United Heads to Bankruptcy Court Over Pensions

CHICAGO (AP) -- Still unprofitable after 29 months in bankruptcy, United Airlines headed for a courtroom showdown with its labor unions over its most radical attempt yet to slash costs.

The target this time: employee pensions.

The carrier is seeking a judge's approval Tuesday in federal bankruptcy court of its plan to have the government's pension insurer take over its defined-benefit plans, resulting in the largest-ever U.S. pension default. United workers would lose about a quarter of their total pensions if they are shifted to the Pension Benefit Guaranty Corp.

The controversial move risks provoking action by employees who already have agreed to sharp cuts. Unions have raised the possibility of striking if United terminates the pensions and has its labor contracts overhauled - a process the airline is set to start Wednesday at a separate hearing.

Some airline industry analysts say the second-biggest U.S. carrier has left itself few options besides taking that risk.

''If they don't do it, they're not going to get the financing to get out of bankruptcy,'' said Ray Neidl of Calyon Securities. ''They're at the point where they need movement.''

United Airlines defended its plan in a 300-page court filing Monday, calling its blueprint for terminating the defined-benefit pensions a ''landmark achievement'' in its restructuring.

The company, a unit of UAL Corp., renewed its claims that eliminating the pensions is a necessary step that would save it billions _ more than $4.4 billion (euro3.43 billion) of funding contributions over six years and $1.7 billion (euro1.33 billion) in potential claims against it. The pensions currently are underfunded by an estimated $9.8 billion (euro7.64 billion).

The carrier said the agreement ''also will provide significant momentum for United's emergence from Chapter 11 and its continuing efforts to become a competitive, sustainable enterprise _ and create greater clarity and certainty for its customers and employees.''

United also reiterated its criticism of the Association of Flight Attendants for threatening to strike over the pension issue, saying it has no legal right to do so.

''AFA is wrong and irresponsibly so,'' United said in the filing.

The flight attendants are calling for United's management team to be replaced.

''We're not going to let this management take us down this path,'' said Sara Nelson Dela Cruz, a spokeswoman for the flight attendants union. ''We'll strike to save our airline if that's what it takes.''

Two other unions are preparing for a potential strike if United breaks its labor contracts.

The International Association of Machinists is expected to announce the results of a strike authorization vote on Wednesday. The Aircraft Mechanics Fraternal Association, representing United mechanics, voted overwhelmingly in January to approve a strike if its contract is terminated.

United has been in Chapter 11 bankruptcy since December 2002 and has been unprofitable since mid-2000.

Labor is not the only challenge facing the airline.

After losing a federal appeals court ruling on Friday, it also risks having as many as eight 767 jets repossessed if it can not resolve deadlocked negotiations with aircraft lessors over how much it must pay to keep using the planes.

United now must decide whether to appeal the ruling, and whether to resume full payment in order to keep using the disputed aircraft. Spokeswoman Jean Medina said the company still hopes to reach a negotiated agreement.

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