Further information ...
	United's Exit From Chapter 11 Could Be Complicated by Ruling - May 9, 2005 Government, business bad at keeping promise - May 9, 2005 Pension showdown: UAL v. unions - 5-10-2005

United workers prepare to strike back

BY MARY WISNIEWSKI
Chicago Sun-Times  Business Reporter
May 10, 2005

United Airlines flight attendants could strike as early as tonight if a U.S. bankruptcy judge approves an agreement between United and the Pension Benefit Guaranty Corp. that would end pension plans and reduce benefits.

"It should be clear we're going to fight to avoid that outcome," said Sara Nelson Dela Cruz, a spokeswoman for the Association of Flight Attendants. "If they trudge forward with this sellout deal with the PBGC, flight attendants could be free to strike."

The world's second-largest airline has claimed that a walk-out would be illegal, and that it could fire striking attendants.

The flight attendants' threat is just one piece in a pile of challenges facing the bankrupt airline as United begins one of the most difficult weeks in its 29-month stay in bankruptcy.

Click here for latest stock quoteThe hearing on the PBGC settlement starts today, and a hearing on whether Elk Grove Village-based United can impose wage cuts on its mechanics and ground workers starts Wednesday. The second hearing could also involve pensions, if the issue is not resolved.

United's pension plans are underfunded by $9.8 billion, of which $6.6 billion is guaranteed by the deficit-burdened PBGC. United said that allowing the PBGC to take over the pensions would save United $4.4 billion over six years.

The mechanics' and ground workers' unions are also considering a strike. Pilots have worked out a separate deal with the airline.

The question of whether workers can strike "is like the elephant in the room," said Bill Rochelle, a lawyer with Fulbright & Jaworski, who represents some aircraft lessors in the United case. "Everyone knows it's there, and no one wants to talk about it."

Rochelle noted that U.S. Bankruptcy Judge Eugene Wedoff would be "careful" about enjoining a strike.

If United workers went on strike, "they might have to shut the airline down for a while," said John Pincavage, a financial analyst for airlines based in Westport, Conn. How long the airline would be down would depend on who walked -- flight attendants would be easier to replace than mechanics, Pincavage said.

Besides strike worries, United suffered two setbacks in the last week.

Late Friday, the PBGC scuttled a joint proposal between United and its ground workers' union that would have established a new pension plan.

The other loss, which also hit Friday, is a 7th U.S. Circuit Court of Appeals ruling that aircraft creditors can repossess eight planes from United for nonpayment.

Though it's not clear whether the creditors will actually take back any planes, the decision puts United in a tougher negotiating position with the parties that own its aircraft.

"Clearly it wasn't the decision we were hoping for," said United Chief Financial Officer Jake Brace. He said the airline would continue to negotiate a "market-rate deal" with aircraft creditors. "It's in everyone's best interest to come to an agreement on this aircraft," Brace said.

The proposed agreement between United and the International Association of Machinists would have provided bag handlers, reservations agents and customer service agents with pension benefits under the union's National Pension Plan, a multiemployer plan. The plan would have resulted in no loss of accrued benefits for active IAM members, according to the union.

In rejecting the proposal, the PBGC claimed it could set a precedent that would encourage corporations to initiate pension terminations in the expectation of a similar settlement, according to the union. The PBGC declined comment on the proposal.

United spokeswoman Jean Medina said the rejection of the proposal "demonstrates how extraordinarily difficult it is to find viable alternatives that meet the needs of all stakeholders."