Angered by United's decision to stop contributing to employee pension plans, the machinists' union asked a federal bankruptcy judge yesterday to appoint a trustee to run the airline. The union's request added more strain to the most bitter labor-management conflict the airline industry has seen in more than a decade.þþAppointment of a trustee would be an extraordinary step that is generally taken only in the case of fraud or clear mismanagement. It effectively removes a chief executive's power and often prompts the departure of other senior managers. þþLast month, United, a unit of the UAL Corporation, announced that it would not make required payments to its four employee pension plans while it remained in bankruptcy protection and that it was considering alternatives, including the termination of the plans.þþIn a motion filed with the bankruptcy court in Chicago, the International Association of Machinists and Aerospace Workers accused United's executives of ÿgross mismanagementÿ and said it was unclear whether the executives could draft a workable restructuring plan.þþÿUnited Airlines' management has thrown away the trust and respect of its employees,ÿ Robert Roach Jr., the union's general vice president for transportation, said in a statement yesterday. þþÿNo airline can successfully exit Chapter 11 without employee support,ÿ Mr. Roach said. ÿThis management team has placed UAL on a collision course with disaster.ÿþþThe machinists' union also filed a motion against United's request that it be given four more months to draft a restructuring plan. United, which filed for bankruptcy protection in December 2002, has the exclusive right to file a restructuring plan through Aug. 30. Its exclusivity has already been extended several times.þþResponding to the union's motions, a United spokesman, Rich Nelson, said, ÿNo amount of highly charged rhetoric or baseless legal filings will make the difficult issues standing between United and exit disappear,ÿ referring to the airline's effort to leave bankruptcy protection. þþÿWhat we need now are constructive engagement and workable solutions,ÿ Mr. Nelson said.þþOn June 28, United's application for a federal loan guarantee package was rejected for a third time, forcing the airline to find billions of dollars in financing so that it can leave bankruptcy protection. þþUnited attributed its decision on pensions to the unwillingness of lenders to finance the airline if its pension liabilities remained in place. Because of the rise in oil prices, the airline is facing jet fuel costs that are nearly $1 billion above its estimates at the end of 2003, forcing it to cut costs.þþNonetheless, the pension move was denounced by the pilots' union at United, which vowed in an angry statement earlier this week to use every legal means to fight the airline. The pilots' union said United could face ÿyears of hostility and chaosÿ for halting its pension contributions unless the issue was resolved.þþMeanwhile, United's flight attendants said yesterday that they had begun a no-confidence vote, through their Web site, of United's chief executive, Glenn F. Tilton, and the airline's management. þþA spokeswoman for the Association of Flight Attendants, Sara Dela Cruz, said the union considered the motion by the machinists' union ÿappropriateÿ but would not say whether her union planned to join it. þþUnited's creditors' committee also met yesterday, but lawyers for the group did not comment. That group includes representatives of the pilots, flight attendants and machinists.þþThe conflict between United and its unions brought to mind the last major airline industry battle, at Eastern Air Lines. In 1990, a bankruptcy court judge appointed Martin R. Shugrue as Eastern's trustee after unions and unsecured creditors joined forces to take control away from Frank Lorenzo, chairman of the Texas Air Group, which owned Eastern. þþMr. Lorenzo's bid to cut jobs and costs prompted union walkouts and led to steep losses, driving the airline into bankruptcy. Despite Mr. Shugrue's appointment, Eastern ceased flying a few years later.þþIn contrast to the collective effort at Eastern, the machinists' union at United was alone in filing its motion yesterday, which came after two lawsuits filed by the union against United earlier this month. þþIn the suits, and in its motions, the machinists' union contended that Mr. Tilton, Frederic F. Brace III, the chief financial officer, and other managers had violated their fiduciary duty to employees. United dismissed the lawsuits as baseless.þþThe union's motions will be heard by Judge Eugene C. Wedoff of Federal Bankruptcy Court in Chicago, near United's home base, at a hearing on Aug. 20.þþMeanwhile, the federal government has until tomorrow to decide whether to take legal action opposing United's decision to skip its pension contributions. þþTechnically, United's move violates federal law, which holds that companies that offer pensions must fund them according to a regulated schedule. But because United is in bankruptcy, government enforcement agencies can do little to force compliance.þþUnder federal pension law, the Labor Department can sue United, but only at the direction of the Treasury Department. A Treasury spokeswoman declined to comment yesterday on the department's intentions.þþThe Pension Benefit Guaranty Corporation, which guarantees pensions, could also sue. It has criticized United's failure to make its contributions and is considering a lawsuit but has not disclosed any decision. þþOn the labor front, industry experts viewed the dispute both as a battle between the machinists' union and United, and a bid by the union to emphasize its influence. þþIn recent years, the machinists' union has been voted out at a series of airlines, including United, in favor of a rival group, the Airline Mechanics Fraternal Association. In fact, the machinists' union no longer represents United mechanics, only ramp workers and gate personnel. þþBy seeking a trustee, ÿthey don't have a lot to lose, but they can gain back their self-respect,ÿ said Gary L. Chaison, professor of industrial relations at Clark University in Worcester, Mass. þþA spokesman, Joseph Tiberi, said that the machinists' union was driven solely by a desire to protect United's workers and had no other motivation.þþThe appointment of a trustee has taken place only a few times in the case of airlines that have emerged from bankruptcy. A court-appointed trustee, Joshua Gotbaum, runs Hawaiian Airlines, the second to be put in charge there since June 2003. A bankruptcy court judge took control away from the management after Boeing Capital led an effort to appoint an overseer.þþDuring the 1990's, trustees were also put in place at Kiwi Airlines and Pan American World Airways, both of which have gone out of business.þþHowever, unions and creditors did not seek a trustee in the last big airline bankruptcy, at US Airways in 2003, even though the company and the union engaged in a series of difficult negotiations on two sets of contract concessions. US Airways is now trying to win a third set of wage and benefit cuts on the threat of another bankruptcy filing. þþIn United's case, Professor Chaison said, the move will put enormous pressure on the airline, now faced with a labor dispute that could drive away customers and perhaps even dissuade lenders from putting money in the airline.þþÿIt chases passengers away pretty quickly,ÿ he said. ÿIf they hear there is a labor dispute, they could go to another Web pageÿ to book tickets.þþMoreover, Professor Chaison predicted the pension issue could be inserted into the presidential campaign, given that it addresses deep worker and corporate concerns.þþþþþþþ
Source: NY Times
