United Continue Discussions With Unions

UAL Corp. (NYSE: UAL), the parent company of United Airlines, today filed a motion underÊSection 1113 (c)Êof Chapter 11 of the U.S. Bankruptcy Code to reject the company’s collective bargaining agreements.Ê The company emphasized that its priority would be to continue negotiating with its unions, but that it had to file the motion today to ensure that the necessary cost savings are in place by early May.Ê The cost savings are critical to United’s ability to meet the requirements of its debtor-in-possession (DIP) financing.Ê The company said that meeting those requirements necessitates permanent wage concessions as well as addressing issues such as benefits, work rules, and “scope clauses” that presently restrict the company’s ability to compete and pursue strategic initiatives.ÊÊ

Glenn F. Tilton, chairman, president and CEO of United, said, “We have a plan to fundamentally transform United’s business in a way that is durable and sustainable, and we have made solid progress in reducing costs.Ê It strikes a balance in achieving our near-term goal of successfully emerging from bankruptcy with our longer-term commitment to create a resilient, profitable enterprise that can be the industry leader once again.Ê Between now and May 1st, we will continue to negotiate around the clock in the belief that we can reach consensual agreements with all of our union groups and render a ruling from the court unnecessary.Ê However, all of us will have to accept changes that are broad and deep, and those changes require that we take an entirely new approach to competing and succeeding in this changed industry.”

Under theÊ1113 (c) motionfiled today with the U.S. Bankruptcy Court for the Northern District of Illinois, United has requested court approval to reject the company’s collective bargaining agreements and make permanent the interim wage relief it received from its unionized employees in early January.Ê The company is also seeking to implement modifications to benefits packages, work rules, scope of work and job security provisions that will maximize the company’s strategic flexibility and facilitate transformation to a competitive and efficient airline.Ê

The company’s proposed collective bargaining modifications have a targeted savings of $2.56 billion annually on a cash basis compared to the current contractual path.Ê Examples of the types of non-compensation issues that the company needs to address include the establishment of common benefit and pension plans, changes to scheduling rules for flight crews, and modifications to scope-of-work rules to permit, among other things, the outsourcing of certain functions, expanded use of regional jets, the establishment of a low-cost carrier and the ability to expand code-share agreements.Ê

United also said that it has reached a tentative agreement with its unionized meteorologists represented by the Transport Workers Union (TWU) on contract modifications that would generate the level of cost savings sought by the company.Ê As a result, the Company will withdraw its 1113 (c) motion for the TWU, subject to ratification of the tentative agreement by the TWU membership.Ê The TWU is expected to vote on this agreement by March 21, 2003.ÊÊ


Additionally, the company said today that it has experienced a recent significant drop-off in revenue as bookings have declined in advance of a potential war with Iraq and that the company must take immediate steps to offset the negative financial effects.Ê United is actively engaged in an industry effort led by the Air Transport Association seeking war-time relief and financial assistance from the US government to mitigate the disproportionate impact of any war on the airline industry and United.Ê United also intends to approach its lenders.ÊÊÊ

In the event United is unable to gain sufficient relief within the next 30 days, the company said that it may need to seek additional temporary pay reductions of at least nine percent across-the-board for all employee groups.ÊÊ If war occurs, United is prepared to reduce capacity as may prove necessary under the circumstances as they unfold.Ê

Tilton continued:Ê “While our revenue picture stabilized in the initial three months after our Chapter 11 filing, we have recently seen a significant slowdown in travel and bookings in advance of a possible war with Iraq.Ê We will do everything possible to avoid a temporary reduction in wages.”

News releases and other information about United Airlines can be found at the company’s website,Êwww.united.com.