Bankrupt airline secures key pay deal

Bankrupt airline secures key pay deal

United is expecting its staff to make sacrifices

Number-two US airline United has reached a tentative pay deal with pilots, which should save it $1.1bn (£0.7bn) and hasten its emergence from bankruptcy.

The package of pay cuts, if ultimately confirmed by union members and the airline's board, goes a long way towards achieving United's target of $2.7bn in annual payroll savings.

It should also help avoid a looming legal battle, as United was threatening to annul existing employment contracts via the courts.

Although United's bankruptcy regime gives it greater flexibility in dealing with employees, many of its staff had resisted the sweeping cost-cuts insisted on by management.

Worker worries

Even if the deal is ratified, United will still face labour problems.

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One crucial issue is enforcing unpaid leave among thousands of maintenance and cabin staff.

Maintenance unions have gone to court to block the demand, and argue that staff are having to pay the price of management's mistakes.

United mechanics and cabin staff are currently working under temporary pay cuts imposed by bankruptcy administrators.

Union rules

Achieving the sort of wholesale cost cuts required by investors is proving tricky for all US airlines.

Airline staff are highly unionised, and different job functions are represented by different unions, meaning that many different pay talks have to proceed simultaneously.

Recently, for example, United hammered out a deal with its 18 staff meteorologists, who insisted on their own pay and conditions settlement.

Slow progress in these talks has mean that airline expenditure has not fallen fast enough to keep pace with slumping demand among travellers.

The war in Iraq is reducing US airline ticket demand by at least 15%, something that is expected to push many more carriers into bankruptcy.