Bruce Wakefield, US Air's CEO, said the enhanced profit-sharing plan is a "generous gesture" by the Alabama pension fund.
The plan would trigger at the first dollar of annual profit. If the company's profit margin is 5% or less, the proposed payout to employees would be 10% of the profit. If the company's margin exceeds 5%, the total payout would be 25% of any pretax profit above that level. Lump-sum, cash payments would be made 60 days after the end of the fiscal year. There is no cap on the amount of profit that could be shared. Company officers would not be included in the plan.
David Wray, president of the Profit Sharing/401(k) Council of America, Chicago, said the US Air profit-sharing plan is unusual because it "triggers on the first dollar of profit."
"Most profit-sharing plans have to meet a profit threshold before they kick in," Mr. Wray added. He also said that paying out 25% of profits above 5% is more generous than most other profit-sharing plans.
He noted, however, that adoption of the plan is contingent on wage cutbacks. That makes it more difficult to compare the US Air profit-sharing plan with those of companies paying competitive wages, Mr. Wray said. Plans with less generous formulas are making payouts on higher wages, he noted.
Mr. Bronner said the airline has to reach an agreement with its unions "in the next 30 days" to avoid another Chapter 11 filing. He sees a 50-50 chance of that happening. Mr. Bronner also said the airline might be forced into liquidation if it files for bankruptcy again.
The Air Line Pilots Association, Washington, and the Association of Flight Attendants, Washington, are negotiating with US Air to make further wage cutbacks. The International Association of Machinists, Washington, has said it will not give up any more; IAM spokesman Joe Tiberi said the offer of a profit-sharing plan hasn't changed the union's position.
Jack Stephan, spokesman for US Airways' pilots, said the profit-sharing plan is part of a "returns package" that the airline will have to give the pilots union to get it to agree to any further wage cuts. "Without a returns package, the idea of an agreement would be nil," he said. "If there's any upside, those who give concessions should get the benefits of it down the road."
Dave Kameras, spokesman for the flight attendants union, said: "The flight attendants are discussing cost-saving methods with management, but they are looking for something in return. …The profit-sharing plan could be part of what they accept in return for wage cuts."
Also sparking concern among union officials is US Airways' request on Aug. 16 to delay contributing $67.5 million to the machinists' and flight attendants' defined benefit pension plans for 2004. If the Internal Revenue Service approves the waiver, the airline will be able to contribute the money over five years, instead of during the normal 18-month period. In a letter to employees, US Air executives said an IRS rejection will "significantly impact" the company's ability to remake itself, and will cause "substantial business hardship."
The company terminated its underfunded pension plan for pilots in March 2002 and set up a defined contribution plan, as part of its earlier reorganization. At that time, the pilots' defined benefit plan had assets of $1.3 billion and liabilities of $2.2 billion.