United Airlines said Monday that it was reinstating service charges for all employee tickets to help it achieve $1.4 billion in non-labor cost savings.
Separately, parent company UAL Corp., which has filed for bankruptcy, is facing opposition from Lehman Brothers and other creditors that have stepped up their campaign to overturn debt-trading restrictions enacted by a U.S. Bankruptcy Court judge this month.
The service charges, which take effect Jan. 1, will cover the $32 million annual cost of providing employee travel benefits, the airline said in a recorded message to employees.
The airline is under increasing pressure to slash costs in order to meet agreements with banks that have lent the carrier money to continue operating while in bankruptcy proceedings.
Previously, United employees did not pay service charges on coach or business-class tickets for domestic or international travel, UAL spokesman Jeff Green said. They paid government taxes and paid service charges only to travel in first-class, he said.
The airline's workers will continue paying government transportation, security and facility taxes on all tickets in addition to the restored service charges.
The new service charges also apply to United retirees, the airline said, but do not apply to employee tickets for United Express flights.
The carrier also said that employees on any paid or unpaid sick leave will need to obtain permission from a supervisor to use their employee travel benefits.
In addition, United is changing the way it calculates fares for employee companions traveling on the airline.
As of March 1, employee companions will receive a 90 percent discount off full-fare economy-class tickets, Green said. Previously, companion fares were determined by a formula based on miles flown.
The airline said it was sending letters to employees detailing the changes to their travel benefits.
United also said KLM Royal Dutch Airlines will cancel an agreement providing discounted fares to United employees as of Dec. 31.
KLM has decided it cannot honor current reduced rate agreements with United because of KLM's new automation and tax issues, UAL said.
KLM Chief Executive Leo van Wijk said the Dutch carrier would have to cut costs to prevent another loss in the fiscal year starting in April.
All tickets issued before Dec. 31 will be valid for travel completed on KLM within 90 days. United said it was trying to negotiate a new arrangement with KLM for discounted employee fares.
In the dispute with creditors, UAL, seeking to protect what it said amounted to $1.4 billion in future tax deductions, won an unusual "claims trading" order that bars bondholders and others from selling billions of dollars worth of debt in the airline.
But creditors say the restriction violates property rights provisions in the U.S. Constitution. Bankruptcy Judge Eugene Wedoff set a hearing on the order for Dec. 30.
Also Monday, Walt Disney Co. said it would take an $83 million charge and write off its investment in airplanes leased to United.
Disney said in a statement it would write off a $114 million investment and take an after-tax charge of $83 million, or 4 cents a share, in the quarter ended Dec. 31.
"Based on United's recent bankruptcy filing, the company believes it is unlikely that it will recover this investment," Disney said.