Deal boosts United’s hopes
CHICAGO (AP) – Mired in the aviation industry’s worst slump, United Airlines has extracted an unprecedented $5.8 billion in tentative labor concessions from its employees. Now, the carrier hopes Washington will help out in United’s battle to avoid bankruptcy court by providing a $1.8 billion loan guarantee.
Cash-strapped United secured the key remaining link to its financial recovery plan Wednesday when its Machinists’ union leaders agreed to $1.5 billion in wage and benefit concessions over 51/2 years following similar pacts with pilots, flight attendants and other employees.
The 37,500 mechanics, baggage handlers and public contact workers could still reject the tentative deal on wage cuts when they vote on it next Wednesday. And the Air Transportation Stabilization Board could reject or significantly shrink the amount United seeks in federal backing for a private loan.
But getting its largest and most resistant union to sign off on steep cuts was the most noteworthy achievement yet for United in its quest to slash costs and restructure its finances to set the stage for recovery.
Investors sent the stock of United parent UAL Corp. up 46 cents, or 14.8 percent, to $3.56 in morning trading Thursday on the New York Stock Exchange.
“The IAM, along with our other unions, has stepped up to the challenge by cooperating in an unprecedented way to set the framework for a stronger, more competitive airline,” United CEO Glenn Tilton said.
The machinists were the only employee group not to have committed to its share of $5.8 billion in labor cutbacks over 51/2 years – the centerpiece of United’s financial recovery plan.
The financially ailing carrier hopes the cuts are steep enough to persuade the government to grant the $1.8 billion loan guarantee it says it needs soon in order to avoid a Chapter 11 bankruptcy filing by year’s end.
Despite the labor concessions and reductions, some analysts on Thursday reiterated their belief that the actions won’t solve the problem of declining airline revenues and could be too little, too late to prevent the airline from having to take its restructuring plan into bankruptcy court.
The head of the pilots’ union, Paul Whiteford, urged Washington to act.
“Each of United’s labor unions has now stepped forward to provide the employee sacrifices necessary to stabilize the company and to support a federal loan guarantee,” said Whiteford, who is also a UAL board member. “United’s fate is now in the hands of the Air Transportation Stabilization Board, and we call on the ATSB to act promptly and fairly.”
United’s 8,800 pilots already have ratified $2.2 billion in cutbacks, and its flight attendants are voting on a tentative agreement for $412 million in wage reductions, with results to be announced next week. Salaried and management employees will contribute another $1.3 billion in labor savings.
The announced reductions are about $400 million short of the $5.8 billion target. United has said it is working on further labor savings, including promised contributions from the airline’s top 40 executives. Spokesman Joe Hopkins said the carrier was working on a statement Thursday spelling out further details.
But the airline already was stepping up its campaign for federal assistance Thursday. United was delivering boxes to the ATSB containing 42,000 letters from employees, suppliers and other allies, urging that the loan guarantee be granted.
United is losing more than $7 million a day and has said it is preparing for the possibility of a bankruptcy filing if it doesn’t receive the loan guarantee, although it has pledged to keep flying its normal daily schedule regardless.
The airline faces a $375 million debt payment on Dec. 2 that poses a stiff test of its dwindling cash reserves, and is working to arrange bankruptcy financing. Details of the machinists’ agreement were to be released later Thursday.
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