- The Washington Times - Wednesday, November 27, 2002

A vote today by United Airlines' machinists union is likely to determine whether the nation's second-largest airline is driven into bankruptcy.
The International Association of Machinists and Aerospace Workers will vote on whether to give back $1.5 billion in wages and vacation time over 5 years. In addition to wage relief, the ailing airline says the union's decision will influence whether United gets the federal loan guarantees it says it needs to stay in business.
"Let's put it this way, if it doesn't go positive, the game's probably over," said Ray Neidl, an airline industry analyst for the Wall Street investment firm Blaylock & Partners.
He predicted that the 37,500 mechanics, ramp workers and customer service representatives would ratify the concessions to spare United Airlines from bankruptcy.
"They realize they need this," Mr. Neidl said.
United Airlines officials acknowledge that the vote today could profoundly affect their future.
"Tomorrow's vote is very important to our overall recovery plan," Jeff Green, United Airlines spokesman, said yesterday.
United's 23,000 unionized flight attendants are also voting this week on whether to give back $412 million in wage concessions over the next five years. That vote tally is scheduled to be announced Saturday.
On Monday United has a $375 million loan payment due. Mr. Green acknowledged that it was not certain the payment would be made. Not making or renegotiating the payment would trigger bankruptcy.
"We got a lot happening in a short amount of time," Mr. Green said.
The airline is seeking $2 billion in loans from private lending institutions to save it from bankruptcy. However, the lending institutions will make the loans only if the federal Air Transportation Stabilization Board will guarantee repayment on at least 90 percent of the total.
No date is set for the ATSB's decision on whether it will grant the loan guarantees. ATSB officials have told United Airlines that its application will be approved only if it can cut expenses enough to ensure the loans will be repaid. The cuts include union wage concessions.
The machinists union's leadership has been endorsing the wage concessions in meetings with its United Airlines members. However, they would make no prediction on the labor-contract vote today.
Frank Larkin, spokesman for the machinists union, said union leaders have been telling members that the alternative is bankruptcy, which could include a court decision to absolve all labor contracts.
United Airlines is losing more than $7 million a day and says the loan guarantees are crucial to avoid Chapter 11 bankruptcy.
In July the Air Transportation Stabilization Board told the airline that its application would be accepted only if it made cost reductions greater than it originally proposed.
The airline responded with pleas to its unions for concessions of $5.8 billion over 5 years.
United Airlines' 8,800 pilots already have agreed to $2.2 billion in wage concessions. Salaried and management employees contributed $1.3 billion more in labor savings.
If the machinists union and flight attendants ratify further concessions this week, top executives are expected to make up the rest.
United Airlines can meet the $5.8 billion target only if machinists ratify the labor concessions today.
Meanwhile, United Airlines announced this week that it would reduce its work force from 83,000 to 74,000 over the next year.
Senior members of Congress are increasing pressure on the Bush administration to approve federal loan guarantees for the airline.
House Speaker J. Dennis Hastert, Illinois Republican, is warning that both traveling consumers and the nation's economy would suffer if United Airlines fails.


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide