Unions and management at two troubled airlines are facing off over cuts that executives say are critical to their companies' survival.þþAt United Airlines, the battle is over reductions in health care benefits for 35,000 retired workers. Executives say the savings are necessary for the airline, the nation's second largest behind American Airlines, to secure federal loan guarantees and emerge from bankruptcy protection as planned later this year. þþMeanwhile, US Airways, the country's seventh-largest carrier, wants a third round of concessions from its unions, on top of two granted while it was in bankruptcy. It sees the wage and benefit cuts as a major component in its drive to reduce its costs to the level of low-fare carriers.þþThe airlines are not being specific about how much they want from the unions, but both have drawn the ire of labor groups. þþThe anger is hottest at United, where flight attendants are leading a charge to stop the airline from carrying out its plans, laid out in a bankruptcy court motion last month, to have retirees pay more for medical coverage.þþThe Association of Flight Attendants contends that it cut a deal with United to protect the benefits of flight attendants who chose to take early retirement by July 1. About 2,500 left the airline last summer, presuming that their benefits were protected, the union said.þþUnited, a unit of the UAL Corporation, maintains that there was no such contractual agreement, only a promise by its chief executive, Glenn F. Tilton, to avoid health care cuts unless ÿabsolutely necessary.ÿ þþIn a court filing last week in Chicago, where United is based, the airline said it had always retained the option of asking the court to reduce retiree benefits, an action allowed under the federal bankruptcy code.þþA United executive, who insisted on anonymity, said the reductions in retiree medical benefits were part of the business plan on which the airline based its application for $1.6 billion in loan guarantees from the Air Transportation Stabilization Board. In turn, those loans would provide the platform for the airline's restructuring.þþIf United cannot achieve the cuts, it will have to reduce spending elsewhere by a similar amount, the official said last week. Any delay in carrying out the cuts will also delay the airline's emergence from bankruptcy, the person said. þþUnited, which hopes to exit Chapter 11 protection by June 30, said in the court filing that it hoped to negotiate any reductions with its labor groups. Nonetheless, the flight attendants are not letting up. The union said it would ask a bankruptcy court judge on Friday to appoint an examiner to investigate the situation.þþMeanwhile, United flight attendants picketed at three airports last Thursday, as United introduced service by its new low-fare carrier, Ted. The union also won the support last week of 109 members of Congress, most of them Democrats, who wrote to Mr. Tilton asking the company to reverse course.þþÿFrankly, we are surprised that United Airlines, so close to successfully emerging from bankruptcy, would risk the lowering of employee morale and reduction of workers' confidence in the company,ÿ the lawmakers wrote. ÿYour decision to seek to take advantage of bankruptcy law in order to breach your own contractual agreements and cut these dedicated former employees' health benefits is extremely troubling.ÿþþDespite the outcry, employees do not have much hope of stopping United, said Gary L. Chaison, professor at Clark University in Worcester, Mass. ÿBankruptcy makes everything 'absolutely necessary,' ÿ Professor Chaison said yesterday, referring to Mr. Tilton's comments.þþHe added that there was still plenty of room for bargaining but that he did not think the union could realistically keep the company from cutting retirees' benefits. Bankrupt companies, from steel makers to retailers, have frequently succeeded over the years to cut retirees' health care benefits, he said.þþMeanwhile, union leaders at US Airways are mulling the company's request for further concessions that would represent half the amount by which the airline wants to reduce its costs. þþUS Airways, which is based in Arlington, Va., emerged from bankruptcy last spring. The airline said in December that it had to rip up its business plan because it was not achieving results that would allow it to stay in compliance with $900 million in federal loan guarantees that formed the basis of its restructuring.þþThe airline faces a stiff challenge from low-fare carriers, particularly Southwest Airlines, which will begin service in May from Philadelphia, one of US Airways' three hubs.þþUnion leaders initially resisted the airline's bid for a third round of cuts, declaring that ÿthe concessions stand is closed.ÿ In response, the airline hired Morgan Stanley to find bidders for a series of major assets, including US Airways' East Coast shuttle and one of its three hubs, which include Pittsburgh and Charlotte, N.C., in addition to Philadelphia.þþThough formal bargaining has yet to begin, union officials met on Feb. 6 with US Airways executives to hear an outline of what the company was proposing.þþUS Airways said its overall costs in 2003 averaged 10.22 cents a seat mile, which analysts say is the highest in the airline industry. Executives told labor leaders that they wanted to cut costs by four cents a mile, to roughly six cents a mile, which the airline said was the average cost for low-fare competitors, including Southwest, JetBlue Airways and America West.þþTo help achieve the four cents a mile savings, US Airways proposed that labor groups grant concessions equal to roughly two cents a mile. According to the presentation, employees would grant concessions equal to 0.9 cents a mile in wages, 0.7 cents a mile in productivity gains and another 0.4 cents in wage cuts.þþThe company, for its part, is promising to cut its operating costs by one cent a mile, its distributing and marketing costs by 0.4 cents a mile, and other costs by 0.2 cents a mile.þþAmy Kudwa, an airline spokeswoman, declined to say what those savings would yield in dollar amounts. She called the figures ÿa broad look at what we would need.ÿþþAs at United, US Airways' unions may not have much chance of fighting off more concessions, if they hope to see their airline remain in operation. Said Professor Chaison: ÿI'd hate to be a union officer now, having said 'never' so many times.ÿþþþþ
Source: NY Times
