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Posted on 11/28/2002 2:02:46 PM PST by Rome2000
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1 hour, 42 minutes ago
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By Kathy Fieweger
CHICAGO (Reuters) - Mechanics at United Airlines said on Thursday they rejected their portion of $1.5 billion in proposed pay cuts over 5-1/2 years, potentially leading to an imminent bankruptcy filing unless the No. 2 U.S. airline can hammer out a new deal with the union workers quickly.
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The International Association of Machinists, District 141M, said its 13,000 members rejected the deal by a 57 percent margin. Some 24,000 other IAM members, including public service workers and baggage handlers, part of a separate bargaining unit called District 141, approved their portions of the cuts.
Elk Grove Village, Illinois-based United, a unit of UAL Corp. (NYSE:UAL - news), said it would immediately begin new talks with the mechanics.
"We intend to achieve the full labor cost savings included in our business plan," the company said in a statement on Thursday afternoon. "Reaching our $5.2 billion target is essential if we are to secure federally backed loans and avoid a Chapter 11 filing."
The mechanics' rejection jeopardizes pay-cut agreements achieved by sister unions, including those for pilots and flight attendants, which all said the givebacks were contingent on every single union taking part in the sacrifices.
United posted massive financial losses in 2001 after the Sept. 11 attacks and again this year as revenues remained weak.
The airline recently secured $5.2 billion in wage cuts from its employees, including five separate unions, as part of a financial recovery plan put before the Air Transportation Stabilization board. That is a new federal agency created after the Sept. 11 attacks and charged with doling out up to $10 billion in loan guarantees.
United has asked the agency to back $1.8 billion of a $2 billion loan. It has met with staffers every week recently after the board said more labor wage concessions were needed than what the airline originally outlined.
Industry experts say a decision from the ATSB will determine the near-term fate of United as it tries to avoid restructuring through the courts.
Pressure on United to present a government agency with a broad package of labor concessions has intensified in recent weeks. The airline faces a big debt repayment of $375 million on Monday for which it needs new capital.
The ATSB has been a tough sell for many airlines -- some have had their financial plans approved, but others, like National Airlines, have been rejected and stopped flying after they ran out of money.
The powerful IAM represents a variety of workers at United from mechanics and customer service agents to baggage handlers and reservation agents. A committee of leaders agreed to the pay cuts only after months of intensive negotiations, having won their first pay raises since 1994 earlier this year.
BANKRUPTCY MAY COME SOON
United faces an imminent bankruptcy filing unless it can persuade the government to grant the loan guarantees very soon as part of the landmark aviation bailout package passed last year. The government wants broad labor cost reductions and a viable business plan.
Mechanics, distrustful of management they say has misguided the company in the past, apparently disagreed with the need to cut costs.
"Each employee measured the costs and benefits of participating in United's recovery plan," said Scotty Ford, District 141-M president, in a statement. "In the end, some thought the risk was worth taking, and others felt they had sacrificed enough. We respect both decisions and this organization will aggressively represent their common interests as this extraordinary situation unfolds."
United and the rest of the airline industry is headed for collapse and nationalization.
If these unions think Washington is going to bail them out with anymore of the taxpayers money they are mistaken.
The people that voted against a pay cut just fired themselves.
Oh well. They can take that unemployment check to the bank and tell the bank teller "But we held the line, by God!"
I won't subject myself and my family to any searches by federal TSA morons unless it is absolutely necessary.
I'm going to restrict my flying to taking the seaplane out to Bimini, and will drive everywhere else.
The entire airline industry is headed for bankruptcy, and will be taken over by the government.
.
Unions are affiliated with the Socialist Internationale and are not compatible with free enterprise.
The GOP had better not hand over any more of our money to these leeches.
These guys are so greedy. The want to be as overpaid and underworked as the pilots but they aren't as important as the pilots.
My bet is that management desperately wanted one union to reject a reasonable proposal. I would have thought the stewardesses would have rejected but the mechanics would have been close behind. Now, management is free to seek bankruptcy while being able to shrug and say, "Geez, we tried everything but the mechanics pee'd in the pool." In bankruptcy, management will be able to disown every labor agreement and impose its own terms. The unions that have agreed will get trimmed a little more than they've agreed but the IAM will go to at least half pay the day after bankruptcy.
Then the IAM will whine to Washington but, to little avail. The horse they backed came in last.
Really? What do you know about the situation? Any idea what those "greedy union members" have given back to date to this lousy excuse for a management of an airline? It wouldn't matter if they worked for free. UA, et al, made some really stupid decisions when cash was easy and business was good and now they want scape goats. Lots of scape goats.
Absolute imbeciles were pulling down 75G's a year and did NOTHING.
The union didn't cooperate, and their went Pan Am and my job.
I worked as a Taxi Driver in NYC after that and had to join a union there too.
It is a Mafia front, giant pension fund except no one gets a pension.
Even the meat cutters have a union in NYC.
You pay dues or you don't cut beef.
Unions are criminal enterprises subsidized by high tax rates.
The Unions have dug their grave, because many more employees are going to be fired after Bankruptcy than would have been laid off after reorganization.
United will be forced to legally cancel every Union contract, and renegotiate from a much stronger position.
"Oh, you dont like what we want to pay you? .....NEXT!!
What I hate, is that the first thing to go is going to be BUSINESS CLASS. More cheap seats, fewer expensive seats. All the airlines are going to have to emulate Southwest and Jet Blue to stay afloat.
But, there will NOT be nationalization, just because a few communists want it. The market will decide.
For really bad management the only real solution is Chapter 7 bankruptcy. In Chapter 7 the court orders them cease operation and shell the planes and the fixtures to the hightest bidder. The creditors would be paid what ever that brings. That would let a new airline start up in its place with new owners and new employees to man the gates and routes.
But, there will NOT be nationalization, just because a few communists want it. The market will decide.
You've got it. The old airline business model created in a rate regulated government controlled environment is dead.
New companies will be created to meet the demand and the current successful ones will expand as the obsolete ones die a screaming death.
United and a lot of others will go belly up. Companies are not guaranteed to last forever. Corporations are defined as legally created persons. And like real people they are born, grow, get old, sick, and die.
There are going to be a lot of airline mechanics changing plugs at the Chevie Dealers for about 1/4 the pay wondering what the hell happened.
Thats right, and whats worse is that the main result will be that BOEING is going to have MASSIVE layoffs, as the surviving airlines consolodate their services around a single aircraft to cut costs.
You and me will be flying coast to coast in cramped 737's and the bigger jets will be reserved for inter-continental travel. Damn the customer, because he will only be flying if he HAS to, and no longer for pleasure, so the airlines will cram us in like cattle headed for slaughter.
I expect charter jet service to explode, along with private plane ownership.
Those former airline mechanics will be selling those big houses paid for with overtime pay, and moving into those cramped downtown apartments with their moms.
And one of the really stupid decision was excessive pay raises for all union workers in 2000.
In the current airline economic crisis, new start up airlines are not likely. If they go to Chapter 7, the other airlines (those that can afford it) will cherry pick United's assets like vultures.
Unions are affiliated with the Socialist Internationale and are not compatible with free enterprise.
Rome,
You and I have agreed on almost everything we have posted on this forum for many years. I find your temperment and outlook to be very admirable.
I do not doubt that you can lay your fingers on many examples of union abuse over the years, and affiliations with some fairly unsavoury organizations.
Your statements about the IAM are without merit or foundation in fact. The problem with UAL is UAL management. Their unions could work for minimum wage, and they would still be headed for bankruptcy, to say nothing of retention problems. If you look at the financial internals of UAL, you will find that it is the most heavily leveraged company in the industry. That works great in good times. It works just as well in the other direction in bad times.
The problems with the industry have nothing to do with cost. It is a revenue problem. The airlines are more efficient today than they were in the late '90s, yet they are losing money - why? They don't have the revenue.
OK, OK...
So, where do we go from here. Was it wise for the IAM to not agree to management's terms for a paycut? Probably not. Yes, the bankruptcy court can change provisions of a contract, but the industry tried that 20 years ago, and it caused more problems than it was designed to help. I doubt that bankruptcy reorganization will do much to change the contract beyond what they would have otherwise agreed to. If they are liquidated, then that is another story. 100% of 0 is 0.
There are only two things that will save the airline industry. Revenue has to pick up or capacity has to be drawn down. I chuckle at all the tough FReepers on this thread that wish for the ruination of an airline, because they are unionized, yet they praise the most heavily unionized carrier in the nation - Southwest.
We are all free-marketers when supply/demand works in our favor. Right now, that means that airlines supply tickets for a price below that which it costs them to produce them. That can only happen so long before the inevitable happens - one carrer (UAL) will go under and take 21% of the US domestic market with it. When that happens, you listen for the cries to bail out United. These same free-market theorists will bitch bitch bitch about the loss of service and the hike in fares it will produce.
FReep on bro,
-Orion
I think that is exactly what they think.
The people that voted against a pay cut just fired themselves.
I sincerely hope so.
Do you hope the management officers that ran this company into the ground lose their jobs? They are not union, and likely vote Pubbie.
Mabye they paid their pilots what they did so they would not go on strike. I guess factual discussions on how those employees worked for 16% less than the competition, and gave up 88% of their retirement from '94 - '00 would be out of bounds. The rest of America experienced one hell of a boom in pay & benefits during that time, while the UAL pilots had frozen pay. Most of that raise was the "snapback" which was contractually mandated from the '94 ESOP.
But you knew that...
Scroll down and look on the right for a comparison of labor costs between UAL and Southwest Airlines. UAL's labor costs in "cents per available seat mile" are 63% higher than Southwest's.
Apples - Oranges.
Southwest flies point-to-point in an all 737 fleet. Their training costs and labor costs reflect this. UAL flies at least 6 or more different types of aircraft to service markets that SWA can not serve. Training is expensive. UAL is also a hub-spoke carrier. These carriers are very profitable during good times and very expensive during bad times. UAL, AA, DAL, NWA all crushed SWA's profit during the boom times. SWA returns the favor during bad times.
Funny how no one compares revenues and profits to SWA during the good times (and as all faithful little Pubbies know, the economy is turning around).
That's exactly what they just did.
IAM: "You want to pay me that? Find some migrant on the 7-Eleven street corner to turn your wrenches. Find a pilot that will fly your plane if a moron is working on it. Find a passenger willing to pay your salary to sit in a plane without a pilot......NEXT!!
they deserve to be unemployed if management was straight with them and took an equal percentage cut across the board in total compensation(base wage and stock options,cut all frills till they are once again earned).
BWAHHHHHH!!!!!! LOL!! ROTFLMAO!!! That is the funniest thing I have ever read on FR. I mean it. That was rich. Airline management giving "straight talk" when money is concerned....You guys kill me!!!
Yeah, airline management shooting straight...That will happen when the Arabs-Jews hold hands and sing Cumbayah, when the sun rises in the West, when RATS call for the end of the income tax, when FReepers wake up and believe that the Pubbies don't care about Americans...
Honestly, I think I just wet myself and slit a gut laughing so hard...
Always, think before posting.
The union didn't cooperate, and their went Pan Am and my job.
Rome, that's a bunch of Bravo Sierra...
PanAm went under because they had no domestic feed for their international operation. Deregulation killed PanAm, and that's too bad, because it was the best of the best.
Get real. There are plenty of skilled people out there who would kill for those jobs. Many would take a meager salary for the Health benefits alone.
Pan Am could not secure loans to stay in business JUST LIKE what is happening with United right now.
Lenders wanted to see blood on the floor with operational costs, and they could not get enough cuts from the Unions.
No cuts, no loans, no Pan Am.
....... they just get worse and are like people on welfare ... just waiting for the next handout .... never changing their behavior
ELLA BEE in post #7
Unions are affiliated with the Socialist Internationale and are not compatible with free enterprise.
The GOP had better not hand over any more of our money to these leeches.
ROME2000 in post #8
These guys are so greedy. The want to be as overpaid and underworked as the pilots but they aren't as important as the pilots.
TACIS post #9
Absolute imbeciles were pulling down 75G's a year and did NOTHING.
The union didn't cooperate, and their went Pan Am and my job.
ROME2000 in post #11
Idiots, they deserve to be unemployed if management was straight with them Issaquahking in post #13
Suicide by union.
Joe Hadenuf post #16
Scroll down and look on the right for a comparison of labor costs between UAL and Southwest Airlines. UAL's labor costs in "cents per available seat mile" are 63% higher than Southwest's.
JACKBILL post #20
And one of the really stupid decision was excessive pay raises for all union workers in 2000.
El Whino post #20
Any idea what those "greedy union members" have given back to date to this lousy excuse for a management of an airline?
Well, as far as the pilots are concerned...
An entire year's pay from '94-'00
88% of their retirement over the same period.
This was the ESOP, and the pilots bought 26% of the airline for the express purpose of not having to merge with another airline. What did UAL management do right in the middle of contract talks in '00? They tried to merge USScareways into their fold. The pilots were pissed beyond comprehension, and one would have to wonder if UAL management is too stupid to be out in public unsupervised. Honestly, they should have floated it after a contract had been inked, and that contract would not have cost them so much to placate the primary owner and most critical employee group.
Airline management amazes me. Have your employees take a monster paycut, based on promises, and then break those promises.
Now, anyone wonder why the IAM voted the way it did?
If I were you, I would go to your union rep and blame this on Republicans...I'll bet he could get you 2 or 3 weeks compensation time off.
I bet most of them are Republican. Does that change your mind?
Get real. There are plenty of skilled people out there who would kill for those jobs. Many would take a meager salary for the Health benefits alone.
Get real? How long would it take to replace 20K mechs? How long do you think UAL would survive if their planes were not moving?
How many of these out of work mechs would cross the picket line?
I want whatever you are smoking and drinking. My in-laws are in town.
No cuts, no loans, no Pan Am.
No domestic feed, no international traffic, no profits, no Pan Am.
The day that United announces that the Union Contracts are voided, they will also likely offer individual jobs to a large percentage of staff.
They will just clear out dead wood, and be better for it. They probably wont have to stop operations at all. Once they void the contracts, the equity in their planes, routes and gates will be enough collateral for loans.
If I were you, I would go to your union rep and blame this on Republicans...I'll bet he could get you 2 or 3 weeks compensation time off.
You just answered my question. It's political. You hate union members, because they are in a union. You have been conditioned to believe that all unions support Dems, and that's just not right in your world.
My union reps are Republicans, as is my union president. The only money we have given to pols in the last election cycle was to Pubbies (Mica, Young, and Smith), and that was to get guns in the cockpit, to keep you safe when you fly. Your Pubbie Prez didn't want that.
Over 80% of my union is regestered Pubbie. That's higher than the population in general, and almost any "red" region in the entire nation.
No, if I went to my union rep with this, he would probably put me on a technical analysis committee to explore how we can reduce our costs to our airline, so we can survive long enough for the economy to turn around or UAL (our biggest competitor) to go out of business. In fact, that is exactly what did happen.
Don't let this upset your perfect Pubbie Paradise/ Rush Limbaugh thought controlled world.
I am not totally against unions....but they have gone way overboard. They do more damage than good now. Like many orgs...they start out with good intentions then they go astray.
Strawman argument.I don't think you understand how this works. They don't decertify the union. That has never happened in the history of the RLA. They can change the terms (some, not many). Lorenzo tried this and failed. Congress banned him from being in the airline business, because of his actions.The day that United announces that the Union Contracts are voided, they will also likely offer individual jobs to a large percentage of staff.
They will just clear out dead wood, and be better for it. They probably wont have to stop operations at all. Once they void the contracts, the equity in their planes, routes and gates will be enough collateral for loans.
They would not be able to start up a non-union IAM. I can say for an absolute-take-it-to-the-bank fact that the pilots will not work under a severely gutted contract, nor will they work without a union.
If UAL tries to decertify any of their unions in bankruptcy, it would not happen. If it did, they would be CH7 within the month.
You obviously don't understand the industry. This isn't the local steel mill.
It's clear that you dont understand this business, so I wont argue with you further.
I am in the industry - how about you?
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