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Taipan

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Aug 20, 2002
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UAL''s contract tack is no labor of love
Threat to dump contracts increases tension
By Paul Merrion
December 21, 2002
Now boarding, United Airlines Bankruptcy Flight 1113, scheduled to depart on time for an unknown destination.
This week, United begins the final, most arduous leg of its yearlong odyssey to slash labor costs when it asks Chief Bankruptcy Court Judge Eugene Wedoff to scrap its union contracts, a process governed by Section 1113 of the bankruptcy code.
The timing of that move is dictated by United''s tight mid-February deadline to stem losses, and terminating the contracts — or at least the threat to do so — ultimately may prove necessary to rescue the carrier from liquidation.
But this legal maneuver also puts a bludgeon on the bargaining table at the very outset, complicating the delicate task of getting workers to accept deep cuts in pay, benefits and work rules.
They made an announcement that we''re going to war, says Thomas Buffenbarger, president of the International Assn. of Machinists and Aerospace Workers (IAM), United''s largest union. If they were serious about bargaining, they wouldn''t have made that announcement. Now, everything has to be done through lawyers.
It puts everybody in a hunker-down mode, he adds. Anything we say to the company in the form of negotiations can be used against us in the Section 1113 proceeding.
That tone is different from the one taken last week, when the union stated that the Section 1113 filing was not a surprise. The statement was meant to reassure investors and the flying public, says the IAM president.
If nothing else, the Section 1113 proceeding underscores the difficult decisions that must be made now that United is running out of time and its unions are running out of leverage.
Under the terms set by United parent UAL Corp.''s bankruptcy lenders, the airline must start generating positive cash flow by March or face default and liquidation. But a court-ordered termination of its labor contracts could take about six weeks, which means United must start the Section 1113 process sooner rather than later, in case negotiations fail.
In a perfect world, in which we don''t live, maybe it wouldn''t be necessary, says a spokesman for Elk Grove Township-based UAL. It''s a contingency in case we need it.
Under Section 1113, a company in bankruptcy proceedings can ask the court to terminate its labor contracts to help restructure its finances. But the company must first present a detailed cost-cutting proposal to its unions and meet other tests, including a demonstration that it has bargained in good faith. If the proposal is rejected by the unions without good cause, then the judge can terminate or modify the collective bargaining agreements.
While both sides view Section 1113 as a last resort, the history of labor-management standoffs at United Airlines would suggest that it might be needed.
Trusting the judge
Last month, United''s mechanics rejected a 7% wage cut, which IAM leaders backed in a vain attempt to win a federal loan guarantee and avoid Chapter 11. Now, to prevent liquidation of the airline, they are being asked to take a 13% cut in pay and accept outsourcing and other work rule changes that will produce thousands of layoffs. Many aren''t buying it.
They say Judge Wedoff is fair, says Richard Bailey, an aircraft maintenance technician for United in San Francisco. Given a choice between management, the IAM or the judge, Mr. Bailey says he trusts the judge to cut the best deal and that''s how a lot of mechanics feel.
United''s pilots, machinists and flight attendants are reeling from the company''s new target of $2.4 billion a year in annual labor savings, about 2½ times the concessions goal contained in the carrier''s unsuccessful attempt to obtain a federal loan guarantee, which led to UAL''s Dec. 9 bankruptcy filing.
A pilots union official was stunned by the depth of the cuts, which include much greater use of regional jets and changes in work rules that would reduce the number of pilots. A statement by the Assn. of Flight Attendants says the company was overreaching with its initial proposal, adding that it was unnecessary and premature to announce last week that the Section 1113 process would start the day after Christmas.
Nevertheless, between now and mid-February, United and its unions must negotiate much deeper concessions than previously contemplated, or the Bankruptcy Court will decide whether labor contracts should be rejected or modified to keep the company flying.
Labor is going to take the biggest hit, maybe even more than shareholders, because in bankruptcy, there''s a very big chance an airline will fail, says George Hopkins, professor of history at Western Illinois University in Macomb and a specialist in airline labor issues. In the last analysis, labor is playing with the weakest imaginable hand in this.
Settlement eases risk
Yet bankruptcy''s ultimate weapon against recalcitrant unions could also produce collateral damage for management.
You can win the battle but lose the war, says an attorney, who asked not to be named, for Virginia-based US Airways Group Inc., which preceded UAL into Bankruptcy Court last August.
Abrogating a union contract could lead to a strike, which would be fatal for a weakened carrier, he says. The risks are so great on both sides that you''d better settle.
©2002 by Crain Communications Inc.

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ual747mech

Senior
Nov 26, 2002
279
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"They say Judge Wedoff is fair," says Richard Bailey, an aircraft maintenance technician for United in San Francisco. Given a choice between management, the IAM or the judge, Mr. Bailey says he trusts the judge to cut the best deal and "that's how a lot of mechanics feel."

That's a stupid statement, I haven't seen a judge who is pro labor when it comes to bankruptcy proceedings.
 

G4G5

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Aug 21, 2002
164
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I think what the author was refering to was the company.Once the contracts have been abrogated, that's it. In some case you may be better with what the judge offers because it's his responsibility to spread the pain equally.
 

Segue

Senior
Oct 31, 2002
276
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www.usaviation.com
"Fair" is a relative word. In Chapter 11, the debtholders are at the top of the food chain, employees and equity holders on the bottom.

The 13% is still a starting point. I would not be surprise if all heavy maintenance was to be outsourced.
 

Steiner

Advanced
Aug 21, 2002
161
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www.usaviation.com
[blockquote]
----------------
On 12/24/2002 3:03:06 AM ual747mech wrote:

"They say Judge Wedoff is fair," says Richard Bailey, an aircraft maintenance technician for United in San Francisco. Given a choice between management, the IAM or the judge, Mr. Bailey says he trusts the judge to cut the best deal and "that's how a lot of mechanics feel."

That's a stupid statement, I haven't seen a judge who is pro labor when it comes to bankruptcy proceedings.
----------------
[/blockquote]

Stupid or not, a local poll of UAL mechanics comes up with the same response. A lot of the feeling is if everything still goes sour after the bankruptcy judge rules, it won't be labor's fault and everyone will finally see that it is because of poor management. (Sorry, I forgot that it is always labor's fault around here)
 

ual747mech

Senior
Nov 26, 2002
279
0
[blockquote]
----------------
On 12/24/2002 8:06:05 AM G4G5 wrote:

I think what the author was refering to was the company.Once the contracts have been abrogated, that's it. In some case you may be better with what the judge offers because it's his responsibility to spread the pain equally.
----------------
[/blockquote]

We are going to feel a lot more pain if we let it go that far. Just like we're feeling a lot more pain now that we are in bankruptcy instead of trying to keep the company out of bankruptcy.
 

N305AS

Advanced
Aug 20, 2002
133
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www.usaviation.com
It appears that some UA employees have the same misconception that US employees did concerning the judge's ability when it comes to contracts and/or Collective Bargaining Agreements (CBAs) under S1113.

The judge can do the following:

1. Uphold the CBA in its entirety.

2. Throw out the CBA in its entirety.

The "well, we'll see if the judge gives us a better offer than the company" line is not accurate, since the judge CANNOT select various portions of your contract to keep, change, or whatever. He can keep the whole thing as it is, or he can s***-can the whole thing and let UA impose their own terms on the employees.

That's it.
 

wts54

Senior
Sep 16, 2002
374
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www.usaviation.com
I was reading where some judges in different jurisdictions interpet the law
differently.If I remember correctly the some judges do in fact change the CBA'S
to what is just needed for the company to survive and others throw the CBA out
entirely.So a judge may say that he will toss out the CBA or maybe he may feel
a 7 year contract is to long,or any other provision the company wants to impose.
Technically the law does say as you suggest the judge has only one alternative,
but from what Ive read thats not always the case.For me personally a 7 year contract
is to long and if a vote is taken I will vote no.

The circuit courts are split on the appropriate standard to apply when considering whether rejection should be permitted. The code
allows rejection if the proposed modifications are "necessary to permit the reorganization."

The Third Circuit Court of Appeals has interpreted the concept of "necessary modifications" to mean that rejection should be
permitted only if the modifications are necessary to prevent liquidation of the firm.

The Second Circuit Court of Appeals has taken a position more favorable to rejection, by allowing rejection if rejection would
be useful in reorganization and if the modifications are reasonable.

http://www.missouri.edu/~labored/1997-21.html
 

kcabpilot

Senior
Aug 22, 2002
271
0
[blockquote]
----------------
On 12/24/2002 8:50:42 AM Segue wrote:

The 13% is still a starting point. I would not be surprise if all heavy maintenance was to be outsourced.

----------------
[/blockquote]

You "wouldn't be surprised"? Why? Because it says in black and white that that is what they intend to do in the proposal? Well - duhh...

Now, explain to me why all the Mechanics should jump on board and vote yes.

Outsourcing - the cure all pill. If they could just outsource all of the labor then all they'd have to do is get rid of those pesky customers and they'd have it made!

Merry Christmas everyone.
 

Segue

Senior
Oct 31, 2002
276
0
www.usaviation.com
[blockquote]
----------------
On 12/25/2002 12:51:59 AM kcabpilot wrote:

[blockquote]
----------------
On 12/24/2002 8:50:42 AM Segue wrote:

The 13% is still a starting point. I would not be surprise if all heavy maintenance was to be outsourced.

----------------
[/blockquote]

You "wouldn't be surprised"? Why? Because it says in black and white that that is what they intend to do in the proposal? Well - duhh...

Now, explain to me why all the Mechanics should jump on board and vote yes.

Outsourcing - the cure all pill. If they could just outsource all of the labor then all they'd have to do is get rid of those pesky customers and they'd have it made!

Merry Christmas everyone.
----------------
[/blockquote]

For their own best interest, the mechanics should do everything they can to save the company. Like it or not, the world will look more like Southwest in the future - they outsource the majority of their maintenance.

UAL liquidation would be a catalyst for rapid change and would probably be good for all of us (the traveling public) in the long run.
 

Steiner

Advanced
Aug 21, 2002
161
0
www.usaviation.com
How would UAL outsourcing their maintenance be any different than the time America West thought that was a good idea for a while? Does anyone remember the Christmas layoffs and A320s at America West? Most companies do not get the same results as Southwest when outsourcing because most companies are not willing to have the same quality assurance program Southwest uses.

Personally, I'm looking forward to the day the outsource mechanics realize they can get a pay raise by taking apart someone's airplane then walking out for higher pay. No RLA games to deal with. No way for the government to TRO them. Sweet!
 

spacewaitress

Senior
Aug 27, 2002
468
0
[blockquote]
----------------
On 12/25/2002 2:32:17 PM Segue wrote:

[blockquote]
----------------
On 12/25/2002 12:51:59 AM kcabpilot wrote:

[blockquote]
----------------
On 12/24/2002 8:50:42 AM Segue wrote:

The 13% is still a starting point. I would not be surprise if all heavy maintenance was to be outsourced.

----------------
[/blockquote]

You "wouldn't be surprised"? Why? Because it says in black and white that that is what they intend to do in the proposal? Well - duhh...

Now, explain to me why all the Mechanics should jump on board and vote yes.

Outsourcing - the cure all pill. If they could just outsource all of the labor then all they'd have to do is get rid of those pesky customers and they'd have it made!

Merry Christmas everyone.
----------------
[/blockquote]

For their own best interest, the mechanics should do everything they can to save the company. Like it or not, the world will look more like Southwest in the future - they outsource the majority of their maintenance.

UAL liquidation would be a catalyst for rapid change and would probably be good for all of us (the traveling public) in the long run.

----------------
[/blockquote]
Not really. The overcapacity problem plaguing the industry today would be solved overnight. No overcapacity = no cut throat competing for customers. That means higher fares friend.
 

ual06

Senior
Aug 30, 2002
331
0
There is a lot of comments on these boards about over capacity, low fares, and
lack of business travelers. Yes, a lot of that is true today and today is what all
must live with. Remember, history does repeat itself. It is all the economy.

Today, many folks would just rather leave the money in the bank than take that
"leisure" trip. But for many it is not leisure travel. For many, there is that "need" to
see Mom and Dad and family; and for others there is that need to visit the graves.
Years ago, families were doors apart. Buggies, ships, trains, cars, planes moved
them continents apart. Does not change "need". When the economy improves, that
"need" will be heard.

During the Gulf War, there was a big drop in travel. Tele conference flourished.
Some said business travel would never recover. It did. Some day the economy
will once again blossom. There will be lucrative contracts to be had. The company
again most likely to win the big contract will be the one knocking on the door in
person rather than the one saying "Let's schedule a tele conference". Before the
telephone it was mostly all face to face and ever since, the most successful has
been face to face. That is part of human nature and it will never change. The
eyes of a person will always say more than their words.

Yes, in the short term there are many insecurities. Not only in the airline industry.
In the long term, life will go on and most likely, all will look back and say, "That
was for the best."
 

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