United, Union Agree on Contract for Pilots

Airline travelers, frustrated all summer by waves of canceled flights and delays that were partly blamed on labor conflicts, could finally see friendlier skies as United Airlines and its pilots’ union reached a tentative deal Saturday on a new contract.

United, the world’s biggest airline, had become the focal point of passengers’ increasing anger because it canceled thousands of flights this summer--a good number of which United blamed on job actions by many of its 10,000 pilots.

The airline asserts that its pilots quit working customary overtime or called in sick to protest the lack of progress in contract negotiations. The union, denying that its members had staged a formal job action, maintained that United had understaffed its busy flight operations.

Regardless, when combined with bad weather in many parts of the country and record numbers of passengers flying this summer, the crew shortages led to chaos at U.S. airports and created an operating crisis for Chicago-based United.

But the airline and the pilots’ union, the Air Line Pilots Assn., said they’d struck a tentative deal after the two sides met around the clock over the last two days, guided by the National Mediation Board.

Terms weren’t immediately released, but the key issues were higher wages and job security, especially in light of plans by United’s parent company, UAL Corp., to buy another major airline, US Airways Group Inc.

“I am very pleased with this tentative agreement,” said United Chairman James Goodwin, who recently went on television with ads that publicly apologized for United’s beleaguered service. United called the new pilots’ contract “industry leading.”

“I acknowledge that this has been a difficult and frustrating process, particularly for our customers, our front-line employees and our pilots,” Goodwin said in a statement.

Rick Dubinsky, chairman of the union’s master executive council, also said the union was “pleased that the recent intensive negotiations have produced a tentative agreement for pilots at United Airlines.”

But travelers probably won’t see a big improvement immediately. They still can expect delays on United and other airlines until after Labor Day, simply because of high passenger demand.

Moreover, United also is wrangling over the same issues with the union that represents its mechanics, who also are refusing overtime or taking other legal steps that are hobbling the airline, according to United.

Indeed, Goodwin said the airline’s “absolute priority now is to continue working hard” to secure a new contract with its mechanics’ union as well.

The new pilots’ contract still is subject to approval by the master executive council, which doesn’t meet until Sept. 6-8, and then the pact must be ratified by United pilots themselves.

United’s size alone--the airline flew 87 million passengers last year, and currently operates 2,400 flights a day--would have made the carrier a key target of passengers’ ire this summer because of air travel problems.

But United’s struggle with labor exacerbated its situation, one that grew so dire that U.S. Transportation Secretary Rodney Slater recently called United “the poster child for what is wrong” with the airline industry.

Also, United resorted to offering bushels of extra bonus miles and other incentives to keep its lucrative corporate customers from taking their business elsewhere. Those frequent fliers account for less than 10% of United’s passengers, but the high fares they generally pay generate nearly half of the airline’s revenues and provide the carrier with its highest profits.

And with untold numbers of executive passengers growing increasingly angry, United feared that many of them would jump to American Airlines, Delta Air Lines or other carriers, or that corporate travel managers would steer business to United’s rivals as well.

Many already have. UAL recently confirmed some analysts’ estimates that the airline’s revenue will be cut by $150 million or more in the quarter ending Sept. 30 because of the raft of cancellations and schedule cutbacks. In the third quarter of last year, UAL’s revenue totaled $4.9 billion.

Earlier this year United, aware of its growing rift with its union members, stripped thousands of flights from its schedule in advance of summer in hopes of having plenty of workers available. But it wasn’t enough, forcing United to cancel thousands more of its flights.

United said it canceled 6,142 flights in May, 4,983 flights in June, 5,323 flights in July and 3,911 flights this month as of Friday, owing to crew shortages, foul weather and other factors.

Indeed, United (and other airlines) ascribe much of the problem to antiquated air traffic control equipment and foot-dragging by the Transportation Department’s Federal Aviation Administration on improving matters. United also contends that many airports, such as in San Francisco and Boston, are bursting at the seams and thus contributing to the flight delays.

The pilots’ contract became amenable April 12, and the pilots’ pay increases are said to be retroactive to that date.

United’s pilots, mechanics and many of its other employees have been operating under contracts that date back to the mid-1990s, when they gave the then-ailing carrier wage concessions in exchange for stock in the company. That deal made UAL the nation’s biggest employee-owned company.

The operating woes at United, and the delays and cancellations throughout the airline industry, also have given ammunition to critics of United’s plan to buy US Airways--the nation’s sixth-largest carrier--and of airline mergers in general.

The speculation is that, if United and US Airways merge, it will spark more deals that would result in only three or four huge airlines in the country. If so, the critics fear it would not only result in higher fares and reduced service, but also dramatically raise the risk that job actions by airline workers could more easily cripple the country’s travel industry.

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Bloomberg News contributed to this story.