ALPA 12-30-02


Sep 16, 2002
December 30, 2002
Dear Fellow Pilot:
On Saturday, December 28, your MEC unanimously endorsed membership
ratification of an Interim Letter of Agreement with United Airlines. While many of the facts of this Agreement have been reported in the media and discussed among our members, I want to outline the agreement and share the context of the
MEC''s decision to move forward with an interim wage reduction while we work through the bankruptcy.
The Interim Agreement provides for a 29 percent reduction in hourly pay rates and overrides effective January 1, 2003. The reduction will remain in effect until the earlier of (i) a negotiated agreement to revise the pilot contract in connection with an overall bankruptcy program,(ii) a court-imposed order revising our contract, or (iii) May 31, 2003. In return, the Company has agreed to defer the filing of any Section 1113©motion to March 15, 2003 and to defer any court decision on a Section 1113 © process until early May of 2003.
This interim agreement will buy us the time we need to understand the company''s true financial status in bankruptcy and to protect our contract in a responsible and reasonable restructuring of United Airlines. Under the terms of the Interim Agreement, the Company has also agreed to protect our legalposition in any Section 1113 process and to recognize the extraordinary level of these
interim pay savings in all future negotiations.
This Agreement represents a huge sacrifice for every pilot, and the process that produced the agreement is a large step backwards in our relationship with the senior management. For now, however,this is what we need to do in order to stabilize the airline, get the process back on track, and position the Company and the pilot group for a reasonable, economic solution that will take the
Company out of bankruptcy.
I strongly urge you to vote in favor of the Interim Agreement to give
your MEC the time and the tools to protect the core of our contract while we work with United''s stakeholders to rebuild our airline.* * *
The events leading up to the Interim Agreement have been very difficult.
The MEC has largely been excluded from the Company''s bankruptcy planning process. Instead,without including your leadership or the MEC''s advisors, management created loan covenants with its DIP or debtor-in-possession financing
lenders that require massive, immediate labor cost reductions. Then,with little warning,management presented the MEC with a Section 1113 contract proposal that would decimate our pay rates and pensions, eliminate work rules, tear up our scope clause, and transfer much of our flying to a new low cost carrier.
Management''s bankruptcy proposal seeks to eliminate or alter almost every provision that matters in our contract.
The Company''s original plan was to initiate a Section 1113 proceeding on December 26,2002 unless the MEC accepted management''s bankruptcy proposal. A December 26 filing would have started the clock on court hearings that could result in a court order imposing the Company''s proposals on its employee groups
by February 15, 2003. In effect, the company''s approach to Section 1113 would have forced the MEC and its bankruptcy/negotiating committee to rewrite our entire contract in three or four weeks at the same time we prepared for litigation over the continued existence of any pilot contract.
To make matters worse, the Company has simply been unable or unwilling
to provide us with the information and materials necessary to construct a rational economic deal that will protect the long-term career interests of the pilots through an economically viable airline. We cannot get a reliable fix on the Company''s near-term cash needs; the Company has not really developed a
longer-term marketing and business program to exit Chapter 11; and management cannot-or will not-tell us how much United might save by revising particular work rules and benefits under the contract.
Given the complexity of the issues, we believed the Company''s initial
1113 timeline was inadequate to be able to produce an agreement that could be ratified and that accomplishes our collective goals to make United Airlines financially sound and competitive. The pilots will lead a rational,economic restructuring of the Company, but we have no intention of allowing senior management to use the bankruptcy as an excuse to pursue a labor agenda that goes well beyond the current industry crisis.
On Sunday evening, December 22, the Company approached us with the concept of an
interim wage reduction that would allow the parties more time to construct a
reasonable, long-term contract settlement. An interim agreement would allow United to comply with its DIP financing covenants in the near term, with a
small margin for error, while we continued negotiations. Under the plan,the Company was willing to defer the Section 1113© filing until March 15 and to delay any court decision to early May in the absence of a negotiated agreement.
The MEC leadership, the MEC, and your advisors participated in several
meetings, conference calls, and discussions on Christmas Eve and throughout Christmas day. These discussions made it clear that we faced two scenarios:
Scenario 1 was the process we were going through prior to this interim proposal. A December 26,2002 Section 1113© motion would start the 51-day negotiating clock. We would have been negotiating over the Company''s draconian and complex proposals the Company presented to us at the worst and most uncertain time of the bankruptcy. At the same time,the Company would have
litigated against us to have the court impose these changes on us. The court would have to rule by February 15 and those changes would go into effect immediately thereafter.
Scenario 2 involved accepting the immediate interim 29 percent pay reduction and
extending the timeline for a fair contract settlement based on economics. No
substantive Section 1113 filing would take place before March 15, 2003 with no court ruling before early May. This approach would extend the time frame to negotiate acceptable changes to our contract and help accomplish our goals to make United financially and competitively viable and emerge from bankruptcy.
Meanwhile, a placeholder Section 1113© motion would be filed on December 27, to provide a fail-safe mid-February Court order date in the event the interim Agreement framework is not ratified by January 8,2003. Along with the rest of your leadership, I have concluded that Scenario 2 is the right approach under these circumstances. The Interim Agreement does not lock us into a long-term pay cut of 29 percent and it does not commit us to accept management''s overreaching contract proposal. It will give the Company an opportunity to stabilize its finances and give us the time we need to construct a reasonable economic restructuring of our company.
Please take the time to read this agreement carefully and consult with
your leadership.
If you ratify this interim agreement, the 81 additional days of negotiations (February 15 to May 5) will allow us to better prepare to accomplish the goals of emerging from bankruptcy with a competitive, viable airline.It also would allow us to negotiate only the necessary changes to our collective bargaining agreement while securing the appropriate returns for our contribution.If you reject this agreement, we will continue our negotiating process in earnest and
prepare to litigate against having these changes imposed on us in bankruptcy court.
In closing, you should know that I share your unhappiness with senior management''s abrupt change in its attitude concerning the MEC and the pilot group. You deserve a management team that will work with your MEC on a constructive path to a shared future. We now need the time and the tools to
protect our Company and our careers for the long term. The Interim Agreement will allow us to do everything in our power to put our Company back on track.
Each and every one of you has done a terrific job in helping our Company set records in operational reliability and performance over the past few months. We must all continue to work our hardest to ensure that United provides the strongest possible product to our customers in this critical time in the life of our airline.
Captain Paul Whiteford
Chairman, UAL MEC