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United Wins New Labor Agreements

Strike Would Likely Have Been Fatal, Analysts Warned

June 1, 2005

United Airlines • Itinerary changes • Lost luggage • Group sales • Unaccompanied minors • Ineffective bumbling --- News • United To Reduce its Fleet By 4 Percent • United Charges for Second Bag • United Pilots Contradict Carrier on Cancellations • Computer Glitch Hits United Airlines • Winter Weather Wreaks Havoc with United Flights • United Gets New Daily U.S.-China Flight • Airline Pensions Under Government Review • United Cleared to Taxi Out of Bankruptcy • United Poised To Emerge From Bankruptcy • United Prepares for Life After Independence • United Wins New Labor Pact • United Plans To End Employee Pensions • United Reaches Agreement With Flight Attendents • United's Union Deals Unraveling

Acknowledging the new reality of the airline industry - low fares and multi-tasking employees - two unions have voted to accept more big pay cuts to help United Airlines emerge from bankruptcy. In a make-or-break showdown, United signed deals with the Aircraft Mechanics Fraternal Association, which represents 7,000 United mechanics, and the International Association of Machinists and Aerospace Workers, which represents 20,000 United reservations agents, ramp workers and others.

The contracts, which include significant pay and benefit cuts, constituted the last major hurdle to United's attempt to get back to more financially friendly skies. The airline needed to squeeze $700 million in annual savings out of its payroll to convince lenders it is serious about regaining profitability.

There was an audible sigh of relief at United's corporate headquarters when the deal was announced. Until the union's blinked, a threatened walkout by 27,000 United employees could have greatly complicated the airline's efforts.

The drawn-out negotiations were marked by sometimes-bitter statements and demonstrations by employees, who were being asked to make financial sacrifices for the sake of the company. During one demonstration many employees denounced the pay and benefit packages still enjoyed by United's top executives.

"Following a constant, good faith engagement, we are pleased to reach this agreement in principle with the IAM, which if ratified will effectively bring to a close a major phase of our restructuring. This agreement, and AMFA's ratification of their agreement, move us significantly forward in our restructuring and set the stage for our exit from bankruptcy," United said in a statement.

The airline still needs to work out other issues, such as refinancing some aircraft leases, but none had the potential of dooming the airline like the labor deals did. Most industry analysts said a strike likely would have been fatal for the airline.

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