CHICAGO (AP) -- The offer by United Airlines' unions to slash labor costs by $5 billion to help stave off bankruptcy got a mixed public reception Thursday as the carrier's management and board huddled to review the proposal.þþInvestors drove United's lagging stock up more than 30 percent, restoring three weeks of losses. But numerous analysts said the concessions might be too little, too late, for an airline that was seeking even bigger cuts to end its two-year money-losing streak.þþUnited chairman and CEO Glenn Tilton didn't publicly tip his hand whether the $1 billion-a-year concessions are enough or would likely satisfy the federal panel that's weighing United's application for a $1.8 billion loan guarantee. The board of directors discussed the plan at a regularly scheduled meeting Thursday but made no announcement.þþSpokesman Joe Hopkins said it probably will be several days before the airline responds. ``We need to take some time to assess what they've presented to us,'' he said.þþIf the cuts are deemed insufficient -- Tilton's predecessor, Jack Creighton, had sought $1.5 billion in annual labor savings for six years, or $9 billion in total -- the world's No. 2 airline can either try to swiftly negotiate larger ones or prepare for a bankruptcy filing it had warned could happen later this fall.þþPilots' union chief Paul Whiteford, who also is one of two union representatives on the board, said he was encouraged by initial conversations with the company about the unions' framework. He said the proposal should give United a better chance to avoid bankruptcy in one of two ways: by qualifying for the government loan guarantee or by adequately strengthening its finances to secure a private loan.þþ``I think we have a shot now. The ball is in the company's court,'' Whiteford said in an interview. ``The company has a very significant tool in its hands and I hope it will use it.''þþInvestors showed rare optimism following what experts said appeared to be the most substantial reductions ever proposed by an airline's unions, exceeding even the newly approved cost cutbacks at US Airways.þþShares in United parent UAL Corp. jumped 73 cents, or 33 percent, to close Thursday at $2.94 on the New York Stock Exchange, although the stock price remains down nearly 80 percent for the year.þþ``The company is in very serious financial difficulty, and it's good that labor is taking an increasingly serious view of the circumstances,'' said Rich Bittenbender, an airline analyst for Moody's, who called the plan ``a good start.''þþWhile details of the unions' plan were not released, it calls for not just labor reductions but other money-saving measures which they said will boost profitability by $2 billion to $3 billion per year.þþCredit Suisse First Boston analyst James Higgins, among others, called the proposal insufficient and said in a note to investors that he expects UAL to be forced into a Chapter 11 bankruptcy filing within a month. While the airline would keep flying if that happens, Higgins noted that bankruptcy talk has scared away business and United's September traffic has been weaker than expected.þþHelane Becker of Buckingham Research Group was similarly doubtful that the cuts are enough, although she said it may be if United's suppliers will grant similar concessions.þþCreighton's plan, which Tilton has not renounced since taking over the job in early September, was for $1.5 billion in annual cuts from labor and another $1 billion from vendors and lessors. If rank-and-file union members approve the newly proposed concessions and vendors come through with their $1 billion, that would still leave the airline 27 percent shy of the needed amount, Higgins said.þþAsked whether rank-and-file union members are likely to endorse the plan, Whiteford said many realize the potential for even more drastic cuts in a bankruptcy proceeding and would be influenced by that prospect. ``When your membership understands that you do a recovery effort, something that's more draconian, the choices become a little more clear,'' he said.þþUnion representatives were stung by the criticism and doubts voiced by some industry analysts. Frank Larkin, a spokesman for the machinists union, said United's employees ``have made a dramatic gesture here and deserve credit for that.''þþ``We're out to save the airline and the jobs that go with it,'' he said. ``And handicapping the odds of doing that with negative comments hardly serves that interest.''þþ
Source: NY Times
