Moves Could Help Carrier Exit Bankruptcy
By Amy Joyce
Washington Post Staff Writer
Tuesday, May 31, 2005
5:05 PM
United Airlines' unions today agreed to contracts that will help move the company toward an exit from Chapter 11 bankruptcy protection.
Members of the Aircraft Mechanics Fraternal Association ratified a five year contract that will include pay and benefit cuts, saving the carrier $96 million and heading off a threatened strike. A few hours later, the International Association of Machinists agreed in principle to a new contract, just beating a bankruptcy court deadline.
The mechanics union, which represents 7,000 United Airlines mechanics and cleaners, voted 59 percent to 41 percent to a 3.9 percent pay cut, among other concessions.
"It's a sad situation that we have to bear the brunt of mismanagement," said O.V. Delle-Femine, the union's national director. "We had to accept it or let the judge do it. This was the lesser of two evils."
The mechanics union had authorized a strike if the contract vote failed, but many felt voting against the contract could bring the company down and eliminate their jobs altogether. United has been in bankruptcy court protection since December 2002. More than 80 percent of its members voted as today's deadline neared.
The mechanics union members had voted down a tentative contract agreement in January, with 57 percent voting no.
"We appreciate that the members of AMFA have voted to ratify their tentative agreement with United. This is an important and necessary step in providing the cost savings United needs to finish its restructuring successfully," the company said in a statement.
A 5 percent defined-contribution pension plan in the new contract will replace the former defined-benefit pension plans. The mechanics' union also will get $40 million in convertible notes upon United's exit from Chapter 11 bankruptcy.The loss of the defined benefit pension plan was a major issue for both unions. AMFA will file a lawsuit against the Pension Benefit Guaranty Corp. in June, over the termination of the unions' pension plans, according to Delle-Femine.
"We were in negotiations and the PBGC unilaterally limited negotiations with the company. They just ignored what we were doing and they wanted to save money at our expense," Delle-Femine said.
The machinists group, United's largest union, representing 20,000 baggage handlers, reservation agents and customer service workers, agreed in principle to a new contract just before a bankruptcy court judge was scheduled to rule on fresh concession. Without an agreement, the judge could have forced the union to accept concessions. The machinists group was the only union that had not agreed to a second round of concessions.
Details of the contract were not available Tuesday afternoon. Union members will vote on the contract at a later date.
"This achievement represents months of difficult bargaining under the most extraordinary circumstances," said District 141 President Randy Canale, in a statement. "I'm now confident we can successfully conclude the process and present our members with a tentative agreement worthy of their ratification."
The bankruptcy judge granted a joint request from the company and the machinists union for more time to finalize details of the agreement.