Creighton says United cost cuts to be revealed this week

By Dave Carpenter
Associated Press Business Writer

A United flight takes off from Newark International Airport yesterday. The airline has warned it may go into bankruptcy. Associated Press

CHICAGO — United Airlines chief executive Jack Creighton told employees that unions of the nation's No. 2 carrier will be informed by the end of this week about cutbacks it's recommending in order to avoid bankruptcy.

The proposals, expected to include substantial pay cuts and other concessions, are part of a recovery plan that struggling United is overhauling in hopes of getting a $1.8 billion federal loan guarantee and ensuring an end to its long financial slide.

"By cutting our costs, we can get ourselves back on track," Creighton reiterated in his weekly taped message to employees.

United announced Aug. 14 that it might have to file for Chapter 11 bankruptcy protection this fall if it didn't reach major cost-saving agreements within 30 days with its employees, vendors and lessors. In a series of meetings with union officials since then, Creighton said United has been "opening the airline's books so the union's financial experts can confirm the serious nature of our economic predicament."

Once the airline's recommendations for each union are shared later this week, he said, United will pursue an amended application for the loan guarantee that it intends to file with the Air Transportation Stabilization Board by Sept. 16.

The chairman and chief executive told employees the airline is pursuing both labor and non-labor cost savings and also is looking to raise revenues by adding flights to certain profitable routes.

Labor cuts, he said, "will help us strike a balance between what we're spending and what we're bringing in. Right now, we are simply spending more than we're making."

The airline lost a record $2.1 billion last year and another $851 million in the first six months of 2002. Labor accounts for roughly 40 percent of its costs.

United's pilots, who own about 28 percent of the company, had been scheduled to vote starting last week on a proposed 10 percent pay cut. But that vote was postponed indefinitely in light of the carrier's push for even bigger cutbacks and cost savings.

The machinists' union has not yet been informed of United's specific proposals, spokesman Joe Tiberi said Monday.

Leaders of the third big union, representing flight attendants, are scheduled to meet with United executives Tuesday.