"People Are Basically Defeated"

Last summer, Malik Miah and his wife, Linda, borrowed $50,000 to remodel their 1,300-square-foot house in South San Francisco. And why not? A veteran mechanic at United Airlines (UALAQ ) Inc., Miah had just received a 37% bump in pay. Granted, the airline was pushing the International Association of Machinists (IAM) to give back the raises as it struggled to avoid bankruptcy. But low interest rates meant the couple could refinance and get the extra money without boosting their monthly payment. With Bay Area real estate values still rising, a house with a new master bedroom would be their ace in the hole if they needed to raise cash and downsize their living standards.

Malik Miah, mechanic
They may need it soon. On May 1, Miah's pay fell 13% under a new IAM cost-cutting contract designed to help lift the ailing carrier out of bankruptcy, while his medical premiums jumped from zero to $120 a month. His union also agreed to let the airline outsource more jobs, and Miah is worried that his post -- he's one of 10 who repair ovens for onboard food service -- could be among them.

On the shop floor, say Miah and his fellow mechanics, the wage cuts and layoff threats never seem far from mind. One co-worker may go to law school. Another is preparing to sell his house, if need be, and move to Oregon, where he reckons he can get by on less money. Meantime, they do their work, but only what's absolutely required. "Even though the financial world may think that us having a new contract makes everything hunky-dory here, I can assure you that it is not," says fellow mechanic Joseph Prisco. Says Miah: "People are basically defeated." Peter McDonald, United's executive vice-president for operations, says morale problems haven't affected the airline's performance, although he concedes that "this is a very painful thing."

For Miah, 51, finding a new job would be hard enough, especially one that pays as well. Even after his wage cut, he makes nearly $31 an hour, thanks to 15 years' seniority. But his search would be even tougher because of his health. A diabetic, Miah had his left foot amputated in 1999 and is recovering from fracturing his right foot in 2002, limiting the kind of work he can do and making him a potential red-flag liability for a new employer. Linda is in the same boat. A full-time nurse at a Kaiser Permanente clinic, she's 54 and had breast cancer in 2000.

Still, the couple has it pretty good. They expect to gross $115,000 this year, and with no children, they'll tuck 15% of that into retirement accounts. They own their cars free and clear -- a 1995 Toyota Camry and a 1999 Ford Ranger pickup. Because United still gives employees free tickets, they also travel a lot, vacationing twice a year in Hawaii, where Linda has family, and jetting off to Alaska or Toronto when they want a break. Their three-bedroom house, worth some $550,000, is ready for the market tomorrow.

But who knows? Thanks to the huge concessions, the carrier said May 20 that it could soon emerge from Chapter 11 as a viable, low-cost airline. If so, employees may earn back some of their pay through bonuses linked to performance that start in 2005. That could help repair morale. Miah believes the next few months will determine whether he'll be part of that new company. "If I can make it through October, I can make it another five years," he predicts. Linda looks up at her husband and crosses her fingers.

By Michael Arndt in South San Francisco

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