Chances of deal at United look slim
By Marilyn Adams
USA Today
CHICAGO — Just days before a crucial contract vote by United Airlines' mechanics, United's chief executive said he thinks union members will ratify a new contract, but the airline is "prepared for anything."
"The stakes are the long-term viability of United Airlines," John Creighton said. "I am very concerned" about the vote.
About 15,000 members of the International Association of Machinists are eligible to vote Tuesday on a labor contract recommended by a White House-named board.
A majority vote for the contract would ratify it and prevent a crippling strike Feb. 20. But if a majority votes no, and two-thirds also vote to strike, United's mechanics could legally walk out that day unless Congress steps in.
On Friday, Machinists union leaders said United mechanics will likely vote against the tentative agreement. The possibility of future wage concessions, too little back pay for two years of missed raises, and anger over management treatment of workers and finances has rallied workers against the contract, union leaders said.
UAL Corp., parent of United — one of Hawai'i's largest carriers with about 20 percent of the total air market to the state — had a record loss last year as travel demand fell because of the recession and Sept. 11 attacks.
"There's a lot of anxiety out there and it's building," said Scotty Ford, district president for United's Machinists union and a chief negotiator. "I tell United every day that this thing is going to go down."
On Wednesday, Creighton declined to say whether United could withstand a strike. UAL ended 2001 with $2.6 billion in cash but was spending at a rate of $10 million a day in the fourth quarter. It lost $2.1 billion for the year.
Union leaders are in the process of explaining the contract to members, but have stopped short of endorsing it. The deal would give mechanics, now working at 1994 wages, an immediate raise of up to 37 percent, a retroactive increase of 13.5 percent for the past two years to be paid later, and additional increases of 3.9 percent next year and 2.8 percent in 2004. The contract would make them the best-paid in the industry, but they would have to defer at least some of that for a while to keep their airline alive.
United accepted the recommendations last month, triggering the vote Tuesday.
"It is an industry-leading contract," said Joe Hopkins, a spokesman for the Chicago-based company, adding that workers should consider all available information in making their decision. While the company isn't out promoting the agreement, supervisors are available to answer any questions, he said.
But in addition to concerns about pay and possible concessions, workers also are upset about money UAL put into its failed bid to acquire US Airways Group Inc. and the investment it has made in a new business-jet unit called Avolar.
"Now United Airlines wants us to pay for its mistakes, and our membership is saying we're not going to pay for those mistakes," said Victor Osuna, an assistant general chairman in Indianapolis.
If the agreement is voted down, Congress may seek to impose a contract through legislation.
Aside from the tentative contract terms, workers are upset with recent company policy changes, such as the elimination of an option to work more hours a day in a shorter workweek as opposed to a six-day workweek.
"I have never seen the morale so low and the anger so high," Ford said. "This management group has harassed the employees so much that they don't care if this company goes bankrupt."
If the contract is ratified, United still has much work to do to halt huge losses that began long before Sept. 11, when two of its jets were hijacked and crashed.
United, which like most airlines is still losing money, must negotiate a contract with another large union — then immediately stop the cash drain by negotiating concessions with all its unions and imposing management pay cuts. The company has been unable to tell unions how long those sacrifices would last.
But that would be just the beginning, Creighton said.
He said he doubts United and other major airlines will be able to return to the boom times of the late '90s, when airlines enjoyed record profits, packed planes and record-high business fares.
The airline announced last week that President Rono Dutta has been removed from day-to-day operations to run a strategic-initiatives group charged with finding innovative solutions.
"We've got to come up with changes that are effective in this changing environment," Creighton said.
United, which depends heavily on business travel and has major operations in California and the Pacific, has been particularly hard-hit by the economic recession in the United States and Asia and the dot-com meltdown. Fourth-quarter revenue was down 39 percent from a year earlier.
"I've asked Rono, 'Are we pricing our product right?' The product we sell is the most perishable in the world," Creighton said.
For example, he said, "Should we sell customers a block of miles and they withdraw them like from a bank account? There are people here who know a lot more than I about this industry who say the old (pricing) model is broken."
Creighton, 69, is the former CEO of Weyerhaeuser, the forest-products company. He was a director on UAL's board when he was tapped for the top job in late October after former CEO James Goodwin was forced out.
Creighton and other airline executives look back fondly on the U.S.'s economic boom years.
Major airlines' business fares — the prices charged to travelers who book at the last minute — climbed to unprecedented levels amid vigorous demand, and the gap between prices paid by leisure vs. business travelers became the widest ever.
But United's circumstances have changed dramatically since Sept. 11. Creighton said the airline's "recovery plan" of cutting costs and raising cash, is "going to get us back on the road to financial stability. But it's not where we want to be. We want to be profitable without concessions."
Bloomberg News Service contributed to this story.
