Pay Cuts Ordered for United Machinists

A U.S. bankruptcy judge Friday ordered temporary 13% pay cuts for United Airlines’ unionized machinists, buying the airline more time to negotiate broad concessions from its entire unionized workforce.

United, a unit of UAL Corp. and the world’s second-largest airline, filed for bankruptcy protection Dec. 9.

Since then, four of the carrier’s five unions have agreed to temporary pay cuts to help the airline reorganize and meet specific financing requirements by lenders.

But the International Assn. of Machinists, representing about 37,000 workers, argued to the judge that the airline had not shown why the cuts were needed now.

In his ruling, U.S. Bankruptcy Judge Eugene Wedoff agreed with the airline that changes to the machinists union’s collective bargaining agreements were “essential, at the present time, to continue United Air Lines Inc.’s business and to avoid irreparable damage to its estate.”

Meetings with unions about changing work rules and benefits have continued while the judge’s decision was awaited.

“From the outset of this process, it has been United’s objective to make the necessary changes in a collaborative way,” Chief Executive Glenn Tilton said. He came on board the airline in early fall, inheriting thorny labor relations, particularly with the machinists union. Its mechanics and other workers in 2002 received their first pay raises since 1994, only to have the airline ask for cuts.

Other airlines are trying to address their own labor costs and issues both in and out of Bankruptcy Court.

AMR Corp.’s American Airlines, the world’s largest carrier, said Friday that it would trim an additional 800 flight attendant jobs. At US Airways Group, which is in bankruptcy protection, flight attendants ratified a second round of cost cuts.

With revenue moribund across the industry, costs are a logical target.

In a message to members, the machinists union had little reaction to the court order other than to say it would advise rank-and-file workers of additional developments. The union said the temporary pay cuts would remain until either a broader concession package is negotiated and approved by the court or until the court rejects the current collective bargaining agreements and United imposes new terms. “The reductions will be applied to each factor that makes up total hourly pay, including base rates and all individual premiums,” the union said.

UAL shares fell 3 cents to $1.48 on the New York Stock Exchange.