United Airlines asks judge to revoke labor contracts

Dave Carpenter

Tuesday, March 18, 2003 | 9:53 a.m.

CHICAGO -- United Airlines asked a bankruptcy judge Monday to nullify its labor contracts, raising the pressure on its unions to agree to long-term cost cuts.

The move gives the two sides until May 1 to settle on negotiated terms or the court could void the contracts -- a drastic and risky means of slashing labor costs that is rarely employed in airline bankruptcies. The airline made the request after failing to reach agreements by a self-imposed deadline.

If agreements aren't in place by May 1, the requested ruling by Judge Eugene Wedoff would enable United to impose its own stricter terms.

That would send ripples through the beleaguered airline industry, where other troubled carriers are closely watching United's efforts to lower costs in hopes of making their own severe labor cost reductions.

It also would effectively wipe out decades' worth of negotiated contract provisions at United, the world's second-largest airline.

Elk Grove Village, Ill.-based United filed the industry's largest bankruptcy on Dec. 9. It posted a record $3.2 billion loss for 2002.

United has warned since January that it would begin the contract-scrapping process if unions didn't agree to concessions by mid-March. The company secured interim wage cuts worth $70 million a month in savings in January.

Talks remain bogged down over the size of United's requested labor cuts and its plan to start a low-fare carrier with a lower wage scale and separate work rules.

"Between now and May 1st, we will continue to negotiate around the clock in the belief that we can reach consensual agreements with all of our union groups and render a ruling from the court unnecessary," said Chief Executive Glenn Tilton.

Randy Canale, chairman of District 141 representing baggage handlers and public contact workers, said negotiations would continue "in a nonstop effort to make action on today's court application unnecessary."

But pilots' union leader Paul Whiteford said he was "extremely dismayed" and called United's proposal an "overreach" in terms of the cuts it envisions.

The maneuvering at United came as Fort Worth, Texas-based American Airlines, hoping to avoid bankruptcy, began formal negotiations with the last of its major unions over proposed pay and benefit cuts of $1.8 billion a year.

In Dallas, negotiators for the world's largest airline held the first formal sessions with representatives of 26,000 flight attendants and 34,500 mechanics and other ground workers. The carrier has been negotiating nearly daily with the union for its 13,500 pilots since late last month.

American's parent, AMR Corp., was losing $5 million a day in January. Many analysts believe it has enough cash to avoid bankruptcy until summer but that war with Iraq could hasten a filing by causing a drop in air travel.