CHICAGO — According to a wire service, United Airlines, desperate to avoid a disastrous strike which experts said could lead to a bankruptcy filing, needs a deal with mechanics soon or the No. 2 U.S. carrier will be flying at Washington’s whim.
The White House, which last year vowed not to allow any airline strikes, said on Wednesday it was watching developments at United closely, while industry analysts said they doubted a strike set for Wednesday, Feb. 20, would occur.
If no deal or extended deadline emerges through the intensified negotiations, industry experts said it could be the catalyst for congressional intervention or a bankruptcy filing for United, a unit of UAL Corp.
“I think a strike will be avoided,” said Ray Neidl, airline analyst at ABN Amro, echoing comments by other veteran industry observers. “I think the two sides will probably hammer something out during the week. If there is a prolonged strike, United would be in very serious danger of having to file for Chapter 11 (bankruptcy protection).”
UAL is already losing reams of money, recently posting the worst annual loss in aviation history, $2.1 billion for 2001. A shift of travelers to rivals, prompted by fears of a strike or bankruptcy filing, would only add to daily cash losses, estimated at around $10 million, analysts said.
The last time union workers struck United was in 1985, when pilots walked off the job. A pilots’ work-to-rule slowdown in the summer of 2000 also caused massive flight cancellations.
DEAL ROUNDLY TROUNCED
The International Association of Machinists and Aerospace Workers District 141-M, representing 13,000 mechanics and cleaning staff, late Tuesday rejected a contract offer from United that included pay raises of up to 37 percent upon signing for the most senior workers.
The raises would have put the workers at the top of the industry, but the offer also included deferral of retroactive pay and links to possible wage concessions down the road. Union members roundly rejected the deal by a 2-to-1 margin.
Congress could have the final word by imposing a settlement, but such a move is unprecedented. Legislators have intervened in rail disputes, but never stepped in to impose contract terms in an airline case under the Railway Labor Act.
The White House could also informally press both the airline and the union for a solution.
PASSENGERS PREPARING
Travel agents report strike talk has already unsettled passengers, who wonder if they should book tickets on rivals.
Robert Bingle, an attorney who flies frequently, said, “If I did have a reservation, I’d be inclined to switch it, right now.” Such rebookings would only make things worse for money-losing United, which many believe may be forced into bankruptcy if the mechanics strike.
Even if a deal with mechanics is reached, the airline is soon to embark upon a broader plan for concessions from all employee groups to restore financial stability.
UAL shares dropped by about 4 percent on Wednesday, down 49 cents at $11.90 on the New York Stock Exchange (news – web sites) in late afternoon. They have lost more than half their value since Sept. 11.
Gail Weiss, a travel agent at Travel Emporium Inc. in Chicago, said travelers are shying away. “If United were to go on strike, we’d pull out all the records to locate those booked on United and protect them. The same thing happened a couple of years ago when American was on strike.”
As holders of 20 percent of UAL’s stock due to an employee stock ownership plan implemented in 1994, machinists say they want to see the airline survive. But they also want a contract that makes up for the concessions they agreed to then, when United was similarly struggling financially.
Pilots, represented by the Air Line Pilots Association (news – web sites), also own 25 percent of the airline and salaried employees, about 9 percent.
In a sign of how far-ranging the strike talk reverberates, credit rating agency Standard & Poor’s said it will likely further cut ratings on UAL debt if a strike occurs.
“In contrast to the mechanics’ strike threatened in December 2001, President Bush (news – web sites) cannot under relevant labor laws prevent this strike,” the agency said. “The ratings will likely be lowered if a strike occurs, and a prolonged work stoppage could force UAL and United to seek bankruptcy protection.”
NEXT WEEK CRUCIAL
The machinists warned the Bush administration and Congress this week to stay out of their business. And initial statements from both the White House and Capitol Hill indicate a willingness to let negotiations work.
“The parties have indicated that they are going to continue to meet and work in good faith to get an agreement, and the White House will monitor those talks and see where they go, but that is where the action is now,” presidential spokesman Ari Fleischer (news – web sites) said.
SOME SAY CONGRESS LEERY
“Congress is not the best place to resolve labor-management disputes,” said Sen. John Rockefeller, a West Virginia Democrat and chairman of the Senate aviation subcommittee. “At this point, they’ve got (time) to work it out in a way that is fair to workers and keeps the company flying, and they better do it.”
The emergency board appointed by President Bush has made its recommendation, so additional formal intervention by the government would have to be triggered by Congress.
Lawmakers are free to adopt any remedy they wish, including extending the deadline for a deal, appointing a new emergency board, or imposing contract terms.