(The following article by Eric Dash was posted on the New York Times website on January 7.)
NEW YORK — In separate bankruptcy proceedings yesterday, US Airways received approval to cancel contracts with its mechanics and baggage handlers and United Airlines won pay cuts it had sought for a similar group.
The rulings were victories for both airlines, which are struggling for survival, but defeats for their unions.
In the US Airways case, Judge Stephen S. Mitchell of Federal Bankruptcy Court in Alexandria, Va., canceled the airline’s contract with the International Association of Machinists, which represents about 8,450 airline mechanics and other employees. They are the only group that has not reached an agreement with the airline.
Judge Mitchell described his decision as a “close call,” but said it would give US Airways the best chance to survive. He also approved a request to terminate the pension plans for machinists and flight attendants.
“The company’s financial situation is so precarious that, even with the relief being sought, there are still grave questions as to whether the debtor can reorganize and emerge from bankruptcy,” Judge Mitchell said. “Which is worse – that half the mechanics lose their jobs or that all of the mechanics lose their jobs?”
US Airways, which filed for bankruptcy for the second time in three years in September, said it would not enforce the judge’s decision until union members voted on its latest contract offer. Earlier proposals sought $269 million in annual savings from workers and proposed what the company called “significantly better” wages than those workers received after they were forced to take a 21 percent pay cut last fall.
The union said talks continued yesterday, and workers vowed not to take aggressive action or strike.
In a separate decision, United, the nation’s second-largest airline, which filed for bankruptcy in December 2002, received permission to exact concessions from gate agents, baggage handlers and maintenance workers, who make up its machinists’ union group.
Judge Eugene R. Wedoff of Federal Bankruptcy Court in Chicago ruled that United could cut the wages of those employees 11.5 percent until April 11. United, a unit of the UAL Corporation, can also cut sick pay 30 percent for those workers.
“It provides us with the savings we need and gives us additional time for negotiations with the I.A.M. to resolve the remaining issues,” a United spokeswoman, Jean Medina, said.
The union expressed disappointment at the concessions but acknowledged that the decision gives negotiators more time to reach an agreement that preserves their pension benefits. United has proposed eliminating all employees’ defined-benefit pension plans in its effort to survive.
The rulings should provide both airlines a little more breathing room and, in the case of US Airways, permit it to stave off liquidation for now.
“It definitely increases the chances of this airline surviving,” Terry Trippler, an air travel consultant in Minneapolis, said.
Judge Mitchell’s ruling on US Airways’ contracts was the first to permit an airline to cancel a labor agreement since 1983, when Continental Airlines used the practice in bankruptcy and prompted Congress to change the laws.
“There is no bargaining after this,” said Peter Capelli, a management professor at the Wharton School of the University of Pennsylvania, who has studied airline labor relations. “The company is going to get to do what it wants to do, whether the union agrees or not.”
In another ruling, US Airways won approval from the bankruptcy court to terminate three employee pension plans, including those for its flight attendant and mechanics’ groups. The minimum contributions for those plans is $987 million over the next five years, and Judge Mitchell called the liability a “financial albatross” that threatened the airline’s ability to reorganize.
United’s pilots, meanwhile, ratified a contract yesterday that is expected to generate $180 million in annual savings for the company. The United Air Line Pilots Association, which has 6,400 members, agreed to the termination of its pension plan in exchange for potential stock in the reorganized company. That deal has drawn fire from many of the airline’s other unions, creditors and the federal government, and Judge Wedoff said he would rule today.
Kristen A. Lee contributed reporting from Alexandria, Va., for this article.