Source: Reuters

NEW YORK, Nov 24 (Reuters) - The parent of United Airlines Inc. on Wednesday asked an Illinois bankruptcy judge to let it reject its labor contracts with its six unions if it fails by January to extract an additional $725 million of annual savings from its employees.

The proposed cuts are on top of $2.56 billion of concessions that unions have already provided. United and its parent UAL Corp. filed or Chapter 11 protection from creditors in December 2002.

In its motion to the U.S. Bankruptcy Court in Chicago, UAL said its "urgent financial needs" demand the additional savings. It said these savings are the "minimum" it needs to secure financing for when it emerges from Chapter 11, and "eventually restore United to long-term financial health."

The additional labor savings that UAL is seeking include $191.2 million from pilots, $180 million from machinists and $137.6 million from flight attendants. Salaried workers and management would give back $111.8 million.

UAL said it also needs to cut its pension liabilities to secure the financing, and wants permission to remove any requirement in collective bargaining agreements that the carrier maintain defined benefit pension plans.

It said if an alternative solution is not found, United plans to ask the court to terminate these plans, which essentially would shift the liabilities to the Pension Benefit Guaranty Corp., a U.S. pension insurer. Doing so, it said, would save an average $639 million a year from 2005 to 2010.

UAL also said it is proposing that all employees' pay be reduced by 4 percent from Jan. 1 until the company emerges from Chapter 11.

In a statement on its Web site, the machinists' union said it will try to reach a consensual agreement with the airline. Dave Kelly, a spokesman for the Air Line Pilots Association, declined immediate comment on the court filing. A call to the flight attendants' union was not immediately returned.

UAL Chief Executive Glenn Tilton and seven other top executives have already agreed to take 15 percent pay cuts as of Jan. 1.

Like other carriers, United, based in Elk Grove Village, Illinois, has struggled with record-high fuel prices and an inability to charge higher fares because of weak demand, as well as competition from low-cost carriers.

US Airways Group Inc., which is also operating in Chapter 11, earlier this month asked another bankruptcy judge to let it void labor contracts with three unions that haven't yet voluntarily accepted cost cuts.

A hearing on UAL's motion is expected on Jan. 10, 2005 before U.S. Bankruptcy Judge Eugene Wedoff.

UAL shares fell 1 cent to 99 cents in Wednesday trading.