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United, mechanics agree on retiree benefit cuts
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Other labor groups holding out
By Melissa Allison
Tribune staff reporter
May 22, 2004
United Airlines has reached an agreement with its mechanics' union to
reduce retiree benefits, but the carrier said Friday that it is
struggling to come to similar terms with other labor groups.
In a U.S. Bankruptcy Court filing, United said resistance from the other
unions has, in some respects, been "a throwback to the uncooperative era"
before the company's last labor negotiations.
Meanwhile, the union representing United's flight attendants issued its
own statement saying, "Any goodwill that existed a year ago has been
squandered."
The labor union that agreed to the retiree benefit changes, the Aircraft
Mechanics Fraternal Association, represents nearly 7,400 United retirees.
United did not disclose details of the agreement, and mechanics' union
representatives were unavailable Friday.
But in recent months, United has sought roughly $55 million in annual
benefit cuts from retirees as part of its overall effort to reduce costs
by $5 billion a year by 2005. The airline says its retiree medical costs
are the highest in the industry.
In its court filing, United says that retirees at AMFA "have done their
part by agreeing to pay a more equitable share of the costs for their
medical benefits, and the rest of United's retirees have no good cause
for refusing to follow suit."
Representatives of six of the seven remaining retiree groups do not see
it that way. They sent a letter to United Chief Executive Glenn Tilton
saying the company has not negotiated in good faith and calling the
airline's demands unreasonable.
The cuts reach "far deeper than those demanded of active employees under
the company's restructuring," the letter said. "Unlike any other
stakeholder in United, the company is demanding that retirees make a
sacrifice that is unlimited in time or amount."
The retirees are willing to make concessions totaling nearly $300 million
through 2010, according to the letter.
The six groups represent about 27,000 United retirees, including pilots,
flight attendants, ramp workers, security officers, flight dispatchers,
and salaried and management employees. The representative for United's
engineers did not sign the letter to Tilton.
United responded with a letter saying the cuts requested by the airline
are necessary if it is to reorganize and become competitive.
"It is absolutely clear that our proposed modifications--which deliver
real cash savings, approximately $350 million through 2010--are
necessary, fair and equitable," wrote Peter McDonald, United's executive
vice president and chief operating officer.
"Your proposal significantly overvalues the savings it would deliver, and
it comes nowhere close to delivering the savings we need. Worse, the
savings don't bring our benefits down to competitive levels and provide
only temporary relief," McDonald wrote.
All parties say they plan to continue negotiating. But if agreements are
not reached, the matter is scheduled to be heard in court next month.
The letter from McDonald riled the International Association of
Machinists and Aerospace Workers, which represents United's ramp workers.
The union fired off a message Friday to its United retirees accusing
Tilton of being indifferent to their needs by not replying to their
letter himself. When he joined United in late 2002, Tilton "urged an
effort to begin a new relationship and trust going forward," the union's
message said. Now, the message told union members, "he has chosen to
ignore you and his own words."
At least one union believes the mechanics' union hurt other retirees by
negotiating with United earlier than the other groups. In late April, the
Association of Flight Attendants for United sent a letter to the
mechanics' union warning that it was too early to talk to the airline
about benefits.
"This is a strategic mistake that threatens to undercut the position of
all the other employees, including the flight attendants, in trying to
limit or avoid the company's proposed cuts to retiree medical benefits,"
wrote Greg Davidowitch, head of United's flight attendants' union.
He said three actuarial firms and three financial advisers were still
sifting through tens of thousands of pages of information from United,
and still waiting for more data.
"There can be no possible advantage for your members in going forward at
this time, because the analysis might prove the cuts are not necessary,
or not fair and equitable," Davidowitch wrote.
In court Friday, Bankruptcy Court Judge Eugene Wedoff approved the
unsecured creditors' committee's request to hire a consulting firm to
evaluate United's board of directors. He also approved changes to
United's debtor-in-possession financing, including extending it from June
30 to Dec. 31, and reducing its interest rate by 1 percentage point.
Copyright © 2004, Chicago Tribune
United, mechanics agree on retiree benefit cuts
--------------------
Other labor groups holding out
By Melissa Allison
Tribune staff reporter
May 22, 2004
United Airlines has reached an agreement with its mechanics' union to
reduce retiree benefits, but the carrier said Friday that it is
struggling to come to similar terms with other labor groups.
In a U.S. Bankruptcy Court filing, United said resistance from the other
unions has, in some respects, been "a throwback to the uncooperative era"
before the company's last labor negotiations.
Meanwhile, the union representing United's flight attendants issued its
own statement saying, "Any goodwill that existed a year ago has been
squandered."
The labor union that agreed to the retiree benefit changes, the Aircraft
Mechanics Fraternal Association, represents nearly 7,400 United retirees.
United did not disclose details of the agreement, and mechanics' union
representatives were unavailable Friday.
But in recent months, United has sought roughly $55 million in annual
benefit cuts from retirees as part of its overall effort to reduce costs
by $5 billion a year by 2005. The airline says its retiree medical costs
are the highest in the industry.
In its court filing, United says that retirees at AMFA "have done their
part by agreeing to pay a more equitable share of the costs for their
medical benefits, and the rest of United's retirees have no good cause
for refusing to follow suit."
Representatives of six of the seven remaining retiree groups do not see
it that way. They sent a letter to United Chief Executive Glenn Tilton
saying the company has not negotiated in good faith and calling the
airline's demands unreasonable.
The cuts reach "far deeper than those demanded of active employees under
the company's restructuring," the letter said. "Unlike any other
stakeholder in United, the company is demanding that retirees make a
sacrifice that is unlimited in time or amount."
The retirees are willing to make concessions totaling nearly $300 million
through 2010, according to the letter.
The six groups represent about 27,000 United retirees, including pilots,
flight attendants, ramp workers, security officers, flight dispatchers,
and salaried and management employees. The representative for United's
engineers did not sign the letter to Tilton.
United responded with a letter saying the cuts requested by the airline
are necessary if it is to reorganize and become competitive.
"It is absolutely clear that our proposed modifications--which deliver
real cash savings, approximately $350 million through 2010--are
necessary, fair and equitable," wrote Peter McDonald, United's executive
vice president and chief operating officer.
"Your proposal significantly overvalues the savings it would deliver, and
it comes nowhere close to delivering the savings we need. Worse, the
savings don't bring our benefits down to competitive levels and provide
only temporary relief," McDonald wrote.
All parties say they plan to continue negotiating. But if agreements are
not reached, the matter is scheduled to be heard in court next month.
The letter from McDonald riled the International Association of
Machinists and Aerospace Workers, which represents United's ramp workers.
The union fired off a message Friday to its United retirees accusing
Tilton of being indifferent to their needs by not replying to their
letter himself. When he joined United in late 2002, Tilton "urged an
effort to begin a new relationship and trust going forward," the union's
message said. Now, the message told union members, "he has chosen to
ignore you and his own words."
At least one union believes the mechanics' union hurt other retirees by
negotiating with United earlier than the other groups. In late April, the
Association of Flight Attendants for United sent a letter to the
mechanics' union warning that it was too early to talk to the airline
about benefits.
"This is a strategic mistake that threatens to undercut the position of
all the other employees, including the flight attendants, in trying to
limit or avoid the company's proposed cuts to retiree medical benefits,"
wrote Greg Davidowitch, head of United's flight attendants' union.
He said three actuarial firms and three financial advisers were still
sifting through tens of thousands of pages of information from United,
and still waiting for more data.
"There can be no possible advantage for your members in going forward at
this time, because the analysis might prove the cuts are not necessary,
or not fair and equitable," Davidowitch wrote.
In court Friday, Bankruptcy Court Judge Eugene Wedoff approved the
unsecured creditors' committee's request to hire a consulting firm to
evaluate United's board of directors. He also approved changes to
United's debtor-in-possession financing, including extending it from June
30 to Dec. 31, and reducing its interest rate by 1 percentage point.
Copyright © 2004, Chicago Tribune
