Posted on: Saturday, January 8, 2005
United scrambling to revise labor pacts
By Dave Carpenter
Associated Press
CHICAGO — United Airlines lost a key bankruptcy court ruling when its pilots' agreement was thrown out yesterday but achieved last-minute negotiating breakthroughs with two other unions to postpone an awkward courtroom showdown over its push for new labor contracts.
AP library photo Judge Eugene Wedoff dealt United a setback by rejecting a disputed deal with the pilots that he said would "unduly tilt the bankruptcy process."
Hours later, after negotiating throughout the day to avoid a labor trial, United announced a tentative labor agreement with its mechanics' union and said it was on the verge of a similar pact with flight attendants. Details of the two contracts, which were not disclosed, were negotiated after United obtained a three-hour delay in the scheduled start of the trial.
Company officials said they intended to meet with the flight attendants through the weekend in hopes of nailing down a deal that would result in the labor trial being formally called off.
United Airlines says it needs to save $725 million in annual labor costs, on top of $2.5 billion it won in 2003, to emerge from Chapter 11 bankruptcy as the industry is pounded by high fuel prices and low fares.
ADVERSE RULING: A judge complicated United's efforts yesterday by tossing out its controversial new deal with pilots, saying it would have paved the way for the company to eliminate all employees' traditional pensions, not just pilots' pensions. TRIAL AVERTED: A "show trial" scheduled to start yesterday in bankruptcy court over United's motion to break labor contracts was postponed after breakthroughs with two unions. "We were disappointed with the pilots' ruling ... but with the afternoon we were very pleased," he told reporters after the trial's postponement.
Barring agreements, CEO Glenn Tilton had been poised to testify at the trial's opening on the need to slash wages and benefits further — saving United $725 million annually — and eliminate defined-benefit pensions.
The carrier, a unit of UAL Corp., maintains soaring fuel costs, industry overcapacity and profit-eroding fare wars with discount carriers forced it to seek drastic labor givebacks on top of $2.5 billion in cuts in 2003.
A trial on its motion to break existing collective bargaining agreements could last as long as a week and risks alienating workers. Flight attendants have threatened to strike if their contract is broken without their consent.
The pilots' contract, which called for 15 percent pay cuts, would have provided United with $180 million in annual savings and paved the way for it to eliminate all defined-benefit pensions. But the flight attendants' and machinists' unions, joined by the government's pension agency and a committee of United's unsecured creditors, had opposed it since shortly after it was announced on Dec. 17.
Wedoff said several aspects of the proposed pilots' agreement would inappropriately "tilt" the bankruptcy process — most notably its stipulation that other unions' pension plans also be terminated for the pilots' agreement to take effect. He said the other unions' arguments to retain their pension plans should be considered on their own merits.
After the pilots' ruling, United withdrew agreements reached earlier this week with two small unions representing about 200 flight dispatchers and meteorologists and said they would be reworked.
The union representing baggage handlers, ramp workers and public-contact workers now faces an April 11 deadline for negotiating a pact after Wedoff on Thursday approved United's emergency motion to temporarily cut wages by 11.5 percent for that group, giving the two sides more time.
The flurry of developments just ahead of a self-imposed labor deadline brought mixed progress for the nation's No. 2 airline in its efforts to slash labor costs for the second time in its two-year bankruptcy.
United Airlines is embroiled in disputes with labor unions and creditors in its bankruptcy restructuring.
United's chief financial officer Jake Brace called it "overall a productive day" despite the adverse verdict on the pilots' deal.
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