While Workers Get Cuts, UAL Unveils $95 Million Retention Plan for Bigwigs

The Association of Flight Attendants has opposed a request by United Airlines' parent company, UAL Corp., to implement a key employee-retention plan for some members of the carrier's management, saying the proposed plan lacks business judgment and has unreasonable terms.

The U.S. Bankruptcy Court in Chicago, which is overseeing UAL's Chapter 11 bankruptcy case, was presented the matter on Wednesday.

According to court papers obtained by Dow Jones Newswires Tuesday, the flight attendant's union said the proposed plan would give members of UAL management significant improvements in compensation and benefits while the company's rank-and-file workers are expected "to forfeit a substantial percentage of their wages." The objection said "the proposal comes at a critical juncture" in negotiations with the airline's union-represented workers.

UAL's flight attendants last week ratified an interim relief agreement that calls for a temporary 9% pay cut, joining other unions that have agreed to similar reductions. The Association of Flight Attendants is the collective bargaining representative for United Airlines' 24,000 flight attendants -- the carrier's largest employee group.

UAL hasn't "demonstrated a real need" for the plan because "statistics provided by the company fail to substantiate (UAL's) claim of a sudden spike in voluntary turnover," the filing said.

The company said in its motion that the rate of officer turnover has traditionally been about 2.5%, but that during the year before UAL's bankruptcy filing December 9, that rate exceeded 10%. Also, a traditional director turnover rate of 10% rose to 17.3% during that year, the filing said.

UAL said the proposed plan, which includes a retention component and a severance component, is essential for UAL to keep key employees on board so the airline can keep operating and emerge from bankruptcy. UAL said the plan "has been carefully structured to avoid unnecessary or excessive incentives and has been tailored to provide bonuses only to those employees that senior management truly believes are critical to the success" of the Chapter 11 case.

UAL estimated the retention component will cost about $32 million and the severance payments could total up to $75 million, depending on the extent of UAL's downsizing, according to the motion filed in December. The filing said the cost of the retention plan is far less than the damage that would result if the key employees left the company.

The objection to the plan said it is inequitable to finance the retention and severance program "with the wage reductions of employees whose average annual income, pre-concession, is less than $35,000." UAL's failure to consult with its labor unions about the plan "indicates a lack of proper business judgment," the filing said.

The Association of Flight Attendants also said that the proposed retention plan doesn't specify any criteria for selecting employees who would participate in the plan.

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