United Turns to Workers For Bottom Line Help

August 30, 2002 (PLANSPONSOR.com) - Another air carrier has turned to its own workforce for some help with its bottom line.

Chicago-based United Airlines has asked employees to approve $1.5 billion in labor cost reductions annually over the next six years as part of the carrier’s emergency restructuring effort, the Associated Press reported.

United did not disclose how the $1.5 billion in labor reductions would be allocated among different unions. But the machinists union said it has been asked for $450 million in annual givebacks from its employees.  The flight attendants union has reportedly been asked to give up a total of $100 million, according to a source familiar with the proposal who spoke on condition of anonymity.

Further, the airline is almost certainly seeking more concessions out of its pilots, who are higher paid and have a larger stake in the employee-owned carrier.

Concession Stand?

Pay cuts and elimination of recently negotiated raises would get United most of the way to its $2.5 billion annual savings target But the powerful pilots union harshly criticized the proposals as unacceptable, illustrating the challenges United faces in winning the concessions.

Without a consensus on cuts, Chief Executive Officer (CEO) Jack Creighton reminded employees this week, the airline might be forced to file for Chapter 11 bankruptcy protection.

Machinist Proposal

The proposal to the machinists union calls for mechanics, ramp workers and other IAM-represented workers to take immediate pay cuts and forgo raises negotiated earlier this year for 2003 and 2004, to be replaced by annual 1.5% pay increases, IAM officials said.

District 141 members – ramp, customer contact and cabin service employees – are being asked to provide a $265 million yearly cost reduction and take 9.5% pay cuts. District 141-M members – mechanics and aircraft cleaners – are asked to reduce costs by $185 million, including 10.4% wage cuts.

The company also would contribute less for employees’ medical and dental plans, the AP reported.

United isn’t the only airline in for a tough time winning employee concessions as part of a general cost-cutting effort.  This week, US Airways came up short in the amount of givebacks approved by its 12,000 International Association of Machinists (IAM) members.

Because of a split between fleet-service employees and mechanics and other US Airways workers, the approved concessions were only worth about $65 million – far short of the $219 million it had hoped for.