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United CEO: More cuts needed
Tilton says cost cuts will have to go deeper than those that union agreed to.
December 6, 2002: 5:24 PM EST

NEW YORK (CNN/Money) - The head of embattled United Airlines told employees at the airline that even deeper cost cuts than those previously negotiated with the unions will be necessary if the airline files for bankruptcy court protections.

"Our plan will have to be more aggressive than it was out of court," Glenn Tilton, CEO of United parent UAL Corp., said in a recorded message to 80,000 United employees Friday. "We will need more cost savings. Work rules will have to be on the table. We have to take this opportunity to create a different and durable cost structure that allows us to compete and succeed in a different revenue environment."

The airline had negotiated with union leaders for labor cost savings of $5.2 billion over the next 5-1/2 years in an attempt to win $1.8 billion in federal loan guarantees. Those concessions disappeared with the rejection of the loan guarantee request by the Air Transportation Stabilization Board late Wednesday, leaving many of the employees receiving industry-leading wages.

Bankruptcy courts have the power to void labor and other contracts, though that can be a difficult and time consuming process. Tilton's message didn't specify if management expected to win the deeper cuts in new negotiations or through court action.

After asking himself the rhetorical question of whether a bankruptcy filing was now inevitable, Tilton would only say that with the ATSB rejection, "Chapter 11 becomes a more likely outcome."

Winning further concessions from the employees will be difficult. The airline's 13,000 mechanics voted against the concession package last week, despite strong support from their union's leadership. The Air Line Pilots Association said Friday it was surprised by Tilton's comments.

"We believe it is very premature to discuss these issues. ALPA is not interested in conducting our negotiations in the public forum," said the union's statement.

Tilton said United is prepared to go ahead with the widely expected bankruptcy filing if necessary, saying the financing needed to continue operations after a filing is in place.

"We have been preparing for a Chapter 11 filing for months, and we are ready if we decide that's the best course for the company," Tilton said.

The UAL bankruptcy filing is expected sometime over the weekend. Airline spokesmen confirmed the company's board of directors, which includes two union representatives, is set to meet Saturday.

On Monday a grace period expires for a missed $300 million debt payment that the company said it needed the loan guarantees in order to pay. Many major bankruptcy filings, including the two largest in U.S. history -- Enron Corp. and WorldCom Inc. -- as well as US Airways Group, were filed on Sundays.

Shares of UAL (UAL: Research, Estimates) closed down 7 cents at 93 cents in trading Friday, after losing more than two-thirds of their value in trading Thursday following the loan guarantee rejection.  Top of page

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