Judge Enforces Wage Cuts On UAL Machinists

United Airlines parent UAL Corp. this morning received good news from U.S. bankruptcy court judge Eugene Wedoff, who imposed temporary wage reductions on the carrier's International Association of Machinists union. The IAM, representing 37,000 United workers, is the carrier's only union to refuse proposed cuts.

In his ruling, Wedhoff said, "It further appears from the evidence submitted by the debtors that interim changes to United Airlines' collective bargaining agreements with the IAM are essential, at the present time, to continue United Airlines' business and to avoid irreparable damage to its estate."

Had Wedoff decided not to impose the wage reductions on the IAM, UAL may have been forced to void all labor contracts.

In a statement, United said, "Today's ruling will keep the company on track to meet debtor-in-possession financing covenants and will provide more time for collaborative discussions between the company and its unions regarding the long-term transformation necessary to emerge successfully from Chapter 11."

The outcome of that transformation will have a significant impact on the nation's other network carriers. "UAL is too big an airline not to influence the entire industry with respect to labor costs," said American Airlines chairman and CEO Don Carty in an interview with Business Travel News this week. "At American, there is not one employee who does not realize that United is our biggest competitor and we must remain competitive. That may lead to tough decisions, but this is not some regional competitor or some small leisure airline, it is United Airlines."

United, which will save $70 million a month from combined cost savings across all five labor unions, now has until May to finalize modifications to collective bargaining agreements.