United rejects unions' ownership plan Talks' failure could spark 'war' at airline, as workers vow to battle restructuring

November 13, 1993|By New York Times News Service

United Airlines rejected a proposal last night from its pilots and machinists union to buy a majority stake in the carrier, saying it was "substantially deficient." United also said the unions had rejected a last-minute counter-proposal from the carrier.

The announcement sounded a death knell for the latest in a string of attempts by United's unions to take over the carrier in recent years and appeared likely to usher in a period of tumultuous labor strife at United. The carrier has proposed to improve profits through broad restructurings and layoffs that the unions oppose.

The carrier's unions have vowed in recent weeks that if the talks failed, they would fight United's plans. Union leaders have called for "war" and "Armageddon" if the company moves to restructure. The unions threats have included strikes and public demonstrations against the company's directors.

People familiar with details of last night's negotiations said the two sides disagreed about the relative value of the unions' proposal; while the unions said their package of wage and productivity concessions, cash, notes and preferred stock was worth $5.5 billion, or roughly $165 a share, United's advisers at First Boston valued their offer at about $140 a share.

Because United's stock closed yesterday at $148.375, up $1.625, on the New York Stock Exchange, the unions' offer apparently failed a key test that it benefit existing shareholders.

The unions -- the International Association of Machinists and the Air Line Pilots Association -- also were said to have offered $650 million in cash, $500 million in debentures and $750 million in preferred stock.

United was also concerned that the unions proposed to put certain limitations on its plan to create a smaller airline within United to meet new competition on low-fare short domestic routes.

In a statement, United said its board had decided to proceed with the sale of 15 of its 17 flight kitchens to Dobbs International Inc. for $119.4 million, which was scheduled to close at midnight last night.

That sale, which would result in layoffs of 5,200 machinists, had served in recent days as deadline for the negotiations. If the sale went through, the unions had said they would withdraw their offer and begin their campaign against United.

United said in its statement that it was willing to continue to hold discussions with the unions, but in light of the increasing difficulty between the unions and United's management, that was considered unlikely.

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