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Sat, Nov 06, 2004 - Page 12 News List

United Airlines moves to terminate pension schemes

CUTTING COSTS Citing the industry's deteriorating financial outlook, the US' No. 2 airline proposed scaled-down contracts, which caused an uproar among employees

AP , CHICAGO

United Airlines has sent its employee unions new contract proposals, seeking to terminate pensions and demanding other concessions.

United, the US' second-largest airline, has been threatening to terminate its pensions since August, and last month it said it would need to cut costs significantly more than anticipated because of the industry's deteriorating financial outlook.

"We recognize this is difficult for employees but it's necessary considering the environment we are in. Fuel is at record high and airfares are at record low," United spokeswoman Jean Medina said Thursday.

The Elk Grove Village-based carrier and its parent company UAL Corp are attempting to save an additional US$2 billion by next year, Medina said. United has already lopped US$5 billion from annual expenditures since it filed for Chapter 11 bankruptcy in December 2002.

Facing US$4.1 billion in obligations to its existing pension program over the next five years, United wants to terminate future pension plans and replace it with a defined contribution plan. United's plan -- which the company says is necessary to attract financing to leave bankruptcy -- has caused an uproar among employees.

The government-financed Pension Benefit Guaranty Corp would have to take on United's huge obligations if the airline terminates the pensions. United's plan has also sparked worry in Washington over the potential steep cost to federal taxpayers.

Steve Derebey, a spokesman for the Air Line Pilots Association, said in a recorded message on Thursday that United's proposal outlines "dramatic changes," including the replacement of pension plans.

Another pilot spokesman declined further comment. The union's governing body is scheduled to meet beginning Nov. 15 and will discuss United's proposal then.

United's machinist union -- the International Association of Machinists and Aerospace Workers -- would not comment on the contract proposal until its members were to see it yesterday, spokesman Joseph Tiberi said.

United's flight attendants union spokeswoman Sara Nelson Dela Cruz also said the Association of Flight Attendants would not comment on the contract proposal until its leaders had discussed it.

Along with labor concessions, United senior executives, including CEO Glenn Tilton, also have agreed to a 15 percent wage reduction beginning Jan. 1, Medina said. Tilton earns US$712,500 annually.

Medina said United hopes to reach consensual agreements with the unions on the contracts. If not, the carrier can ask the bankruptcy judge to impose cuts, Medina said.

United is also widely expected to disclose thousands of additional job cuts when it reveals its new business plan later this month. Medina said on Thursday the company does not yet have specifics on the number of job cuts it would make. The world's second-largest airline has about 62,000 employees, down from more than 100,000 before the 2001 terror attacks.

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