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Posted on Wed, Apr. 30, 2003

United Airlines Workers Ratify Contracts

MEGAN REICHGOTT

Associated Press

CHICAGO -Mechanics and baggage handlers for United Airlines approved new contracts Wednesday morning, helping the bankrupt airline slash labor costs by about $4.7 billion over the next six years.

The vote follows flight attendants' approval Tuesday of a contract that will save the world's second-biggest carrier another $1.9 billion over the same time period.

United's CEO Glenn Tilton said the unions' vote helped push forward the carrier's restructuring effort.

"Four months ago we set several goals: to reach consensual agreements on cost savings with all of our unions, to improve productivity, and to lay the foundation for a more competitive, flexible and efficient airline," he said. "With today's ratifications, we have achieved all of those goals."

Seventy percent of eligible mechanics and 83.2 percent of eligible baggage handlers voted to ratify the contract, said Joseph Tiberi, spokesman for the International Association of Machinists and Aerospace Workers.

"The problems and solutions of the airline's latest crisis go far beyond labor costs, but immediate action was needed to ensure the survival of this airline," said Mechanics' union President Scotty Ford.

Turnout for the flight attendants' vote was 63 percent, suggesting the reluctance with which the painful cuts were accepted. Of those, 75 percent voted to ratify the new contract.

Flight attendants' union president Greg Davidowitch said the results were necessary but no cause for celebration.

"Today marks an immense step toward stability and security for our airline and our jobs," he said. However, he added, the sacrifices made by employees "will have a harsh effect on our work lives and our families."

Approval by all three groups, following earlier approval by pilots, flight dispatchers and meteorologists, have sealed United's quest to lower its annual labor tab by $2.56 billion through 2008, or $15.4 billion in total.

But unlike past labor dramas at United and the recent one at rival American Airlines, the outcomes wouldn't make or break the carrier's recovery effort.

If any group had voted down the tentative agreement, United planned to head to bankruptcy court on May 15 to get a judge to impose its preferred terms.

The 18,000 flight attendants accepted an agreement calling for 9 percent wage cuts, changes in work rules and fewer holidays. The pact would save United $314 million a year.

Members of the International Association of Machinists District 141, representing 23,000 ramp, customer service and retail workers, were asked to approve 13 percent pay cuts, a 20 percent co-pay on health insurance and increased use of part-time help - a package that would save United $2.6 billion through 2008.

The 12,000 mechanics, members of District 141-M, voted on 13 percent wage cuts and an overhaul of work rules adding up to $2.09 billion in total savings through 2008.

United's 8,000 pilots already have ratified the biggest chunk of the savings - a total of $6.6 billion, including 30 percent wage reductions and significant work-rule changes.

United gained the leverage of bankruptcy court to impose cuts when it filed for Chapter 11 protection on Dec. 9, and already has used it to get temporary cuts that expire Wednesday.

Still, United needs to avoid labor dissension if it is to emerge successfully from bankruptcy and become profitable again.

Airline analyst Ray Neidl said United's future depends on several factors.

"They have to have a good business plan. Probably the biggest challenge is industry and economic developments worldwide - what's going to happen with SARS, terrorism and the world economy will determine what happens to them to a large extent," said Neidl, of Blaylock and Partners.

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Associated Press Business Writer Dave Carpenter contributed to this report.

MHC