The Denver Post

Court's clock ticks on talks between United and unions

The airline is seeking millions in cost cuts. A pretrial hearing is set for Jan. 6 in lieu of agreements.

By Kelly Yamanouchi
Denver Post Staff Writer

Tuesday, December 21, 2004 -

Talks between bankrupt United Airlines and its unions are reaching a
critical stage, and the time crunch is tightening.

United says it needs to have hundreds of millions of dollars in cost cuts by mid-January to maintain enough cash for its business, to get financing to exit bankruptcy and, potentially, to satisfy the terms of lenders.

A pretrial hearing on a "1113(c)" motion to reject labor contracts, in the
event the company can't reach an agreement to modify them, is Jan. 6,
followed by a trial starting Jan. 7 or Jan. 10.

The airline has reached a tentative agreement on concessions with leaders of one of its unions.

The executive council of the Air Line Pilots Association last week came to a tentative agreement including 14.7 percent pay cuts and a pledge not to
oppose termination of the pilots' pension plan if that is needed to exit
bankruptcy.

The agreement is a sign of progress for United in its effort to secure $725
million in labor cuts, but it does not sit well with other unions at United
and the U.S. Pension Benefit Guaranty Corp., the agency that guarantees
basic pension benefits.

Shortly after the pilots' tentative agreement was announced, the Association of Flight Attendants at United said on its website the pilots' agreement "grossly oversteps its purpose in negotiating concessions."

Although the pilots' tentative agreement as written may be terminated if
other pension plans are continued, with certain conditions, the
International Association of Machinists at United told members that
"regardless of what any other labor group may agree to, the IAM will not
reach any 1113(c) consensual agreement that includes termination of our
members' pension plans."

Pension Benefit Guaranty Corp. executive director Bradley Belt said in a
statement, "We are concerned that this (pilots') agreement sets a dangerous
precedent."

"The company is making generous new pension promises even as it is refusing
to honor its old pension promises," Belt said. "Equally troublesome is the
notion that the pilots union insists on the termination of the pension plans for other United employees. We will be scrutinizing this agreement very closely and will take all appropriate steps to protect the financial
interests of the pension insurance program."

Pilots will begin voting soon on their tentative agreement, which requires a simple majority for approval. Voting is done either online or by telephone, and pilots can change their votes throughout the process until the ballots close in early January.

Separately, a report by a consulting firm hired to review United's business
plan said United's plan "is feasible, with certain caveats."

The firm, Bridge Associates LLC, said the plan is subject to many
assumptions and execution risks, including achieving "revenue enhancement"
and savings.

It also said financing for the plan is subject to risks including the rise
of interest rates and the mix of potential investors.

Bridge Associates, a New York firm specializing in restructuring, was hired
as part of an agreement among the company, the flight attendants union and
the machinists union in exchange for the unions' withdrawal of a motion for
a trustee to replace management.

Staff writer Kelly Yamanouchi can be reached at kyamanouchi@denverpost.com
or 303-820-1488.