Judge Allows US Air to Toss Union Contract

A bankruptcy judge Thursday approved a bid by US Airways (search) to throw out the contract covering machinists if the group fails to approve a package of concessions now up for a vote.

Judge Stephen Mitchell also permitted the airline to terminate pension plans covering the machinists and flight attendants to save more money at the No. 7 U.S. airline.

The twin rulings will help ensure the company's plan to save nearly $1 billion in labor costs it says it must have immediately to survive past mid-January.

But Mitchell said there were "grave questions" whether US Airways could successfully emerge from its second trip through Chapter 11 bankruptcy (search) protection in two years, even with the savings from labor groups.

After the hearing, US Airways Chief Executive Officer Bruce Lakefield told reporters "the judge accurately described what we're going through" and Lakefield pledged to move forward on reorganization.

Angry machinists confronted Lakefield outside the courthouse, demanding to know what pay cut the CEO would take.

US Airways announced prior to Mitchell's ruling that the machinists' union would send the company's last offer to its membership for a vote, and that tally would likely be completed within two weeks.

The company's proposal would total more than $300 million in pay and pension givebacks as part of its drive for nearly $1 billion in savings from all labor groups. The airline says it needs the cuts immediately to avoid liquidation within weeks.

Acceptance of the plan would supersede Mitchell's order.

Mitchell said US Airways met the test to terminate collective bargaining agreements because the unions had presented no evidence that the savings proposed were not necessary.

The company has also wanted to impose outsourcing provisions that could cost the mechanics roughly half their jobs.

"Which is worse, half the mechanics lose their jobs or all of the mechanics lose their jobs," Mitchell said.