United Airlines averted a threatened strike Tuesday by reaching a last-minute deal with the union that represents 19,000 baggage handlers and customer-service and reservations agents, among others.
It was the final agreement the bankrupt airline needed to reach a key goal: slashing its yearly labor costs by $700 million.
United spent more than six months seeking pay cuts and other concessions from employees.
“This is a key day as part of our restructuring,” United spokeswoman Jean Medina said. “This is about both sides doing the work … restructuring United so that we can be a sustainable, viable company.”
The International Association of Machinists had threatened to strike if its labor contract was thrown out in bankruptcy court at a hearing scheduled for Tuesday. United had said a strike would be illegal.
The union, in negotiations nearly until the start of the hearing, said the “agreement in principle” resolves issues and includes a replacement pension plan. United had been targeting $176 million in cost savings from the union through pay cuts and other concessions.
Negotiators hope to complete details in the agreement by June 17. A temporary 11.5 percent pay cut and reduction in sick pay will be extended until then.
The pact is subject to a ratification vote by the union’s members and court approval.
“Prospects for United are considerably better now,” said Douglas Baird, a professor at the University of Chicago Law School. Still, “it has a bunch of challenges in front of it,” including difficult negotiations on aircraft leases.
United has 60,000 employees, including about 6,000 in Denver. It is the largest carrier at Denver International Airport and has been in bankruptcy since December 2002.
Earlier Tuesday, United cleared another hurdle when its mechanics union voted to approve a new contract.
United mechanics and aircraft cleaners represented by the Aircraft Mechanics Fraternal Association approved a five-year deal with pay cuts, outsourcing and other concessions. The approval avoids the possibility of a strike and saves United $96 million annually.
The mechanics union agreement includes 3.9 percent pay cuts. Benefits, such as sick days and holidays, also will be reduced. Under the agreement, the airline is allowed to outsource some work, including computer technician work, fueling and aircraft cleaning. The pact also allows United to outsource some heavy maintenance overseas.
“It’s not like it’s a victory by any means,” said Richard Turk, a spokesman for the mechanics union. “There’s nothing really positive in this for us.”
Fifty-nine percent of the mechanics union members’ votes were to accept the agreement, while 41 percent rejected it. Of the 5,662 eligible voters, 80.7 percent voted.
With only a 59 percent vote of approval, “I think there’s a high risk of attrition, but we’ll just have to see how it plays out,” Turk said.
While United reached those milestones Tuesday, the Association of Flight Attendants plans a legal fight against United’s move to terminate employee pension plans.
A hearing on an injunction against an agreement between the U.S. pension insurance agency and United Airlines for termination of the plans is scheduled for Friday. U.S. Reps. George Miller of California and Jan Schakowsky of Illinois filed a friend-of-the-court brief Tuesday in support of the flight attendants union.
Separately, United ended up on the losing end of a dispute over airplane leases.
United must return four of its 767-300 aircraft following the court-ordered cancellation of a temporary restraining order on repossession of 14 aircraft. The jets were leased to United by a consortium of lenders. The loss of the jets forces United to suspend its Chicago-Buenos Aires, Argentina, route in June, earlier than planned. The service may resume on different aircraft, perhaps 767s, in December to meet seasonal demand.
Other flights affected are domestic routes, and those will be covered by other aircraft.
United continues negotiations on new leases for the four other aircraft that are subject to repossession as early as the end of this week, United attorney Jamie Sprayregen said.
United also must resolve lease negotiations on still more aircraft, submit a plan of reorganization, secure financing to exit bankruptcy and find a way to become profitable.
“If they have a good summer and remain cash flow positive, then things will look brighter in the fall,” Baird, the Chicago law professor, said. “On the other hand, there’s a lot that’s uncertain.”
Staff writer Kelly Yamanouchi can be reached at 303-820-1488 or kyamanouchi@denverpost.com.
