United mechanics OK pact
Deal gives them 37% raises, avoids strike that could have brought bankruptcy.
March 6, 2002: 10:13 a.m. ET
By Staff Writer Chris Isidore
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NEW YORK (CNN/Money) - United Airlines has averted a potential strike after its mechanics voted in favor of a new wage package similar to one they rejected three weeks ago.
About 13,000 members of the International Association of Machinists, who were poised to go on strike as soon as 12:01 a.m. ET Thursday, voted 59 percent Tuesday in favor of a five-year deal that immediately increases their pay by up to 37 percent, their first raises since 1993. The deal makes them the best paid mechanics in the industry.
The gains for United members could be short-lived, though. The unit of UAL Corp., the world's second-largest airline company, is seeking concessions from all its unions -- including IAM -- to stem ongoing losses at the carrier.
Shares of UAL (UAL: up $0.23 to $15.76, Research, Estimates) were higher in early trading Wednesday following the vote.
Before management can begin negotiating concessions it needs to reach agreement on another 30,000 United employees represented by IAM who work as ramp workers, customer service representatives and other jobs at the carrier.
While analysts have questioned the airline's ability to afford this wage package, they also said a strike would have sent the carrier to bankruptcy court.
"Today's ratification vote provides a foundation on which to build our strategic recovery efforts," United CEO Jack Creighton said. "Our next goals are to address the outstanding contracts with IAM and then to work collectively and creatively with our union leadership and all employee groups to continue our recovery strategy."
The pact approved by members was reached by labor and management negotiators Feb. 18, just days before members were set to go on strike. It will bring the top pay for mechanics to $35.14 an hour immediately, or a bit more than $73,000 a year. That's up from $25.60 an hour before the deal. Pay would rise to $37.54 an hour by the end of the contract.
About 68 percent of United mechanics voted against a similar wage proposal Feb. 12 when it was proposed by a government panel appointed by President Bush to study the labor dispute and avert a potential strike. The deal approved Tuesday gives members slightly more retroactive pay, and makes those payments sooner than on the rejected pact. It also improves retirement benefits more than the earlier agreement.
But the previous "no" vote apparently was greatly a reaction to a provision in the panel's findings calling for concession talks. A vote for the earlier proposal was a de facto approval of that move toward concessions. While the union and management will hold concession talks now, any agreement on givebacks must now go back to members for ratification under this new agreement.
Unions representing pilots and flight attendants at United had won wage increases, but the move to reach new agreements with IAM was short-circuited by the Sept. 11 terrorist attack.
UAL was struggling with large losses even before the attack sharply decreased demand for air travel; the company has not posted a quarterly profit since the second quarter of 2000. Analysts surveyed by First Call now look for the company to lose $20.67 a share this year, although that is an improvement from the $33.23-a-share loss posted in 2001.
The wage agreement with pilots reached in August 2000 was blamed for causing losses and starting a cycle of pay raises throughout the industry. Those increases in labor costs, coupled with a decline in business travel due to a slowing of the U.S. economy, left most carriers in position to post losses in 2001 even before the attack.
Many analysts believe if United is successful in winning wage concessions, it could spark a wave of concessions throughout the industry as well.
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The agreement approved Tuesday includes retroactive pay back to July 12, 2000 for many of the 2,000 mechanics who were laid off in the wake of the Sept. 11 terrorist attack. While employment at United and most other major carriers remains lower than it was before the attack, the carriers have started to recall some employees as they gear up for the spring travel season. 
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