United Airlines flight attendants said yesterday that they offered to cut their salaries by 3.6 percent and forgo a lump-sum payment due next March as part of key negotiations to help the company avoid filing for bankruptcy protection.
Talks between the nation's second-largest airline and its three largest labor unions were moving forward, according to the parties involved. United is trying to trim labor costs by $5.8 billion over the next 51/2 years so it can gain approval for a $1.8 billion federal loan guarantee, which the company says it needs to stave off bankruptcy.
The Air Line Pilots Association said it was close to an agreement, but its leaders, along with those of the machinists union, declined to discuss the negotiations. The Association of Flight Attendants said it probably will continue talks with United over the weekend.
Airline officials declined comment. "We're making progress, but until we've reached agreements" with all of the unions, "we're not going to discuss those talks," said Chris Brathwaite, a United spokesman.
United on Tuesday submitted an updated business plan with the promised cost cuts to the federal Air Transportation Stabilization Board, which is reviewing the company's loan guarantee request.
Passenger traffic has plunged since the Sept. 11, 2001, terrrorist attacks. United lost more than $2 billion last year and $503 million in the third quarter of 2002. The company is burning through $7 million in cash a day. Overall, the U.S. airline industry is expected to lose as much as $9 billion this year.
The stabilization board already has approved a loan guarantee for America West and gave conditional approval to US Airways, which is operating under bankruptcy protection.
The fate of United's application rests largely on whether the airline can reach agreements with each union. The company has $1 billion in loan payments and other obligations due at the end of the year. Over the past few weeks, United also has been negotiating with suppliers, banks and business partners in an effort to find ways to reduce payments and cut costs, according to a source close to the negotiations
"Clearly time is running out. Given that United filed its application with the ATSB prior to reaching definitive agreements with labor, we view the filing as somewhat of a Hail Mary," said Jamie Baker, airline analyst at J.P. Morgan Chase & Co. The board, Baker said, "is looking for specifics, not generalities."
The flight attendants said their pay cut proposal, if approved, would affect 85 percent of the membership, or 20,000 people. The proposal also cancellation of the March lump-sum payment, which would be equivalent to 5 percent of the flight attendants' total salaries. The union did not say how much money that would save.
The union also offered to extend its contract with United two additional years, to 2008. The union's offer does not include benefit cuts.
A source close to the negotiations said the airline's agreement with its pilots is the most important one because they are the highest-paid employees.
"The pilots will likely be the first group to finalize," the source said. "They are the biggest chunk of the labor savings, without any doubt."