- The Washington Times - Tuesday, December 14, 2004

CHICAGO (AP) — United Airlines has secured a tentative contract agreement with its pilots, clearing a critical early hurdle in its effort to make another round of painful labor cuts in bankruptcy without needing a court order.

The agreement, announced yesterday, makes the pilots the first of United’s four big unions to come to initial terms. All four have decried the bankrupt airline’s latest proposed steep cutbacks but risk having the company’s terms imposed in bankruptcy court if they don’t reach a settlement.

Details were not disclosed by either the company or the union’s leadership, which meets tomorrow in Chicago to decide whether to ask pilots to ratify it. But United, which has the weight of federal bankruptcy law on its side, has said any revised contract with pilots must provide $191 million in annual savings to the company.

“United is pleased to have reached a tentative agreement with the Air Line Pilots Association on the cost savings the company needs to secure the exit-financing necessary to restructure successfully,” company spokeswoman Jean Medina said.

The pilots’ union informed its members of the agreement Monday night.

“We do have a tentative agreement with the company,” union spokesman Herb Hunter said, declining to elaborate.

The deal, if ratified by rank-and-file pilots, could help United avoid a potentially devastating labor showdown. Difficult negotiations with unions representing the mechanics, flight attendants and ramp and public-contact workers remain unresolved, however.

Airline analyst Ray Neidl of Calyon Securities said the agreement is important but it’s too early to judge the pact’s significance in United’s latest push to lower labor costs.

“If they can get the employees’ unions to do it voluntarily, rather than through the court, that’s key,” he said. “The pilots tend to be the leaders, so getting the pilots on board is a big first step.”

The nation’s No. 2 airline, a unit of Elk Grove Village -based UAL Corp., said this fall it needed to impose another $725 million in annual labor cuts after already extracting $2.5 billion a year in concessions last year.

United has said it will ask to have the lower pay and new benefits structure imposed by a bankruptcy judge if the unions don’t agree to new contracts by mid-January.

The company last month gave the pilots’ union a series of options on how to achieve its targeted $191 million in wage and benefit cuts — from a straight 18 percent pay cut to smaller cuts and changes in work rules.

In addition to companywide wage and benefit reductions, United also is moving to eliminate defined-benefit pension plans as it seeks to become leaner and more competitive after losing in excess of $9 billion since 2000 — $4 billion of it during two years in Chapter 11 bankruptcy.

The pilots will feel the biggest setback from the loss of traditional pensions.

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