United sees bookings decline as strike looms

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By Kathy Fieweger

ELK GROVE VILLAGE, Ill., Feb 15 (Reuters) - United Airlines on Friday said
passengers began looking elsewhere for flights in anticipation of a strike
set for next week after 13,000 mechanics and cleaners rejected a contract
offer.

With a strike deadline looming in five days at the No. 2 U.S. carrier, talks
resumed Friday afternoon. Earlier this week, mechanics rejected an offer
from United that included a 37 percent pay increase for the most senior
workers, but also sought unspecified future wage concessions and deferred
retroactive pay, among other provisions.

"We clearly intend to avoid a strike," Chief Financial Officer Jake Brace
told Reuters in an interview at United's headquarters in Elk Grove Village,
a suburb of Chicago. "We are seeing a lower share of bookings than we have
been seeing."


Brace, a United Airlines veteran, is part of the negotiating team trying to
hammer out an agreement after members of the International Association of
Mechanics and Aerospace Workers District Lodge 141-M on Tuesday rejected the
first contract offer from United, a unit of UAL Corp. (UAL), since
negotiations began two years ago.

The union was unhappy with the recommendation of a presidential emergency
board that mechanics defer retroactive pay. The machinists said the contract
contained no job security provisions and they rejected a proposed blueprint
for possible wage concessions.

Brace declined to speculate on various analysts' comments that a mechanics
strike could force the airline into filing for bankruptcy protection. United
posted a net loss of $2.1 billion in 2001, an industry record.

"We still have access to the capital markets, we still have a lot of
collateral in both aircraft and non-aircraft," said Brace, who conceded
morale at the airline is not high. "It's (morale) OK. I think that they
understand that the situation we're in is difficult."

The raises would have been the workers' first base-pay hikes in eight years.

Sen. Richard Durbin, an Illinois Democrat, late Friday told Reuters he was
getting a good sense from both the union and UAL Chief Executive Jack
Creighton that an agreement could be reached. "I'm getting positive feelings
from both sides," Durbin said in a phone interview. "The threat of a strike
has taken its toll on United." He made an offer to both parties in writing
this week to personally help broker a deal.

REASSURING PASSENGERS

A separate bargaining unit of the IAM representing ground workers, including
passenger service, ramp and store employees, is also negotiating on a
contract under the direction of the National Mediation Board.

In 1994, machinist union members, like pilots, gave pay cuts in return for a
stake in the airline through an employee stock ownership plan. The IAM is
unhappy that the airline's latest offer includes future wage concessions
from all employee groups to help restore financial stability.

The mechanics last struck United in 1979. During the summer 2000, pilots
staged a work-to-rule slowdown that forced flight cancellations and left
United with a sullied reputation among travelers. Subsequently, pilots
represented by the Air Line Pilots Association won an industry-leading
contract.

Meanwhile, United is seeking to reassure passengers, sending electronic mail
this week to frequent flyers, saying it was "doing everything we can to
reach an agreement and avoid a strike."

Mechanics had authorized a strike in December, but the Bush administration
blocked it before the busy holiday travel season by appointing a special
board.

The board recommended pay raises even though United said it could not afford
them in the wake of the Sept. 11 attacks that crushed airline travel.

UNION SAYS DEADLINE REAL

Brace said the retroactive pay portion of new contracts would require about
$400 million in cash for both units of the IAM to be paid. The airline's
cash balance at the end of 2001 was $2.6 billion.

Both the union and United have said if progress was made in talks, another
contract vote could be scheduled for mid-March.

But union spokesman Frank Larkin called the strike deadline of Wednesday,
12:01 a.m. EST (0501 GMT) very real.

"There are five days remaining, and in airline negotiations that constitutes
an eternity," Larkin said. "Everyone recognizes that the (special) board did
serve some purpose in providing a place for the negotiations to take off
from."

The White House can no longer intervene, but Congress could pass a law to
extend the deadline or impose a settlement. Labor has warned Washington in
plain terms not to get involved. Before recessing until Feb. 25, lawmakers
acknowledged the delicacy of the talks and urged both sides to settle.

"My hope is that the parties can work out any differences and not seek
congressional action," said Sen. Ernest Hollings, a South Carolina Democrat
and chairman of the Senate Commerce Committee. "No one wants a strike or a
shutdown, but Congress is not the place to settle this dispute right now."

At the very least, Congress would wait until after its recess before
considering intervening in any strike. United also hopes to avoid further
government involvement.

UAL shares were trading near lows set immediately after the Sept. 11
attacks, when two of their jets were hijacked and crashed. The stock added
28 cents to $11.36 on Friday on the New York Stock Exchange.

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