United CEO's grim letter provokes union anger

USA Today

A warning by United Airlines CEO James Goodwin that the airline will "perish" without more cost cuts sent the airline's shares down nearly 10 percent yesterday and led one labor leader to call for his resignation.

United, two of whose jets were hijacked in the terrorist attacks, was losing hundreds of millions of dollars before Sept. 11, and it's laying off 20,000 employees amid a travel slump. Labor unions voiced anger at Goodwin's blunt letter to employees this week and accused him of pressuring them for contract givebacks.

The head of the International Association of Machinists said Goodwin's decisions to spend tens of millions of dollars this year to launch a corporate-jet business and on a failed bid to acquire US Airways had ruined his credibility.

"We think Goodwin should step down and take (executive vice president) Andy Studdert with him," says Tom Buffenbarger, the IAM's international president. "We're going to call for something to happen" at the airline's Oct. 24 board meeting."

The letter, and reaction, exposed more than ever the bitter rift between United's management and labor — and how difficult pay cuts may be to get despite the Sept. 11 disaster. The IAM and Air Line Pilots Association yesterday demanded United open its books to prove its need. The powerful pilots union negotiated a historic pay raise last year. IAM members — mechanics, ramp workers, customer service agents — haven't had a raise in years and are in contract negotiations.

Shares of United parent UAL fell 9.6 percent to $16.85. Wall Street analysts view Goodwin's grim warning as accurate.

"He's definitely not posturing," says ABN Amro analyst Ray Neidl. United's high labor costs and debt load and losses from 2000's slowdown by the pilots union puts it at greater risk of bankruptcy than most other airlines, he says.

United spokesman Andy Plews says Goodwin's letter was intended to inform employees about United's condition.