CHICAGO (Reuters) - Trying to help United Airlines avoid bankruptcy, a coalition representing five unions on Wednesday said it offered the No. 2 U.S. carrier $1 billion per year over five years in wage cuts plus other undetermined concessions.
But the group had not decided how to divide up the sacrifices among the individual unions -- a critical element -- and the amount was below what United originally asked the unions to provide--$1.5 billion per year for six years.
United is hoping to avoid an autumn bankruptcy by getting $2.0 billion in loans, $1.8 billion of which would be guaranteed by the federal government.
In a letter to UAL Corp. (NYSE:UAL - News) Chief Executive Glenn Tilton, the coalition representing all unionized workers said: "We stand ready to negotiate and implement a recovery program that will provide United with $5 billion dollars in labor cost savings over the next five years."
The Elk Grove Village, Illinois-based airline warned in August it might have to file for bankruptcy. It asked unions for a total of $9 billion in concessions over six years. But the unions immediately balked at those figures and formed an unusual band to come up with their own plan.
Along with other cost savings and "strategic initiatives," the proposal would enable United to improve its core annual profitability by $2 to $3 billion, the group said.
United is 55-percent owned by employees and both the pilots and machinists union have seats on the board of directors.
UAL TO STUDY PROPOSAL
The airline responded with a statement saying it would study the proposal, given the "very real" deadlines it faces because of its financial situation. But it added it needed to remain a "highly competitive business" for the long-term.
Most major U.S. carriers including American Airlines, a unit of AMR Corp. (NYSE:AMR - News), and Delta Air Lines Inc. (NYSE
AL - News) have been analyzing the very way they do business, given stiff competition from the likes of low-cost carriers Southwest Airlines (NYSE:LUV - News) and JetBlue Airways Corp. (NasdaqNM:JBLU - News).
In a separate statement, the International Association of Machinists said the allocation among unions and the specific additional cost savings would be the subject of more discussions with the airline.
"In recognition of United's precarious financial condition and in accordance with our collective bargaining agreements, the IAM agreed to enter into discussions with the carrier in an attempt to avoid a United Airlines bankruptcy," said District 141-M President Scotty Ford.
"We also hope our commitment will help United qualify for an Air Transportation Stabilization Board loan guarantee."
The ATSB, formed after the Sept. 11 attacks decimated the demand for air travel and sparked record losses across the industry, is considering United's application for government-backed loans. Initial feedback was that the airline needed to secure more concessions from its labor groups.
UAL lost a record $2.1 billion in 2001 and faces nearly $900 million in debt payments in November.
But the group had not decided how to divide up the sacrifices among the individual unions -- a critical element -- and the amount was below what United originally asked the unions to provide--$1.5 billion per year for six years.
United is hoping to avoid an autumn bankruptcy by getting $2.0 billion in loans, $1.8 billion of which would be guaranteed by the federal government.
In a letter to UAL Corp. (NYSE:UAL - News) Chief Executive Glenn Tilton, the coalition representing all unionized workers said: "We stand ready to negotiate and implement a recovery program that will provide United with $5 billion dollars in labor cost savings over the next five years."
The Elk Grove Village, Illinois-based airline warned in August it might have to file for bankruptcy. It asked unions for a total of $9 billion in concessions over six years. But the unions immediately balked at those figures and formed an unusual band to come up with their own plan.
Along with other cost savings and "strategic initiatives," the proposal would enable United to improve its core annual profitability by $2 to $3 billion, the group said.
United is 55-percent owned by employees and both the pilots and machinists union have seats on the board of directors.
UAL TO STUDY PROPOSAL
The airline responded with a statement saying it would study the proposal, given the "very real" deadlines it faces because of its financial situation. But it added it needed to remain a "highly competitive business" for the long-term.
Most major U.S. carriers including American Airlines, a unit of AMR Corp. (NYSE:AMR - News), and Delta Air Lines Inc. (NYSE
AL - News) have been analyzing the very way they do business, given stiff competition from the likes of low-cost carriers Southwest Airlines (NYSE:LUV - News) and JetBlue Airways Corp. (NasdaqNM:JBLU - News).In a separate statement, the International Association of Machinists said the allocation among unions and the specific additional cost savings would be the subject of more discussions with the airline.
"In recognition of United's precarious financial condition and in accordance with our collective bargaining agreements, the IAM agreed to enter into discussions with the carrier in an attempt to avoid a United Airlines bankruptcy," said District 141-M President Scotty Ford.
"We also hope our commitment will help United qualify for an Air Transportation Stabilization Board loan guarantee."
The ATSB, formed after the Sept. 11 attacks decimated the demand for air travel and sparked record losses across the industry, is considering United's application for government-backed loans. Initial feedback was that the airline needed to secure more concessions from its labor groups.
UAL lost a record $2.1 billion in 2001 and faces nearly $900 million in debt payments in November.
