CHICAGO – United Airlines mechanics have “overwhelmingly” rejected a new contract with the bankrupt carrier and said they are ready to strike if a judge throws out their current agreement.
The airline’s management called the vote “disappointing” and said it will be in federal bankruptcy court Monday, arguing the current contract is hindering the airline’s efforts to get out of bankruptcy. The mechanics countered that they have proposals that can save the airline money without further cuts to pay and benefits.
If the mechanics strike, it could be a blow the beleaguered airline cannot recover from, some experts say. It could also set up a legal showdown over whether the mechanics can be forced to work under a court-imposed contract.
“If there’s any extended shutdown on United, they won’t make it,” said Douglas Baird, a bankruptcy expert at the University of Chicago Law School.
The airline needs the cash that comes in from continued operations, Baird and other experts said, and if that stops, the banks that have loaned United money to continue operations will pull out. “If they call a strike, United is basically finished,” Baird said. “It’s the death knell. That’s when you bring in the defibrillator.”
The Aircraft Mechanics Fraternal Association represents 7,000 workers. The union’s employees said they do not believe management has viable solutions to bring the airline out of bankruptcy.
Employees “have shown that they do not have faith in the company’s ability to successfully return United Airlines to profitability,” O.V. Delle-Femine, national director of the association, said in a statement Friday.
“Management at United has been unsuccessful in past attempts to become profitable after employees agreed to concessions. Our members are tired of subsidizing mismanagement.”
The union did not release the results of the vote to accept the contract, but said about 89 percent voted to authorize a strike.
The proposed contract would have cut pay 5 percent for mechanics and 10 percent for workers who clean the aircraft. It would have also changed work rules, cut back on vacation and sick time, and allowed for more outsourcing of jobs to non-union workers.
The average aircraft mechanic makes $60,000, said David Quinn, a mechanic with 20 years of experience who sat in on the negotiations with the airline.
“They would have dropped the pay portion of our contract 5 percent, but the overall package would have had an economic impact of about 18.3 percent,” he said. “So it’s really trivializing it when you call it just a 5 percent reduction.”
United has told its unions it needs to cut labor costs by about $725 million annually. The mechanics’ share is about $100 million. In addition, United wants to eliminate employee pensions and replace them with a less costly retirement benefit.
Those cuts are in addition to the $2.5 billion in labor cost cuts made in 2003. The airline has been under the protection of the bankruptcy court since December 2002.
The mechanics had sought to add provisions in the contract that would have restored some of the cuts if fuel prices fell or other financial benchmarks were met. “We told them that when the company turned around, we wanted to be part of that turnaround and share the upside as well as the down,” Quinn said. “On anything, the cry from the company was they have a need for a verifiable and durable savings.”
But the airline did make special accommodations for other workers, he noted.
United’s proposed contract with its pilots would give that union a $550 million convertible note when the carrier gets out of bankruptcy. The revenue the sale of that note produces will blunt some of the economic impact the pilots will feel from their lost pension, the union and United management has said.
Union negotiators said they wanted a similar agreement, but United said no. Airline consultant Michael Boyd said he sympathizes with the mechanics’ frustrations with management, but said a strike would be the wrong response.
“I understand why they’re upset, but drilling a hole in the bottom of the boat isn’t going to fix it,” said Boyd, with the Boyd Group, a Colorado-based consultancy. “Unfortunately, United has to get its costs down somewhere.
“I would suspect AMFA would have been better off calling for the total removal of the front office instead of calling for a strike.”
AMFA is a relatively new union at United. In 2003, United’s mechanics were represented by the International Association of Machinists and Aerospace Workers, but they broke from that union and joined AMFA.
The IAM continues to represent other United employees, including ramp workers and baggage handlers.
Airline mechanics are facing tough times across the industry, said Robert Mann, an airline consultant with R.W. Mann & Co. Earlier this month, US Airways mechanics represented by the IAM agreed to eliminate thousands of jobs to help that airline’s efforts to emerge from its second bankruptcy in two years.
“For many, it’s up or out. Do they want to continue at this degraded level of compensation or go practice a technical trade on the outside?” Mann said.
Monday, United also will find out if most of its other unions have ratified new contracts that will cut their pay and benefits. The carrier has said it will ask the court to void other contracts if those workers also reject new deals.
United has argued that its workers cannot legally strike and that the court can force rewritten contract terms on workers. It’s a position Baird and some other legal scholars disagree with, arguing that forcing people to work according to terms they never agreed to violates their constitutional rights.
“The only thing the judge can do is say United is no longer bound to have to offer these terms and conditions to employ these mechanics,” he said. “What the judge can’t do is tell the mechanics that they never agreed to this but that they have to work under these terms and conditions.”
If the court rejects the contract, it will likely force United to continue talks with its workers unless the airline is prepared to bring in new employees willing to work under whatever pay and benefits the airline is offering, Baird said.
Friday’s announcement by the mechanics capped a rough week for United. Thursday, the airline’s parent company, UAL Corp., announced it lost $664 million in the last three months of 2004 and finished the year with a $1.6 billion deficit.
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