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Tue, Mar 25, 2003

United Reaches Agreement With Union

...All 18 Members

OK, so it's a small part of United's labor force, those 18 meteorologists of the Transport Workers Union, who keep the airliners safe and on time; but it's a step in the right direction, as United tries for all it's worth (currently, about 83¢ a share) to stay afloat.

If UAL doesn't reach satisfactory agreements with all its unions by May 1, there is a good chance that remaining contracts will be abrogated by the court; failing efforts after that could seal the world's second-largest-airline's fate.

United's other unions -- pilots, flight attendants, and dispatchers (but not machinists) -- agreed months ago to contract revisions. It's possible that the "cooperative" unions will hold out until after the machinists give in, and it's quite possible the machinists, after seeing how the other unions are willing to shoulder the IAM's "share," won't budge. If that's what happens, or if the union workers find they can make more money at another job, United's bacon is burned.

The airline must show the Court a plan for sufficient cash flow, a plan that will allow UAL to pay off creditors in an amount they, too, approve. [A recent plan, filed by fellow Chapter 11 airline, US Airways, allowed repayment of roughly 2¢ on the dollar, to prepetition unsecured creditors --ed.]

As the war comes into focus, travel, particularly international travel, continues a slump. Fuel prices have, finally, taken a turn lower: this may help, to some extent. The big expense that remains, at the airline whose unions were boasting in recent years that they had reached "industry-leading" contract agreements, is labor. With a continuing and worsening overcapacity in the industry, prices (including the price of labor) must decline. [The other solution, lowering supply, is off the table, as long as major airlines are "protected" from foreclosure by Chapter 11 --ed.]

The fallout among major airlines' suppliers will take years of recovery, as the second shock wave of major airline Chapter 11 filings hits the supporting industries.

FMI: www.ual.com; www.twu.org

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