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CHICAGO United Airlines asks judge to void pacts

Thursday, March 20, 2003

The airline gave its unions a May 1 deadline.
CHICAGO (AP) -- United Airlines asked a bankruptcy judge Monday to nullify its labor contracts after failing to reach agreements by a self-imposed deadline, raising the pressure on its unions to agree to long-term cost cuts.
The move gives the two sides until May 1 to settle on negotiated terms or the court could void the contracts -- a drastic and risky means of slashing labor costs that is rarely employed in airline bankruptcies.
If agreements aren't in place by then, the requested ruling by Judge Eugene Wedoff would enable United to impose its own, stricter terms, helping it stay on its lenders' timetable to show progress in bankruptcy or lose its financing.
United said the recent slowdown in travel and bookings because of Iraqi war fears will force it to further reduce employees' interim wages by 9 percent or more within a month if it doesn't get "sufficient relief" from either the government or its lenders.
Warnings since January
The airline has warned since January, when it secured interim wage cuts worth $70 million a month in savings, that it would begin the contract-scrapping process if unions didn't agree to concessions by mid-March.
But the talks with unions remain bogged down over both the size of United's requested labor cuts -- 31 percent, or $2.56 billion annually, through 2008 -- and its plan to start a low-fare carrier, which would entail a lower wage scale and separate work rules.
The pilots' and flight attendants' unions criticized the filing and said United was using the bankruptcy process to seek far deeper cuts than are needed to make it successful again.
United emphasized in an announcement that its priority remains on negotiated contracts but that it had to file the motion Monday to ensure that the necessary cost savings are in place by May.
"Between now and May 1st, we will continue to negotiate around the clock in the belief that we can reach consensual agreements with all of our union groups and render a ruling from the court unnecessary," said chief executive Glenn Tilton, adding that the unions may have to accept "broad and deep" changes to stay competitive.
Elk Grove Village, Ill.-based United filed the industry's largest bankruptcy Dec. 9 after sustaining heavy losses since 2000. It posted a record $3.2 billion loss for 2002.