Salaried and management employees’ wage reductions will be based on current wages, ranging from 2.8% for employees earning $30,000 or less, up to 10.7% for employees at the highest management salary level. The announced wage reductions are effective December 16, the company said.
In addition to their wage cuts, all salaried and management employees have given up their planned 2002 merit salary increase and a 2002 incentive payment.
The bankruptcy filing will come at a steep price for the 83,000 employees who currently own 55% of the company. A bankruptcy judge is almost certain to order wage and job cuts and could dissolve the employee stock-ownership plan, or ESOP.
Monday, the day the Chicago-based filed its bankruptcy petition, officials also announced that they will start talks with company unions to see how unionized United workers “will contribute to the company’s cost-control efforts.”
“Filing for Chapter 11 is the means by which we can stem United’s continued losses and get our costs under control so we can transform our company into a more competitive airline,” Glenn Tilton, United’s chairman, president and chief executive officer, said in a statement. “We have said for some time now that reducing labor costs are a critical component of our recovery effort and will need to be implemented as soon as possible.”
The Chapter 11 filing was the fifth-largest ever as measured by assets. The previous largest was by Continental Airlines a decade ago. United listed almost $25.4 billion in assets as of Sept. 30 — more than twice Continental’s when it filed, according to the WSJ. It is the 11th time a major US airline has filed for bankruptcy since deregulation in 1978, including three times for carrier TWA.
The suburban Chicago-based company has lost $4 billion in the last two years due to a slumping economy, flawed business strategies and the September 11 terrorist attacks. It faced debt payments of $875 million later this week, according to the WSJ.