Despite Labor Pact, UAL's Future Remains Uncertain

In short, machinists bristle at the notion of paying for management's mistakes with pay cuts. Employees point to management's disastrous attempt to merge with now-bankrupt US Airways and its plans to launch a private jet unit called Avolar as critical blunders. They claim these moves distracted management from seeing how bad business was and kept them from doing something -- like cut their own pay -- to avert disaster.

A Rock and a Hard Place

In the end, the machinists are stuck choosing between the lesser of two evils. If they reject management's proposal, the company will go bankrupt, which means everything the union has fought for over decades disappears. Labor contracts, including pay scales, will be torn up. That equity stake will vanish. Thousands will lose their jobs. And UAL could very well join Braniff and Eastern on the scrap heap of history.

But if the machinists accept the agreement, they'll be voting in favor of a pay cut, with no guarantee that the company will be able to survive as a going concern. The company owes $375 million by Dec. 16, after factoring in a 10-business-day grace period, and is burning nearly $8 million a day. And the government may not provide the $1.8 billion loan guarantee, even if machinists accept the wage cuts.

Monday's news of a new agreement between the IAM and management may be good news, but it might not be enough to overcome years of bitterness. Some machinists are ready to fight management until the company's death, if only to keep wages intact for machinists at other carriers.

"UAL's operating officers are responsible for their mistakes," said another machinist. "As long as they are exempt from pay cuts and remain in charge, we will reject all concessions. They only undermine the pay structure throughout the entire industry."