United Mechanics Union
Rejects New Contract
DOW JONES NEWSWIRES
January 28, 2005 12:00 p.m.
Members of the union representing mechanics at UAL Corp.'s United Airlines rejected a contract proposal negotiated by airline managers and union leaders, and threatened to strike if a bankruptcy judge changes their current contract.
In a news release Friday, the Aircraft Mechanics Fraternal Association union said members "voted overwhelmingly" to reject the new contract, which would have cut wages and benefits. The company has said it needs to wring significant cost cuts from labor to be able to exit from Chapter 11 bankruptcy protection.
"The employees have shown that they do not have faith in the company's ability to successfully return United Airlines to profitability. Management at United has been unsuccessful in past attempts to become profitable after employees agreed to concessions. Our members are tired of subsidizing mismanagement," said the union's national director, O.V. Delle-Femine, in a statement.
United officials weren't immediately available to comment on the mechanics' vote.
The Chicago airline has already pared $2.5 billion from its labor costs, but said late last year that it needs to wring another $725 million in annual cuts in order to strengthen its balance sheet during a search for financing to exit bankruptcy.
Because UAL is operating under bankruptcy-court protection, executives could ask the bankruptcy judge to impose cost cuts on the mechanics, and to terminate the mechanics' existing contract.
The union said its members have authorized a strike if the current contract is changed.
Already the bankruptcy judge has blocked the airline's attempt to cut labor costs by terminating employee pension plans. The judge also nixed a pilot contract that would have allowed the airline to dump the pilot pension, if other union groups also agreed to have their pensions terminated.
Pilots are in the midst of voting on a new contract proposal. Voting ends Monday.
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