Court OKs UAL Wage Cuts
UAL Corp. won court approval Monday for wage cuts for United Airlines’ pilots and flight attendants worth $311 million annually, clearing a hurdle in its bid to exit bankruptcy protection.
U.S. Bankruptcy Judge Eugene Wedoff also gave the No. 2 U.S. carrier permission to cut its mechanics’ pay temporarily while negotiations continue for a permanent labor contract.
The rulings move United a step closer to achieving $725 million in annual labor savings it says it needs to exit Chapter 11.
The deals cut the pilots’ pay by 11.8% and the flight attendants’ pay by 9.5%.
Mechanics’ salaries will be cut by 9.8% over four months, savings worth $21 million, paving the way for a possible clash with their union, which has rejected wage cuts and voted to strike if the court altered its contract.
The mechanics’ proposed pay cut would start today. If talks fail to produce permanent concessions, UAL may still seek to cancel the existing contract.
The carrier dismissed the possibility of a strike.
“We don’t think there’s going to be a strike,” said UAL Chief Financial Officer Jake Brace.
Legal experts are split over whether an airline union can strike if its contract is thrown out. Airline workers are governed by the federal Railway Labor Act, which permits a walkout only after mediation fails to resolve a collective bargaining dispute. But labor unions believe the law does not apply once a contract is terminated.
Union officials could not be reached for comment.
United now has tentative deals with four of the six unions from whom it needs wage concessions. Labor groups have already approved $2.56 billion in concessions. The Elk Grove Village, Ill.-based carrier has been under Chapter 11 protection since December 2002.
Earlier Monday, UAL pilots ratified the proposed concession package with a 75% majority of the voting members, a spokesman for the Air Line Pilots Assn. said. The five-year deal guarantees that the pilots union will not object to the elimination of its pension plans under certain conditions. The deal also promises $550 million in convertible notes to help offset pension losses. The savings to UAL are about $180 million annually, the union said.
Members of the Assn. of Flight Attendants on Monday ratified their labor pact -- worth about $131 million annually -- by a smaller margin.
