United’s Unions Offer Pay-Cut Plan

Unions for UAL Corp.’s United Airlines late Wednesday proposed $5 billion in labor-cost savings over the next five years to help the beleaguered carrier stay out of bankruptcy proceedings.

The coalition of unions at United--the nation’s second-largest airline behind AMR Corp.’s American and the biggest operator at Los Angeles International Airport--didn’t disclose how much each employee group would sacrifice and that it was still to be worked out. But it said a viable recovery plan would have to include “significant” cost cutting by management.

The proposed reduction represents a 14% cut from United’s labor costs in 2001, when the carrier lost an industry record $2.1 billion amid the protracted slump in travel.

In August, United proposed slashing its labor costs by $1.5 billion a year, or 21%, for the next six years. The airline, based in Elk Grove Village, Ill., warned that without cuts it would face a cash squeeze later this year, wouldn’t qualify for a $1.8-billion federal loan guarantee it’s seeking and might have to reorganize under Chapter 11 of the bankruptcy laws.

But that plan met stiff resistance from unions for United’s pilots, mechanics, flight attendants and other ground workers. Along with two other unions, they began forming an alternative cost-reduction package, which they delivered to new UAL Chief Executive Glenn Tilton on Wednesday.

“Now United can successfully amend its application for a loan guarantee ... get access to near-term financing, avoid bankruptcy and rebuild,” said Greg Davidowitch, president of the United master executive council at the Assn. of Flight Attendants.

United said “we appreciate this quick but thorough effort” by the unions and said it would have a response soon in order to finalize its loan-guarantee application.

United, with 84,000 employees and 1,900 daily flights, is 55% owned by its workers. Its pilots’ and mechanics’ unions also have seats on UAL’s board of directors.

The unions’ announcement came after the close of markets. UAL’s stock edged up 9 cents, to $2.21 a share, on the New York Stock Exchange.