United Announces It May Make 'Significant Layoffs' to Slash Costs

From Bloomberg News

United Airlines might make "significant layoffs" as it seeks to cut $2.4 billion a year in labor costs and emerge from bankruptcy protection.

The layoffs might come "over the next several weeks," said spokesman Joe Hopkins. The UAL Corp. unit is required by law to notify employees of possible layoffs, he said. The airline warned of the job cuts in a recorded message to employees.

United has about 81,000 employees, about one-fourth of them in California. United is the biggest airline at the Los Angeles and San Francisco airports.

The Chicago-based carrier said before the Dec. 9 bankruptcy filing that it would need to reduce its workforce to 74,000 by 2004. After the filing, the company said it would need to make deeper cuts.

The latest layoff notice was issued as the International Assn. of Machinists challenged United's request that a judge impose a 13% pay cut on the union. Such wage cut proposals, including agreements with four unions, would save as much as $70 million a month.

"The time ahead must be used for work that will be even more difficult and demanding than these previous weeks and months," UAL Chief Executive Glenn Tilton told workers in a taped message this week.

The machinists union, which represents about 37,500 mechanics, cleaners, baggage handlers and airport customer service agents, said in a court filing Tuesday that Chicago-based United's request to impose the wage cut wasn't justified.

The carrier hasn't engaged in negotiations or provided sufficient financial information, the union said in a filing opposing United's motion. The union also said that under bankruptcy law, United must prove that the changes are needed to keep it from ceasing operations and asserted that the carrier hasn't done that.

U.S. Bankruptcy Judge Eugene Wedoff said he would rule as early as Jan. 9 whether to accept temporary wage cut agreements reached with the unions. United, which said it has the highest employee costs in the industry, needs to reduce labor costs by Feb. 15 to meet requirements for its $1.5-billion bankruptcy financing.

The airline said last month that it would lay off 220 of its 9,700 pilots by Feb. 7. A previous tentative agreement between United and the pilots union, which may serve as the basis for a new agreement, would have allowed an additional 380 layoffs.

United said last month that about 600 mechanics would be laid off.

UAL shares were unchanged at $1.43 in New York Stock Exchange trading. They lost 89% of their value last year.

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