United Airlines' unions yesterday agreed to contracts that will help the company move toward an exit from Chapter 11 bankruptcy protection.
Members of the Aircraft Mechanics Fraternal Association ratified a five-year contract that includes pay and benefit cuts, saving the company $96 million a year and heading off a threatened strike. International Association of Machinists and Aerospace Workers agreed in principle to a new contract. Both unions acted before a deadline yesterday that was imposed by the bankruptcy court.
"These are two major steps for our restructuring," said Jean Medina, a company spokeswoman. "This is clearly evidence of unions and the company stepping up to do the work."
The mechanics union, which represents 7,000 United Airlines mechanics and cleaners, voted 59 percent to 41 percent in favor of a 3.9 percent pay cut, among other concessions. Almost 81 percent of its members voted.
"It's a sad situation that we have to bear the brunt of mismanagement," said O.V. Delle-Femine, the AMFA'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 workers felt that voting against the contract could bring the company down and eliminate their jobs altogether. United has been operating under bankruptcy court protection since December 2002.
The mechanics union members had voted down a tentative contract agreement in January, with 57 percent voting no.
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 protection.
Both unions have protested the elimination of their defined-benefit pension plans, which were terminated at the airline's request by the bankruptcy court and taken over by the Pension Benefit Guaranty Corp., the U.S. agency that insures pensions. The AMFA will file a lawsuit against the PBGC this month over the termination of the 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 the bankruptcy court judge was scheduled to rule on fresh concessions. Without an agreement, the judge could have forced the union to accept concessions.
The machinists union and the company negotiated throughout the holiday weekend.
A formal contract agreement will be presented in federal bankruptcy court on June 17. Members will vote on the contract after that date.
"This achievement represents months of difficult bargaining under the most extraordinary circumstances," IAM District 141 President S.R. "Randy" Canale said in a written statement. "I'm now confident we can successfully conclude the process and present our members with a tentative agreement worthy of their ratification."
Before Tuesday's agreed-upon concessions, United had cut $2.5 billion in labor costs since it filed for bankruptcy. It is trying to get $725 million in additional annual pay and benefit cuts from its 62,000 employees.