United Airlines moved closer Monday to reaching its goal of $5.8 billion in cost savings and avoiding a trip to bankruptcy court.þþA flurry of developments, including announcing pay cuts for white-collar workers, approval of wage concessions from the airline's pilots and progress on cost-cutting talks with its machinists union, all helped buoy prospects for the Elk Grove Township-based airline.þþYet despite the apparent progress, Glenn Tilton, chairman and chief executive of United, said it remains a roll of the dice whether the airline will seek bankruptcy protection.þþÿWe are prepared to file,ÿ Tilton said in a message to United's employees. ÿIf it's the best available option for the company, we'll do it.ÿþþEven if a bankruptcy filing occurs, Tilton told employees, little will change in their day-to-day jobs. ÿWe'll be flying the day we file the paperwork and the day after,ÿ he said.þþHowever, United faces a more immediate financial crisis because a $375 million bond payment is due in less than two weeks.þþThe airline, in an effort to raise cash for the payment, has asked for help from its partners in the Star Alliance: 14 airlines that formed a cooperative worldwide network that share passengers and revenue. Tilton is to fly to Rio de Janeiro this week to meet with executives from those airlines.þþThe series of disclosures from United and its unions came a day after the carrier said it is eliminating 9,000 more jobs, reducing the number of its workers to 74,000. In addition, the airline said it will cut another 100 scheduled flights and ground additional dozens of planes in its bid to avoid bankruptcy.þþShares of UAL Corp., United's parent, soared Monday on news of the job cuts, rising nearly 20 percent, or 55 cents, to close at $3.50.þþThe moves, the carrier said, will allow it to return to profitability in 2004, far sooner than its competitors are saying about their own financial outlook.þþÿThe plan is to transform our airline,ÿ Tilton said. ÿWe're doing that in a number of ways--by changing our relationship with our employees, responding differently to competition and reducing the size of our airline.ÿþþOn Monday, white-collar workers agreed to pay cuts that could reach up to 10 percent for some high-salaried employees. Also, United's members of the Air Line Pilots Association overwhelmingly approved a proposal that will result in members accepting an 18 percent pay cut.þþMachinists optimisticþþMost significant, a spokesman for the International Association of Machinists and Aerospace Workers, which represents the airline's 37,000 mechanics, ramp, gate and customer service workers, said it hopes to have a pay cut agreement finalized with the airline by the weekend.þþThe machinists union is insisting that members get credit for $500 million in retroactive pay. Joe Tiberi, a spokesman for the machinists union, said ÿprogress is being madeÿ by negotiators for the two district lodges representing United workers despite significant problems.þþÿWe're optimistic that we can have something to our members and have voting completed by early December,ÿ he said. If a tentative agreement with United is reached this week, the union would need time to notify members of the conditions.þþÿWe're hoping that we will be able to help United's [guaranteed] loan application and be in time to avoid a bankruptcy filing.ÿþþUnited now has identified where about $4 billion in cuts are to come, but it still is trying to provide details of who will provide the approximately $1.8 billion remaining of the $5.8 billion in labor savings over 5 1/2 years that the airline told the Air Transportation Stabilization Board will be cut.þþIn addition to the labor cuts, the airline has said that it will trim other costs by $7.7 billion.þþUnited has asked the loan board to approve a $2 billion loan, of which $1.8 billion would be guaranteed by the government. The airline has said that it may be forced to file for bankruptcy without the loan.þþStock options promisedþþThe agreements with employees come at a price.þþEach union is being promised millions in stock options if cuts are approved. The airline's 8,800 pilots, for example, are to receive 20 million stock options. United also needs to resolve how much of a stake the government will receive in return for the loan guarantee.þþThe ATSB demanded that America West Airlines turn over warrants that could be converted into a one-third interest in the airline in return for its $380 million loan guarantee. It has made similar demands upon American Trans Air and Frontier Airlines as conditions for granting final approval for their loans, and reportedly has demanded a stake from Aloha Airlines.þþThat is almost certain to dilute the value of the shares United's employees end up owning.þþDespite the progress, Tilton told employees that he could not predict how the ATSB will treat the loan application.þþÿAll I can do is make sure that we've given the [ATSB] all the information we can, that we've worked as hard as we need to and that we've made the best possible case in support of our application,ÿ he said.þ
Source: Chicago Tribune
