7.5 percent pay cut, while other management employees face a 5 percent pay cut. The retirement plan is being cut for all management workers.
The source said that generally, the cuts to salary are not as severe as the cuts to retirement plans, vacation time and other benefits.
The management work force will be cut about 10 percent from its current level of 3,700 through attrition, reorganization and layoffs, the source said. He estimated that "hundreds" of layoffs will be required, in addition to permanent elimination of jobs now being held vacant.
The airline's plan for management cuts comes as its pilots' union is scheduled to resume debate Tuesday on whether to allow its 3,000 rank-and-file members to vote on a package of $300 million in annual cuts, including an 18 percent pay cut, the airline says it needs to return to profitability.
Also, on Thursday, the airline will ask a bankruptcy judge to impose temporary pay cuts of 23 percent on all union workers, along with cuts to retirement plans.
It is unclear how the announced management cuts will affect union workers' willingness to accept pay cuts. So far, the company has been unable to ratify labor deals with any of its major unions.
Jack Stephan, spokesman for the Air Line Pilots Association (search), did not immediately return a phone call seeking comment Monday night.
The company has warned that it may be forced to liquidate by mid-February if it cannot implement its cost cuts. The airline has said it will seek permanent cuts through the bankruptcy process if it cannot reach agreements with its unions.
The company employs 28,000 workers in its mainline operations and about 34,000 workers overall. About 84 percent of its workers are covered under union contracts, according to the company's annual report.