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Health Care Matters MEC Communications Letter to Glenn Tilton
Letter to Glenn Tilton
May 19, 2004
Glenn Tilton, Chairman & CEO
United Airlines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Re: Section 1114
Dear Glenn:
The undersigned represent salaried and management and nearly all unionized pre-July 1, 2003 retirees. This historic coalition has joined together to forge a common and productive response to the Company’s request that retirees agree voluntarily to reduce their medical benefits.
On Friday, May 21, United intends to file a motion requesting that the Bankruptcy Court force the retirees to accept the Company’s proposed reductions in retiree medical benefits. Before the Company files its motion, Section 1114 of the Bankruptcy Code requires the Company to serve its proposed modifications on the authorized representatives, provide information necessary to evaluate the proposal, and confer in good faith with the representatives about its proposal. We believe the Company has not met these requirements.
In March, the Company served its proposal, which sought cuts in benefits and increases in contributions, which are excessive for a number of reasons, including:
- The modifications effectively result in cuts in Company-sponsored income for the vast majority of retirees, which are far deeper than those demanded of active employees under the Company’s restructuring.
- Unlike any other stakeholder in United, the Company is demanding that retirees make a sacrifice that is unlimited in time or amount.
- The proposed cuts would survive and escalate far beyond the duration of the business plan that underlies United’s reorganization.
- The retirees have no opportunity to share in the ultimate success of United through renegotiation of their terms, or participation in the existing gain-sharing and profit-sharing programs.
- These demands are made of people on fixed pensions, who are least able to bear the permanent, escalating burden that would be imposed.
- These retiree medical benefits are deferred compensation that was promised to the retirees in return for a lifetime of productive service to the Company.
- Thousands of employees retired in the first half of 2003 in the expectation that by doing so they would protect their retiree benefits.
As much as we believe that the Company’s proposal is unreasonable and inconsistent with Section 1114 standards, we, and the retirees we represent, share everyone’s desire that the Company succeed. The retirees are willing to make a fair and equitable contribution to a successful reorganization. In that spirit, we made good faith counterproposals which addressed the Company’s concerns:
- Recognizing the framework of the Company’s business plan, which projects financial results through 2010, we offer substantial economic concessions which total nearly $300 million over that period.
- In each year of the Company’s business plan, the economics of our proposal match what the Company has told us is the most critical financial criterion for obtaining exit financing.
- The problem is not permanent, as the Company’s cost for pre-July 1, 2003 retiree health insurance will shrink as that population shrinks. Nonetheless, much of the value of our proposal is through changes which last indefinitely beyond the term of the business plan.
- Sacrifices offered by retirees under our proposal take into account their ability to pay.
We had hoped that, in response to our sincere and constructive counterproposals, the Company would confer in a good faith effort to reach a consensual agreement. Instead, in response to each of our proposals, the Company’s negotiators repeatedly made fundamentally the same proposal that had been made in March. Intransigence is not good faith negotiations.
With the Company’s self-imposed deadline for filing the Section 1114 motion fast approaching, only a fundamental change in the Company’s approach to these discussions will prevent destructive litigation that will serve no one’s interest. We are sure that you recognize that the character of this Company will be defined for many years to come by its conduct during this bankruptcy process, and in particular how it chooses to treat its most vulnerable constituency. To that end, we urge you, as the leader of the corporation, to seize this opportunity to reach consensus with 35,000 retirees and thereby to demonstrate that the Company’s transformation is not simply financial, but extends to the culture of this organization and the morale of its employees.
Considering these circumstances, we look forward to your immediate response.
Very truly yours,
Charles F. McErlean, Jr.
Chairman, SAM Section
1114 Committee
Roger D. Hall
Chairman, Pilots Section
1114 Committee
Gregory Davidowitch
President, UAL-MEC
AFA-CWA
S.R. Canale
President & Directing General Chairman
IAM District Lodge 141
Mikel Alpers
President, PAFCA-UAL
David Durkin
President, TWU Local 540