United Airlines Chief Executive Glenn Tilton yesterday reiterated the carrier's intent to eliminate unionized employees' current pension...
CHICAGO — United Airlines Chief Executive Glenn Tilton yesterday reiterated the carrier’s intent to eliminate unionized employees’ current pension plans and replace existing labor contracts as necessary to obtain bankruptcy-exit financing.
Escalating fuel prices have left the airline in no position to compromise on its cutback plans, Tilton said.
United said in a bankruptcy filing yesterday that it intends to replace existing pensions and tear up collective-bargaining agreements with the mechanics and machinists unions if they don’t agree to permanent pay cuts and other concessions by a May 11 trial date.
In its filing, the company argued that it has found no alternatives to ending the pension plans and replacing labor contracts. The airline said it “shares its employees’ frustration” over having to take the step.
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“But the unalterable fact remains that, as the future of one of the world’s largest airlines and its 60,000 employees hang in the balance, now is not the time for half measures,” United told the court.
Tilton said United is still targeting this fall for emerging from Chapter 11 bankruptcy protection, but only if it is able to reduce costs enough to satisfy banks interested in providing $2 billion to $2.5 billion in exit financing. He described contract negotiations as “rigorous.”
As in previous showdowns, the unions representing United’s mechanics and other ground workers are threatening to strike if United’s preferred wage and benefit cuts are imposed in bankruptcy court without reaching agreements with employees.
The Association of Flight Attendants threatened Friday to tear up its own cost-saving deal with United, accusing company leaders of failing to demonstrate they have cut their own salaries as promised.
Analyst Ray Neidl of Calyon Securities said there’s no assurance employees will agree to further concessions. But he said there’s no alternative if United is to come up with exit financing.
Neidl said “this is the year when things will start changing” in the industry if fuel prices remain high, foreseeing either mergers or liquidation.
United has been restructuring under the protection of federal bankruptcy law since 2002. It continues to lose money along with most of the industry due to high fuel prices, low fares and competition from discount carriers. Analysts see industry losses as high as $5 billion this year.
Tilton said in a speech the industry needs to consolidate. Later, he cited the merger creating Air France-KLM, the world’s largest airline, as a model.
He dismissed as a “false premise” the notion that a carrier needs to go under for the industry to improve. “It’s not a matter of US Air or Independence Air going out of business,” he said. “That’s simply not going to make things better for everyone.”