United claims it needs additional job cuts

Airline wants to reduce costs another $655 million

September 02, 2004|By Melissa Allison | Melissa Allison,CHICAGO TRIBUNE

CHICAGO - A deep round of job cuts at United Airlines is needed to help shave another $655 million in annual costs so the carrier can attract financing to exit bankruptcy, sources said yesterday.

That would come on top of the $5 billion a year United has said it would save by next year - with half coming through cuts to employees' wages and benefits.

"It is clear that achieving cost competitiveness will require additional job reductions over time," United spokeswoman Jean Medina said yesterday. She did not say how many jobs might be cut or when.

Sources close to the situation said the company has identified $655 million in savings.

"They didn't say whether the savings would come from people or what, but they're talking outsourcing, and that implies you're cutting heads," one source said.

The Financial Times of London reported yesterday that its sources said United might lay off about 6,000 employees, in reductions that would be phased in as part of productivity changes and further outsourcing. Medina would not comment on the report.

The number of employees at United is already down about 40 percent from the middle of 2001, to about 62,000.

Since losing its bid for a federal loan guarantee that would have propelled it out of bankruptcy, United has told employees that more cost cuts are coming. Last month, the carrier said it "likely" would terminate its four pension plans, which the government estimates are underfunded by $8.3 billion.

Several U.S. airlines have asked employees for concessions in recent months as they battle rising fuel costs, heightened competition and the loss of high-paying business travelers.

Delta Air Lines has said it must cut jobs and slash pay and benefits to avoid bankruptcy. And U.S. Airways has asked its pilots, Machinists and others for concessions to help it avoid filing for Chapter 11 protection a second time since 2001.

United is telling some people that it can reduce costs by $655 million - about 4 percent of the airline's $15 billion in operating expenses for last year.

In a recorded call to employees this week, United Chief Operating Officer Pete McDonald identified $625 million in cost savings from six areas - call centers, maintenance, airport operations, fuel consumption and flight operations, sales distribution and at the airline's regional jet business, United Express. He said the company also has looked at cutting overhead in its headquarters operations.

Job cuts and other operational savings might keep the airline from terminating one or more of its pension plans, sources said. Management is devising an assortment of possible cost cuts and will work with its board, creditors, unions and others to determine which cuts to make, they said.

Several union officials said they have heard nothing about a new round of job cuts. And last week, United said it would recall 375 more flight attendants in addition to the 371 it planned to recall this fall.

"We don't respond to speculation and hearsay, but if United has any plan that involves cost cuts for our members, they should speak to us about it," said Joseph Tiberi, a spokesman for the International Association of Machinists and Aerospace Workers.

United's pilots union said it has not heard about job cuts from the airline, but said the carrier has a "serious shortage of pilots."

The Chicago Tribune is a Tribune Publishing newspaper.

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