From: Reuters
Author: Meredith Grossman Dubner

CHICAGO (Reuters) - A federal bankruptcy judge on Friday agreed to consider a motion by United Airlines to cancel its union contracts to save $725 million annually.

The No. 2 U.S. airline, which has been operating under Chapter 11 protection since December 2002, also won 60 more days of exclusivity to file its reorganization plan with the court.

The exclusivity extension prevents other parties, including creditors, from submitting competing reorganization proposals through January. The company is expected to seek another extension.

Judge Eugene Wedoff said he would weigh United's bid to throw out labor agreements if the company was unable to reach voluntary agreements on concessions with its unions in the meantime.

Wedoff said he would hear from all sides on the matter and try to reach a decision by mid-January, as United has requested.

United has already submitted new cost-savings proposals to its pilots, mechanics, flight attendants and other workers and hopes to find a "viable resolution."

But the Association of Flight Attendants is threatening to strike if its contracts are voided at United and US Airways, which is also bankrupt and seeking to dump all but one of its labor agreements if new concessions are not reached soon. US Airways pilots have already agreed to another round of long-term givebacks.

United is aggressively trying to save an additional $2 billion in overall costs to attract private financing needed to exit bankruptcy.

As part of this effort, United wants to cut employee pay and benefits and carry out work rule changes. It also wants to replace long-standing union pension plans with cheaper retirement options.

United executives are also taking pay cuts, the carrier told the court.

Pressure is building on all of the biggest U.S. airlines -- the so-called legacy carriers -- to cut costs more aggressively as losses continue to mount and competition with discounters grows more fierce.

On Thursday, Continental Airlines said it was seeking $500 million in givebacks from its workers by the end of February. Pilots at Delta Air Lines and Northwest Airlines ratified huge concession packages this month.