United Airlines took a first step toward achieving the additional labor savings it seeks in bankruptcy, imposing wage reductions on its 8,500 nonunion employees that include an 11 percent pay cut for CEO Glenn Tilton and other top executives.
The airline, owned by UAL Corp., told employees on a company hot line Monday that the cuts will account for $112 million of the $725 million a year in labor savings it needs.
They do not include an additional 4 percent temporary reduction in salary that will take effect with the permanent cuts on Jan. 1 and remain in place until United emerges from bankruptcy. The nation’s No. 2 carrier has not specified a target date for its exit from Chapter 11, but with the industry still in financial turmoil that is now not expected until next fall.
“We believe that this is a fair and equitable way to achieve the immediate cost savings necessary to exit bankruptcy,” United spokeswoman Jean Medina said. “We are building a company that can succeed in a leaner, more competitive market and provide opportunity and value to our employees.”
Tilton’s salary will now be $605,625 as of Jan. 1, Medina said. He previously reduced his $845,500 annual pay by 16 percent in August when United accelerated its push for labor cuts.
Pay cuts also will be 11 percent for the seven top executives who report to Tilton, along with 8 percent for officers, 6 percent for management employees and 4 percent for salaried workers. The 4 percent temporary cuts will be applied to the lowered amounts.
The Elk Grove Village, Ill.-based airline also said it is devising new benefit plans for the nonunion employees that could affect medical and dental programs, vacation and holiday schedules and sick leave.
United said it will achieve the rest of its savings for salaried and management employees through productivity enhancements totaling at least $30 million annually. It did not specify the savings.
Management remains in difficult negotiations with its unions over the bulk of the labor cuts, hoping it does not have to ask a bankruptcy judge to put them into effect next month in lieu of an agreement.
Analysts say widespread dissension or work stoppages over the cuts — which follow last year’s double-digit pay reductions — could cost United customers and risk putting it out of business.
Also Monday, UAL named David Wing its new controller. Wing formerly was chief financial officer of ATA Airlines and previously worked at American Airlines.