United Contract Seeks to End Pension
United Airlines sent its employee unions new contract proposals Thursday, seeking to terminate pensions and demanding other concessions.
United, the nation’s second-largest airline, has been threatening to terminate its pensions since August. Last month it said it would need to cut costs significantly more than anticipated because of the industry’s deteriorating financial outlook.
“We recognize this is difficult for employees, but it’s necessary considering the environment we are in. Fuel is at a record high, and airfares are at a record low,” United spokeswoman Jean Medina said.
The carrier and its Elk Grove Village, Ill.-based parent company, UAL Corp., are attempting to save an additional $2 billion by 2005, Medina said. United already has lopped $5 billion from annual expenditures since it filed for Chapter 11 bankruptcy protection in December 2002.
“This is a challenge. It is a challenge that must be met. And it must be equitable for all of our employees,” United Chief Executive Glenn Tilton said Thursday in a recorded message to employees.
Facing $4.1 billion in obligations to its existing pension program over the next five years, United wants to terminate future pension plans and replace them with a defined contribution plan. United’s plan -- which the company says is necessary to attract financing to leave bankruptcy protection -- has caused an uproar among employees.
The government-financed Pension Benefit Guaranty Corp. would have to take on United’s huge obligations if the airline terminates the pensions. United’s plan has also sparked worry in Washington over the potential steep cost to federal taxpayers.
Steve Derebey, a spokesman for the Air Line Pilots Assn., said in a recorded message Thursday that United’s proposal outlined “dramatic changes,” including the replacement of pension plans. The union’s governing body is scheduled to meet beginning Nov. 15 and will discuss United’s proposal then.
Along with labor concessions, United senior executives, including Tilton, also have agreed to a 15% wage reduction beginning Jan. 1.
