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United Airlines, Union Reach Accord

This is an image taken Monday, Oct. 26, 2009 a fallen gravestone is seen at the City of London Cemetery & Crematorium in east London. Think London is crowded with the living? Consider the armies of the dead. There are almost 8 million people in the British capital and many millions more under the soil of a city that has been inhabited for 2,000 years. And London is rapidly running out of places to put them. (AP Photo/Sang Tan)
AP Photo/Sang Tan
United Airlines reached a tentative contract agreement Friday with its mechanics union, the last labor group to agree to long-term cuts in pay and benefits as part of the carrier's drastic overhaul in bankruptcy.

Chief executive Glenn Tilton touted the completion of initial agreements with all unions as an "extraordinary" achievement for United.

But even if all the accords are ratified by union members, the airline faces a struggle to restructure and meet its lenders' strict benchmarks amid an unprecedented slump in the industry, compounded recently by the war in Iraq and the SARS virus.

The agreement announced Friday calls for 13 percent wage reductions, new work rules and a 20 percent co-pay on health insurance over six years. The airline's 12,000 mechanics and aircraft cleaners will vote on the agreement on April 29.

The contract would lower company costs by $349 million a year through 2008, or a total of $2.09 billion. The airline indicated the deal would provide the last remaining portion of the $2.56 billion in annual labor savings it seeks to be more competitive.

Without an agreement, bankruptcy court hearings were set to begin Monday on United's motion to void the mechanics' contract May 1. If the mechanics fail to ratify it, United can still have its own wages and work rules imposed in bankruptcy court starting on that date.

"From the moment United Airlines declared bankruptcy on Dec. 9, a painful restructuring was inevitable," said Scotty Ford, president of IAM District 141-M representing the mechanics. "Despite proposed changes to pay, benefits and working conditions, this agreement preserves the essential value of a job at United Airlines."

Even though United could force through its own contract changes in bankruptcy court, the airline wants to reach consensual deals to avoid a recurrence of labor trouble, which could be fatal for its reorganization. Already, the airline has faced substantial resistance to its plans to shift 30 percent of its flights to a new low-fare, lower-paying carrier, codenamed Starfish.

"Achieving tentative agreements with all of our unions is an extraordinary accomplishment for United," Tilton said. "With all of our labor groups aligned, I feel confident that United's transformation into a more efficient, effective airline, able to compete across markets and product lines, is on track to succeed."

Later Friday, the pilots' union was scheduled to announce voting results on ratification of a contract that would result in $1.1 billion in annual savings for the airline — by far the largest share of worker concessions. Flight attendants, baggage handlers and public contact workers also are voting this month on contract changes.