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United Airlines, machinists reach accord

UAL Corp's United Airlines and the machinists' union reached a tentative agreement on a new contract for 12,800 mechanics and cleaning workers, avoiding the possibility of a strike today at the second-largest airline.

The proposed contract, which would run to 2005, keeps wage levels set by a presidential board last month, including a 37 percent pay increase this year for United's top mechanics, said union spokesman Joe Tiberi. The agreement changes terms on retroactive pay, future concessions and retirement benefits that workers cited in rejecting the panel's plan last week, he said.

United, which had a US$2.1 billion loss last year, has said revenue was down in recent weeks as travelers booked on other carriers because of the strike threat. Some analysts said a walkout might lead the carrier to file for Chapter 11 bankruptcy protection. Talks began in December 1999, and union rejection of the panel's plan led to the Wednesday strike deadline.

The agreement "certainly is a good thing in the short term," said Bill Mastoris, managing director of research for BNY Capital Markets Inc, which trades UAL bonds. "Now, the really tough work begins."

UAL Chief Executive Officer John Creighton has told all employees that United needs billions of dollars in concessions over the next several years to stem losses. Chicago-based UAL is 55 percent owned by workers because of wage concessions the employees made in 1994 to help the carrier.

The Machinists agreement "is a critical milestone in developing a recovery plan that meets the needs of passengers, preserves jobs and puts the company on the road to financial stability," Creighton said in a statement.

The union's negotiating team said it unanimously recommended a vote in favor of today's agreement. The Machinists leadership had given no recommendation on the contract proposed by the presidential panel, which the company accepted and workers voted 68 percent against.

United and the union agreed to postpone the strike deadline to March 7, with a vote on the latest agreement coming March 5, Tiberi said.

The tentative accord "fulfills the promise to negotiate an industry-leading contract, one that recognizes the past sacrifice and current value of these employees," Scotty Ford, the union's district president and a chief negotiator, said in a statement.

The five-year term of the proposed agreement begins in July 2000, when the previous contract became open for changes.

The tentative agreement addresses some objections workers had to the board's proposal, including a new provision to pay retroactive wages starting in December, as opposed to April 2004, Tiberi said. The proposed contract also will let workers vote on any future wage concessions instead of forcing them to accept any givebacks that the company secures from other employees, he said.

Retirement benefits under the agreement would rise to US$87 a month for each year of service, from the previously proposed US$85 and the current US$60. The two sides also agreed to changes on additional pay for mechanics who hold two licenses.

"These are the changes [workers] were telling me they wanted to see in order for it to get ratified," said Tom Reardon, an assistant general chairman for the union.

Wages set by the presidential board call for mechanics' top pay rate to rise this year to US$35.14 an hour from US$25.60, with the highest pay rate for cleaning-crew workers increasing 19 percent to US$19.76 an hour from US$16.61. The union represents 10,600 mechanics and 2,200 cleaning workers.

The Machinists union initially had sought increases of 43 percent to US$36.63 an hour on top pay for mechanics and 28.5 percent to US$21.34 for cleaning workers.

The provisions for retroactive pay going back to July 2000 call for the top mechanics' rate to rise 13.5 percent to US$29.05 an hour and 9.9 percent to US$18.25 for cleaning workers. The retroactive increases will also apply for 2,500 mechanics and cleaning workers laid off after the Sept. 11 attacks.

"As soon as they get this raise they're going to be asked to give parts of it back," said Darryl Jenkins, director of the Aviation Institute at George Washington University. "I have a feeling that round two has already been fought."

The company's costs are going to go up, though its real problem has been revenue, said Michael Boyd, a consultant at Boyd Group in Evergreen, Colorado. United needs more people to fly at higher fares, he said.

The two sides agreed to an expedited negotiation process for the next contract for the mechanics and cleaning workers.

United and the Machinists still are in mediated talks on a new contract for 30,000 baggage handlers, reservation agents and airport workers, including some who were laid off. That contract also became open to change in July 2000.

UAL's shares rose US$0.28 to US$11.36 Friday and didn't trade yesterday because of the Presidents Day holiday in the US. The stock has declined 71 percent in the past year.
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