ALEXANDRIA, Va – US Airways Group Inc warned in a bankruptcy court filing that it may have to liquidate by February next year if a judge does not impose a temporary 23 per cent pay cut on its union workers.

The airline asked a judge last Friday to impose the pay cuts by October 14 at the latest. On Monday, US Bankruptcy Judge Stephen Mithcell scheduled a hearing on the issue for October 7.

Without the reductions, the airline’s cash reserves will fall so low by February that its lenders will likely withdraw the financing that has allowed the company to operate while in bankruptcy.

“If [US Airways] cannot accumulate cash during the next five months… there is a high probability that they will suffer irreparable harm to their asset base and ongoing business, resulting in material downsizing, massive lay-offs and potential liquidation by mid-February 2005,” the airline’s lawyers wrote in their motion seeking the emergency cuts.

The filing also indicates in a footnote that the airline will now seek $950 million in permanent annual cost reductions from its unions. Before it files for bankruptcy, the company had sought $800 million a year in cost cuts.

Company officials have said greater cuts are needed because when it filed for bankruptcy the company lost financing to increase its fleet of regional jets, which it had hoped would be a strong source of revenue.

According to the filing, the average salary of US Airways employees would fall to $45,822 from $59,509. That would drop US Airways from third to seventh among major US airlines, lower than the average pay at Southwest Airlines, but higher than the average at JetBlue Airways.

Average pilot pay would drop to $119,000 from $155,000 a year, while flight attendants’ average salary would drop to $27,701 from $36,975, according to the motion.

The temporary relief would also include reductions to pension and retirement plans and eliminate the requirement that US Airways maintain a fleet of at least 279 mainline jets, possibly allowing for more lay-offs.

The Air Line Pilots Association, representing US Airways’ 3,000 pilots, has said it will oppose the company’s effort to impose the temporary pay cuts but that it continues to negotiate with the airline. The Association of Flight Attendants has said it is seeking to negotiate a smaller pay cut.

The company’s cash reserves will reach precarious levels in January and February because that is when the company must make $260 million in debt and lease payments on its fleet of aircraft. If the company skips those payments, it would lose jets that constitute the core of its fleet.

The federal Air Transportation Stabilisation Board is providing the bulk of the airline’s financing throughout the bankruptcy. The agency also lent the airline $900 million in March when it emerged from its first trip into bankruptcy.

The court filing indicates that the agency’s financing is set to expire October 15 and may not be extended unless the airline can show it has a credible business plan in place, which includes reduced labour costs.