United Puts Pressure on Unions

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United Puts Pressure on Unions

By EDWARD WONG

NY Times, December 18, 2002

United Airlines said yesterday that if it did not reach agreements on concessions from its unions soon, it would ask a bankruptcy judge on Dec. 26 to start a process that could allow the company to void its union contracts.

The company said that while it was still committed to reaching agreements with all its unions, it might need to have the paperwork in place to nullify contracts to obtain cost cuts.

"We have communicated this to the unions," said Chris Brathwaite, a spokesman for United, a unit of the UAL Corporation. "We remain committed to achieving consensual agreements."

United's request, which would come in a court motion, would fall under Section 1113 of the bankruptcy code, which allows companies to cancel work contracts that impede its return to financial health. But United's lawyers would have to make a strong case in the weeks after making such a motion that the union contracts were hindering United's progress.

The company said that it needed to negotiate agreements on labor cost reductions by Feb. 15 to meet requirements that were established by its four lenders. Those lenders agreed to give United $1.5 billion in debtor-in-possession financing. United can use $800 million of that but it must meet certain cash flow projections each month to maintain access to the money.

The flight attendants' union has said the company is looking to cut $2.4 billion a year in labor costs, two and a half times what the unions had tentatively agreed to in November. But those agreements were voided when the airline's application for a federal loan guarantee was rejected two weeks ago. The unions said this week that they were shocked by the new, larger amount that United was seeking.

They did not seem surprised, though, by United's announcement that it could make the court request next week.

"We understand that the announcement in court today about the future filing of an 1113 motion is purely procedural," said Paul Whiteford, who represents the pilots' union on the board of UAL. "The company talks about a commitment to forging consensual agreements. We hope they mean what they say, but so far the process they have employed gives us pause and concern."

Mr. Whiteford added that his union had not yet received a detailed business plan that lays out the company's operations and structure after it emerges from bankruptcy. "This is critical for us in our evaluation of their proposals," he said.

Leaders of the machinists' union sent a message to workers saying that United's announcement "is not a surprise" and pointed out that US Airways made a similar filing after it went into bankruptcy court in August.

Sara Dela Cruz, a spokeswoman for the flight attendants' union, said, "We do believe that while this is routine and expected, seeking to reject the employees' contracts is premature and unnecessarily provocative."

Glenn F. Tilton, the chief executive of United, sent a letter to employees yesterday urging them to help the company reduce its costs.

At US Airways, which is also negotiating for cost cuts with its workers, one union put out a message to its members yesterday saying that the airline and its main lender had threatened to shut operations by Friday or next Monday if the unions did not agree to concessions.