MOON TOWNSHIP, Pa. – If it happens, the credit union will just have to change its focus, says Joseph Cirelli, president/CEO of the $564 million US Airways FCU here. Cirelli is of course talking about the possibility of US Airways ceasing operations and selling off its assets. That is now being talked about because the latest news on the United Airlines/US Airways merger is that the deal may not happen. The two airlines released a statement saying they are talking about the possibility of "terminating the proposed merger." The deal did have credit union implications. United Airlines FCU, Chicago, is one of the largest CUs in the nation with $3.2 billion in assets. Cirelli said when the merger deal was announced the two credit unions started to discuss a possible merger of the credit unions, with United Airlines FCU being the likely surviving CU. Those talks have stopped, said Cirelli. "It would have been a good thing for the members, and both the airlines were counting on the merger. The county manager here is very disappointed. They're concerned about the economic impact on the Pittsburgh area if US Airways goes away," said Cirelli. But what about the economic impact on US Airways FCU if the airline goes away? Cirelli says the CU is prepared. "If that happened, we would just have to change our philosophies from a single sponsor credit union and position ourselves in other areas with SEGs. The PanAm and Eastern Airlines credit unions did it. They changed their names and they're both thriving," said Cirelli. The Eastern Airlines credit union was originally Eastern Airlines Employees Credit union. It changed its name to Eastern Financial FCU. The primary PanAm credit union was formerly Pan American FCU. It changed its name to People's Alliance FCU. Cirelli estimates that less than half of its 102,000 members are U.S. Airways employees. The airline has 45,000 active employees. US Airways has started diversifying in recent years. "Several years ago we positioned ourselves and started taking in some SEGs, and we already have a lot of family members of US Airways' employees as members. It would have an effect on us, but I don't think it will be as big as some might think," said Cirelli, saying displaced employees would find new work, though the CU may take an upfront hit from a sharp decline in payroll deposits. "We're a Camel 1. We have a 14% capital to asset ratio. We're in good shape," said Cirelli. For United Airlines FCU, it's business as usual, said President/CEO Bob Bream. "We've had discussions with them (US Airways FCU). We've shared a lot of operational nuances, and our meetings have been very positive and productive. I would assume and presume that things will go back to normal. They have their own separate FOMs, we have ours," said Bream. Bream said the merger would have been a lot of work, which the CU was prepared to take on. "If we could have received buy-ins from all concerned parties, and at the end of the day it was going to benefit the members of both organizations, then there was at least a desire to see if we could make this work," said Bream. If US Airways does shut down, Cirelli can expect a lot of the same that happened to Pan American FCU. "We went to work one morning and all of a sudden 18,000 people didn't have jobs. The payroll deductions stopped, loans started going delinquent. We saw the handwriting on the wall with PanAm being in dire straits, we started to get SEGs. That's what saved us when PanAm went out of business," said Nick Lacetera, president/CEO of People's Alliance FCU. Lacetera said the sudden reduction in payroll deposits can take its toll very quickly. "In December of 1991 we were $200 million in assets. In an 18-month period we dropped to $100 million. Now eleven years later we've grown back to almost $140 million and we have 330 different SEGs," said Lacetera. It isn't pretty when a SEG, that is the CU's bread and butter, suddenly vanishes. Lacetera said he could tell horror stories all day about the experience. "We went through a lot of hell for awhile. Our delinquency rate was very high. NCUA gave us a letter of understanding that took us a year to get out of. We were able to survive with very strong collection policies and restrictions on the lending products we were offering. We had 11 branches, we shut most of them down. We were down to four, now we have six," said Lacetera. The CU was forced to cut staff. "We had to lay off some really good people. Sometimes you have to do things for survival's sake. We found out that you can survive doing almost as much with less people. All of the senior management took pay cuts. The board stayed together, no one jumped ship." The CU still has a check with a Pan American airplane on it. Interestingly, Lacetera wasn't sold on changing the name when the airline went out of business, but was actually forced to by NCUA. But now Lacetera is glad the name was changed. "With all the different SEGs, you have to or one group will feel slighted." He said the key to the new name was keeping the PAFCU acronym, which the CU was known for for years. A member is credited with creating the new name in a name change contest. When the PanAm airline was going strong about 75% of the CU's 35,000 employees were active PanAm employees. Lacetera said today, a decade later, about 12,000 of its members are former PanAm employees. "It was quite an experience. We just finished our last examination and we are now a CAMEL 1. It was a very, very long hard fight. The key was having enough SEGs to keep cash flowing." [email protected]