CHICAGO - United Airlines asked its unions to accept labor cost cuts totaling $2.4 billion as it seeks to reorganize in bankruptcy court, according to unions representing flight attendants and mechanics.
The request from UAL Corp.'s United is more than twice the $945 million in pay and benefit concessions the world's second-largest carrier sought before filing for Chapter 11 protection from creditors on Dec. 9.
United, which has some of the highest costs in the industry, is trying to reduce expenses to emerge from bankruptcy within 18 months. Unions must act on the proposals by mid-February to satisfy terms for $1.5 billion in bankruptcy financing, the United Association of Flight Attendants told members in a message posted on its Web site.
The Machinists union, which represents United mechanics, cleaning workers and baggage handlers, was "incredulous" upon seeing the proposals, said Scotty Ford, president of the Mechanics' district. "We're discussing strategy with our financial and legal advisers."
The company began making presentations to union leaders on the proposals last week and won't comment on the details, said United spokesman Rich Nelson.
Previously negotiated wage and benefit reductions weren't enough to help the airline win approval for a $1.8 billion U.S. loan guarantee. A federal board decided not to provide government backing, saying United's financial plan was "unsound."
UAL shares, which are about 55 percent owned by employees, have dropped 89 percent this year. They fell 25 cents to $1.50 on the New York Stock Exchange yesterday
The International Association of Machinists and Aerospace Workers hasn't scheduled any negotiations with the company at this point, Ford said. Members would take a 13 percent pay cut under the proposal, which would last through 2009, the Machinists said. Previously, the company had asked for wage cuts of up to 7 percent.
The proposal also calls on Machinists union members to pay 20 percent of medical and dental benefit plans and change work rules that keep the company from contracting out work that might result in worker layoffs.
United provided the proposals as a way to start talks and the attendants' union expects those negotiations to begin soon, association spokesman Jeff Zack said.
"There is not confusion about the severity of the situation," Zack said. "We're going to work with the company to get through this."
The top council of United's Air Line Pilots Association will start analyzing the proposal this week and won't meet with the company until afterward, said spokesman David Kelly. He declined to discuss specifics of the proposal.
"We were stunned and puzzled by the material we received on Friday," Kelly said. "We remain committed to working with the company on a rational economic plan."