Airline Didn't Think Unions Would Help Enough, Voluntarily
predicted, United Airlines asked the Court to void its union
contracts, in a 1113(c) filing Monday. Most of United's unions,
including the pilots and flight attendants, have been cooperative,
to one degree or another, through the past several months; the
mechanics have been outwardly intransigent. UAL couldn't ask the
Court to void some contracts and not others, and, having no
ironclad assurance that the mechanics (and possibly other unions)
wouldn't stymie reorganization efforts, the airline did the natural
thing. With UAL's not longer being an "employee-owned company," the
union representation on the airline's Board has diminished powers;
with the contracts' likely to be abrogated, the union bosses find
themselves accidentally outmaneuvered.
UAL's Official Statement Reads Like This:
UAL Corp. (NYSE: UAL), the parent company of
United Airlines, today [Monday] filed a motion under Section
1113 (c) of Chapter 11 of the U.S. Bankruptcy Code to reject the
company's collective bargaining agreements. The company emphasized
that its priority would be to continue negotiating with its unions,
but that it had to file the motion today to ensure that the
necessary cost savings are in place by early May. The cost savings
are critical to United's ability to meet the requirements of its
debtor-in-possession (DIP) financing. The company said that meeting
those requirements necessitates permanent wage concessions as well
as addressing issues such as benefits, work rules, and "scope
clauses" that presently restrict the company's ability to compete
and pursue strategic initiatives.
Glenn F. Tilton (pictured), chairman, president and CEO of
United, said, "We have a plan to fundamentally transform United's
business in a way that is durable and sustainable, and we have made
solid progress in reducing costs. It strikes a balance in achieving
our near-term goal of successfully emerging from bankruptcy with
our longer-term commitment to create a resilient, profitable
enterprise that can be the industry leader once again. Between now
and May 1st, we will continue to negotiate around the clock in the
belief that we can reach consensual agreements with all of our
union groups and render a ruling from the court unnecessary.
However, all of us will have to accept changes that are broad and
deep, and those changes require that we take an entirely new
approach to competing and succeeding in this changed industry."
Under the 1113 (c) motion filed today with the U.S. Bankruptcy
Court for the Northern District of Illinois, United has requested
court approval to reject the company's collective bargaining
agreements and make permanent the interim wage relief it received
from its unionized employees in early January. The company is also
seeking to implement modifications to benefits packages, work
rules, scope of work and job security provisions that will maximize
the company's strategic flexibility and facilitate transformation
to a competitive and efficient airline.
The company's proposed collective bargaining modifications have
a targeted savings of $2.56 billion annually on a cash basis
compared to the current contractual path. Examples of the types of
non-compensation issues that the company needs to address include
the establishment of common benefit and pension plans, changes to
scheduling rules for flight crews, and modifications to
scope-of-work rules to permit, among other things, the outsourcing
of certain functions, expanded use of regional jets, the
establishment of a low- cost carrier and the ability to expand
said that it has reached a tentative agreement with its unionized
meteorologists represented by the Transport Workers Union (TWU) on
contract modifications that would generate the level of cost
savings sought by the company. As a result, the Company will
withdraw its 1113 (c) motion for the TWU, subject to ratification
of the tentative agreement by the TWU membership. The TWU is
expected to vote on this agreement by March 21, 2003.
Additionally, the company said today that it has experienced a
recent significant drop-off in revenue as bookings have declined in
advance of a potential war with Iraq and that the company must take
immediate steps to offset the negative financial effects. United is
actively engaged in an industry effort led by the Air Transport
Association seeking war-time relief and financial assistance from
the US government to mitigate the disproportionate impact of any
war on the airline industry and United. United also intends to
approach its lenders.
In the event United is unable to gain sufficient relief within
the next 30 days, the company said that it may need to seek
additional temporary pay reductions of at least nine percent
across-the-board for all employee groups. If war occurs, United is
prepared to reduce capacity as may prove necessary under the
circumstances as they unfold.
Tilton continued: "While our revenue picture stabilized in the
initial three months after our Chapter 11 filing, we have recently
seen a significant slowdown in travel and bookings in advance of a
possible war with Iraq. We will do everything possible to avoid a
temporary reduction in wages."
UAL-MEC Chairman Captain Paul Whiteford responded
the last few weeks, ALPA and the company have engaged in what has
amounted to an extremely disappointing exercise. When we submitted
our proposal to the company on February 25, it was with the hopes
that it would serve as a starting point for real dialogue and
negotiation. We offered what we believe was a thoughtful and
realistic vision of a revitalized United, braced for a future with
lower pilot costs, significantly increased productivity and a way
to address the low cost competition issue without diluting the
United brand. Our proposal called for great sacrifices from our
pilots. It cuts fat, muscle and even some bone."
"We are extremely dismayed by the Company's 1113(c) proposal.
Our contract is the product of 52 years of good-faith collective
bargaining conducted under federal labor law. To seek to wipe out
this contract by the stroke of a judge's pen is disheartening."
"We believe United's proposal is an overreach designed to take
advantage of a pilot group that has assumed a leadership role for
more than a year in addressing United's economic problems. No
fair-minded observer can look at United's proposal and not see it
for what it is. Notwithstanding this, we believe it is in the best
interests, not just for our pilots but also for United Airlines, to
reach a negotiated settlement."
"During what will be very difficult periods of time ahead us,
United Airlines pilots will continue delivering the industry
leading standards that the traveling public has to come to
The Flight Attendants Are Not Happy, Either:
Airlines flight attendant Master Executive Council President Greg
Davidowitch, of the Association of Flight Attendants, AFL-CIO,
issued the following statement late Monday afternoon:
"AFA is extremely disappointed that United Airlines has filed an
1113c motion to abrogate the flight attendant collective bargaining
agreement that seeks cuts far beyond what is necessary to turn
United into a successfully reorganized carrier.
"Flight attendants understand that for this reorganization to be
successful, United must emerge from bankruptcy able to compete.
AFA's proposal of over $1 billion in labor savings over the next
six years puts United's flight attendant costs at a level
competitive with Southwest Airlines current flight attendant costs.
In fact, AFA's proposal is the equivalent of our entire work group
working for free one year of the six. The proposal provides these
substantial cost savings as well as greater scheduling flexibility
and relief in other areas of the contract targeted by
"Flight attendants are among the lowest paid workers at the
airline, yet we have repeatedly shown our commitment to United's
successful restructuring by setting industry records for service
and by agreeing to immediate sacrifices that allowed United to meet
initial DIP covenants. To put management's 1113c motion into
perspective, the cuts United is proposing would put thousands of
flight attendants at an income level qualifying them for welfare
and other government aid programs. There is no fat, the muscle is
carved, and United's filing is cutting straight to the bone.
"AFA's goal is to reach a consensual agreement with current
United management, and negotiations aimed at reaching an acceptable
agreement continue. But United is abusing the 1113 process. 1113
was established to protect labor contracts from being unnecessarily
modified and to ensure that the sacrifices made by all parties are
fair and equitable. United's 1113 motion goes far beyond what's
needed to successfully restructure in an attempt to gut our
contract, and places an inordinate burden on the flight
"As we have said before, history shows that discord between
labor and management in the bankruptcy process does not promote
success. And AFA's number one goal is success for our company and
security for our members."