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The Honolulu Advertiser
Posted on: Monday, February 10, 2003

Labor leaders wary of United Airlines 'breakup'

By Lynne Marek
Bloomberg News Service

CHICAGO — UAL Corp.'s Glenn Tilton won praise as "a good listener and a person of integrity" from the head of United Airlines' pilots union in September, when Tilton became chairman and took the task of keeping the company afloat.

"The biggest single challenge United faced in 2002 was to reduce its costs, the highest in the industry," Glenn Tilton said in a statement last week.

Advertiser library photo • Dec. 10, 2002

Now UAL is in Chapter 11 bankruptcy protection and Paul Whiteford, head of the Air Line Pilots Association and a UAL board member, is singing a different tune. Tilton, he said, is shutting pilots out of recovery efforts, and his proposal for a separate low-cost carrier amounts to a "breakup plan" that the union will fight "by every lawful means."

Tilton has said he will present his plan to workers starting this week.

The 53-year-old Tilton is walking a tightrope as he tries to revive UAL after its Dec. 9 bankruptcy filing. He is eliminating jobs and asking for pay and benefit cuts to reduce labor costs by $2.4 billion a year. At the same time, he seeks to improve service and avoid a worker backlash that might disrupt flights.

"The most important thing is having better relations with their labor unions and making sure they're all on board with concessions," said Kent White, a Thrivent Financial for Lutherans analyst who helps to oversee a $35 million to $40 million investment in UAL.

"The biggest single challenge United faced in 2002 was to reduce its costs, the highest in the industry," Tilton said in a statement last week.

Tilton, a former oilman , has a big to-do list. In addition to reducing labor and supplier costs, he is offering lower business fares to revive demand and boost total revenue and creating a low-fare unit to compete with discounters such as Southwest Airlines Co. that have taken away customers.

The main thrust of Tilton's efforts since the bankruptcy filing is to make deeper wage and benefit cuts and to change work rules to make employees more productive. United workers already agreed to or were forced to take interim pay cuts of as much as 29 percent while their unions negotiate permanent changes. UAL has said it needs to reach agreements by March 15.

The pilots and the Association of Flight Attendants both oppose the plan for a separate low-fare carrier, which the attendants said would shift as much as 40 percent of UAL's service to the new unit. Major airlines typically offer lower wages and benefits for employees of the low-cost units.

The airline has managed to improve service. At least 88 percent of its flights were on time in September, October and November, ranking United first or second among major carriers in the U.S. Transportation Department statistics. In 2001's fourth quarter, United ranked 10th.

Tilton's team has told the bankruptcy court that UAL may be able to return to an operating profit by next year and to net income in 2005.