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UAL Mechanics Reject Tentative Agreement

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Source: Media Article

Date: Jan 28, 2005

Source: Reuters
Author: Kyle Peterson

CHICAGO (Reuters) - The union representing mechanics at bankrupt United Airlines on Friday said its members overwhelmingly rejected proposed wage and benefit cuts and voted to call a strike if the court alters the current contract.

The Aircraft Mechanics Fraternal Association said in a statement that members rejected a tentative agreement that would have reduced their wages and benefits. The rejection puts a fresh obstacle in the carrier's plans to exit bankruptcy.

Its members also voted in favor of calling for a labor strike if the court changes the conditions of the existing labor agreement, reached in 2003, which already contains concessions. United, a unit of UAL Corp., said it would try to terminate the mechanics' current labor contract.

"We're disappointed that membership did not ratify the agreement," UAL spokeswoman Jean Medina said. "Regretfully, we will be seeking to reject the current contract to achieve the savings we need."

UAL could ask for bankruptcy court permission at a hearing scheduled for Monday to end the contract.

The union's rejection of the labor deal, and especially the vote to call for a strike, augured poorly for the battered UAL, one analyst said.

"This harkens back to the demise of Eastern Airlines in the early '90s," said Stuart Klaskin of KKC Aviation Consulting, who called the AMFA's move "suicidal."

"A strike while in bankruptcy is an absolute death blow to a company," Klaskin said. "I just get the impression that the unions at UAL really do not grasp how tenuous the situation is."

The No. 2 U.S. carrier, which has been under Chapter 11 protection since December 2002, has said it needs an additional $725 million in annual labor savings to exit bankruptcy. Labor groups have already approved $2.56 billion in concessions to help the carrier restructure.

The airline industry has been hammered by soaring fuel costs, low revenue and competition from low-cost carriers.

The rejected five-year deal would have cut overall wages and benefits by 18.3 percent annually, AMFA spokesman Dave Quinn said. Such a cut would put the mechanics' pay well below the national average for U.S. workers with comparable skill sets, he added.

"AMFA is now preparing to go before Bankruptcy Judge Eugene Wedoff to present our proposals that we believe will provide significant saving for United without continuing to cut pay and benefits," AMFA National Director O.V. Delle-Femine said in a statement.

The union, which represents more than 7,000 UAL mechanics and related personnel, said its members have no faith in United's ability to return the company to profitability.

The AMFA rejection leaves United with tentative deals with only four of the six unions from whom it needs to win concessions. UAL's pilots and flight attendant unions are set to conclude votes on their agreements on Monday. United and the unions are negotiating pension issues separately.

The Elk Grove Village, Illinois-based carrier also has an agreement on a temporary 11.5 percent wage cut for members of the International Association of Machinists and Aerospace Workers.

Judge Wedoff said in open court last week that he likely would approve the deals upon union ratification.

If the company fails to reach permanent deals with its unions on concessions, the airline hopes to void their collective bargaining deals. UAL narrowly avoided a January trial on the labor pacts when it reached last-minute tentative agreements with its flight attendants and mechanics.

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