United in high-stakes standoff
CHICAGO — United Airlines is embroiled in disputes with unions and creditors as it nears a key deadline in its 25-month-old bankruptcy restructuring, running the risk of labor actions that could endanger its future.
The confrontations reflect United’s high-stakes maneuvering to raise enough cash to exit Chapter 11 bankruptcy protection without alienating its work force — already disheartened by the need for two substantial pay and benefit cuts in two years.
“If you’re United and you’re trying to get people back in your planes, this is not the position you want to be in,” said George Novak, an airline industry researcher at George Washington University’s Aviation Institute.
The carrier’s push to tear up employees’ existing contracts, if necessary, in order to lop $750 million off annual labor costs by mid-January is headed for a courtroom showdown starting Friday unless three of its biggest unions agree to new terms by then.
Negotiators for the mechanics’ union were nearing a tentative contract agreement with the company on Wednesday, according to a union leader. But no formal negotiations were scheduled involving baggage handlers and public contact workers, and talks continued without an agreement with the flight attendants, who have promised periodic strikes if United breaks their contract.
Additionally, some unions have joined with creditors and banks to oppose the contract agreement crafted by United and its pilots, who agreed not to fight the company’s elimination of traditional pensions after receiving extra financial considerations.
In objections to be aired in bankruptcy court today, they have denounced that plan as an effort to short-circuit the pension deliberation process.
United, a unit of Elk Grove Village, Ill.-based UAL Corp., plans to have CEO Glenn Tilton testify in bankruptcy court Friday on the need to slash wages and benefits further and eliminate defined-benefit pensions after 4 1/2 years of steep losses. It says record jet fuel costs, the glut of airline capacity and air fares at a 12-year low have forced its hand.
“The decisions we’ve made have been very hard, but they have been necessary,” Tilton told employees in a recorded message Tuesday. “The fundamental economics of this business are inarguable. You have to cover your costs even when customers do not want to pay as much for air fares as they once did.”
While most employees don’t question the legitimacy of the industrywide financial crisis, whether they want to keep their jobs for sharply reduced pay remains an open question.
“Many mechanics are on the edge of financial distress” after the last pay cut, said Joe Prisco, president of Local 9 of the Aircraft Mechanics Fraternal Association. “A lot of people are saying ‘I’m not going to vote for anything that has a pay cut.’ “
Prisco, an observer at Wednesday’s bargaining session in suburban Rosemont, said negotiators appeared to be near a tentative agreement but there is no assurance that members will ratify it. The deal being discussed would slightly reduce United’s initial demand for $101 million in annual concessions from the mechanics, through lowered wages and benefits.
AMFA will not recommend a “Yes” or “No” vote, the union official said.