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Officials Say New Union Agreement Will Help United Airlines Avoid Bankruptcy - 2002-12-02

The second-largest airline in the United States says it has reached an agreement with its mechanics union on a pay cut. United Airlines says it needs concessions from all of its employee unions to avoid bankruptcy.

United Airlines spokesman Jeff Green says it took all Sunday and part of Monday, but the carrier and its mechanics' union have a tentative deal that could help the financially-troubled airline. "It is a new tentative agreement on proposed contract changes and wage cuts for our mechanics group. They will vote on it on Thursday," he said.

United wants its 13,000 mechanics to agree to a $700 million package of concessions during the next five years. The airline is trying to cut its labor costs by more than $5 billion to win federal loan guarantees that should keep United out of bankruptcy.

Last week, mechanics rejected a similar concessions proposal, but United's Jeff Green is hopeful the union will accept the package this time. "I think there are a lot of people hoping that after Thursday, we are positioned to move forward with our financial recovery program, and then focus on getting the federal loan guarantee," he said.

Like most airlines in the United States, United has lost customers and money since the 2001 terrorist attacks on New York and Washington. The airline has recently been losing $8 million a day.

Its leadership says United needs the federal loan guarantees to help it get $2 billion in private loans. Without that money, the airline would most likely have to file for bankruptcy.

Such a filing would probably not affect United passengers right away, since the airline would continue flying its normal schedule. But, it could have a major effect on the airline's workers, since a bankruptcy judge could order unions to agree to tougher wage concessions than United has requested.

United's pilots union had previously agreed to wage cuts, and flight attendants approved more than $400 million in concessions on Saturday.

United Airlines' stock rose about 30 percent, following word of the tentative agreement with mechanics. But at roughly $3 a share, it is still about 80 percent lower than it was in March.