United Airlines Seeks $9B Labor Cuts

United Airlines said Thursday it is asking its employees to approve cutting its labor costs by $1.5 billion annually over the next six years as part of its emergency restructuring plan.

The labor cutbacks, to include pay reductions and the scrapping of recently negotiated raises, would provide the bulk of $2.5 billion the struggling carrier has targeted in annual savings in order to ensure its recovery.

The first specifics of United's plan to transform itself into a smaller, more cost-efficient carrier came at the halfway point of its self-imposed 30-day deadline for reaching agreements with labor and other groups on far-reaching cutbacks.

"The company believes that the $2.5 billion target will better align costs with anticipated future revenues and increase the likelihood that the company will qualify for $1.8 billion in loan guarantees from the Air Transportation Stabilization Board," the airline said in a brief statement late Thursday afternoon.

The unions did not immediately respond to United's proposals, which were given to them on Wednesday.

Earlier, the machinists union said United is seeking $450 million in annual givebacks from its employees. The airline also is seeking big concessions from its pilots, who have an even larger stake in the employee-owned carrier, and other unions, although details were not released.

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

The International Association of Machinists and Aerospace Workers posted the company's new terms on union Web sites while its leaders reviewed them. The union did not respond to the proposal but said United's management made clear that the huge cost savings total it put forward is non-negotiable.

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 percent 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 percent pay cuts. District 141-M members — mechanics and aircraft cleaners — are asked to reduce costs by $185 million, including 10.4 percent wage cuts.

The company also would contribute less for employees' medical and dental plans.

Those proposed cuts are part of a companywide push to sharply reduce high costs in hopes of receiving the federal loan guarantee it says it urgently needs to help pay off impending debt obligations, as well as to help it end more than two years of unprofitability.

IAM spokesman Joe Tiberi said the union doesn't feel any discussions about a recovery plan should take place until United hires a permanent chief executive officer to replace Creighton, who turns 70 on Sunday and wants to step down soon.

Creighton announced Aug. 14 that United might have to file for bankruptcy-court protection this fall if it can't reach major cost-saving agreements by mid-September with its employees, vendors and lessors.

He said this week that the airline intends to file a revised application with the Air Transportation Stabilization Board on Sept. 16, provided it can secure those agreements.

But the proposals are certain to face strong objections from employees at a company where relations between management and labor have been frayed for years. Under United's employee stock ownership plan, many workers gave up raises in 1994 in exchange for stock that has since plummeted in value.

Tiberi said the union was reviewing the proposal thoroughly and would not comment on it Thursday, possibly not until next week.

"Like anyone else being asked to make a significant investment, we're going to do due diligence on it," he said.

Shares in United parent company UAL Corp. fell 23 cents to close at $3.05 in afternoon trading on the New York Stock Exchange.