United Airlines lost a key bankruptcy court ruling when its pilots’ agreement was thrown out Friday but achieved last-minute negotiating breakthroughs with two other unions to postpone an awkward courtroom showdown over its push for new labor contracts.
The flurry of developments just ahead of a self-imposed labor deadline brought mixed progress for the nation’s No. 2 airline in its efforts to slash labor costs for the second time in its two-year bankruptcy.
Judge Eugene Wedoff dealt United a setback by rejecting a disputed deal with the pilots that he said would “unduly tilt the bankruptcy process.”
Hours later, after negotiating throughout the day to avoid a labor trial, United announced a tentative labor agreement with its mechanics’ union and said it was on the verge of a similar pact with flight attendants. Details of the two contracts, which were not disclosed, were negotiated after United obtained a three-hour delay in the scheduled start of the trial.
Company officials said they intended to meet with the flight attendants through the weekend in hopes of nailing down a deal that would result in the labor trial being formally called off.
United’s chief financial officer Jake Brace called it “overall a productive day” despite the adverse verdict on the pilots’ deal.
“We were disappointed with the pilots’ ruling ... but with the afternoon we were very pleased,” he told reporters after the trial’s postponement.
Barring agreements, CEO Glenn Tilton had been poised to testify at the trial’s opening late Friday on the need to slash wages and benefits further — saving United $725 million annually — and eliminate defined-benefit pensions.
The carrier, a unit of UAL Corp., maintains soaring fuel costs, industry overcapacity and profit-eroding fare wars with discount carriers forced it to seek drastic labor givebacks on top of $2.5 billion in cuts in 2003.
A trial on its motion to break existing collective bargaining agreements could last as long as a week and risks alienating workers. Flight attendants have threatened to strike if their contract is broken without their consent.
United said the mechanics’ deal, if ratified, would provide for the reduced costs it seeks from the union. The two sides would have another 90 days to negotiate on pensions before United seeks court action.
Spokesman Richard Turk of the Aircraft Mechanics Fraternal Association declined comment on the agreement, saying the union’s members had not yet been informed of the details.
Sara Nelson Dela Cruz, spokeswoman for the United unit of the Association of Flight Attendants, emphasized that any agreement reached at the negotiating table would have to be approved by members.
“It’s in the airline’s best interest to reach an agreement with us as soon as possible,” she said.
The pilots’ contract, which called for 15 percent pay cuts, would have provided United with $180 million in annual savings and paved the way for it to eliminate all defined-benefit pensions. But the flight attendants’ and machinists’ unions, joined by the government’s pension agency and a committee of United’s unsecured creditors, had opposed it since shortly after it was announced on Dec. 17.
Wedoff said several aspects of the proposed pilots’ agreement would inappropriately “tilt” the bankruptcy process — most notably its stipulation that other unions’ pension plans also be terminated for the pilots’ agreement to take effect. He said the other unions’ arguments to retain their pension plans should be considered on their own merits.
“I come to this decision with extraordinary reluctance,” Wedoff said, citing the pilots’ efforts to craft an agreement and the sacrifices they have already made.
He said he hoped the company and pilots could craft a contract based on the previous one but warned that he would also reject any future agreement that was tied to the elimination of other unions’ pensions.
Both United and the Air Line Pilots Association expressed regret at the ruling but said they would return to the bargaining table.
The proposed contract would have allowed the union to terminate the deal if United allowed any other employee group to keep its pension program. The federal Pension Benefit Guaranty Corp., which estimates it would have been responsible for about $1.4 billion of the pilots’ plan had it been terminated, had aggressively opposed that stipulation.
“We hope and trust that any new agreement between the company and the pilots’ union will not be structured in a way that abuses the pension insurance system,” PBCG spokesman Gary Pastorius said.
After the pilots’ ruling, United withdrew agreements reached earlier this week with two small unions representing about 200 flight dispatchers and meteorologists and said they would be reworked. Brace said they contained stipulations similar to the one Wedoff objected to in the pilots’ deal.
The union representing baggage handlers, ramp workers and public-contact workers now faces an April 11 deadline for negotiating a pact after Wedoff on Thursday approved United’s emergency motion to temporarily cut wages by 11.5 percent for that group, giving the two sides more time.