UAL asks judge to void its labor contracts

Bankruptcy code not so used since 1983

March 18, 2003|By NEW YORK TIMES NEWS SERVICE

United Airlines asked a federal bankruptcy court judge yesterday to set aside its labor agreements as it seeks deep wage and benefit cuts from its employees.

The motion, filed in Chicago by United's parent, the UAL Corp., proposed a series of agreements that would permanently reduce wage and benefit levels by $2.56 billion a year and make changes in schedules for flight crews, in pension plans, in job security and in various clauses that govern staffing levels and job duties. UAL also wants to create a low-fare airline.

If Judge Eugene Wedoff allows United to void its contracts, it would be the first time that an airline had used the bankruptcy code to cancel its labor agreements and impose new work rules since Frank Lorenzo did so at Continental Airlines in 1983.

Yesterday was the final day when United, which filed for bankruptcy in December, was allowed under bankruptcy law to make the request. Otherwise, it would have lost the ability to apply what could be a critical tool as it seeks to reorganize.

Although the action was expected, it had extraordinary significance in the case of United, which had been 55 percent owned by its employees before it filed for bankruptcy. In addition, United's labor unions held three seats on its board and had the right to veto the selection of a chief executive. Those rights were terminated two weeks ago when employee ownership fell below 20 percent.

The changes that United is seeking would allow it to create a low-fare airline, which would take over about 30 percent of its current operations. The unions strongly oppose such an airline.

United also said it would place greater emphasis on the use of regional jets, contract out functions now performed by airline employees and expand code-sharing agreements with other airlines.

"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," Glenn F. Tilton, UAL's chief executive, said in a statement.

Industry analysts said they expect negotiations between United and its unions, under way in earnest over the past few weeks, to continue. But United's unions face two deadlines. Yesterday, Tilton said the threat of war in Iraq had caused United's bookings to drop significantly. If it cannot reach agreement with its unions within 30 days, he said, the airline will be forced to impose across-the-board cutbacks of at least 9 percent on all 72,500 employees.

In case of war, Tilton said, the airline is prepared to reduce capacity as much as necessary. Last week, in a recording to employees, Tilton placed the amount at 10 percent to 12 percent.

Another deadline looms May 1, when United is required to meet terms of $1.5 billion in debtor-in-possession financing that it obtained when it filed for bankruptcy.

Tilton vowed that the airline would negotiate "around the clock" to reach agreements with its unions by then. "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," Tilton said.

United's pilots said they were "extremely dismayed" by the court filing. "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," said Paul Whiteford, chairman of the Air Line Pilots Association's master executive council at United and one of the union members on the board.

The abrogation of a contract is "like the voiding of a sacred oath," said Gary Chaison, professor of industrial relations at Clark University in Worcester, Mass. "It's asking for cooperation under threat. It's going to greatly embitter relations between labor and management."

United also sought to void contracts with the Association of Flight Attendants; the Machinists union, which represents mechanics and other airport workers; and the Professional Airline Flight Control Association, representing traffic controllers.

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