This article from NYTimes.com has been sent to you by psa188@juno.com. United and Machinists Reach Deal on Concessions November 21, 2002 By MICHELINE MAYNARD Leaders of the machinists' union at United Airlines agreed late yesterday to concessions worth $1.5 billion in an effort to help the airline avoid bankruptcy, becoming the last employee group to sign on to the company's turnaround effort. The International Association of Machinists - which represents 37,500 baggage handlers, mechanics and ground workers at the airline - is United's biggest single union and the final group that United needs to complete its bid for employee concessions. United's fate now rests with the federal Air Transportation Stabilization Board, which is considering the airline's application for $1.8 billion in loan guarantees so that it can pay for its operations, which are costing the airline about $7 million a day. There is little time for United, a unit of the UAL Corporation, to go back and ask for more cuts if the board is not satisfied. United is facing a Dec. 2 deadline for making a $375 million payment on debt secured by aircraft. If it cannot make or extend the payment, and does not obtain the loan guarantees by then, executives say the company will be forced to file for Chapter 11 bankruptcy protection. Leaders at the two union locals that represent United machinists approved the package after meetings with the airline over the last several weeks. The union set a ratification vote for Nov. 27. The machinists' union did not give details of the package, disclosing only the amount of the concessions. It said it would inform union members about the package later this week. "Too many airlines have been forced into bankruptcy, never to return," said Randy Canale, president of I.A.M. District 141, one of the two union locals, in a statement issued after the union leaders' vote. "Too many good airline careers and families have been destroyed. Despite obstacles and unprecedented economic pressures, I still believe our greatest days lie before us." In his own statement, Glenn F. Tilton, the airline's chief executive, thanked employees for their effort. "The I.A.M., along with our other unions, has stepped up to the challenge by cooperating in an unprecedented way to set the framework for a stronger, more competitive airline," he said. United's employees hold 55 percent of the airline's stock along with a majority of the seats on its board. United's pilots have approved $2.2 billion in wage cuts, while tentative agreements have been reached with flight attendants - who are expected to contribute $412 million in concessions - and with the meteorologists and aircraft dispatchers. In addition, United said its salaried employees would contribute $1.3 billion in wage cuts. The airline is giving stock options to employees who participate. But, with the machinists, the total of the wage concessions appears to be only about $5.4 billion, about $400 million short of United's goal. Company executives would apparently make up the shortfall. But even so, the difference between what the employees promised to give and the actual concessions may raise eyebrows at the federal board. The board's staff members, who have yet to make a recommendation to the three-member panel, have been trying to discern whether United employees pledged enough in concessions for an airline the size of United, according to people close to the board's deliberations. Congress created the board after the Sept. 11 attacks to allocate $10 billion in emergency financing. United has argued that it already meets the three main criteria that qualify a carrier to receive help: damage from the Sept. 11 attacks, inability to gain access to credit markets and a program to repay money it borrows. In its business plan, which United released on Sunday, the airline said it would return to an operating profit by 2004. It has promised to begin paying back the loans in 2005 and repay them in full by 2007. United also plans to cut an additional 9,000 jobs through 2004, bringing its employment level to 74,000, down from about 100,000 before the Sept. 11 attacks. It plans to defer aircraft purchases and make further cuts throughout its operations. The wage concessions that the airline has obtained as well as the business plan are United's best attempt at winning approval, said Jamie N. Baker, an airline industry analyst with J. P. Morgan Chase in New York. "UAL has thrown its Hail Mary pass," he said. Mr. Baker, however, viewed the effort as insufficient and said the airline would not be able to avoid a bankruptcy filing, a view shared by others on Wall Street and in the industry. That would be inevitable if the carrier does not receive the loan guarantees, executives have said. Thomas F. Boland, managing partner at the Seneca Financial Group, in Greenwich, Conn., said United was at something of a disadvantage because the air board has had the opportunity to view business plans from a range of other airlines and can compare those carriers' assumptions with those of United. Mr. Boland, who advised America West in its successful application for loan guarantees, speculated that the board was considering broader implications as it weighed United's application. "The real question, which applies to United, and which applies to the industry, is, What should the industry look like?" United has been working to line up debtor-in-possession financing from investment banks. Mr. Tilton has argued that the efforts at winning concessions, and the cuts that United has announced, will stand the airline in good stead if it has to file for bankruptcy. In an interview last week, he said that United would be able to quickly reorganize and customers would not be inconvenienced. But bankruptcy experts say that the case could be messy, with aircraft leaseholders, bondholders and corporate customers coming forward in bankruptcy court to protect their interests. http://www.nytimes.com/2002/11/21/business/21AIR.html?ex=1038914014&ei=1&en=9bc2af76e36d9898 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