Airline Didn't Think Unions Would Help Enough, Voluntarily

As predicted, United Airlines asked the Court to void its union contracts, in a 1113(c) filing Monday. Most of United's unions, including the pilots and flight attendants, have been cooperative, to one degree or another, through the past several months; the mechanics have been outwardly intransigent. UAL couldn't ask the Court to void some contracts and not others, and, having no ironclad assurance that the mechanics (and possibly other unions) wouldn't stymie reorganization efforts, the airline did the natural thing. With UAL's not longer being an "employee-owned company," the union representation on the airline's Board has diminished powers; with the contracts' likely to be abrogated, the union bosses find themselves accidentally outmaneuvered.

UAL's Official Statement Reads Like This:

UAL Corp. (NYSE: UAL), the parent company of United Airlines, today [Monday] filed a motion under Section 1113 (c) of Chapter 11 of the U.S. Bankruptcy Code to reject the company's collective bargaining agreements. The company emphasized that its priority would be to continue negotiating with its unions, but that it had to file the motion today to ensure that the necessary cost savings are in place by early May. The cost savings are critical to United's ability to meet the requirements of its debtor-in-possession (DIP) financing. The company said that meeting those requirements necessitates permanent wage concessions as well as addressing issues such as benefits, work rules, and "scope clauses" that presently restrict the company's ability to compete and pursue strategic initiatives.

Glenn F. Tilton (pictured), chairman, president and CEO of United, said, "We have a plan to fundamentally transform United's business in a way that is durable and sustainable, and we have made solid progress in reducing costs. It strikes a balance in achieving our near-term goal of successfully emerging from bankruptcy with our longer-term commitment to create a resilient, profitable enterprise that can be the industry leader once again. Between now and May 1st, we will continue to negotiate around the clock in the belief that we can reach consensual agreements with all of our union groups and render a ruling from the court unnecessary. However, all of us will have to accept changes that are broad and deep, and those changes require that we take an entirely new approach to competing and succeeding in this changed industry."

Under the 1113 (c) motion filed today with the U.S. Bankruptcy Court for the Northern District of Illinois, United has requested court approval to reject the company's collective bargaining agreements and make permanent the interim wage relief it received from its unionized employees in early January. The company is also seeking to implement modifications to benefits packages, work rules, scope of work and job security provisions that will maximize the company's strategic flexibility and facilitate transformation to a competitive and efficient airline.

The company's proposed collective bargaining modifications have a targeted savings of $2.56 billion annually on a cash basis compared to the current contractual path. Examples of the types of non-compensation issues that the company needs to address include the establishment of common benefit and pension plans, changes to scheduling rules for flight crews, and modifications to scope-of-work rules to permit, among other things, the outsourcing of certain functions, expanded use of regional jets, the establishment of a low- cost carrier and the ability to expand code-share agreements.

United also said that it has reached a tentative agreement with its unionized meteorologists represented by the Transport Workers Union (TWU) on contract modifications that would generate the level of cost savings sought by the company. As a result, the Company will withdraw its 1113 (c) motion for the TWU, subject to ratification of the tentative agreement by the TWU membership. The TWU is expected to vote on this agreement by March 21, 2003.

Additionally, the company said today that it has experienced a recent significant drop-off in revenue as bookings have declined in advance of a potential war with Iraq and that the company must take immediate steps to offset the negative financial effects. United is actively engaged in an industry effort led by the Air Transport Association seeking war-time relief and financial assistance from the US government to mitigate the disproportionate impact of any war on the airline industry and United. United also intends to approach its lenders.

In the event United is unable to gain sufficient relief within the next 30 days, the company said that it may need to seek additional temporary pay reductions of at least nine percent across-the-board for all employee groups. If war occurs, United is prepared to reduce capacity as may prove necessary under the circumstances as they unfold.

Tilton continued: "While our revenue picture stabilized in the initial three months after our Chapter 11 filing, we have recently seen a significant slowdown in travel and bookings in advance of a possible war with Iraq. We will do everything possible to avoid a temporary reduction in wages."

UAL-MEC Chairman Captain Paul Whiteford responded immediately:

"Over the last few weeks, ALPA and the company have engaged in what has amounted to an extremely disappointing exercise. When we submitted our proposal to the company on February 25, it was with the hopes that it would serve as a starting point for real dialogue and negotiation. We offered what we believe was a thoughtful and realistic vision of a revitalized United, braced for a future with lower pilot costs, significantly increased productivity and a way to address the low cost competition issue without diluting the United brand. Our proposal called for great sacrifices from our pilots. It cuts fat, muscle and even some bone."

"We are extremely dismayed by the Company's 1113(c) proposal. Our contract is the product of 52 years of good-faith collective bargaining conducted under federal labor law. To seek to wipe out this contract by the stroke of a judge's pen is disheartening."

"We believe United's proposal is an overreach designed to take advantage of a pilot group that has assumed a leadership role for more than a year in addressing United's economic problems. No fair-minded observer can look at United's proposal and not see it for what it is. Notwithstanding this, we believe it is in the best interests, not just for our pilots but also for United Airlines, to reach a negotiated settlement."

"During what will be very difficult periods of time ahead us, United Airlines pilots will continue delivering the industry leading standards that the traveling public has to come to expect."

The Flight Attendants Are Not Happy, Either:

United Airlines flight attendant Master Executive Council President Greg Davidowitch, of the Association of Flight Attendants, AFL-CIO, issued the following statement late Monday afternoon:

"AFA is extremely disappointed that United Airlines has filed an 1113c motion to abrogate the flight attendant collective bargaining agreement that seeks cuts far beyond what is necessary to turn United into a successfully reorganized carrier.

"Flight attendants understand that for this reorganization to be successful, United must emerge from bankruptcy able to compete. AFA's proposal of over $1 billion in labor savings over the next six years puts United's flight attendant costs at a level competitive with Southwest Airlines current flight attendant costs. In fact, AFA's proposal is the equivalent of our entire work group working for free one year of the six. The proposal provides these substantial cost savings as well as greater scheduling flexibility and relief in other areas of the contract targeted by management.

"Flight attendants are among the lowest paid workers at the airline, yet we have repeatedly shown our commitment to United's successful restructuring by setting industry records for service and by agreeing to immediate sacrifices that allowed United to meet initial DIP covenants. To put management's 1113c motion into perspective, the cuts United is proposing would put thousands of flight attendants at an income level qualifying them for welfare and other government aid programs. There is no fat, the muscle is carved, and United's filing is cutting straight to the bone.

"AFA's goal is to reach a consensual agreement with current United management, and negotiations aimed at reaching an acceptable agreement continue. But United is abusing the 1113 process. 1113 was established to protect labor contracts from being unnecessarily modified and to ensure that the sacrifices made by all parties are fair and equitable. United's 1113 motion goes far beyond what's needed to successfully restructure in an attempt to gut our contract, and places an inordinate burden on the flight attendants.

"As we have said before, history shows that discord between labor and management in the bankruptcy process does not promote success. And AFA's number one goal is success for our company and security for our members."

www.ual.com; www.alpa.org; www.afanet.org; www.unitedafa.org