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US Airways Group Inc. received some vital financial support Thursday when a bankruptcy judge cleared the way for the airline to cancel its labor agreement with its mechanics, a move that would buy the company time to complete its reorganization. Judge Stephen Mitchell of the U.S. Bankruptcy Court for the Eastern District of Virginia authorized the airline to void its collective bargaining agreements with the International Association of Machinists and Aerospace Workers if the mechanics do not approve a new deal in the coming weeks. US Airways said Thursday that the IAM has agreed to send the company’s last offer to its membership for a vote. That deal, if accepted, would give the company about $300 million in pay and benefit givebacks and allow the struggling carrier to outsource much of its maintenance work. The union expects to complete its vote on the plan by Jan. 21. The judge also approved US Airways’ request to terminate the pension plans of its mechanics and flight attendants, which would free the airline from $1 billion in future obligations. The airline has said it needs the cuts to avoid a near-term liquidation. US Airways has a deal in place with creditor General Electric Co. to provide it with $140 million in much-needed liquidity, but that deal requires the carrier to cut its costs by midmonth. US Airways received more good news when its flight attendants late Wednesday voted to approve a deal that would cut their pay by about 10 percent. Still, the company faces significant challenges. The airline, only weeks removed from an employee sick-out that forced it to cancel more than 400 flights over the Christmas weekend, risks further alienating employees, who are being forced to take their second pay cut since 2002. It remains to be seen whether the mechanics will vote in favor of the deal. Should the airline impose a contract that labor has rejected, industry analysts predict that further work actions could follow. Randy Canale, president of the IAM unit representing US Airways machinists, told members Thursday that “there was no way our negotiators could endorse an agreement” that involves outsourcing jobs. But Canale said the union chose to put the proposal up to a vote so the final decision “will rest in the hands of the members, where it belongs.” Analysts said US Airways would be unlikely to survive another employee work stoppage. The mere threat of a strike would likely dissuade customers from flying US Airways, costing the airline the revenue it needs to sustain operations. The airline also faces competitive pressure throughout its route network, including discount king Southwest Airlines Co.’s entrance into US Airways’ strongholds in Philadelphia and Pittsburgh and Delta Air Lines Inc.’s plan to slash fares nationwide. US Airways is hardly the only carrier under pressure. Continental Airlines Inc. warned in a securities filing Thursday that it must cut wages by $500 million in the coming months to avoid a liquidity crunch later this year. Houston-based Continental said it has about $984 million in debt and pension payments due this year. And FLYi Inc., a Dulles, Va.-based discount carrier that has warned it could go bankrupt as early as this month, is rumored to be in discussions about a possible merger or asset sale to raise cash before an $83 million aircraft lease payment comes due in mid-January. Analysts have speculated that regional jet operators Mesa Air Group Inc., which made an unsuccessful hostile run at FLYi’s predecessor company a year ago, or Republic Airways Holdings Inc. could be interested in a deal with FLYi. Copyright �2005 TDD, LLC. All rights reserved.

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