Chicago, Aug. 30 (Reuters): United Airlines on Thursday demanded $ 9 billion in cost cuts over six years from its labour unions to avoid a bankruptcy filing, but two of the unions balked at the proposal, throwing the future of the number 2 US carrier into doubt.
UAL Corp, hard hit by the effects of the September 11 attacks, falling revenues and labour strife, said it was seeking $ 1.5 billion in annual savings from labour as part of a plan to cut yearly costs by $ 2.5 billion and avoid a bankruptcy filing this autumn.
The machinists’ union said it would not discuss any proposals until a successor to UAL’s interim chief executive, Jack Creighton, is named, while the pilots’ union rejected the cuts outright.
“We told the company that their proposal was just totally and wholly unacceptable,” Steve Derebey, a spokesman for the Air Line Pilots Association, said. Asked what was specifically objectionable, he replied: “the scope and magnitude...it boggles our mind.”
“We still plan to work with the pilots and all of our employee groups, because as we said earlier, we really have two paths we can take. One is to reduce our costs; the other, of course, is a possible Chapter 11 filing,” a UAL spokesman said.
Analysts said without further measures, the Elk Grove Village, Illinois-based airline is likely to be forced to file for bankruptcy protection.
“Barring significant progress in the coming weeks that we simply do not believe is forthcoming, we continue to believe UAL has a 75 to 80 per cent or greater risk of filing for Chapter 11 protection,” James Higgins, an analyst at Credit Suisse First Boston, said in a research note this week.
United said the cost-cutting target would boost the likelihood of getting $ 1.8 billion in federal loan guarantees when it re-applies to the US Air Transportation Stabilisation Board.
The agency, created after the September 11 attacks, told the airline it needed “broader, deeper and longer” concessions from labour, vendors and suppliers, according to United Airlines.
The airline also faces a fourth-quarter cash crunch due to large debt payments falling due. It imposed a September 15 deadline to reach labour agreements as it tries to avoid following smaller US Airways Group Inc. into bankruptcy.
Customers will also feel the pinch. The airline said it was initiating several ticketing policy changes as a cost-saving measure including eliminating paper tickets and raising the accumulated frequent flier miles needed to buy seat upgrades.