United Back Before Judge on Cost Cuts

CHICAGO (AP) -- Despite its worst quarterly loss in two years and frayed labor relations, the parent company of United Airlines says it's making progress in its effort to leave bankruptcy. Not on the bottom line, however. After announcing a $1.1 billion loss for the first quarter of 2005 the day before, UAL Corp. was back before a bankruptcy judge Thursday seeking permission to reduce costs further by imposing lower pay and benefits on two unions.

Record fuel costs, decade-low fares and proliferating growth among discount airlines have contributed to 19 straight money-losing quarters, including $5.8 billion in losses since it entered bankruptcy in December 2002. The confrontational court battle is focused on yet another area where United has lagged competitors: labor costs, its biggest expense.

After United won approval to eliminate its defined-benefit pensions earlier this week, CEO Glenn Tilton told employees in a taped message that the cost-cutting is boosting the airline's future prospects.

''Although there is much more work still to do, we are nearing our restructuring objective to emerge from Chapter 11 as a viable and sustainable United Airlines,'' he said. ''We are building a solid foundation that is opening opportunities for success and growth.''

Jake Brace, the company's chief financial officer, was scheduled to testify about the need for contract changes as the potentially weeklong trial began its second day Thursday. United wants Judge Eugene Wedoff to order existing contracts with the mechanics' and machinists' unions torn up in order to impose lower terms.

Some of the factors keeping United in bankruptcy despite relatively full planes and a strong on-time performance are industrywide problems beyond its control, such as soaring jet fuel prices. The airline reported a $250 million operating loss for the first three months of 2005 due mostly to an additional $202 million in fuel expenses compared with a year earlier.

Employees remain upset that the company is targeting them for a second round of givebacks in two years, with angry unions continuing to warn of possible strikes depending on the outcome of the trial.

The Association of Flight Attendants, which has warned of random, unannounced strikes, is still reviewing its legal and other options and was not carrying out any strike acts, spokeswoman Sara Nelson Dela Cruz said Thursday.

The International Association of Machinists and Aerospace Workers announced its members had voted by a 94 percent majority this month to authorize a strike if United succeeds in forcing new contract terms on them.

United, a unit of Elk Grove Village, Ill.-based UAL, has contracts in place with its pilots and flight attendants through 2010 but has been unable to negotiate agreements on long-term pacts with the mechanics' and Machinists' unions.

Top IAM executive Randy Canale expressed optimism that the union and United will reach agreement in the next few days on a contract that members would ratify, even though formal negotiations aren't set to resume until next week.

''We're still communicating and we're in discussions even while the trial is under way,'' Canale said.

United also held daylong negotiations Wednesday with the Aircraft Mechanics Fraternal Association, which presented a new offer to United management, AMFA spokesman Richard Turk said. The talks included a specific offer on a proposed replacement for the defined-benefit pension United is eliminating - something all unions must now negotiate following Tuesday's court approval to transfer the pensions to the Pension Benefit Guaranty Corp.

In opening arguments of a trial that could last until May 19, attorneys for the machinists and mechanics unions said United has negotiated in bad faith and is seeking endless concessions.

''There's been sacrifice after sacrifice after sacrifice, and the question is 'To what end?''' said Sharon Levine, attorney for the IAM.