Ailing United Airlines hopes steep labor concessions will help persuade Washington to help

CHICAGO (AP) _ Mired in an industry-wide slump, United Airlines has extracted an unprecedented $5.8 billion in tentative labor concessions from its employees. <br><br>Now, the cash-strapped carrier hopes

Thursday, November 21st 2002, 12:00 am

By: News On 6

CHICAGO (AP) _ Mired in an industry-wide slump, United Airlines has extracted an unprecedented $5.8 billion in tentative labor concessions from its employees.

Now, the cash-strapped carrier hopes that Washington will provide some more help by approving a $1.8 billion loan guarantee that could stave off a bankruptcy filing.

United secured the key remaining link to its financial recovery plan Wednesday when its machinists' union leaders agreed to $1.5 billion in wage and benefit concessions over 5 1/2 years following similar pacts with pilots, flight attendants and other employees.

``United Airlines is struggling to overcome the combined effects of 9-11 and an unrelenting worldwide travel recession,'' said Scotty Ford, president of the machinists' District 141-M. ``We tried to balance United's urgent need to avoid bankruptcy with our members' needs for job security and proper compensation for the vital services they provide United Airlines.''

The 37,500 mechanics, baggage handlers and public contact workers could still reject the tentative deal on wage cuts when they vote on it next Wednesday. And the Air Transportation Stabilization Board could reject or significantly shrink the amount United seeks in federal backing for a private loan.

But getting its largest and most resistant union to sign off on steep cuts was the most noteworthy achievement yet for United in its quest to slash costs and restructure its finances to set the stage for recovery.

Optimistic investors sent the stock of United parent UAL Corp. soaring by 27 percent in after-hours trading Wednesday following the late-afternoon announcement.

``The IAM, along with our other unions, has stepped up to the challenge by cooperating in an unprecedented way to set the framework for a stronger, more competitive airline,'' said United CEO Glenn Tilton.

The machinists were the only employee group not to have committed to its share of $5.8 billion in labor cutbacks over 5 1/2 years _ the centerpiece of United's financial recovery plan.

The airline disclosed details of its financial plan last Sunday, saying it will drop from its current 83,000 employees to 74,000 over the next year, retire 49 of its larger aircraft and reduce the number of cities it serves and flight frequencies by 6 percent _ steps it said would return it to profitability in 2004. This year, United is likely to exceed 2001's record $2.1 billion loss.

Despite the labor concessions and reductions, analysts say the actions won't solve the problem of declining airline revenues and could be too little, too late to avoid a Chapter 11 bankruptcy filing by year's end.

``Most people don't think it (the loan guarantee) will happen. I think there's a small chance,'' said Ray Neidl, airline analyst for Blaylock & Partners, who predicted the union rank and file will ratify the deal.