NYTimes.com Article: United Talks of Total Savings as It Pushes for Federal Help

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United Talks of Total Savings as It Pushes for Federal Help

November 27, 2002
By MICHELINE MAYNARD






Throwing all of its ammunition into efforts to win approval
for $1.8 billion in federal loan guarantees that would help
it avoid bankruptcy court, United Airlines said yesterday
that its recovery package would yield savings of $14.1
billion in the next five and a half years.

That number, which United disclosed for the first time,
represents a compilation of every resource the airline has
gathered in its effort to remain solvent, including
employee wage and benefit concessions, reductions in its
flight schedules, the retirement of airplanes, and spending
cuts throughout its operations.

Nearly all of those savings had been previously announced,
except for $1.2 billion in new savings announced yesterday.


The package's most notable feature is the concessions
United got from its main unions through 2008. Members of
the International Association of Machinists vote today on
their package, worth $1.5 billion to the airline.

United, a unit of the UAL Corporation, clarified yesterday
that the actual wage and benefit cuts negotiated with its
employees would total $5.2 billion in the next five and a
half years once it reduces its flight schedules, as it has
announced it will do through next year. United and its
unions had been aiming for savings of $5.8 billion through
2008.

But United said the schedule reductions would lead to
savings of $1.2 billion because the airline would rely on
more efficient aircraft. It was the first time United had
disclosed the $1.2 billion figure.

The wage and benefit cuts, plus the flight schedule
savings, are expected to give the airline $6.4 billion in
savings from labor-related sources, United said. The
airline also expects spending cuts to save $1.4 billion a
year, or $7.7 billion through 2008.

The combination of the two sets of savings results in the
$14.1 billion number, the airline said. United said its
employees would receive stock options and a profit-sharing
plan once its recovery plan was under way. United also said
senior executives would make contributions, which are still
undisclosed, to the turnaround plan.

The announcement of the figure for savings appeared to be
part of an effort by the airline to counter contentions by
some of its competitors that the airline has not cut costs
sufficiently.

The airline said yesterday that the contract provisions
would not take effect unless it received the loan
guarantees and completed a financing plan by Dec. 31. But
that point seemed moot because United has said it will have
to seek bankruptcy protection if it cannot win approval for
the loan guarantees and misses a $375 million payment on
debt, backed by aircraft, that is due on Monday.

http://www.nytimes.com/2002/11/27/business/27UAL.html?ex=1039407002&ei=1&en=7fcddfb900947ff5



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