CHICAGO — UAL Corp. plans to trim $1.3 billion in non-union employee wages and benefits in addition to 9,000 more job cuts and reduced flight capacity announced over the weekend as the owner of United Airlines seeks to secure a U.S. loan guarantee and avoid bankruptcy.
The pay cuts for salaried and management employees is part of $5.8 billion in concessions the world's second-largest airline said it needed to remain solvent. The carrier has reached agreements with all major unions except the machinists, and it still is creating a plan for concessions by executives.
UAL, which has had nine straight quarterly losses, is trying to convince the Air Transportation Stabilization Board that it qualifies for a government guarantee the company needs to raise $2 billion from banks or other lenders. Some analysts and airline consultants doubt UAL can meet the revenue and savings projections included in its plan.
"Of that $5.8 billion, a lot is not real money," said Ray Neidl, a Blaylock & Partners analyst who rates UAL "hold." Concessions such as giving up future pay won't help offset current losses, he said.
Salaried and management employees will take pay cuts of as much as 10.7 percent and forego planned 2002 merit increases. In addition to the job cuts announced Sunday, the company said it would trim flights by 6 percent from 1,800 a day now, stop flying 49 aircraft and delay deliveries of at least 25 more planes through 2005.
UAL also plans to boost the number of smaller jets flown by United Express commuter carriers, including Utah-based SkyWest Inc., to trim operating costs.
"Just laying off people, although maybe necessary, won't fix the problem," said Michael Boyd, president of aviation consultant Boyd Group. UAL also needs to win more passengers as well as cut costs, he said.
The company and rivals had more than $7 billion in losses in 2001 and forecast losses of at least that much this year as the U.S. recession eroded business travel and security and insurance costs increased after the Sept. 11, 2001, terrorist attacks.
AMR Corp., parent of American Airlines, the world's biggest carrier, said in August it would cut 7,000 more jobs, and Delta Air Lines Inc. announced plans last month to drop as many as 8,000 jobs.
UAL has more incentive to avoid a U.S. Chapter 11 bankruptcy filing because of stock owned by its employees, Neidl said. Such a filing would render the company's common stock worthless.
The company on Monday said it would issue stock options to employees participating in the concessionary plans, representing 52 million shares, or 30 percent of UAL's fully diluted common stock after it's issued. UAL won't seek shareholder approval to issue the options because such a delay would jeopardize the company's viability.
United's revenue projections are too optimistic, particularly because the union agreements still let workers, such as pilots, earn more than they would at most rival carriers and restore pay in future years, said Robert Mann, president of the airline economics and labor consulting firm RW Mann & Co.
"What I have yet to see is some indication of how their revenue projections, which appear quite different from anyone else's, can cover the cost of the concessionary pay packages," he said.
UAL said in a statement that it expects an operating profit for the full year in 2004 after reducing the work force by 11 percent. UAL plans to cut the number of jobs to 74,000 by 2004 from 83,000 now. That would reduce the company's employment by 26 percent from before the 2001 terrorist attacks.
UAL would start repaying loans secured by the government guarantee in 2005, with repayment completed by 2007, the company said.
The company plans to cut capital spending 81 percent to $450 million in 2003 from the annual average of $2.4 billion over the past seven years, the statement said. It also seeks $1.5 billion in concessions and savings from suppliers and leasing companies.
UAL had a $2.15 billion net loss last year and has had $1.74 billion in net losses through the third quarter.
The airline is retiring 9 percent of its planes, which totaled 543 at the end of 2001, spokesman Jeff Green said. The company, which had delayed accepting most new aircraft until 2004, postponed deliveries for two more years. Green declined to identify the manufacturer.
The airline will boost the number of United Express regional jets by 86 percent to 236 in a bid to improve efficiency, Green said. The aircraft will be operated by carriers including Atlantic Coast Airlines Holdings Inc. and SkyWest, he said.