This article from NYTimes.com has been sent to you by psa188@juno.com. UAL and Unions Set Goal for Cost Cuts October 19, 2002 By EDWARD WONG United Airlines and its unions said yesterday that they had agreed to try to wring $5.8 billion in savings from labor costs over five and a half years, even as UAL, United's parent company, reported one of its worst quarterly losses. The agreement on a figure for concessions is seen as a sign of progress in the company's effort to put together a stringent business plan to obtain much-needed financing. But some analysts said the talks were moving too slowly, and that United, the nation's second-largest carrier, after American, could be forced to file for bankruptcy protection by mid-November, when it faces a large debt payment. United also said yesterday that it would file its new business plan with the federal government next week to bolster an application for a $1.8 billion loan guarantee, which would help it get $2 billion in private loans. Executives are meeting with representatives from each of five unions to parcel out the concessions. "Discussions with individual coalition members to finalize their component of the $5.8 billion are moving forward, but at varying paces," Jake Brace, chief financial officer, said in a statement. "These discussions need to be brought to a quick resolution to achieve our common goal." UAL reported a net loss in the third quarter of $889 million, or $15.57 a share. In the period a year ago, when it had to weather the financial fallout of the Sept. 11 attacks, UAL had a loss of $1.2 billion, or $21.43 a share. The company reported revenue of $3.7 billion, down 9 percent from the a year ago. Excluding special items like a tax valuation allowance, UAL had a third-quarter loss of $503 million, or $8.82 a share. This was below the analysts' consensus estimate of $7.42 a share, as surveyed by Thomson First Call. Shares of UAL closed down 2 cents yesterday at $1.71. Perhaps most significant, UAL said it had a cash balance of $2 billion, but was burning through it at a rate of $7 million a day by the end of the third quarter. About $344 million of the cash balance cannot be used because it is tied up in various financial obligations. "United's cash burn will be even worse in the fourth quarter due to seasonal trends and the continued weak revenue environment," the company said. Given all that, it was no surprise that some analysts appeared less than sanguine about United's future. "I think it's good news for the company that the unions seem to be moving closer to some sort of agreement," said Jim Corridore, an analyst at Standard & Poor's. "But that's too little, too late. The company has these debt obligations that become due in November. It's questionable how quickly the government can move on their application." Executives at United have been talking regularly to the Air Transportation Stabilization Board, the government agency that administers the $10 billion loan guarantee program that was set up by Congress after the attacks. The unions tried to appear optimistic yesterday, saying that the $5.8 billion in savings would help the company avoid bankruptcy. Late last month, the five unions came together to offer the company $5 billion in cost savings over five years, even though executives had asked for $9 billion over six years in August. Since the unions made their offer, management has been negotiating with labor leaders for further concessions. "Where the money comes from would be determined through negotiations with each union on productivity issues or wage cuts," said Paul Whiteford, who represents the pilots' union on UAL's board. "That's for each union to negotiate with the company." The pilots issued a statement yesterday morning saying that four of UAL's five unions had come up with the $5.8 billion number. This implied that the machinists' union, which recently split off from the union coalition to start separate negotiations with the company, had not agreed to that number. But the machinists quickly said they supported the proposed $5.8 billion in concessions. "We began meeting in discussions with United Airlines yesterday, and we are making progress," Joe Tiberi, a union spokesman, said. "We are all working toward that goal." Mr. Tiberi said United had to recognize that the machinists had already made sacrifices, like deferring $500 million in retroactive pay. The first $70 million of that becomes due in early December. Jeff Zack, a spokesman for the flight attendants, said that talks between his union and executives were expected to begin next week, and that there is no "tentative agreement on anything at this time." Raymond E. Neidl, an analyst at Blaylock & Partners, pointed out that even if union leaders agree to concessions with management, the rank-and-file members would probably have to approve the cuts and that "you need the understanding on the part of the employees why they're making this sacrifice." http://www.nytimes.com/2002/10/19/business/19AIR.html?ex=1036036402&ei=1&en=0f11b67646372681 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company