updated 7/21/2005 5:51:34 PM ET 2005-07-21T21:51:34

United Airlines on Thursday concluded a contentious effort to wring out more labor costs in a bid to leave bankruptcy when its machinists union announced ratification of a new contract.

The agreement with the International Association of Machinists and Aerospace Workers cuts pay by up to 5.5 percent and trims some benefits, which should save United about $175 million annually.

With the ratification, each of United's six unions has agreed to new contracts, resulting in $700 million in annual labor savings. It clears the way for United to file a reorganization plan with the bankruptcy court, which it expects to do around Aug. 1.

Separately, a federal judge in Chicago rejected an appeal from United's flight attendants union challenging bankruptcy Judge Eugene Wedoff's May ruling that allowed the company to terminate its pension plan and transfer obligations to the federal government's pension insurer.

Judge Samuel Der-Yeghiayan ruled that the move did not violate its contract with the Association of Flight Attendants. United's five other unions also saw their plans turned over to the Pension Benefit Guaranty Corp. as a result of Wedoff's May ruling.

The AFA argued that the pension termination violated its labor contract and has threatened random strikes to protest the move. It said it would appeal the ruling.

"As long as management insists on a plan that would devastate the flight attendants' retirement security, we will not give in," AFA president Greg Davidowitch said in a statement issued after the judge's ruling Thursday.

About 67 percent of IAM members, which include 20,000 baggage handlers, customer service representatives and other ground workers, voted in favor of the agreement. The union this spring had threatened to strike if a bankruptcy judge annulled their contract.

The contract allows pension contributions for current employees to go into the machinists' pension plan, rather than a company 401(k) as United had originally proposed.

"We now have ratified, consensually negotiated collective bargaining agreements with all our labor groups, bringing a difficult phase of our restructuring to a close," United spokeswoman Jean Medina said.

IAM officials made clear, though, that hard feelings still linger.

"If United management cannot utilize the cost savings their employees provided to reverse course and become competitive, they must be replaced with more capable individuals," said Randy Canale, president of IAM District 141.

Meanwhile, the AFA contract _ ratified by members in January _ has been in arbitration since April after the union accused United executives of failing to cut their own salaries along with those of workers as agreed. The company denies that allegation.

United, a unit of Elk Grove Village-based UAL Corp., has asked a federal bankruptcy judge to schedule a September hearing on its reorganization plan. The company has said it hopes to exit a more than 2 1/2-year bankruptcy sometime this fall.

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