Thursday, November 21, 2002

A United ticket agent worked with a passenger at Chicago O'Hare International Airport yesterday. The union representing mechanics, baggage handlers and reservation employees agreed to $1.5 billion in wage and benefit concessions to aid the struggling airline.

United machinists
agree to wage cuts

The $1.5 billion concession
is a big boost to the airline

By Dave Carpenter
Associated Press

CHICAGO >> The union representing 37,500 United Airlines machinists tentatively agreed yesterday to $1.5 billion in wage and benefit concessions, giving United an important boost in its bid to stave off bankruptcy.

United Air Lines The machinists were the only employee group not to have committed to its share of $5.8 billion in labor cutbacks over 5 1/2 years -- the centerpiece of United's financial recovery plan.

The financially ailing carrier hopes the cuts are steep enough to persuade the government to grant a $1.8 billion loan guarantee United says it needs to avoid filing for Chapter 11 bankruptcy protection by year's end.

The mechanics, baggage handlers, reservations employees and other workers represented by the IAM will vote Nov. 27 on the agreements.

Union leaders said they agreed to the cutbacks to help prevent a bankruptcy filing.

"Too many airlines have been forced into bankruptcy, never to return," said Randy Canale, president of IAM District 141, one of two districts involved in the agreements. "Despite obstacles and unprecedented economic pressures, I still believe our greatest days lie before us."

It remains highly uncertain whether United's austerity plan will be enough to convince the Air Transportation Stabilization Board the airline is back on course toward profitability, justifying a hefty loan guarantee.

Despite the unprecedented labor concessions and reductions, some analysts say the actions won't solve the problem of declining airline revenues and are too little, too late to prevent United from having to take its restructuring plan into bankruptcy court.

But investors are increasingly hopeful, sending United's stock soaring in after-hours trading following the late-afternoon announcement.

After closing down 23 cents at $3.10 on the New York Stock Exchange yesterday, shares in parent company UAL Corp. closed up 22 cents to $3.32 today.

"This agreement offers further compelling evidence of United's ability to transform itself through collaboration among all work groups," said Glenn Tilton, who took over in September as United's chairman and CEO. "The fact that all six union groups have reached tentative agreements is evidence of a new attitude and commitment which can translate into a competitive advantage for United Airlines."

United's 8,800 pilots already have ratified $2.2 billion in cutbacks, and its flight attendants are voting on a tentative agreement for $412 million in wage reductions, with results to be announced next week.

Salaried and management employees will contribute another $1.3 billion in labor savings, with United's top executives expected to provide the rest.

United is losing more than $7 million a day and has said it is preparing for the possibility of a bankruptcy filing if it doesn't receive the loan guarantee, although it has pledged to keep flying its normal daily schedule regardless.

The airline faces a $375 million debt payment on Dec. 2 that poses a stiff test of its dwindling cash reserves, and is working to arrange bankruptcy financing.

Scotty Ford, president of the machinists' District 141-M, said the unions had to act.

"United Airlines is struggling to overcome the combined effects of 9-11 and an unrelenting worldwide travel recession," Ford said. "We tried to balance United's urgent need to avoid bankruptcy with our members' needs for job security and proper compensation for the vital services they provide United Airlines."

Details of the changes to pay and vacation accrual were being posted on union Web sites.

Employees own about 55 percent of United's stock. The airline said earlier this week that in order to obtain the labor concessions, it agreed to grant employees stock options representing 30 percent of UAL's shares, enabling them to profit more from a recovery.

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