Members of the union representing 20,000 groundworkers at bankrupt United Airlines have ratified a five year contract that will save the carrier USD$176 million a year, the International Association of Machinists said on Thursday.
Sixty-seven percent of all voting IAM members accepted the amended terms, the union said. The ratification moves United a step closer to emerging from Chapter 11.
The deal, which still requires approval by a bankruptcy court, cuts employee pay by 3 percent to 5.5 percent and guarantees a company contribution to a multi-employer pension plan. United was scheduled to ask bankruptcy Judge Eugene Wedoff to sign off on the deal on Friday.
"The decision to agree to an amended contract was not an easy one to make, but it was without question the right choice," said IAM President Randy Canale in a letter to members posted on the union's web site.
The IAM had recommended that its members ratify the contract, which runs from July 1 to the end of 2009.
According to the terms of the deal, employees may join the pension plan starting March 1, 2006. At that time, United would begin making contributions equal to 4 percent of employee earnings. The contribution rises to 5 percent in 2007, 6 percent in 2008 and 6.5 percent 2009.
The agreement cuts workers wages, reduces the number of paid holidays to eight from 10, cuts vacation time and increases reliance on part-time employees.
It also stipulates that each hour of sick leave be paid at 80 percent of an employee's hourly rate for the first 56 consecutive hours of each absence. That is down from 100 percent payment for sick days.
"This was expected, and I think it's good news for United to keep moving along," said Alan Sbarra, an airline analyst at Roach & Sbarra.
The airline, which has been bankrupt since December 2002, intends to file a reorganization plan around August 1.
The IAM is the last labor group to strike a permanent deal with the airline. 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 of USD$700 million annually.
The IAM and United reached an agreement in principle on May 31 just ahead of a ruling by Wedoff on the contracts.
The IAM had promised to strike if Wedoff were to terminate the workers' existing contract without a new one in place. If Wedoff approves the deal, the threat of an IAM strike is off the table.
"This agreement means that 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 said in a statement.
