Human Capital & Careers

United’s DB Plans Safe, for Now

Two unions agree to reductions in pay, and temporary cuts are imposed on another, but the airline and its four largest unions will deal with the de...
Stephen TaubFebruary 1, 2005

United Airlines’ pilots and flight attendants will take pay cuts to help the airline emerge from bankruptcy.

The pilots agreed to a 12 percent cut in pay, and the flight attendants, to a 9.5 percent reduction, as part of a five-year plan approved by the bankruptcy court late Monday, according to Bloomberg. The mechanics’ union, which rejected a pay-reduction offer, was forced by Judge Eugene Wedoff to take a temporary 10 percent cut.

Under the deal, the pilots still have their pensions, for now. As The Wall Street Journal reported in December, the Air Line Pilots Association had agreed to relinquish its heretofore-sacred defined-benefit plan to help the airline climb above its shaky financial situation. In exchange, when United’s parent, UAL Corp., exits bankruptcy protection later this year, it was to issue $550 million in convertible notes to the union’s 6,600 active pilots, which they could have sold to cover some of the “lost” pension money, added the paper.

Last month, however, United and its four largest unions decided to deal with the pension issue at a later date so they can have more time to negotiate this critical issue, according to the Associated Press.

The AP also pointed out that if United can’t reach agreements by May with each of the four unions — the airline has already made deals with two smaller unions — it faces a bankruptcy court trial on its proposal to eliminate pensions.

According to Reuters, the new cost-cutting deal guarantees that the pilots union will not object to the elimination of its pension plans under certain conditions.