Chicago – A potentially historic trial at which United Airlines seeks to break two of its labor contracts began Wednesday with attorneys sparring about the bankrupt airline’s business pressures and obligations.
Competitors, fuel costs, frugal travelers and Internet travel sites have forced United to press for more concessions from employees, company attorneys argued. But attorneys for the airline’s machinists and mechanics unions argued that United has not been receptive to some alternatives in bargaining and that the company’s proposal isn’t reasonable.
United seeks a 25 percent pay cut or more “from a group that’s already living paycheck to paycheck,” machinists union attorney Sharon Levine said.
As the bankruptcy court trial before Judge Eugene Wedoff began, United separately continued negotiations with the machinists and mechanics unions for pay cuts, rights to outsource some work and other changes. The company this year reached settlements with other unions and said it still hopes to reach agreements with the two remaining unions before the trial is completed.
“In labor negotiations, deadlines and outside pressure tend to encourage the parties to get closer together faster,” United chief financial officer Jake Brace said.
But the International Association of Machinists, which represents ramp workers, customer service employees and others, voiced resistance Wednesday to the company’s moves in a demonstration outside the courthouse.
Its members authorized a strike if their contracts are terminated in bankruptcy proceedings, with 94 percent voting in favor of the move, the union announced.
Machinists union member Lora Carpenter said she would hate to see it come to a strike, “but if they take away our contracts, we have nothing.”
United has said it believes a strike would be illegal. The company has 60,000 employees, including 6,000 in Denver. It has been in Chapter 11 bankruptcy for nearly 2 1/2 years.
The machinists union “wants to reach agreement with United, but only if it is fair and equitable,” union leader Randy Canale said.
As United attorneys argued in the courtroom, the company reported that it lost $1.1 billion in the first three months of this year, including $250 million from operations. It had a $54 million operating profit in March.
The company reported its cash balance increased by $197 million in the quarter, demonstrating that “restructuring is delivering results,” according to Brace.
Attorneys for United, the machinists union and the mechanics union each gave opening arguments Wednesday, and United called its first witness.
Although United cut pay earlier in its bankruptcy, United attorney Alex Dimitrief argued that “United’s world has changed even more.”
The airline suffers from increased competition from low-cost carriers such as Southwest and Frontier Airlines and needs to cut more from labor costs, it argued. The company called expert witness Daniel Kasper, who said fundamental changes in the industry include the growth of low-cost carriers.
The start of the trial came a day after United got Wedoff’s approval for an agreement to end its four pension plans. The end of the pension plans is an important step to get out of bankruptcy, the airline said. But the move angered and disappointed some retirees and employees.
The flight attendants union repeated a threat to strike, but said no strike has been called yet.
Staff writer Kelly Yamanouchi can be reached at 303-820-1488 or kyamanouchi@denverpost.com.
