United trial pushed back as contract talks intensify

Dave Carpenter

Wednesday, May 18, 2005 | 9:16 a.m.

CHICAGO -- A judge ordered a two-day recess Tuesday in United Airlines' bankruptcy court trial, giving the carrier and its machinists' union more time to bargain over a new contract and eliminate the need for a ruling that could trigger an employee strike.

The trial was pushed back as negotiations intensified between United and its machinists' union, the only group without at least an agreement on a long-term contract after the mechanics' union consented to a tentative five-year deal Monday night.

United, which initiated the trial by seeking to have lower pay and benefits imposed in the absence of consensual deals, asked Judge Eugene Wedoff to postpone scheduled testimony until Thursday afternoon.

"We remain very optimistic that the commitment that both sides have to this process will result in a tentative agreement," Pete McDonald, United's chief operating officer, said in an interview. "We'd like to avoid the courtroom process if we possibly can."

Negotiators for United, which is owned by Elk Grove Village, Ill.-based UAL Corp., and the International Association of Machinists and Aerospace Workers met Tuesday after bargaining late into the night on Monday, IAM spokesman Joseph Tiberi said.

The IAM, which represents about 20,000 United baggage handlers and reservations agents, declined to discuss specifics of the talks or say whether an agreement appeared close.

The company was seeking annual wage and benefit cuts totaling $176 million over five years from machinists as part of its push to reduce companywide labor costs by an additional $700 million before it comes out of bankruptcy.

Tiberi said the union acknowledged the need for additional cost savings but was working to "ensure that any additional sacrifice is fair and necessary to the restructuring of United Airlines."

The IAM also kept up the pressure on United by going forward with highly public strike preparations, inviting TV camera crews and other media to a meeting at a union hall near O'Hare International Airport where leaders distributed picket signs and gave out strike assignments.

The union has threatened a strike if Wedoff orders the contract broken without its consent, which could come any time after closing arguments now scheduled for Friday afternoon.

"We still hope to get an agreement, but if the judge rules in United's favor we will walk," Tiberi said.

Mechanics began voting electronically Tuesday on the tentative deal reached by their negotiators. Results of the ratification vote will be announced as soon as it concludes on May 31.

The 7,000 United mechanics narrowly voted down a previous contract agreement in January and another rejection could still leave the airline vulnerable to a walkout. The Aircraft Mechanics Fraternal Association submitted the tentative pact to its members without recommending which way they vote.

Asked how concerned United is about another vote failure, McDonald said the company had worked closely with AMFA negotiators to try to resolve concerns they had with the previous settlement.

"We believe that we've addressed these concerns and still achieve the necessary savings that are required for us to obtain the exit financing we need," he said. "So we're very optimistic with these concerns being addressed that we can get it ratified."

The mechanics' agreement gives United the $96 million in annual wage and benefit cuts it was seeking. Mechanics would take 3.9 percent pay cuts starting June 1, on top of 14 percent reductions two years ago. Reduced benefits, such as sick days and holidays, would account for the rest of the labor savings.

A 5 percent defined-contribution pension plan is part of the contract, replacing the defined-benefits plan that United eliminated last week along with those of other employee groups. The mechanics' union also would get $40 million in convertible notes upon United's exit from Chapter 11 bankruptcy.

United was hoping to ride the negotiating momentum to an agreement with its largest union, the IAM, which was being asked for concessions that amount to about 25 percent of the companywide labor cost reductions.

"We really appreciate the sacrifices that our employees are making here," McDonald said. "This is difficult, but it's being made to enable United to obtain the financing and be a winning company for the future."