As predicted, with a history lesson in the article:
United Asks to Void Union Contracts
By MICHELINE MAYNARD
United Airlines asked a federal bankruptcy court judge yesterday to set aside its labor agreements as it seeks deep wage and benefit cuts for its employees.
The motion, filed in Chicago by United's parent, the UAL Corporation, proposed a series of agreements that would permanently reduce wages and benefits by $2.56 billion a year and make changes in schedules for flight crews; pension plans; job security; and various clauses that govern staffing levels and job duties. UAL also wants to create a low-fare airline.
If Judge Eugene Wedoff of United States Bankruptcy Court permits United to revoke its contracts, it will be the first time a major airline has used the bankruptcy code to cancel its labor agreements and impose new work rules since Frank Lorenzo did so in 1983 at Continental Airlines.
The court filing came on the final day that United, which filed in December for bankruptcy protection, was permitted under bankruptcy law to make the request. Otherwise, it would have lost the ability to apply what could be a critical tool as it seeks to reorganize.
Although the action was expected, it had extraordinary significance in the case of United, whose employees owned 55 percent of the airline before it filed for bankruptcy. In addition, United's labor unions held three seats on its board and had the right to veto the selection of a chief executive. Those rights were terminated two weeks ago when employee ownership fell below 20 percent.
The changes United is seeking would permit it to create a low-fare airline, which would take over about 30 percent of its operations. The unions strongly oppose such an airline.
United also said it would place greater emphasis on the use of regional jets, contract out functions now performed by airline employees and expand code-sharing agreements with other airlines.
"We have a plan to fundamentally transform United's business in a way that is durable and sustainable, and we have made solid progress in reducing costs," Glenn F. Tilton, the chief executive of UAL, said. "It strikes a balance in achieving our near-term goal of successfully emerging from bankruptcy with our longer-term commitment to create a resilient, profitable enterprise that can be the industry leader once again."
Industry analysts said they expected negotiations between United and its unions, under way in earnest over the last few weeks, to continue. But United's unions face two deadlines. Yesterday, Mr. Tilton said that the threat of war in Iraq had caused United's bookings to drop significantly. If it cannot reach agreement with its unions within 30 days, he said, the airline will be forced to impose across-the-board cutbacks of at least 9 percent on all 72,500 employees. If war occurs, Mr. Tilton said, the airline is prepared to cut capacity by whatever level is necessary. Last week, in a recording to employees, Mr. Tilton placed that figure at 10 percent to 12 percent.
Another deadline looms on May 1, when United must meet terms of $1.5 billion in debtor-in-possession financing that it obtained when it filed for bankruptcy. Mr. Tilton vowed that the airline would negotiate "around the clock" to reach agreements with its unions by then.
"However, all of us will have to accept changes that are broad and deep, and those changes require that we take an entirely new approach to competing and succeeding in this changed industry," Mr. Tilton said.
United's pilots were said to be "extremely dismayed" by the court filing. "Our contract is the product of 52 years of good-faith collective bargaining conducted under federal labor law," said Paul Whiteford, chairman of the Air Line Pilots Association's master executive council at United and one of the union members on the airline's board. "To seek to wipe out this contract by the stroke of a judge's pen is disheartening,"
Gary Chaison, professor of industrial relations at Clark University in Worcester, Mass., said that the abrogation of a contract is "like the voiding of a sacred oath."
"It's asking for cooperation under threat," he said. "It's going to greatly embitter relations between labor and management."
In addition to the pilots' union contract, United sought to cancel contracts with the Association of Flight Attendants; the International Association of Machinists and Aerospace Workers, which represents mechanics and other airport workers; and the Professional Airline Flight Control Association, representing traffic controllers.
United said the union that represents meteorologists would be exempt from its motion. It reached agreement this weekend with that union, the Transport Workers Union, on a new contract with the concessions it sought. United said meteorologists would vote on the plan by Friday.
Mr. Whiteford, who vehemently opposes the low-fare airline proposal, described the airline's plan as "an overreach," but he said it would be in the labor unions' best interests to reach a negotiated settlement rather than see new contract provisions imposed in court.
The airline industry has one glaring example of the chaos that can occur if that happens. In 1983, amid a nasty dispute with Continental Airlines' unions over his bid for wage and benefit cuts, Mr. Lorenzo filed for Chapter 11 bankruptcy protection and shut down the company for three days, then reopened it with just one-third the number of employees, who were paid 50 percent less.
Continental's unions subsequently went on strike, but Mr. Lorenzo persuaded a bankruptcy court to throw out Continental's contracts and replace them with new ones paying the sharply lower rates. Ultimately, the federal bankruptcy code was changed to make it much harder for airlines to cancel their contracts.
US Airways, which filed for bankruptcy last summer, filed a motion like United's but did not impose new contracts. Instead, it kept negotiating with its unions, and the airline obtained multiple sets of concessions before its restructuring plan was complete. Yesterday, US Airways' creditors' committee endorsed the plan. The airline hopes to emerge from bankruptcy on March 31.
http://www.nytimes.com/2003/03/18/business/18AIR.html