In a filing with the U.S. Bankruptcy Court this afternoon, UAL Corp. (NYSE: UAL), the parent company of United Airlines, restated that it is moving quickly to address three imperatives confronting the company and its employees: a financial imperative driven by the terms of its Debtor-in-Possession (å“DIPå”) financing, which impose strict deadlines on Unitedå‘s cost-reduction targets; a transformational imperative, requiring the company to revamp its business model and compete profitably on a sustainable basis; and a labor relations imperative, requiring the company to permanently revamp its wage structures and work rules to ensure the company can provide well-paying and stable jobs at a vibrant enterprise.
In its filing, the company said it has reached tentative agreement with the leadership of four of its six U.S. union groups - representing pilots, flight attendants, dispatchers and meteorologists - on significant interim wage reductions, paving the way for United to “exhaust every conceivable means by which [it can] address [its] transformational and labor relations imperatives on a collaborative and consensual basis.”
United said it expects the interim wage reductions to be put out for ratification by January 8, 2003.
Additionally, United’s motion seeks the court’s authority to impose wage reductions on the company’s employees that are represented by the International Association of Machinists, which has not agreed to the wage reduction proposals.
“The agreements today are a crucial first step in our efforts to change the way we do business at United,” says Glenn Tilton, chairman, president and chief executive officer. “Our goal through this whole process is to create a more competitive airline that develops new business opportunities, responds creatively to the marketplace and provides stable jobs, sustainable growth and durability through economic cycles. Today, we begin the process of reaching agreements on the critical work of taking costs out of our system. As we continue to move forward, we will focus on work rules and scope of work changes that will give us the flexibility we need to accomplish our transformation.”
The filing was a conditional motion under Section 1113 (c) of Chapter 11 of the U.S. Bankruptcy Code that could ultimately lead to the rejection of the company’s collective bargaining agreements and the securing of interim wage relief from its unionized employees. United filed the motion with the U.S. Bankruptcy Court in the Northern District of Illinois.
United said in its motion that, if approved by the Court and ratified by union membership, the proposed wage concessions will take effect January 1, 2003 and will be a significant step in helping the company to meet the immediate requirements of its debtor-in-possession (DIP) financing agreements, which require that substantial cost reductions be in place by February 15, 2003. In addition, United told the court that transformation of its business will require long-term modifications to its labor agreements - including work rules and scope of work clauses - to make the company more competitive.
United said that if the proposed wage concessions are ratified by the four unions and the Court approves immediate wage relief from the IAM141 and IAM141-M, it will not seek to proceed to a Section 1113(c) hearing until March 2003. However, today’s filing of the conditional Section 1113(c) motion would enable the company , if necessary, to ask Judge Eugene R. Wedoff to set a Section 1113(c) hearing in time to implement required labor cost reductions.