=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/c/a/2005/05/12/BUG1HCNMQK= 1.DTL --------------------------------------------------------------------- Thursday, May 12, 2005 (SF Chronicle) UNITED STILL WANTS MORE FROM UNIONS/Pension handoff not enough: After losin= g $1.1 billion, airline seeks another $725 million in labor savings George Raine, Chronicle Staff Writer One day after a federal judge allowed United Airlines to terminate 120,0= 00 employee and retiree pensions, the bankrupt airline was back in court Wednesday seeking cost-cutting changes in two of its labor contracts. If United has its way and trims $725 million in annual labor costs, it will be close to resolving its bankruptcy, which it entered December 2002. Even if the door is flung open, however, the struggle will continue, a reality reinforced Wednesday when UAL Corp., United's parent, reported a net loss of $1.1 billion in the first quarter. The operating loss of $250 million, UAL said, was mainly a result of fuel costs of $1.46 per gallon, up 36 percent from a year ago. It gets worse: United predicts jet fuel will cost an average $1.66 a gallon in the second quarter. Fuel is but one challenge facing United and all other airlines, but the major carriers -- United, American and Delta, in particular -- have fallen out of step in an industry where consumers have favored low-cost and little- fanfare carriers. The legacy airlines have been slow to adapt. Wednesday's trial began with Federal Bankruptcy Court Judge Eugene Wedoff hearing testimony from United officials, who said its only option is to cut wages and benefits for members of two unions, the International Association of Machinists and Aerospace Workers and the Aircraft Mechanics Fraternal Association. United wants the judge to authorize the rewriting of some contractual language, but it doesn't mean the pacts are tossed out. The trial may last several weeks. The unions' response is that they might go on strike if there are unacceptable changes made in their contracts. The mechanics authorized a strike in that event last January, and the machinists union, representing some 30,000 active and retired United employees, including baggage handlers, said Wednesday that its members authorized a strike by a 94 percent margin in recent voting. "We are not willing to make the unfair and disproportionate sacrifices United is demanding," said IAM District 141 President Randy Canale in Washington, D.C. "United used the bankruptcy court to point a gun at their employees. They can only blame themselves if it backfires." Standard & Poor's analyst Philip Baggaley said in a report Wednesday, "A full-scale strike by any major union would be financially devastating and could lead to liquidation of the airline. For that reason, it appears that the unions will instead seek to use that threat, but not follow through, in an effort to win better terms in the replacement defined-contribution plans and overall labor contracts." All of United's employees have agreed to concessions in previous negotiations, giving back $2.5 billion a year to the company. The company says it needs more. "During the trial, we will present our case to the court for long-term savings we need from the IAM and AMFA," said United spokeswoman Jean Medina. "We need to achieve an additional $2 billion in cost savings, including $725 million in savings from labor groups -- including salaried and management -- to be a sustainable, viable companygoing forward," she said. United employees and retirees are "beyond mad," said Richard Turk, a spokesman for the mechanics union in the Bay Area. "I once asked United how many vice presidents they had," said Willibald Spitz, 73, of the South Bay, who retired in 1993 after 34 years with the company. "They said 165 vice presidents. I said, 'How can you make money?' It's high time that management goes." "United was an awesome company," particularly during spectacular growth spurts in the 1990s, Terry Sousoures, 46, a flight attendant working out of San Francisco International Airport for 21 years, said Wednesday, reflecting on a proud airline history. "But I've seen morale deteriorate on a huge scale. It's unbelievable. And I don't think they (management) are done." Sousoures is president of the United chapter of the Association of Flight Attendants. On Tuesday, the bankruptcy judge approved the termination of United's four pension plans, the largest corporate pension default in the nation's history. The pensions are still viable because they are to be transferred -- pending appeal by the unions -- to the federal government's pension insurer, the Pension Benefit Guaranty Corp., which will pay out less in pension payments. Collectively, United's pension plans are underfunded by $9.8 billion, $6. 6 billion of which is guaranteed, according to the Pension Benefit Guaranty Corp., a federal corporation created under the Employee Retirement Income Security Act of 1974. The $4.5 million pension set aside for Glenn Tilton, United's chairman a= nd CEO, is not in play. It was placed in a trust when he joined the company in September 2002, after leaving Chevron, three months before United filed for Chapter 11. UAL Corp. shares closed Wednesday at 99 cents, up 4 cents. UNION GIVEBACKS Here is a list of additional labor contract savings United Airlines says it needs. Only the machinists and mechanics unions do not have agreements with United. Salaried and management: $112 million Air Line Pilots Association: $191 million Association of Flight Attendants: $138 million Aircraft Mechanics Fraternal Association: $101 million International Association of Machinists and Aerospace Workers: $180 million Professional Airline Flight Control Association: $3 million Transport Workers Union: $242,000 Source: United Airlines E-mail George Raine at graine@xxxxxxxxxxxxxxxx -------------------------= --------------------------------------------- Copyright 2005 SF Chronicle