United unions turn up heat

Tribune staff reporter

Two key unions at United Airlines are making their boldest moves yet against Chief Executive Glenn Tilton in a showdown over threats to pension plans.

On Wednesday, the eve of a United board meeting, the International Association of Machinists and Aerospace Workers asked the bankruptcy court to appoint a trustee to oversee United's bankruptcy, saying management has "thrown away the trust and respect of its employees."

Separately, the Association of Flight Attendants said Wednesday there has been "tremendous turnout" for a vote of no confidence in management posted late Tuesday on the union's Web site.

"Your vote of no confidence is needed to send a clear and compelling message" to management that it has failed, union leaders tell members in a letter on the Web site.

While United has secured major concessions from employees in its 20-month bankruptcy, Tilton appears to have pushed employees too far by announcing in July that United would stop paying into employee pension plans. The company said it needed the money after failing to secure a $1.1 billion federal loan guarantee to exit bankruptcy.

For more than a year, Tilton tried to keep from touching the company's pension plans, which the government estimates are underfunded by at least $7.5 billion. Now, many believe United will terminate the plans altogether to help attract exit financing.

Union leaders have vowed not to sacrifice their retirement plans. In addition to the trustee request, the machinists this week also objected to United's request for a four-month extension of the time in which the airline can file a plan of reorganization.

"United's creditors must be allowed to explore alternatives and not be held hostage by a failed management team," the union said in a statement.

The U.S. Bankruptcy Court in Chicago is scheduled to consider United's extension request Aug. 20 and the union's motion for a trustee in mid-September.

United spokesman Rich Nelson said Wednesday that "no amount of highly charged rhetoric and baseless legal filings will make the difficult issues standing between United and exit disappear. What we need now are constructive engagement and workable solutions."

Experts are divided about whether mounting pressure from employees--which includes two machinist union lawsuits against Tilton and other top executives--could topple United management.

A no-confidence vote by the flight attendants' union would be largely symbolic, and it is highly unlikely that the court will appoint a trustee.

"The appointment of a trustee would be staggeringly unusual," said Douglas Baird, a bankruptcy professor at the University of Chicago Law School. "Typically you see trustees appointed in smaller cases when there is fraud or there has been mismanagement. It is very rare for trustees to be appointed in large cases even when there is fraud."

Bankrupt Hawaiian Airlines was assigned a trustee last year after Boeing Co. and other creditors accused executives of putting their interests before those of the creditors.

Many view the machinists' bid to put a trustee in control of United as an uphill battle to save the airline's pension plans.

"They want to kill the messenger," said Ray Neidl, an analyst at Blaylock & Partners in New York.

The message, he said, is that United's pensions are such a drag on the carrier that they might not survive, a fact that would remain even under a trustee or new management.

Still, Neidl said, "when different unions start doing this, it usually means doom for management."

Michael Kayman, a restructuring consultant in Chicago, disagrees. Tilton might leave the carrier after it emerges from bankruptcy, but his job is safe despite union ire, Kayman said.

"It is very, very uncommon this far along into bankruptcy to change management. If there were a change right now, it would suggest that the bankruptcy will continue for a prolonged period because of a dramatic shift in strategy," he said.

For now, workers are using official channels to resolve disputes. But United's labor strife could be particularly damaging if it leads to such low morale that customers begin to notice.

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