United threatens bankruptcy to squeeze more from unions
By Jennifer Biddle, IAM Local 1781 | November 1, 2002 | Page 11
SAN FRANCISCO--United Airlines announced 1,250 layoffs October 21, the first wave of deep cuts in its operations. The furloughs come on the heels of the company's third-quarter financial report, which cites a net loss of $889 million, the second worst loss in United's history.
United says these layoffs will save it $100 million a year. Combined with 20,000 employees laid off a year ago in the wake of September 11, the company will save over $2 billion a year in payroll expenses alone.
Yet United is actually doing better financially than it did a year ago, when its net loss was almost 25 percent more per share. And despite its current losses, it still has $2 billion in cash reserves. Moreover, according to the company's 2001 Annual Report, passenger load factors have increased dramatically. While fuel prices have increased dramatically, most major airlines hedge fuel to abate sudden increases in pricing.
Interim CEO Jack Creighton even painted a rosy picture to employees at the start of the summer in town hall-style meetings, claiming that United was hitting all the markers Wall Street liked to see. So what gives?
The airlines have long wanted to restructure the industry into regional, low-cost systems based on Southwest Airlines' model. However, spinning off jobs to smaller regional jets and outsourcing maintenance to nonunion facilities have been major sticking points in contract disputes for pilots and mechanics.
Since the 9/11 attacks, airlines used the crisis in air travel and the recession to attack their unions and carry out restructuring--and in the case of US Airways, used bankruptcy to get huge concessions. For its part, United admitted that the reservation job losses--half the total announced this month--are largely the result of increased use of Internet ticket services.
Still, United presented its five unions with an ultimatum: $9 billion in concessions or the possibility of far greater cuts through bankruptcy. United did it under the guise of securing a $1.8 billion loan guarantee from the federal Air Transportation Stabilization Board (ATSB).
The ATSB rejected United's initial application on the grounds that the carrier had to secure greater concessions from employees. Now United demands on mechanics in the International Association of Machinists (IAM) include the elimination of contract language and outstanding grievances protecting jobs from outsourcing.
The company's maneuvering angered many employees because the numbers just didn't add up. When the company asked for $9 billion in concessions, it claimed to be losing $1 million a day. Counting losses and debt payments due in November, it would still have taken United more than five years to burn through its cash reserves alone. It has more than $4 billion in non-cash assets.
Could it be that United--which refused to pay a full day's wage to the flight crews who perished September 11--will now refuse to pay a fair wage to the rest of us? In the Age of Enron, can we really trust airline executives to be honest? Should our tax dollars go to bailing out the airlines while executives negotiate millions in bonuses for themselves as they pass out the pink slips?
For example, Glenn Tilton, United's new CEO, received a $3 million signing bonus, has an annual salary of $950,000 with a potential 100 percent "target bonus" and another 100 percent "superior performance bonus." He also received a $4.5 million, fully-funded pension trust and grants to buy more than 1 million shares of stock. Tilton, the interim chair of Dynegy, Inc., left the position for United when the energy company couldn't overcome its Enron-style scandal.
One would think the industry's unions could win the hearts and minds of the public with a slogan like: "American Workers--Victims of 9/11 and Greedy, Corrupt Business Executives!" Instead, all of United's unions--the IAM, ALPA, AFA, TWU, and CWA--joined in a coalition to graciously agree on our behalf to $5 billion in cuts. But soon after presenting their counterproposal, both the Machinists' and Flight Attendants' unions departed the coalition to bargain on their own.
While the unions seem to think they can cut a deal to stave off bankruptcy, most employees see the writing on the wall. Wall Street analysts now almost unanimously say that they expect United to file for bankruptcy mid-November.
With the unions divided and weak and not willing to mobilize a fight, workers will have to organize on their own. The bottom line is that the airlines want to restructure at our expense--and it will be up to us to fight them.
A small network of American Airlines and United mechanics attempting to do just this will be organizing pickets against concessions on November 20 at airports around the country. Actions like this will help build momentum against concessions at United and could be the beginning of an industry-wide campaign to mobilize workers against the concessions Wall Street and airline executives are banking on.