Posted on: Tuesday, November 27, 2001
Turbulence subsiding at United
By Dave Carpenter
Associated Press
CHICAGO — With the threat of a year-end holiday strike by its mechanics averted and its stock no longer in free fall, United Airlines' bumpy ride looks a bit smoother.
But the nation's second-biggest carrier still must navigate through difficult operating and labor challenges to reverse its descent into financial instability.
Like other major airlines, United badly needs a rebound in slumping air traffic to reduce losses that continue to total millions of dollars a day.
Experts see its situation as somewhat more urgent than its competitors', however, because United's record third-quarter loss of $1.16 billion was the industry's worst.
"Everybody's on the Titanic here, except United may be in steerage," says Denver airline consultant Michael Boyd.
John Creighton, who replaced James Goodwin as chief executive on Oct. 28, has received positive early reviews from the company's influential unions for opening the books and pledging to do what it takes to avoid bankruptcy for the airline's parent, UAL Corp.
For his urgent cost-cutting mission to succeed he still needs to untangle a difficult knot in labor-management relations at the 55 percent employee-owned company.
UAL wants wage and other concessions to reduce labor costs, which are its largest single operating expense and about 40 percent of its operating tab. But union leaders insist on Creighton first cutting executive pay and dumping the rest of Goodwin's management team — a shake-up that some expect soon.
"All of us (union groups) are unanimous that the management is absolutely dysfunctional," Rick Dubinsky, head of the United pilots union and a UAL board member, said in an interview.
"I believe Jack Creighton will recognize some of that dysfunction and will make appropriate changes."
At the top of unions' wish list for dismissal: president Rono Dutta and chief operating officer Andrew Studdert.
But Creighton intent to crack down on labor costs became clear with his recent refusal, according to union negotiators, to offer an immediate pay increase to the airline's 15,000 mechanics, despite the fact they haven't had one since 1994 and are nearly two years into contract talks.
That impasse moved closer to a strike when federal mediators started the required 30-day countdown Wednesday. But the White House's swift assurance that President Bush would intervene to prevent a holiday work stoppage by creating a presidential emergency board means it couldn't legally start until Feb. 21.
United also got a boost last week from the continued recovery of its stock. UAL shares, which had plunged in the final months of Goodwin's tenure, have rebounded 77 percent since then, closing at $16.62 Friday since bottoming out Nov. 12 at $9.40.
