NYTimes.com Article: United Machinists' Union Approves Pay Concessions

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United Machinists' Union Approves Pay Concessions

May 1, 2003
By EDWARD WONG






The machinists' union at United Airlines said yesterday
that its members had voted to give the company $794 million
a year in wage and benefit concessions for six years.

United has persuaded each of its labor groups to agree to
the cuts that it sought going into bankruptcy court. It
must now turn its attention to achieving savings in other
areas and overhauling its business model.

United has won reductions totaling $2.56 billion a year
from its workers, including managers and nonunion
employees.

Judge Eugene R. Wedoff accepted the new contracts yesterday
in bankruptcy court in Chicago.

The concessions go into effect today. Wage cuts among the
unions range from 9 percent for the flight attendants to 30
percent for the pilots. The machinists are taking salary
cuts of 13 percent. There will almost certainly be layoffs
among some union members.

"With this critical milestone behind us, we can now move
quickly to implement the ratified changes in all of our
labor agreements," Glenn F. Tilton, chief executive of
United, said yesterday in a written statement. "I
appreciate the tough choices and sacrifices all our
employees are making to help ensure United emerges from
bankruptcy and succeeds for the long term."

The International Association of Machinists finished
counting the votes early yesterday. The union represents
22,000 workers, with 10,000 in a mechanics sub-group. Of
voters in that group, 70 percent supported the concessions,
while 83 percent of voters in the other group - which
consists mostly of baggage handlers - supported them.

Before the ballots were counted, there were questions
whether the mechanics would support the concessions. They
voted last Thanksgiving to reject concessions that United
had said it needed to obtain a $1.8 billion federal loan
guarantee. The rejection was one of several factors that
pushed the airline to file for bankruptcy protection in
early December.

The mechanics' unit has also been constantly threatened
with a representation takeover by the Aircraft Mechanics
Fraternal Organization, which says it has resisted
concessions at Northwest Airlines. The National Mediation
Board said yesterday that it would hold a vote allowing
mechanics at United to choose their union. The voting will
start June 12 and end July 14.

"Our members are providing United Airlines with the means
and opportunity to successfully restructure and avoid
liquidation," said Scotty Ford, president of the mechanics'
unit. "The problems and solutions of the airline's latest
crisis go far beyond labor costs, but immediate action was
needed to ensure the survival of this airline."

United, a unit of the UAL Corporation, has also been
working to cut aircraft leasing costs, as well as
renegotiate other contracts with suppliers. With the latest
round of labor concessions, it no longer has the industry's
highest unit-labor costs, or cost per available seat mile.
The contract ratifications also mean there will be no labor
opposition to its plans for a low-cost airline, a project
that has the working name Starfish.

Delta Air Lines now has the highest unit-labor costs,
according to industry analysts. American Airlines
previously topped it, as did US Airways, but they have won
concessions from workers recently.

On Tuesday afternoon, Delta executives gave the Air Line
Pilots Association a proposal for cost cuts. The plan
includes a 22 percent hourly wage cut as well as changes to
work rules, elimination of raises this year and next and a
scaling back of health care benefits.

Mike Pinho, a union spokesman, said in an e-mail message to
members that union leaders would review the proposal. The
pilots are the only work group at Delta to have
representation.

Jamie Baker, an analyst at J. P. Morgan Chase, said that
negotiations with unions for concessions at Delta and
Northwest would happen slowly, and that things would
probably turn "ugly" before any progress was made. He said
he did not expect to see the two airlines win concessions
until next year.

The problem, he said, is that Delta and Northwest - which
have had stronger cash positions than their rivals - cannot
make a legitimate case that they are on the verge of
bankruptcy, while American Airlines could.

"Achieving labor concessions is far easier when bankruptcy
is an easier threat," he said. "It's not at that point at
Northwest and Delta."

http://www.nytimes.com/2003/05/01/business/01AIR.html?ex=1052796003&ei=1&en=6d91da4ee85fc1d5



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