United union approves cuts

Published: Sunday, December 1, 2002 at 6:01 a.m.
Last Modified: Saturday, November 30, 2002 at 10:23 p.m.
CHICAGO - United Airlines' flight attendants ratified a cost-cutting deal with the nation's No. 2 carrier Saturday, one day after the company's stock tanked as analysts called bankruptcy nearly inevitable.
Association of Flight Attendants spokeswoman Dawn Deeks said 87 percent of the flight attendants who voted signed off on the deal. United's 24,000 flight attendants had been widely expected to approve the $412 million in wage concessions.
However, their OK means little as long as the airline's mechanics continue to resist proposed reductions of $600 million in their wages and benefits.
Wage-cutting agreements accepted by United's pilots and other employee groups expire Dec. 31 unless mechanics sign on. United is asking for a total of $5.2 billion in companywide labor cuts over 5 years.
The airline says its application for a $1.8 billion federal loan guarantee is imperiled if all unions cannot agree on wage concessions. A ruling is expected any day on the guarantee, which cash-poor United says it must have to obtain $2 billion in private loans.
Without the loan guarantee, United has said it would have no choice but to file for bankruptcy.
In a message to employees recorded after the mechanics' vote and before the attendants' approval, United chief executive Glenn Tilton warned that a bankruptcy filing could dramatically alter the what he called a "cooperative" negotiation process. "We all must then follow a prescribed course that is both unpredictable and potentially adversarial," Tilton said.
A bankruptcy is likely to have no immediate effect on passengers. United has said it will continue flying its normal schedule, as US Airways has been doing since its Chapter 11 filing in August.
United and the International Association of Machinists and Aerospace Workers were scheduled to meet today to discuss the mechanics' rejection. Union spokesman Frank Tiberi said the flight attendants' vote would have no effect on those negotiations.
Shares in United parent UAL Corp. plunged $1.12, or 31 percent, in holiday-shortened trading Friday to close at $2.51 on the New York Stock Exchange. That was the first trading day since the mechanics' vote was announced.
The stock has lost 92 percent of its value since before the attacks of Sept. 11, 2001.
United has been struggling since the Sept. 11 attacks to reverse multimillion-dollar losses each day. It has reduced service and has laid off 20,000 workers because of the weak economy and sharply reduced spending by business travelers.
With hefty debt payments and other challenges looming, there's almost no time left for United to find the financial backing it needs to avoid filing for bankruptcy-court protection from its creditors.
"The mechanics' vote makes bankruptcy virtually inevitable for United and UAL," said credit analyst Philip Baggaley of Standard & Poor's, which downgraded the company's long-term corporate debt rating deeper into junk status.
The airline faces a $375 million debt payment Monday, although under a grace period it could push that back to Dec. 16.
A bankruptcy filing likely would have a profound impact on the airline industry.
A bankruptcy court judge is likely to slash labor and other costs even more severely than United has proposed, prompting cutbacks and new revenue strategies among its competitors.
United's employee stock ownership plan also would be endangered, as would workers' remaining investments in the 55 percent employee-owned carrier.

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