Union leaders at United pull together to cut costs


Aug 29, 2002
Union leaders at United pull together to cut costs
By Marilyn Adams, USA TODAY
United Airlines'' union leaders appear to have agreed Tuesday on a several-billion-dollar package of cost cuts designed to help keep the giant carrier out of bankruptcy protection.
United had sought $9 billion in labor cost cuts over six years to help it qualify for a $2 billion loan guaranteed by the federal government.
United parent UAL, which has lost about $3 billion since January 2001, faces nearly $900 million in debt payments this fall and warned in August it would have to seek Chapter 11 bankruptcy protection without the loan.
Although the labor cost cuts are not expected to total $9 billion, the extraordinary cooperation among the unions in reaching an agreement signaled the possibility that United might be able to restructure outside of bankruptcy court.
But it is too soon to know whether the airline will agree to the package, whether union members will vote to ratify it, and whether a Chapter 11 filing can be avoided.
The agreement, which is expected to go to the airline today, came after a Tuesday meeting in Washington of United''s union leaders and the No. 2 officer of the AFL-CIO, people familiar with the meeting said.
Leaders of United''s unions had sought the meeting with Rich Trumka, the AFL-CIO''s secretary-treasurer and a former United Mine Workers official. They wanted him to help finalize the size of the package and determine how best to divide it among the unions. Trumka could not be reached Tuesday.
It was a very good meeting, Jeff Zack, spokesman for the Association of Flight Attendants, said Tuesday. We expect to finish our work Wednesday. He declined to elaborate.
Union leaders have been under tremendous pressure to respond to UAL''s demand. United is 55% employee owned, and leaders of the pilots and mechanics unions sit on the board. In a bankruptcy, union leaders fear, their equity would be wiped out and their board seats lost.
Leaders of the pilots, flight attendants and mechanics unions and their financial consultants have been crunching numbers for weeks near United''s suburban Chicago headquarters.
In a recorded message to employees Monday, UAL CEO Glenn Tilton said the company was having an open and constructive dialogue with the unions.
But United has continued making plans for a possible bankruptcy filing in October or early November.
People familiar with the company''s plans say that to avoid filing, United needs tentative union agreements by the end of this month to allow time for ratification votes, which can take weeks.
Lenders and the government would require ratified agreements and other cost cuts before providing credit.
I doubt the unions will come up with a proposal that's even in management's ballpark. Hope I'm wrong.
Rhino........I dont really care what management's ballpark is. They will ask for pie in the sky. I'll trust my unions advisors which I pay for. End of discussion. If they dont like it, too bad.

Chances are the company asked for more than they truly needed. And chances are the unions would be willing to give a bit more than their proposal contains at the present time. Now they'll negotiate and then we'll see how committed all parties are to resolving this outside of bankruptcy. There isn't much time, so things must move quickly.
On 9/25/2002 7:02:36 PM ua767fo wrote:

Rhino........I dont really care what management's ballpark is. They will ask for pie in the sky. I'll trust my unions advisors which I pay for. End of discussion. If they dont like it, too bad.

I wonder if the judge will negotiate or really care what your union advisors think.
CHICAGO, Sept 25 (Reuters) - The coalition for five unions at United Airlines on Wednesday said it offered the No. 2 U.S. carrier $1 billion per year over five years in wage cuts plus other undetermined concessions to help the airline get loans but the group had not decided how to divide up the sacrifices.

Well as a 1K flyer and stockholder for some time I am sitting on a different fence from any employee in ANY union group.

And the above is the BEST news I have seen out of UA for a year. Any bloody minded insistence from ANY labor group for retnetion of the fantasy land terms and conditions that have got UA into this costs mess have to be now thrown out the window. This is sink or swim time.

The unions and managmement look like they have decided swimming (but a little slower than usual) is a lot preferable than SINKING.

I applaud their common sense and hope the rank and file back them in their endeavours. :)
I believe the company asked for what is required to obtain the loan guarantee because the duration of the cuts and new agreements equal the ATSB timeline for loan guarantee approval.

The ATSB requires a business plan that provides a 7 percent profit margin and Fitch Rating to provide a projected B credit rating within 7 years.

The company's numbers of $1.5 billion per year in annual employee cuts and $1.0 billion per year in creditor, vendor, and lessor cuts are very similar to the US ATSB application on a percentage basis.

The biggest UA problems could be with the IAM because of the AMFA issue and the second major problem could be with aircraft lessors, who after taking a haircut in the US reorganization are likely to be in no mood to voluntarily provide major financial relief.

These two hurdles will be large obstacles to quickly over come and in the case of labor may need to be resolved in bankruptcy court with a Section 1113 hearing.

In regard to the aircraft lessors, this may require bankruptcy as well to have some aircraft returned to the lease company's at an early Omnibus Hearing, to get the lessor's attention and to obtain the cuts necessary to qualify for the federal loan guarantee.

Well, if everyone doesn't play ball, than it doesn't take a genius to figure out what our next step will be. Either way, let's just get it over with and move on. The longer we wait, the harder it'll be to turn this ship around.