United, Machinists reach tentative accord

Judge grants airline more time to develop reorganization plan

June 18, 2005|By Mark Skertic | Mark Skertic,CHICAGO TRIBUNE

CHICAGO - United Airlines has reached labor peace with its largest union and been granted two more months to work on its bankruptcy reorganization plan.

The airline and International Association of Machinists and Aerospace Workers announced a tentative agreement yesterday on a contract that calls for wage and benefit concessions from United's largest union. The deal ensures union members would continue to have a pension and leaves United with concessions from all its unions.

Also yesterday, Bankruptcy Judge Eugene Wedoff said he would extend until Sept. 1 United's exclusivity period - the time when the carrier's management can craft its bankruptcy-exit plan without potential suitors shopping alternative proposals to the airline's creditors.

The tentative deal with the Machinists ends months of talks with each labor group, and allows United management to focus on its next challenge - renegotiating leases on 72 aircraft or risk losing them.

United had said it needed $700 million in wage and benefit cuts, otherwise it would be unable to attract the financing it needs to emerge from Chapter 11 this year. United has been operating under court protection since December 2002.

The carrier did not release details of the new Machinists' contract, although it had been seeking about $175 million in annual savings from the group. Union leaders said specifics would be released to the membership Tuesday. The union, which includes baggage handlers and customer-service representatives, represents about 20,000 workers, a third of United's work force.

"This tentative agreement was not reached easily," union leaders said in a letter to members posted on the IAM Web site yesterday. "We fought the company at the bargaining table, in the boardroom, in the halls of Congress, in the courts and in the streets."

Members will have until July 22 to vote on the five-year pact.

It would leave them as the only United workers who continue to have a pension - although it would no longer be a United Airlines pension. United agreed to a union demand that its spending on worker retirement benefits would go to the IAM's National Pension Plan rather than a company 401(k).

Many workers prefer a pension, which pays a guaranteed amount. The payout from a 401(k) depends on how much is in the account when a worker retires.

If union members approve the contract, the United workers will make up the largest employee group in the IAM plan. About 1,700 employers have workers in the plan, which has 70,000 members and pays benefits to 55,000 retirees and their survivors.

While declining to discuss how much it will contribute, United Chief Financial Officer Jake Brace said the expense to the airline would not be more expensive than paying into a 401(k).

The Chicago Tribune is a Tribune Publishing newspaper.

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