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United in talks to avoid strike
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February 15, 2002: 5:47 p.m. ET
Union, airline return to talks facing strike deadline and bankruptcy threat.
By Staff Writer Chris Isidore
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NEW YORK (CNN/Money) - United Airlines and the International Association of Machinists began negotiations Friday seeking to avoid a strike that analysts believe could put the airline into bankruptcy, but which few believe will actually occur.
The rejection of a proposed settlement by about 13,000 rank-and-file mechanics at the airline early Wednesday raised the threat of a strike at the struggling airline. Both management and union officials say they believe that a strike can be avoided, and a company spokesman wouldn't entertain questions what will happen if there is no new deal by 12:01 a.m. on Feb. 20.
"Our focus is on the bargaining table," said airline spokesman Joe Hopkins. "The union feels it can be done, we feel it can be done. We just have to follow through."
Still, unlike most negotiations in the airline industry, there is little opportunity left for federal intervention to stop a strike this time if there is no agreement. A union spokesman said that lack of alternatives should help move negotiations along this time.
"Up until this point there has always been an exit that allowed the talks to go on, the prospect of additional time," said IAM spokesman Frank Larkin. "With that removed, this will be a different week of negotiations, one that hopefully will produce an agreement."
Larkin said that while Friday's meeting in the Chicago area will be the first face to face meeting between the two sides since the rejection of the contract, talks between the two have already begun.
"As soon as the vote result was known, intense negotiations began," he said.
Feds unlikely to stop strike this time
Unions in the airline and railroad industries are far more limited in their ability to go on strike than other private-sector unions. Normally the president can appoint a "presidential emergency board," which blocks a strike or lockout for a 60-day period while a three-member panel studies the labor dispute and makes recommendations.
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United Airlines mechanics Edward Osmanski, left, and James Taylor leave their union office after a contract rejection and strike vote earlier this week. | |
But President Bush has already played that card in this dispute. It was the PEB's recommendation that the machinists rejected, and Feb. 20 is the expiration of a 60-day period during which the union was blocked from striking.
At this point, without an agreement only Congress can prevent a strike after that expiration, but Congress was likely to recess for the President's Day holiday late Thursday and was not expected to be back in session until late next week or early the following week at the earliest.
Bankruptcy threat is real at UAL
The PEB recommended retroactive and current pay increases totaling 37 percent for the mechanics to bring pay to an industry-leading $35.14 an hour. But it recognized that United faced the threat of bankruptcy if it had to pay the pay increases to mechanics, and recommended that the retroactive pay be deferred.
It also recommended that the IAM join other unions in negotiating concessions with the airline, but said it was proper that the mechanics get raises already won by other unions before it joined concession talks.
Analysts say a strike would be disastrous for United parent UAL Corp. (UAL: up $0.28 to $11.36, Research, Estimates), the world's second largest airline company, which had already projected to burn through $720 million in cash in the quarter without the threat of a work stoppage.
"They're hemorrhaging cash," said Jim Corridore, airline equity analyst for Standard & Poor's, one of the analysts who believes bankruptcy is likely, if not certain, if there's a strike.
"Even though they had $2.6 billion in cash at the end of the fourth quarter, if they had to shut down the airline for any period of time, I don't think they could pay their bills," he said.
Analysts don't expect strike
But Corridore and other analysts believes that the union's knowledge of this situation, and the 20 percent stake held in UAL by members of the union, will stop a strike from happening.
"They have to realize it'd be biting off their own nose to strike," said Corridore. "I'm sure the union is using the financial situation for leverage. They know they have the company over the barrel."
Glenn Engel, airline analyst for Goldman Sachs, said he doesn't believe the union will win a significantly better contract than the one rejected by the rank and file earlier this week, but changes should be enough to satisfy the membership.
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"Union can't convince membership they got the best deal unless they take management to the brink of a strike," he said. "I'm sure there will be some sweeteners, but I don't think it'll be a dramatically different contract." 
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