United says ready to start contract-voiding process Monday
CHICAGO (AP) =97 United Airlines is unlikely to reach agreements with its=20
unions on long-term concessions by next week's target date, a top executive=
=20
of the bankrupt carrier said Wednesday, forcing it to start seeking=20
court-ordered contracts.
Chief financial officer Jake Brace said following a meeting of United=20
creditors that the airline expects to go to bankruptcy court on Monday as=20
planned to request a release from the existing contracts. "I expect we will=
=20
be filing papers in court with some of the unions," he said in an=20
interview. He declined to say whether any agreements are possible with any=
=20
of United's three big unions by Monday, which union officials have=20
indicated is unlikely. The contracts wouldn't be nullified until May under=
=20
United's proposal, giving labor and management another 45 days from that=20
date to settle on terms. But initiating the legal process, which could wipe=
=20
out decades of negotiated labor terms, will add new urgency to the contract=
=20
talks at the heart of United's bankruptcy reorganization. United made clear=
=20
at the creditors' meeting that it needs new contract terms in place by May=
=20
1, when temporary wage cuts expire, in order to meet its lenders' strict=20
financial benchmarks in bankruptcy. It wants to slash labor costs by 31% or=
=20
$2.56 billion annually through 2008.
Besides resisting the drastic cutbacks, unions are opposed to the separate=
=20
low-cost carrier that United wants to establish in order to better compete=
=20
with discount airlines, concerned about the effect on pay, work rules and=20
seniority. The company told creditors that its cash flow in January was a=20
positive $1 million a day, handily beating its forecast that it would lose=
=20
$10 million to $15 million that month. It attributed the showing to the=20
benefits of achieving interim labor agreements early that month.
But that achievement was clouded by United's acknowledgement that lower=20
revenues and rising jet fuel costs have hurt its financial performance more=
=20
than expected since then. "Customers are declining to book international=20
trips very far into the future while the threat of war is looming," Brace=20
said. United filed for Chapter 11 bankruptcy protection on Dec. 9 after 2{=
=20
years of heavy losses. It hopes to emerge from bankruptcy sometime in 2004=
=20
=97 an objective that Brace said has not changed. But the industrywide=
crisis=20
has cast that goal in significant doubt, and other major carriers may soon=
=20
join United and US Airways in bankruptcy court. Fewer than 50 people, most=
=20
of them lawyers, attended Wednesday's public meeting at a downtown hotel.
Shares in United parent UAL Corp. fell 6 cents to close at 91 cents on the=
=20
New York Stock Exchange.
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