United Mechanics Reject Pay Cut

CHICAGO —  Mechanics at United Airlines said Thursday that they rejected their portion of $1.5 billion in proposed pay cuts over 5 1/2 years, which could lead to a filing for bankruptcy protection unless the No. 2 U.S. airline can hammer out a new deal with the union workers quickly.

The International Assn. of Machinists, District 141M, said its 13,000 members rejected the deal by a 57% margin.

Some 24,000 other IAM members, including public service workers and baggage handlers, part of a separate bargaining unit called District 141, approved their portions of the cuts.

United, a unit of UAL Corp., is the largest operator at Los Angeles International and San Francisco International airports.

Elk Grove Village, Ill.-based United said Thursday that it would immediately begin new talks with the mechanics.

The mechanics’ rejection jeopardizes pay-cut agreements made by sister unions, including those for pilots and flight attendants, which said the givebacks were contingent on every union taking part in the sacrifices.

United posted massive financial losses in 2001 after the Sept. 11 terrorist attacks and again this year as revenue remained weak. The airline recently secured $5.2 billion in wage cuts from its employees, including five separate unions, as part of a financial recovery plan put before the Air Transportation Stabilization Board. That is a new federal agency created after the Sept. 11 attacks and charged with doling out as much as $10 billion in loan guarantees.

United has asked the agency to back $1.8 billion of a $2-billion loan. It has met with staffers every week recently after the board said more labor wage concessions were needed than those the carrier originally outlined.

Industry experts say a decision from the ATSB will determine the near-term fate of United as it tries to avoid restructuring through the courts.

Pressure on United to present a broad package of labor concessions has intensified in recent weeks. The airline now faces a debt payment of $375 million Monday for which it needs new capital.

The ATSB has been a tough sell for many airlines. Some have gotten their financial plans approved, but others, such as National Airlines, have been rejected and stopped flying after they ran out of money.

The powerful IAM represents a variety of United workers. A committee of leaders agreed to the pay cuts only after months of intensive negotiations, after winning this year their first pay raises since 1994.

United faces an imminent bankruptcy filing unless it can persuade the government to grant the loan guarantees very soon as part of the landmark aviation bailout package passed last year. The government wants broad labor cost reductions and a viable business plan.

Mechanics, distrustful of management they say has misguided the company in the past, apparently disagreed with the need to cut costs.

“Each employee measured the costs and benefits of participating in United’s recovery plan,” Scotty Ford, District 141-M president, said in a statement. “In the end, some thought the risk was worth taking, and others felt they had sacrificed enough.”