US Airways' hopes for labor harmony -- or at least not outright acrimony -- as it moves to ask unions for more givebacks got off to a rough start this week, with the top leaders of the machinists union calling the airline's chief executive a "miserable failure."
In a tough-worded letter to 9,500 union members, International Association of Machinists District 141 and 141-M presidents Scotty Ford and Randy Canale demanded that CEO David Siegel change his ways or "step aside and give the job to someone capable of handling it."
The attack from the heads of the two unions, based in San Francisco and Chicago, respectively, signals a difficult month ahead for Siegel, who after months of hinting at the need for a third round of employee concessions is finally ready to approach workers with specific requests.
The embattled CEO tried to lay the ground work last week, saying in a Web cast to the carrier's 28,000 workers that low-cost carrier Southwest Airlines is "coming to kill us" and that to survive, the money-losing carrier needs to cut its costs yet again.
The expense of flying one passenger one mile has to drop, he said, from its current level of 10 cents to about 6 cents, a figure more in line with low-cost carriers. To close that gap, Siegel said, the airline needs its workers to negotiate new employment contracts, and he warned that cuts in pay and benefits might be needed and layoffs could be a possibility.
He wants formal negotiations to begin later this month and the new contracts in place by June. Thus far, only pilots have agreed to cooperate -- though their cooperation is crucial, in part because a key part of the airline's strategy will be to increase significantly the amount of actual flying.
The machinists represent Siegel's toughest opposition and have been at odds with the carrier for the better part of the year. The two sides have been fighting over the company's outsourcing of jet maintenance to a nonunion firm in Alabama.
The machinists also have been holding firm on their refusal to consider new contract talks or new concessions, saying that the company squandered two previous rounds of concessions while failing to turn the company around.
Reiterating that claim this week, the leaders of the machinists union accused Siegel of using "fear" to make his case for more cuts and argued that his attempt to sway workers last week "failed miserably, and looked like a CEO making a very public plea to save his job in the face of his own miserable failure."
The reference to Siegel's job is timely, since starting today he is free to leave US Airways for any reason and collect a severance package worth $4.5 million. That provision, good until April 30, was built into his contract during last year's bankruptcy.
During his talk last week, Siegel indicated that he was willing to give up the $4.5 million and take a cut in pay, bringing his $600,000 salary more in line with the top executive salaries at low-cost carriers. "I am prepared to lead this fight," he said. "I am not going to cut and run."
US Airways Chairman David Bronner, asked this week about Siegel's comments, also hinted that Siegel might be around for a while. Talking about Siegel's voluntary salary reduction, he said, "I think this is an indication we are teamed up to make this thing work."
Bronner and Siegel discussed the chief executive's future during a March 17 meeting in Bronner's Mobile, Ala., office. Bronner said the board wanted to know what Siegel planned to do with his April walk-away provision.
Siegel's willingness to take a salary cut is "clearly common sense," Bronner said. As the leader of a company that's asking employees to give up pay and benefits, "You have to put yourself at risk more than anybody else," he said.
But the machinists' union leaders were not as impressed with Siegel's willingness to sacrifice. Even if he were to reduce his salary to low-cost carrier levels, it "would still be too much and cannot be justified."