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United Faces Labor Strife After Buyout Talks Fail

November 13, 1993

CHICAGO (AP) _ United Airlines faces labor strife after rejecting a bid from two unions for majority employee ownership.

But that may be the price the nation’s second-largest carrier must pay to cut costs and become competitive with lower-cost airlines, an airline expert said.

″From an economic standpoint, United has to do something,″ said Barbara Beyer of Avmark, an aviation consulting firm in Arlington, Va. ″They’re going to have to make the changes whether the employees like it or not.″

The unions representing United’s pilots and ground crews said they were ″bitterly disappointed″ after United rejected their bid late Friday.

Despite threats, United said it would proceed with a planned sale of 15 of its 17 flight kitchens to Dobbs International Services Inc. Workers at the kitchens prepare airplane food.

Michael Peete, a spokesman for the International Association of Machinists, said earlier Friday to union members that if the kitchens are sold, United ″will have declared war on all employees.″.

He said the Machinists ″will not stand idly by and let the wolf gang do what they will.″ The kitchens employ 5,200 machinists, whose fate under the proposed sale is undetermined.

United said the buyout proposal, valued by the unions at $5 billion, did not provide a high enough value for UAL Corp.’s stock, which closed Friday at $148.37 1/2 a share. UAL is United’s parent company.

After United rejected the bid, the machinists and the Air Line Pilots Association rejected a counteroffer from the company, which they said was virtually the same as an August proposal in which the company reportedly wanted $180 a share.

Under the union proposal, United had until midnight CST to cancel the $119.4 million kitchen sale to Dobbs, a division of Phoenix, Ariz.-based Dial Corp.

The union proposal called for UAL stockholders to receive cash, notes, preferred stock and a substantial minority common stock interest in a reorganized company.

In exchange, the pilots and ground crews would make significant wage concessions to help boost the airline’s competitiveness against low-cost carriers, the unions said.

Chicago-based UAL has lost more than $1.2 billion since the beginning of 1991 despite a profit of $15 million through the first three quarters of 1993. United and other conventional carriers face increasing competition from budget airlines.