updated 11/5/2004 9:40:31 AM ET 2004-11-05T14:40:31

United Airlines' workers are getting formal details on how the bankrupt company wants to replace their traditional pension with a 401(k)-style benefit plan — plus further steep reductions in pay and other benefits.

United, the nation's second-largest airline, has been threatening to terminate its pensions since August, and last month it said it would need to cut costs significantly more than anticipated because of the industry's deteriorating financial outlook.

"This is a challenge. It is a challenge that must be met. And, it must be equitable for all of our employees," United CEO Glenn Tilton said Thursday in a recorded message to employees.

United will ask a bankruptcy court judge to approve an extra $725 million in annual savings from workers, part of an effort to squeeze an additional $2 billion from the carrier's cost structure by next year, The Wall Street reported Friday, citing people familiar with the matter.

"We recognize this is difficult for employees but it's necessary considering the environment we are in. Fuel is at a record high and airfares are at a record low," United spokeswoman Jean Medina said.

United also is widely expected to disclose additional job cuts when it reveals its new business plan later this month. Medina said Thursday the company does not yet have specifics on the number of job cuts it would make. The world's second-largest airline has about 62,000 employees, down from more than 100,000 before the 2001 terror attacks.

The Elk Grove Village-based carrier and its parent company UAL Corp. already have lopped $5 billion from annual expenditures since it filed for Chapter 11 bankruptcy in December 2002.

Facing $4.1 billion in obligations to its existing pension program over the next five years, United wants to terminate future pension plans and replace it with a defined contribution plan. United's plan — which the company says is necessary to attract financing to leave bankruptcy — has caused an uproar among employees.

The government-financed Pension Benefit Guaranty Corp. would be forced to assume United's huge obligations if the airline terminates the pensions. United's plan has also sparked worry in Washington over the potential cost to federal taxpayers.

Steve Derebey, a spokesman for the Air Line Pilots Association, said in a recorded message Thursday that United's proposal outlines "dramatic changes," including the replacement of pension plans. Another pilot spokesman declined further comment. The union's governing body is scheduled to meet beginning Nov. 15 and will discuss United's proposal then.

United's machinist union _ the International Association of Machinists and Aerospace Workers _ would not comment on the contract proposal until its members see it on Friday, spokesman Joseph Tiberi said.

United's flight attendants union spokeswoman Sara Nelson Dela Cruz also said the Association of Flight Attendants would not comment on the contract proposal until its leaders meet Friday to discuss it.

Along with labor concessions, United senior executives, including Tilton, also have agreed to a 15 percent wage reduction beginning Jan. 1, Medina said. Tilton earns $712,500 annually.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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