Talks Progress Between United, Unions

United Airlines (search) and its ramp workers' and mechanics' unions intensified contract negotiations Thursday, pushing to settle their differences before a bankruptcy court rules on their high-risk showdown over labor costs.

Against the urgent backdrop of strike threats by three employee groups, United held separate contract talks at local hotels with the Aircraft Mechanics Fraternal Association (search) and the International Association of Machinists and Aerospace Workers (search) even as a courtroom trial pitting management versus employees unfolded.

The Machinists' union said recent progress pointed to a likely agreement by the time the trial ends next week, which would avert the need for a ruling likely to carry grave consequences for both the airline and its workers.

"The only place this is going to get resolved is at the bargaining table, not in the courtroom," said Randy Canale (search), president of IAM District 141, representing 20,000 United baggage handlers and ramp and public-contact workers.

United declined to discuss the status of either set of contract negotiations except to say they are ongoing.

The nation's second-largest airline is seeking approval from Judge Eugene Wedoff, following an expected week-long trial, to replace the two existing contracts with its own lower-cost versions even without unions' consent. But a ruling in its favor could provoke a strike by employees that analysts say could be fatal to United.

The other outcome, a verdict keeping temporary contracts intact, also would be a setback for both sides since United needs long-term deals in place in order to secure the $2 billion in loans it needs to emerge from bankruptcy.

United Chief Financial Officer Jake Brace (search), testifying Thursday on the trial's second day, said the company had exhausted all other options before concluding it needed to make labor cutbacks for the second time in two years in order to get enough savings to draw bankruptcy exit financing.

"We wanted to look at opportunities to improve revenue and optimize the network" and renegotiate aircraft leases, among other savings, he said. "And we still didn't have enough, so we had to talk about collective bargaining replacements."

Besides the mechanics and machinists, the flight attendants' union has threatened to strike over the latest round of labor givebacks, particularly the elimination of traditional pensions.

The strike talk has prompted concern among passengers, raising the prospect that some will avoiding booking flights on United in coming weeks because of it.

Brace acknowledged worries about the possibility of a strike but said high fuel costs and other industry challenges have forced United's hand.

"The morale of our employees is extremely important and we're extremely concerned about it," he said under questioning by a company attorney. "We wouldn't be seeking these changes if we didn't absolutely need them."

AMFA negotiators presented a new contract proposal to United and were awaiting a response Thursday.

Terry O'Rourke, an AMFA member from San Francisco who is observing the talks, said the bargaining was stepping up but job security remained the biggest sticking point. The company was refusing to offer any, he said.

"Why would we want to vote for something that's a career-ending vote?" O'Rourke said.

The United mechanic said the specter of customers avoiding United was a significant influence on talks.

"The company's playing with fire," he said.

United already secured agreements for new five-year contracts from its pilots and flight attendants earlier this year. It is seeking annual wage and benefit cuts totaling $176 million from machinists and $96 million from mechanics as part of total labor savings of about $700 million yearly.