United Asks Unions For Deep Cuts
Employees Balk at Plan To Slash Pay, Benefits

By Keith L. Alexander
Washington Post Staff Writer
Friday, August 30, 2002; Page E01

United Airlines told employees yesterday that it needs to reduce its costs by $2.5 billion a year for the next six years -- $1.5 billion of that through a 22 percent cut in wages and benefit expenses -- to avoid having to seek bankruptcy protection this fall.

The nation's second-largest airline, which lost more than $2 billion last year, said in a statement that the cost reductions would "increase the likelihood" that the airline would qualify for $1.8 billion in federal loan guarantees.

The Air Transportation Stabilization Board, which reviews loan guarantee applications, has not ruled on United's. But sources close to the process say United executives have been informed that the airline needs deeper concessions to win approval.

United hopes to obtain the employee concessions before Sept. 16, when it plans to resubmit its application.

The labor groups are already balking at the proposal. "They're asking for $9 billion in pay cuts [the total after six years] to get a $2 billion loan. That's where we're going to have the problem," a union spokesman said.

United asked its 37,000 mechanics, ramp agents and gate agents to give up a total of $450 million in wages and benefits, the union said. Of that total, the airline asked for a cut of 9.5 percent, or $265 million, in annual pay and benefits from its ramp workers and airport agents. It also asked for a cut of 10.4 percent, or $185 million, in annual pay and benefits from its mechanics.

Both groups are represented by the International Association of Machinists, the same union that covers the 6,800 mechanics who early yesterday rejected a more modest cost-cutting proposal by US Airways. which has already entered Chapter 11 bankruptcy protection.

The machinists union's leadership had already rejected a 10 percent pay cut sought by United in June.

United is also seeking $100 million a year in pay and benefit cuts from its flight attendants. It was unclear how much United wants from its pilots. But in a message to the pilots, Paul Whiteford, chairman of the airline's pilots union, called the company's proposal "wholly unacceptable."

Union leaders are scheduled to meet next week to go over United's proposal.

Also yesterday, United said it would raise the price of upgrading tickets and eliminate paper tickets by July to save money.

Early yesterday, 57 percent of US Airways' mechanics voted down a proposal that would have reduced their wages by 6.8 percent, or $154 million a year, and significantly reduced sick leave and other benefits.

Like United, US Airways is trying to drastically reduce its employee costs. The Arlington-based airline is seeking about $1 billion in concessions to meet conditions of its tentative $900 million federal loan guarantee and is trying to win another $200 million in concessions from aircraft lessors and suppliers.

US Airways, which lost nearly $2 billion last year, has obtained more than $600 million in concessions from its pilots, flight attendants, flight dispatchers, simulator engineers and flight-crew training instructors. Early yesterday, US Airways' 5,400 baggage handlers and fleet service workers, who are represented by the machinists union but have a contract separate from the mechanics', approved their agreement by 62 percent.

That contract calls for a pay cut of $65 million a year, or about 8.5 percent, through July 1, 2005. At that time, the employees will get a 2 percent pay raise. The agreement also gives the baggage handlers an equity stake and profit-sharing plan that have yet to be determined.

US Airways officials said yesterday that they hope to reach cost-cutting agreements with their mechanics -- as well as with their 6,000 reservation and airport ticket-counter agents, represented by the Communication Workers of America -- so that there won't be a need for a court battle over whether to nullify those union contracts.

US Airways management recently said it would ask the U.S. Bankruptcy Court in Alexandria for permission to impose more severe pay and benefit reductions on any group of employees that didn't agree to concessions. The request would be heard Sept. 10.

"Our hopes are not to have the Sept. 10 hearing," said US Airways spokesman David Casteleveter. "If we get ratifications from those two unions, there will be no need to have the Sept. 10 hearing."

Machinists spokesman Joe Tiberi said no discussions between labor and management had been set up as of yesterday. "We are aware of our obligations to meet with the carrier to discuss these issues under bankruptcy law. But our members have spoken, and we will continue to be guided by their decision," he said.

Jeff Miller, a spokesman for the Communication Workers of America, said his group is still in talks with the airline and hopes to send a proposal to its members for a vote before Sept. 10.