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United to furlough nearly 1000 pilots

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United to furlough nearly 1000 pilots

chicagotribune.com/…554576.story

Hanoi, Vietnam
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1. Re: United to furlough nearly 1000 pilots

United to slash 950 pilot jobs

More cutbacks expected at other unions, airlines

By Julie Johnsson | Tribune reporter

June 24, 2008

Airlines are starting to reveal the significant toll to be borne by workers as they pare operations later this year.

United Airlines told pilots Monday it intends to eliminate about 950 pilot jobs starting at summer's end, when the Chicago-based carrier begins grounding the first of the 100 aircraft it plans to shed.

The layoffs already have begun among United's salaried and management workers, where it plans to cut as many as 1,600 jobs, or 21 percent of the total workforce. Those cuts are occurring in different parts of the company, the airline said in a memo to pilots, and include reductions at United's large Elk Grove Township operations center.

This is the first time U.S. airlines have contemplated large-scale layoffs since the last industrywide downturn, which followed the Sept. 11, 2001, attacks and eventually forced four of the nation's six largest carriers, including United, into bankruptcy.

Record fuel prices coupled with a slowing demand for travel are having a devastating effect on airlines. In the space of a few months, they have gone from earning their highest annual profits in eight years to shrinking their operations and fighting to remain solvent.

While most U.S. airlines do not plan to cut deeply into their unionized workforces until later this year, some, like United, are starting to give workers advance warning of their plans. Continental Airlines has said it will drop 3,000 jobs, while 4,000 Delta Air Lines workers grabbed the company's offer of early buyouts. Deeper cuts are on the way at American Airlines, which is still finalizing details, a spokeswoman said.

The cuts come at an inopportune time for junior airline pilots, who are first in line to lose their jobs.

Pilots nearing retirement age are working longer, taking advantage of a new federal law that pushed their mandatory retirement age back by five years to 65. Instead of the more than 2,000 pilot retirements that would have occurred this year, improving job prospects for younger pilots, there will be only about 400, according to research conducted by Atlanta-based AIR Inc., a pilot career information service.

The Age 65 rule has "come at the worst time, when we have too many pilots and not enough pilots retiring," said Kit Darby, a former airline pilot and president of the consulting firm.

United, the nation's second-largest carrier, intends to send furlough notices to about 1,450 pilots with the least seniority, including those already on military or personal leaves of absence.

"This process is one of the difficult but necessary steps we need to take to size our business appropriately to reflect the current market reality," United told employees Monday.

The notices for the first 100 pilots to be furloughed, the airline equivalent of a layoff, will be issued in mid-July and will take effect at the end of August, United said. The furloughs will continue through the end of 2009 as the carrier grounds its oldest and least fuel-efficient aircraft.

The cuts represent about 12 percent of the 7,800 pilots employed by United, and amount to nearly 10 pilots for each of the 100 aircraft that the airline intends to retire as part of sweeping cost-cutting measures.

United is finalizing details of job cuts at other unions, but expects every aspect of its operation to be affected.

"We are working with all of our unions to mitigate involuntary furloughs," said United spokeswoman Megan McCarthy. "We will communicate to each employee group when we know what the impact will be on those employees."

As carriers ground planes from their fleet, they are trying to reduce jobs and infrastructure by a corresponding amount in an attempt to keep overhead expenses from soaring and to offset any lost revenues.

Survival is now paramount for United and its peers. Those that are able to conserve cash and avoid a return trip to bankruptcy court stand to benefit from the capacity cuts that will accompany the industry's failures, analysts said. They think U.S. carriers need to cut aircraft and available seats by about 20 percent in order to gain sufficient power to raise prices enough to offset fuel bills that have doubled over the past year.

Last week, United announced plans to create a close alliance with Continental in which they would share technology and sell tickets on each other's flights as a means of increasing revenue. The deal is not likely to take effect until late 2009, analysts said.

If United had done nothing to counteract soaring fuel costs, its cash reserves would fall below $1 billion by early 2009, causing it to default on loans and placing it in imminent danger of Chapter 11, according to a recent research report by Jamie Baker, airline analyst with investment bank JPMorgan.

"You want to be the last guy standing," said aviation consultant Jon Ash. "There is an inherent demand out there and it's not going to go away. As long as you can stay in the game, ultimately, you'll be fine."

jjohnsson@tribune.com

2. Re: United to furlough nearly 1000 pilots

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