Judge OKs Temporary United Pay Cuts

January 10, 2003 (PLANSPONSOR.com) - A US bankruptcy judge has ordered temporary 13% pay cuts for United Airlines' unionized machinists, buying the airline more time to negotiate broad concessions among its entire unionized workforce.

But the International Association of Machinists, representing about 37,000 workers, argued to the judge that the airline had not shown why the cuts were needed, according to a Reuters news report.

In his ruling, US Bankruptcy Judge Eugene Wedoff agreed with the airline that changes to the IAM’s collective bargaining agreements were “essential, at the present time, to continue United Air Lines Inc.’s business and to avoid irreparable damage to its estate,” Reuters reported.

Wedoff said to be fair to the other unions, which agreed to take pay cuts effective January 1, the IAM union members’ pay will actually be cut by 14% from Friday until May 1. That would be equivalent to the 13% reduction retroactively to January 1 that the company was seeking, he wrote.

Pilots’ pay is being cut the most, at 29%, and flight attendants’ salaries are being trimmed by 9%. Smaller unions representing flight dispatchers and meteorologists are also taking 13% cuts, Reuters said.

United has about 80,000 employees, nearly 80% of whom are represented by labor unions. United, the world’s second-largest airline, filed for bankruptcy on December 9. (See  United’s Chapter 11 Includes Wage, Incentives Cuts ). Since then, four of the carrier’s five unions had agreed to temporary pay cuts to help the airline reorganize and meet lenders’ financing requirements.

The labor savings represent about $80 million per month in cash. Now, the airline has until May to make sweeping changes to work rules that unions follow.