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The Honolulu Advertiser
Posted on: Friday, July 22, 2005

United's machinists ratify labor agreements

By Mark Skertic
Chicago Tribune

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CHICAGO — United Airlines baggage carriers, customer-service agents, food-service employees and other workers have approved new contracts with the carrier.

The agreements, which include wage and benefit reductions, were approved by 67 percent of the workers who voted, the International Association of Machinists and Aerospace Workers said yesterday.

The confirmation came on the same day a federal judge in Chicago rejected the argument of another United union that is fighting the termination of its pension plan. U.S. District Judge Samuel Der-Yeghiayan's ruling was a blow to the efforts of the Association of Flight Attendants to preserve their retirement plan.

The machinists are the last labor group, and the largest, with which United was negotiating new agreements. The union has about 20,000 members, accounting for about one-third of United's workforce. Five different work groups represented by the machinists' union approved the new deals, which run through 2009.

"The decision to agree to an amended contract was not an easy one to make, but it was without question the right choice," Randy Canale, president and directing general chairman of IAM District 141, told members in a letter posted on the union's Web site.

"I am not at all happy with the condition of United Airlines, but I am proud that IAM members have accepted the challenge to resurrect our company and return it to prominence."

With the last round of approvals, United was able to secure about $700 million in annual pay and benefit concessions from its employees, cuts that management said were essential to returning the carrier to profitability.

United, based in Elk Grove Township, Ill., has been operating under bankruptcy court protection since December 2002. Management has said the carrier could exit bankruptcy this fall.

"This has been a very difficult time for all our employees, but amending our labor agreements was critical to our future," chief executive Glenn Tilton said. "These are tough times for our industry. We see our competitors confronting the same challenges United has faced. The work we are doing significantly improves our ability to compete going forward."

For machinists' union members, the latest concessions will actually put a little more money into their paychecks. They had been working under a court-imposed 11.5 percent pay cut. The new contract calls for a 5.5 percent pay reduction. Workers won't get a raise until May 2007, when a 1.5 percent increase is scheduled.

The union is also the only one at United that continues to have a pension plan, though it is one not administered by the company. Instead, their retirement benefit is through the IAM National Pension Plan.

Last year, United management said the airline would be unable to secure the financing necessary to leave bankruptcy if it continued to be saddled with its nearly $10 billion pension obligation.

Existing pension liabilities have been turned over to the federal Pension Benefit Guaranty Corp. Because of federal rules and caps, many employees will receive thousands of dollars less in retirement because of the change. The carrier is now offering most workers a 401(k), a retirement plan that, unlike a pension, does not promise a specific payout amount in the future.

In the machinists' case, United is making a contribution to the IAM National plan.

The only union not getting any retirement benefit is the Association of Flight Attendants, which has threatened strikes and challenged the airline's legal right to kill its pension plan. The union and the airline have been unable to agree on how to replace the pension.