United Airlines Machinists to Ask Court to Halt Wage Cuts

The machinists union at United Airlines on Tuesday formally objected to proposed temporary 13 percent wage cuts, saying the bankrupt airline did not provide enough financial data to back up its claim that it needed the cuts to survive.

United, a unit of UAL Corp. (UAL), filed for bankruptcy Dec. 9 and is seeking $2.4 billion in wage cuts annually from its union and nonunion workers. It has warned that without sufficient cost cuts and revenue growth, its lenders could pull its special bankruptcy financing, threatening its survival.

Leaders of the pilots' and flight attendants' unions at United have already agreed to temporary wage cuts, buying the airline more time to negotiate permanent deals once rank-and-file members approve them. But the leadership of the International Association of Machinists has not done so.

In court papers filed on Tuesday, the IAM said the provision of the bankruptcy code that United is using to seek the temporary wage cuts, known as 1113(e), requires specific documentation proving its very existence is threatened.

"The IAM submits that United has not satisfied this heavy burden," the filing said. "The evidence, if any, does not establish that the proposed reductions are necessary or even appropriate on an interim basis."

More Cuts Coming

On its Web site, the IAM also said the proposed temporary cuts are only the first step and that the airline has proposed "additional, more far-reaching permanent proposals."

Executives and union officials at other airlines are closely watching developments on the labor front at United, as high costs and weak revenue have led to billions of dollars in losses industrywide since the Sept. 11, 2001, attacks.

The judge presiding over United's bankruptcy case said he would consider both the IAM's objection and United's response on Jan. 10. At that point, he will decide whether the temporary cuts should go into effect or whether a different negotiating process under the U.S. bankruptcy code's section 1113(c) will kick in.

Meanwhile, during a court hearing Monday about a complicated tax issue involving the company's employee stock ownership plan, the airline's Chief Financial Officer said UAL's net operating loss, which is a special tax reporting figure only, will total about $3.2 billion for 2002. That is the figure that will be provided to the Internal Revenue Service in about February, CFO Jake Brace said.