United machinists to ask court to stop wage cuts = = = = Tuesday December 31, 12:40 PM EST = By Kathy Fieweger CHICAGO, Dec 31 (Reuters) - The machinists union at United Airlines on Tu= esday prepared court papers objecting to proposed temporary 13 percent wa= ge cuts, saying it did not have enough time to consider the bankrupt airl= ine's financial data outlining why such cuts were needed right now. United, a unit of UAL Corp., (UAL) filed for bankruptcy Dec. 9 and is see= king $2.4 billion in wage cuts annually from its union and nonunion worke= rs. It has warned that without sufficient cost cuts and revenue growth, i= ts special bankruptcy financing can be pulled, threatening its survival. Leaders of the pilots' and flight attendants' unions at United have alrea= dy agreed to temporary wage cuts, buying the airline more time to negotia= te permanent deals once rank-and-file members approve them. But the leade= rship of the International Association of Machinists has not done so. = Executives and union officials at other airlines are closely watching dev= elopments on the labor front at United, as high costs and weak revenue ha= ve led to billions of dollars in losses industry-wide since the Sept. 11,= 2001, attacks. The judge presiding over United's bankruptcy case said he will consider b= oth the IAM's objection and United's response on Jan. 10. At that point, = he will decide whether the temporary cuts should go into effect or whethe= r a different negotiating process under the U.S. bankruptcy code's sectio= n 1113(c) will kick in. Meanwhile, during a court hearing Monday about a complicated tax issue in= volving the company's employee stock ownership plan, the airline's Chief = Financial Officer said UAL's net operating loss, which is a special tax r= eporting figure only, will total about $3.2 billion for 2002. That is the= figure that will be provided to the Internal Revenue Service in about Fe= bruary, said CFO Jake Brace. For the first 11 months of 2002, United has amassed pretax losses of abou= t $2.8 billion, Brace said. He forecast the airline would return to opera= ting profitability in 2004 and return to a net profit in 2005, as outline= d in a business plan provided to bankruptcy lenders. In 2001, the airline's net operating loss for taxable purposes was $2.97 = billion, Brace said, although UAL reported to investors a net loss of $2.= 1 billion. JUDGE PUTS OFF RULING ON TAX ISSUE U.S. Bankruptcy Court Judge Eugene Wedoff heard arguments about whether S= tate Street Bank, the investment manager for United's ESOP stock, should = be allowed to continue selling out of its holdings as it desires. State Street wants to keep selling stock to preserve some value for share= holders. But the airline maintains that policy could could jeopardize the= existence of what it estimates are about $5.2 billion in special tax ass= ets called net operating loss carryforwards. Some of the NOLs can also be wiped out when the airline cancels debt obli= gations as part of the bankruptcy process. UAL is planning to use the so-called NOLs as a means of boosting future c= ash flow once it exits the bankruptcy court. Brace said. It has already u= sed about $2.7 billion of such NOLs in the past on its tax returns. If St= ate Street sells too much of the employee stock, however, the resulting a= change of ownership can wipe out the NOLs. United and the lenders who provided $1.5 billion in debtor-in-possesion f= inancing consider the NOLs an asset of the estate, critical to implementi= ng the reorganization plan, Brace said. Analysts said they were not surprised by the estimated losses at United, = as airline industry revenue remains depressed. "As far as the loss, they lost over $2 billion last year and things have = gotten worse, so that is not necessarily surprising," said Morningstar an= alyst Nicholas Owens. "Any talk about profitability is predicated on a return in demand for air= travel, basically the economy and business flying, and these factors won= 't play out until the middle of next year," Owens said. "I am waiting to see more of a finalized restructuring plan, what we have= right now is witnessing some dirty laundry, which doesn't bode well but = doesn't give any indication of what the business plan will look like," he= added. (Additional reporting by David Bailey) = =A92002 Reuters Limited. = Roger EWROPS