United seeking $725 million in further labor cuts, ditching pensions

Friday, November 5th 2004, 12:29 pm

By: News On 6

CHICAGO (AP) _ United Airlines is moving to obtain another $725 million in labor concessions and eliminate employees' traditional pensions as it seeks the financing to come out of bankruptcy.

A day after the troubled carrier notified employees that further steep reductions in pay and other benefits are coming, union leaders met to analyze the proposed cuts and decide how to respond. United's largest unions declined comment until discussing the plan further.

The nation's second-largest airline has been threatening to terminate its pensions since August. Last month, it said it would need to cut costs significantly more than anticipated because of the industry's deteriorating financial outlook.

Spokeswoman Jean Medina confirmed Friday that the carrier will ask a bankruptcy court judge to approve an extra $725 million in annual savings from workers, part of an effort to squeeze an additional $2 billion from the carrier's cost structure by next year.

``We recognize this is difficult for employees, but it's necessary considering the environment we are in. Fuel is at a record high and air fares are at a record low,'' she said.

The company was going to bankruptcy court to lay out a schedule for negotiations and deadlines. Medina said the new filing would not disclose specific details of the latest planned cuts.

United CEO Glenn Tilton disclosed the company's intentions in a recorded message to employees late Thursday.

``This is a challenge,'' he said. ``It is a challenge that must be met. And, it must be equitable for all of our employees.''

United also is widely expected to disclose additional job cuts when it reveals its new plan later this month. Medina said the company does not yet have specifics on the number of job cuts it would make. It currently has about 62,000 employees, down from more than 100,000 before the 2001 terror attacks.

The Elk Grove Village-based carrier and its parent company UAL Corp. already have lopped $5 billion from annual expenditures since it filed for Chapter 11 bankruptcy in December 2002.

Facing $4.1 billion in obligations to its existing pension program over the next five years, United wants to terminate future pension plans and replace it with a 401(k)-style defined contribution program. United's plan _ which the company says is necessary to attract financing to leave bankruptcy _ has caused an uproar among employees.

The government-financed Pension Benefit Guaranty Corp. would be forced to assume United's huge obligations if the airline terminates the pensions. United's plan has also sparked worry in Washington over the potential cost to federal taxpayers.

Steve Derebey, a spokesman for the Air Line Pilots Association, said in a recorded message that United's proposal outlines ``dramatic changes,'' including the replacement of pension plans. Another pilot union spokesman declined further comment. The union's governing body is scheduled to meet beginning Nov. 15 and will discuss United's proposal then.

Along with labor concessions, United senior executives, including Tilton, also have agreed to a 15 percent wage reduction beginning Jan. 1, Medina said. Tilton earns $712,500 annually.