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The Honolulu Advertiser
Posted on: Thursday, February 14, 2002

Hawai'i fears United strike

Advertiser Staff and News Services

United Airlines is facing a crisis of confidence — one that could have a profound effect on millions of fliers, thousands of employees and Hawai'i's economy.

While members of United's mechanics' union here voted to accept a contract offer that would give them industry-leading pay, they were outnumbered by their counterparts in other areas, who voted overwhelmingly to strike next Wednesday and ground the airline.

And while the airline and International Association of Machinists are resuming round-the-clock talks tomorrow, there are no guarantees.

For mighty United and its millions of customers, the prospect of another shutdown so soon after airlines were grounded Sept. 11 seems beyond belief. United was the world's largest airline until recently and touted itself as the biggest employee-owned company, with representatives of its mechanics' and pilots' unions on its board.

UAL, the parent company, was hugely profitable in the late 1990s, posting $1.2 billion annual net income in 1999 and launching a $4 billion bid to buy US Airways the next year.

A strike could cost the airline as much as $40 million a day on top of the $2.1 billion it lost last year. Hundreds of thousands of passengers would flee to other airlines, leaving many airports in chaos and perhaps putting United a step closer to bankruptcy court.

In Hawai'i, where United is the top domestic airline, with more than a fifth of all flights to the Islands, a strike would be a severe blow to the tourism industry, still struggling to recover from the Sept. 11 attacks.

Airline officials yesterday declined to say whether a strike would shut down Hawai'i operations, expressing confidence a settlement could be reached.

"We're working with the unions together to make sure there is no interruption of service," said Tom Renville, managing director of United Airlines-Hawai'i, yesterday.

United runs 17 daily weekday flights to the Islands, 22 daily on weekends. The airline cut back its Hawai'i schedule when business dropped after Sept. 11, and is just beginning to restore those flights. It expects to restart two daily roundtrips tomorrow, from Los Angeles and from San Francisco.

"We're disappointed with the results," Renville said of the union vote. "We were hoping for a positive outcome.... But we are very hopeful and confident that we, along with our union, will be able to sit back down at the negotiating table and get a resolution."

Voting took place Tuesday. In Hawai'i, 166 union members were eligible, and the majority of those voting were in favor of accepting the company's offer, said Jesse Ikei, vice president-Hawaii, District Lodge 141M of the International Association of Machinists and Aerospace Workers.

In a separate vote on whether to authorize a strike, the Hawai'i union members were split 50-50, Ikei said. He would not say how many mechanics voted.

Ikei attributed the difference between the local and national outcomes to "just different views on what is being offered."

"All we know is each member did their own thing after reviewing the proposals," Ikei said.

In 1998, a 15-day strike by Northwest Airlines pilots cost Hawai'i $10.7 million in lost visitor revenue and wages. The airline laid off 778 local employees during that strike, which also siphoned off $1.3 million in state tax revenues. Analysts estimate the strike kept away 8,400 tourists.

The depth of United's crisis surprises people who have done business with the company for years.

"I never thought I'd see 'United Airlines' and 'bankruptcy' in the same sentence," said Al Lang, owner of Lincoln Park Travel in Chicago, where United has been the hometown airline for 75 years at O'Hare Airport, the world's busiest.

But, he adds, some industry observers can't fathom how the mechanics could vote to put their airline at risk after it lost two jets and all aboard on Sept. 11. Already, some 20,000 United employees have been laid off in the wake of the attacks.

"It's a suicide mission," said Wall Street analyst Ray Neidl, who tracks airlines for ABN Amro.

On Tuesday the 13,000-member IAM voted down contract terms drafted by a White House-appointed board, which recommended immediate raises of as much as 37 percent — along with an agreement to take "fair" but unspecified pay cuts with United's other unions — to save the airline.

Eight years ago, in a bid to gain more say over the company's direction, the same union took about a 10 percent pay cut and made other sacrifices in exchange for UAL stock and a seat on the board.

Tuesday's vote — 68 percent rejected the contract and 86 percent backed a strike — shows just how deep distrust runs and how difficult a recovery will be. The IAM members resent that they are working at 1994 wages while mechanics at other airlines, and other groups at United, are paid substantially more.

Many analysts say President Bush or Congress could be expected to step in and keep the airline running. But under federal law, the White House has no further power to delay or stop a strike. And neither the House nor the Senate seems inclined to intervene.

"No one wants a strike or a shutdown, but Congress is not the place to settle this dispute right now," said Senate Commerce Committee Chairman Ernest Hollings, D-S.C.

The Associated Press and Advertiser Staff Writer Susan Hooper contributed to this report.