By Keith L. Alexander
Washington Post Staff Writer
Saturday, November 6, 2004
Three of the nation's largest airlines announced steep cost and job cuts yesterday in an effort to return to profitability and better position themselves for long-term survival.
UAL Corp., parent of United Airlines, asked a bankruptcy court judge yesterday to approve an additional $2 billion in cuts from its operations. The airline is seeking to modify its existing labor contracts to slash $725 million annually in worker pay and benefits. It also wants to eliminate its four employee pension plans.
Since filing for bankruptcy protection nearly two years ago, United -- the nation's second-largest carrier -- has already cut about $5 billion in costs. Nearly $2 billion came from employees' pay and benefits.
Delta Air Lines Inc., which avoided a Chapter 11 filing last month after its pilots agreed to vote on a $1 billion cost-cutting contract, announced plans to eliminate 2,000 maintenance jobs, nearly 3,000 customer service jobs and 1,800 management positions. The job cuts, which will begin Jan. 1, will be phased in over 18 months.
Anthony Black, a Delta spokesman, said the airline would offer early retirement or voluntary leave programs before it begins terminating positions.
Delta's 7,000 pilots have until Nov. 11 to vote on a contract that would slash pay by 32.5 percent. Even if the pilots agree to the cuts, Delta executives have said the airline -- the nation's third largest -- may still have to seek Chapter 11 bankruptcy protection.
Also yesterday, Northwest Airlines Corp., the nation's fourth-largest carrier, said its pilots ratified a two-year, $265 million concession package that includes 15 percent pay cuts. Management and non-contract workers will also contribute an additional $35 million in pay cuts and benefit changes for $300 million in annual savings.
Northwest, based in Eagan, Minn., is trying to cuts labor costs by $950 million a year. The airline is also in talks with other unions, including those representing its mechanics, flight attendants and transport workers.
The nation's airlines are entering their slowest travel period of the year and are trying to find ways to boost cash levels to survive. High fuel prices also are weighing on the industry. The major carriers are facing sharp competition from low-cost rivals and have been unable to raise ticket prices.
In its bankruptcy court filing yesterday, United executives requested a Nov. 19 hearing to discuss the possible rejection of labor contracts. The executives said they are hoping to reach "consensual" agreements with employees and asked the court to set a deadline. "Having a deadlines often helps the parties in reaching a consensual resolution," United said in its filing.
If United and its unions don't reach an agreement, United would ask the bankruptcy court to reject the labor contracts and impose new, cost-cutting terms on its workers. Last month, Arlington-based US Airways Group Inc. made a similar request in bankruptcy court and was allowed to impose a 21 percent pay cut for the majority of its workers through February.
United said it needed the cuts by mid-January to "maintain adequate cash balances" to satisfy its financing levels set by lenders and to attract exit financing.
Jean Medina, a United spokeswoman, said the airline also expected to announce additional job cuts because it will need "fewer employees going forward." The airline has about 62,000 workers.
Joseph Tiberi, a spokesman for the International Association of Machinists and Aerospace Workers, which represents the airline's 20,000 ramp, stock clerks, gate and reservation agents, said union leaders were reviewing United's request and its impact on its members.
United wants to replace four of its employee pension plans with 401(k) contribution programs. The move would eliminate nearly $2 billion in future retirement benefits for many of United's 120,000 retirees and workers.
United's action would dump billions of dollars in future pension obligations onto the Pension Benefit Guaranty Corp., the federal agency that insures corporate pension payments. The PBGC estimated that United's pension plans are about $8.3 billion underfunded and that a pension default would be the biggest in corporate history.
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