Latest United Pilots Pact Adds 90-Day Pension Fix Window

January 19, 2005 ( - The fate of the United Airlines pilots' defined benefit pension would be left temporarily unresolved under a revised contract disclosed Wednesday that also calls for an 11.8% pay cut.

The tentative pact, some details of which were disclosed Wednesday by the pilots’ union, was sent to United’s 6,400 pilots for a ratification vote that lasts until January 31, according to an Associated Press report. The hourly rate would be cut by nearly 3% less than the 14.7% reduction of the previous agreement, which a federal bankruptcy judge threw out January 7 (See  Judge Tosses United Pilot Contract ).

A statement on the pilots’ Web site said its Master Executive Council (MEC) recommended approval by the members.

“After careful consideration and thorough study, the governing body of United’s pilots unanimously voted that ratification of this new agreement is the best course of action for all pilots at United Airlines. Absent this agreement, we faced an unacceptable outcome in litigation before the Bankruptcy Court,” said MEC Chairman Captain Mark Bathurst, in  the statement . “Given the circumstances in which we find ourselves, it is our belief that this agreement provides the stability that the company needs to move toward an expeditious exit from Chapter 11 bankruptcy protection.

But left unchanged is a company commitment to pay the pilots $550 million in convertible notes when the air carrier emerges from bankruptcy, assuming the group’s defined-benefit pension plan is terminated (See  ALPA Agrees not to Fight UAL Pension Termination ). Added to the newest agreement is a 90-day window in which United and the Air Line Pilots Association can pursue possible alternatives to the controversial elimination of pensions.

The company has insisted it needs to scrap traditional pensions and replace them with defined-contribution plans to save enough money to be able to operate profitably outside bankruptcy. Pilots had agreed conditionally under the previous contract not to fight the pension move, but the judge said that deal would have been unfair to other unions that are still fighting to retain their pensions.

United wants to redo all its labor contracts to save costs for the second time in its 25-month bankruptcy. After slashing labor costs by $2.5 billion annually in 2003, the Elk Grove Village, Illinois-based airline says it needs another $725 million in yearly expense cuts.

Flight attendants and mechanics also are voting on whether to ratify tentative contract agreements reached by their union negotiators this month. The union representing baggage handlers, ramp workers and public-contact workers faces an April 11 deadline for negotiating a pact following a short-term deal put in place this month.