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United gets agreement with pilots, still needs more concessions
By Jeff Pines
Washington, Dec. 15 - United Air Lines Inc. said it obtained a tentative agreement from the Air Line Pilots Association on the cost savings the airline needs to tie down exit financing.
According to United, the union's master executive council will review the proposal Dec. 16 and if it endorses it, the proposed agreement will be voted on by the membership.
United said it will not disclose or discuss any terms of the tentative agreement.
The airline said is still negotiating with its other unions and will not address its pension issue until after a decision is made through the bankruptcy court. United has said its pension fund obligations are a major component of its financial difficulties.
In paperwork filed with the U.S. Bankruptcy Court for the Northern District of Illinois and the Securities Exchange Commission, United said that unless it cuts its labor costs "current projections, the company's cash balance will sink to precarious levels during the historically lean winter months, putting the entire operation at risk."
United said it needs more labor savings or will face a projected operating loss of $725 million for 2005.
Another concern is the minimum cash balance covenant in its debtor-in-possession financing. The agreement requires the airline to maintain at least $750 million in cash, but United said it needs more savings in labor costs by mid-January or by early May its cash balance will sink below $750 million.
The Elk Grove Township, Ill.-based airline and its parent holding company, UAL Corp., filed for bankruptcy on Dec. 9, 2002. Its Chapter 11 case number is 02-48191.
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