A federal bankruptcy judge on Friday rejected an agreement between United Airlines and its pilots union, saying it "unfairly tilted the bankruptcy process" in favor of the pilots.
The five year deal would have cut the pilots' wages by 14 percent, providing the bankrupt carrier with USD$180 million in annual labor savings. It also would have allowed UAL, parent of United, to toss out the pilots' traditional pension plans.
Members of the Air Line Pilots Association ratified the deal on Thursday by a vast majority. However, Judge Eugene Wedoff said certain caveats of the agreement gave the pilots undue leverage over the bankruptcy process.
"I come to this decision with extraordinary reluctance. I recognize the realities of give and take in the bargaining process," Wedoff said in court.
The rejected agreement had called for UAL to issue USD$550 million in convertible notes to the pilots once it emerged from bankruptcy.
Chief among Wedoff's concerns about the deal was a stipulation that the agreement may be terminated if United fails to end the pension plans of its other unions.
The deal also said that if the pilots' agreement was terminated, UAL must pay them about USD$28 million a month for the duration of its bankruptcy.
The ruling sends UAL and ALPA back to the bargaining table to hammer out a new deal.
"While we intend to meet with the company over the next few days to explore the consequences of the judge's decision, there can be no assurance that the parties will reach another settlement," the ALPA said in a statement.
Any further agreements with United on the matter must be approved by ALPA's full United Master Executive Council and, most likely, to an additional membership ratification vote, the statement said.
United has been under Chapter 11 protection for more than two years, clobbered recently by soaring fuel prices, weak revenue and competition from low-cost rivals.
"We are disappointed that United's agreement with ALPA was not approved by the court," UAL spokeswoman Jean Medina said. "We believe the agreement we forged with the union was fair and equitable and in the best interest of the estate."
The carrier has asked Wedoff for permission to end its collective bargaining agreements with its labor unions if it fails to achieve USD$725 million in annual savings from its work force by January. That amount is on top of USD$2.56 billion in concessions the unions have already provided.
United has yet to reach deals with all of its major unions, including the one representing its flight attendants. The flight attendants union has threatened intermittent strikes if their collective bargaining agreement is terminated.
The carrier has tentative agreements with two smaller unions: the Professional Airline Flight Control Association and the Transport Workers Union.
A trial on the matter was scheduled to begin later on Friday. United's witness list filed with the court includes Chief Executive Glenn Tilton, who may testify as early as Friday.
