The union representing some ground workers at United Airlines on Friday said its negotiating committee has recommended that members ratify a deal that would give the bankrupt carrier USD$176 million in annual savings.
Later in bankruptcy court United won approval for a 60 day extension of its right to file a business plan without interference from other parties. The airline now has until September 1 to submit a proposal without competition. The current exclusivity period was due to expire July 1.
United's agreement with the International Association of Machinists and Aerospace Workers establishes participation in the multi-employer IAM National Pension Plan, a fully-funded, defined benefit plan covering 65,000 beneficiaries at 1,700 US companies. Issues related to the workers' pension plans had been a key sticking point in negotiations.
The five year tentative agreement also moves United closer to achieving the USD$700 million in annual labor savings it says it needs to exit Chapter 11.
"I'm sure they expect it to pass," said Alan Sbarra, an airline analyst at Roach & Sbarra, of the IAM leadership. "I'm sure that they knew what they had to do. I think the odds are good that they'll pass it."
Details of the agreement will be presented to the IAM members on Tuesday, and voting is set to conclude by July 22, the union said. The IAM represents about 20,000 active United employees who work in baggage handling, public contact, security and other areas.
"The IAM negotiating committee unanimously recommends ratification of this tentative agreement as the best way to avoid contract termination, provide secure pension benefits and job security for our members," IAM President Randy Canale said in a statement.
The union's recommendation comes 2-1/2 weeks after the IAM reached an agreement in principle with United. That agreement was enough to head off a court ruling that could have voided the workers' collective bargaining agreement.
United had asked for court permission to terminate the collective bargaining agreements it had with any union that had not given the concessions the airline needed to meet its labor cost savings target.
The IAM is the last union with which United has no permanent deal. If the members fail to ratify the contract, then bankruptcy Judge Eugene Wedoff still could issue a ruling that terminates the IAM members' existing contract. The IAM has threatened to strike if the court voids their contract without a new one in place.
United's request for an extension of its exclusive right to file a business plan had met some resistance. Two banks on the list of creditors -- US Bank National Association and the Bank of New York -- as well as the flight attendants union, objected to more time, saying competing business plans would produce a faster and better result.
Separately, HSBC Bank USA said it did not oppose the extension, but asked the court to stipulate that UAL must produce a business plan before September 1.
Wedoff said terminating exclusivity now would pose a distraction to United's efforts to draft a plan. He added that he hopes this will be the last extension.
United's Chief Financial Officer Jake Brace told reporters that the carrier aims to complete its business plan as soon as possible, ideally within the exclusivity period. But he stopped short of saying the company would not have to ask for another extension.
"I'm not going to speculate on what might happen," Brace said.
United, operating in bankruptcy since December 2002, has been battered by soaring fuel costs, weak revenue and competition from low-cost carriers.
