NYTimes.com Article: Judge Orders Pay Cuts for Machinists at United

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Judge Orders Pay Cuts for Machinists at United

January 10, 2003
By REUTERS






Filed at 1:04 p.m. ET

CHICAGO (Reuters) - A U.S. bankruptcy judge on Friday
ordered temporary 13 percent pay cuts for United Airlines'
unionized machinists, buying the airline more time to
negotiate broad concessions from its entire unionized work
force.

United, a unit of UAL Corp. (UAL.N) and the world's
second-largest airline, filed for bankruptcy on Dec. 9.

Since then, four of the carrier's five unions had agreed to
temporary pay cuts to help the airline reorganize and meet
specific financing requirements by lenders.

But the International Association of Machinists,
representing about 37,000 workers, argued to the judge that
the airline had not shown why the cuts were needed now.

In his ruling issued on Friday morning, U.S. Bankruptcy
Judge Eugene Wedoff agreed with the airline that changes to
the IAM's collective bargaining agreements were
``essential, at the present time, to continue United Air
Lines Inc.'s business and to avoid irreparable damage to
its estate.''

United said in a statement it will now turn attention to
getting longer-term solutions to emerge from bankruptcy.

Meetings with unions about changing work rules and benefits
have continued while the judge's decision was awaited.

``From the outset of this process, it has been United's
objective to make the necessary changes in a collaborative
way,'' said Chief Executive Glenn Tilton. He came on board
the airline in early fall, inheriting thorny labor
relations, particularly with the IAM. Its mechanics and
other workers in 2002 received their first pay raises since
1994, only to have the airline turn around and ask for
cuts.

MUTED REACTION FROM UNION

In a message to members, the IAM had little reaction to the
order other than to say it would advise rank-and-file
workers of additional developments. The IAM said the
temporary pay cuts will remain in effect until either a
broader concession package is negotiated and approved by
the court or until the court rejects the current collective
bargaining agreements altogether and United imposes new
terms.

``The reductions will be applied to each factor that makes
up total hourly pay, including base rates and all
individual premiums,'' the IAM said.

Wedoff said to be fair to the other unions, which agreed to
take pay cuts effective Jan. 1, the IAM union members' pay
will actually be cut by 14 percent from Friday until May 1.
That would be equivalent to the 13 percent reduction
retroactive to Jan. 1 that the company was seeking, he
wrote.

Pilots' pay is being cut the most, at 29 percent, and
flight attendants' salaries are being trimmed by 9 percent.


Smaller unions representing flight dispatchers and
meteorologists are also taking 13 percent cuts.

United has about 80,000 employees, nearly 80 percent of
whom are represented by labor unions.

AIRLINE SAVING $80 MILLION A MONTH

The airline, based in
Elk Grove Village, Illinois, had some of the highest labor
costs in the industry as it headed into bankruptcy. Already
hurt by a slowdown in lucrative business travel, United saw
its losses balloon after the Sept. 11, 2001, attacks on New
York and Washington, and ultimately it was unable to keep
enough cash to pay various debt obligations.

A source familiar with the matter told Reuters the
magnitude of the pay cuts now secured from the unions
represents the total amount of what was needed to meet
requirements of loans known as debtor-in-possession
financing.

The labor savings represent about $80 million per month in
cash, he said. Now the airline has until May to make
sweeping changes to work rules that unions follow, he said.


United in a statement put its savings at about $70 million
a month.

The institutions that have loaned United a total of $1.5
billion to keep flying in bankruptcy are J.P. Morgan Chase
(JPM.N), Citigroup (C.N), Bank One (ONE.N) and CIT Group
(CIT.N).

http://www.nytimes.com/reuters/business/business-airlines-united-machinists.html?ex=1043225803&ei=1&en=bec297eb1ea0f927



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