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United vows to cut more costs, exit bankruptcy

Labor complains it's being targeted

CHICAGO -- Pillows and blankets will stay. More corporate and administrative costs will be cut. Airport operations will be redesigned to be more cost-efficient.

United Airlines is looking for more nonlabor savings after completing workforce-related cuts totaling $3.8 billion annually over the past two years.

''In every area of our work where we are not yet competitive, we'll continue to lower expenses and improve productivity," chief executive Glenn Tilton told employees last week.

After 30 months in bankruptcy, the nation's second-largest airline hopes to emerge from Chapter 11 this fall. This target became more reachable Tuesday, when United gained contract agreements with its last two holdout unions, representing a combined 27,000 mechanics, ramp workers, and other ground workers.

But the carrier still has important unfinished business before it nails down the needed $2 billion to $2.5 billion from banks in exit financing. First is resolving a costly standoff over airplane leases. United's initial goal of slicing $900 million a year off rental costs was dealt a major blow last month when it lost a risky court bid to have the leasing companies declared an illegal cartel, giving them the upper hand in negotiations.

Unions and other critics say management has been obsessed with labor cuts.

Michael Riley, chief financial officer at United in 1985-86 and now assistant dean at the University of Maryland, acknowledged the progress made in reworking labor contracts but said more should have been accomplished elsewhere.

''How much better it could have been if they had figured out at the start what they did really need," Riley said. ''They've been focused on wage givebacks from labor, as opposed to figuring out a strategy to make the place better."

United management denies it has overlooked other areas or that cutting labor costs has been, as the flight attendants union puts it, its first and last choice.

Chief operating officer Pete McDonald said ''our focus has been just as intense on the nonlabor side to reduce costs."

He said United is trying to avoid cutbacks in areas that make a difference to passengers -- such as pillows, blankets, and Economy Plus, a seating section with extra legroom.

Labor has accounted for more than half the cuts in bankruptcy.

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