Published December 27, 2002
CHICAGO – United Airlines, seeking $2.4 billion in yearly wage cuts to pacify the lenders that have kept it flying in bankruptcy, took a step toward voiding its union labor contracts Friday.
The world's second-largest carrier filed a motion in U.S. Bankruptcy Court asking a judge to dissolve its labor agreements if the two sides are unable to agree on wage cuts, United spokesman Joe Hopkins said.
United has until Feb. 15 to cut costs or it could lose the remainder of the $1.5 billion in interim financing a group of banks extended the carrier to allow it to restructure under Chapter 11 bankruptcy.
The carrier has offered to withdraw the motion until at least March 15 if four of its unions agree to voluntary pay cuts and the court forces the other two, both Machinists groups, to forgo raises and take 13 percent cuts.
The rejection last month by Machinists-represented mechanics of proposed wage cuts was widely seen as the death blow to United's bid for federal loan guarantees that might have averted bankruptcy.
All four unions would have to agree to the givebacks by Jan. 8.
The pilots union would take the biggest hit, having to give up scheduled raises and take 29 percent pay cuts.
Spokesman Dave Kelly said late Friday that the Air Line Pilots Association remains committed to working with the company "to reach a rational business plan."
United says its labor costs are the highest in the industry. So far, the company has not outlined specific cost-cutting proposals.
The Illinois-based company needs to slash its labor costs by $2.4 billion a year to satisfy its lenders, according to the flight attendants' union. The unions have already agreed on about $1 billion in yearly cuts, as part of United's failed try for a government loan guarantee.
The airline warned in its Chapter 11 bankruptcy filing on Dec. 10 that cuts were coming that would go well beyond its previous financial recovery plan, which called for $5.2 billion in labor cutbacks by 2008.
Shares in United parent UAL Corp. rose 9 cents to close at $1.38 each Friday on the New York Stock Exchange.