NY Times UAL story(4 postings)

UALX727

Well-known member
Joined
Nov 26, 2001
Posts
234
Total Time
12,000
Into Thin Air

February 17, 2002

By ROGER LOWENSTEIN

On the evening of Sept. 10, negotiators for the C.E.O. of
United Airlines, James Goodwin, huddled in Washington with
union officials representing United's 30,000 baggage
handlers, customer-service representatives and reservation
agents. They were putting the finishing touches on an
agreement for a hefty double-digit wage increase, and
Goodwin, a tall, likable West Virginian who had been with
the company 34 years, was waiting for a call to give his
O.K. It didn't matter that United, which had lost $605
million in the first half of 2001, was in a financial
tailspin: when airline unions are due for a raise, they get
one. If you don't understand why, then you don't understand
the airline business.

As it happened, the talks dragged on, and at 5:30 on the
morning of the 11th, the negotiators trudged off to get a
few winks. Randy Canale, a union negotiator, returned to
his hotel, the Capital Hilton, not far from the Pentagon,
figuring they would sign later that day. He awoke earlier
than expected, to the sound of sirens. ''Boy, it sounds
awful close,'' Canale murmured. Someone was banging on his
door, and puffs of smoke were visible from the hotel
window. Two of United's jets were down, the wage hike was
history and so was the 57-year-old Goodwin's career. Seven
weeks later, he was dismissed by United's board. It hardly
mattered that United's directors would have approved the
agreement and were as much to blame as Goodwin. They were
letting him go for a way of doing business that has
tormented United and the entire industry for decades.

Since 1978, when commercial aviation was deregulated, no
fewer than 137 carriers have filed for bankruptcy
protection. And from the end of World War II, when aviation
started to become big business, through 1994, the sum of
the industry's profits and losses was less than zero.
Warren E. Buffett once remarked that it would have been a
blessing for shareholders if someone had thought to shoot
down Orville Wright at Kitty Hawk.

This is the industry that Congress has rushed to save, and
this is the record that -- failing basic changes -- it will
have helped to perpetuate. Indeed, even as it reels from
last year's record $3.8 billion operating loss, United is
facing the possibility of a strike by its mechanics,
pending a vote on a proposed 37 percent wage hike this past
week. If this rings faintly of ''Alice in Wonderland,''
well, that is because airlines are not like other
businesses, where competition breeds variety and choice for
consumers and profits for business. They are more like
flying utilities. As passengers, we demand quality service
-- on-time takeoffs, edible food, plenty of leg room -- and
don't much care who provides it, as long as they make it
cheap. That leaves the airlines with the dubious honor of
competing to be the Ma Bell, the Con Ed, of the sky.

One reason the major airlines find themselves in this
predicament is that they use huge amounts of fixed capital
-- wide-body jets go for $100 million each and can't be
readily liquidated. They also depend on a skilled labor
force. The two problems exacerbate each other. Since
airlines cannot afford to let planes sit idle, they can ill
suffer strikes. That makes their unions unusually powerful.
Consider some other businesses for a moment: Microsoft has
highly skilled programmers but little invested capital.
Merrill Lynch has both, but its assets -- stocks and bonds
mostly -- could be liquidated overnight. Steel has high
fixed capital, but it can replace its workers more easily.

Airline pilots (and mechanics too) are not so replaceable.
Stringent safety codes strengthen the unions further by
introducing a stickiness into the rules that govern hiring
and firing. Any other industry would compensate by raising
fares, but air travel is a commodity, so the temptation is
always to cut fares to fill seats.

None of this was caused by the attack on the World Trade
Center. But until then, it was possible to believe that
airlines were turning a corner. Even though they were
losing money in 2001, they had recently enjoyed some good
years, thanks to genuine improvements in their operations.
They had learned to manage their fleets more efficiently,
they had structured their routes better and they had cut
overhead.

United was emblematic of the airlines' ephemeral
prosperity. In the late 1990's, it reported $4 billion in
profits, and its route map, stretching over four
continents, was the envy of the industry. Most strikingly,
it had ventured a daring solution to the industry's
thorniest problem -- labor -- by selling a majority of its
stock to its employees.

But despite this groundbreaking arrangement, United was
never able to fully align the interests of its employees,
particularly the pilots, with its own. Rick Dubinsky,
longtime head of the AirLine Pilots Association at United,
made this clear when he and Goodwin began a recent wage
negotiation. ''We don't want to kill the golden goose,''
Dubinsky told Goodwin. ''We just want to choke it by the
neck until it gives us every last egg.''

On Sept. 11, the goose ran out of eggs.

In five months,
United's traffic has shrunk by, on average, a quarter,
fares are down and two of its fleets lie mothballed in the
middle of the Mojave Desert. Meanwhile, it has been begging
senior pilots, who can earn close to $300,000 a year, to
sit home and collect a full 80 percent of their pay for
doing nothing; otherwise, they can remain on the premises,
though inactive, at full pay. This is why by the end of
2002 United stands to lose every penny it made in the
previous five years -- and why bankruptcy for one of the
nation's largest and most venerable airlines looms as a
real possibility.

United's modern history started in 1985, when Richard
Ferris, the C.E.O. at the time, boldly challenged his
pilots. The underlying issue -- then, and in every
subsequent dispute -- was management's desire to break the
contractual stranglehold inherited from regulation. Before
1978, fares were set by the Civil Aeronautics Board, which
generally let carriers pass along their costs. Such a cozy
set-up naturally bred inefficiency (banks were similarly
slothful in the days of managed interest rates), and
airlines got used to rubber-stamping union demands.
Eventually, they approved a byzantine system of work rules
sought by pilots and other employees. Come deregulation,
competition intensified, air fares dropped and more people
started flying. But the stifling work rules remained and
so, of course, did safety constraints and also antitrust
concerns preventing mergers. In effect, aviation became
deregulated only on one side: free competition for revenue;
costs largely immovable.
 

UALX727

Well-known member
Joined
Nov 26, 2001
Posts
234
Total Time
12,000
part 2

Ferris tried to win points by befriending the pilots. He
started flying, got a license and took some union members
under his wing. For a while, it worked. Attacking a brazen
case of featherbedding, he got the union to agree to cut
the number of pilots in the cockpits of Boeing 737's from
three to two. But when he tried to impose a lower wage
scale for newly hired pilots -- as Robert Crandall had done
at American -- the pilots went on strike.

The head of the union's strike committee, Dubinsky, was
nicknamed Mad Dog. The son of a butcher, he was hired by
United in 1965 at a measly $500 a month. He flew the
tobacco route: Winston-Salem, Raleigh-Durham, Chattanooga.
In the pilot culture of the day, captains were virtual gods
and young flight engineers like Dubinsky received barely
more respect than the stewardesses. Dubinsky, though, found
a vent for his aggressiveness. He started doing small
chores for the AirLine Pilots Association and then handling
grievances, and the union discovered that he was a badger.
By 1985, he was brimming with class-conscious fervor. The
pilots, despite their political conservatism and sense of
themselves as professional people, heeded him. Pilots make
good money but lack the free agency of other professionals.
If a United pilot moves to Delta or American, he loses his
seniority and most of his pay. That makes him utterly
dependent on the union -- and makes the union a potent
force.

Ferris hired replacements to keep United flying, and the
pilots returned after 29 days, taking the offer Ferris had
on the table. The strike was over, but permanent damage had
been done. A certain culture, an implacable
Arab-Israeli-like hatred, took hold at the airline, and
nobody has been able to dislodge it since. More
significant, United's experience helped spread fear through
the industry. Airlines began to leapfrog one another,
granting successively better terms at each negotiation --
anything to avoid a strike.

Today, thanks to generous vacations, sick-leave provisions
and clauses that fix minimums for days worked and trips
flown, United pilots get paid for 81 hours a month but
actually fly, on average, only 50 hours. Considering that a
Boeing 747-400 captain gets a top rate of $302 an hour, you
can see what a drain this is. Though pilots spend many
nights away from home, a hardship that is worth some extra
compensation, they freely admit that flying, on most days,
is hardly the risky proposition it was when the first
contracts were penned. ''It's not a hard job for a guy that
has been around,'' says one 40-year-old United pilot I
talked to. ''Because of advances in technology, we have
great airplanes to fly.'' Their flexible schedules allow
many pilots to carry on second careers.

By 1986, Ferris decided that United couldn't make money
just flying planes. So he stitched together a hotel and
car-rental conglomerate, aiming to use the airline to feed
the travel businesses -- synergy! He paid a consultant $7
million to rename United's parent the Allegis Corporation.
Wall Street snickered. The pilots did not. They feared that
Ferris would divert capital into the other divisions until
the airline was a rump operation and then start cutting
jobs.

The ALPA adviser was the illustrious F. Lee Bailey, and he
told them that their jobs would never be safe unless they
really took control -- a message that the pilots, being
pilots, were happy to hear. Dubinsky and Bailey flew to
Chicago to meet with a leader of the International
Association of Machinists and dropped a proposal for an
employee buyout into his lap.

The machinists didn't like it. Presciently, they saw the
plan as leaving workers to bargain with themselves, an
obvious conflict. But Dubinsky made his bid public. It was
a strange time on Wall Street, in which anybody could
seemingly acquire anyone else and companies were said to be
worth more dead than alive. Coniston Partners, a hedge
fund, bought a chunk of stock and agitated for a breakup.
The board, feeling pressured, sacked Ferris and agreed to
sell the travel assets. Stephen Wolf, a veteran of two
previous airline turnarounds, was named C.E.O. late in
1987.

After briefly joining with ALPA to attempt a high-priced
buyout (which, when it failed, set off the stock-market
crash of October 1989), Wolf embarked on an expansion kick,
snatching up international routes and ordering $22 billion
worth of equipment. His competitors followed suit. Since
wages rise sharply with experience, airlines were desperate
to hire younger crews. ''So how do you get more new
pilots?'' says Harry C. Pinson, an investment banker who
worked with Wolf. ''You grow the airline.''

The logic was so compelling that airlines bought many more
planes than they needed. In aviation, such capital mistakes
don't go away. Equipment is so expensive that once a plane
is delivered it must be flown. Even carriers that file for
bankruptcy limp along for years, usually operating at lower
costs and undercutting the rest.

Wolf discovered this in 1990, when conflict in the Mideast
and a recession at home (sound familiar?) sent the industry
into a nose dive. Making matters worse, Southwest, then a
relative upstart, was tormenting the industry and, in
particular, stealing United's traffic in California.

As losses mounted, Wolf clamored for union givebacks. He
and Dubinsky began to shadowbox. When United ordered new
747's, a dispute with the pilots' union kept them parked on
a ramp. When United tried to start service to India, the
pilots delayed it by demanding private restrooms and
Western food. Dubinsky kept up the pressure, but his time
was running out. His term at ALPA expired. (He lost an
effort to rescind a term-limits clause and wrote an acid
farewell remembered within the union as ''the Nixon
letter.'') Wolf, a tall, aloof C.E.O. who arrived at
United's headquarters near O'Hare Airport at 6 each
morning, seized the opportunity. He sold off the flight
kitchens, which made the machinists fear that their jobs
would be next. Then, with their cooperation, Wolf and the
pilots, now led by Roger Hall, a less tempestuous chief,
cobbled together an audacious employee stock-ownership
plan.

Similar ideas had been tried at Northwest and Eastern, but
never with workers in control -- that was what bred such
hope at United. The pilots, machinists and nonunion
salaried employees (the flight attendants opted out) got
three board directors, various control provisions and,
critically, 55 percent of the stock. The pilots, the
biggest bloc, got 25 percent, in exchange for an equivalent
percentage cut in wages and benefits.

A new era of worker-management cooperation was born.
Optimism ran high. Robert Reich, the secretary of labor in
the Clinton administration, gushed that the
employee-ownership plan ''could change the face of the
airline industry.'' But there was one devastating
oversight: yes, you could turn employees into owners, but
could you get them to act that way? Could you get them to
place the same value on their stock as on their weekly
paychecks?

The difficulty, as Dubinsky would shrewdly observe when he
was back battling United management, is that ''you can't
eat stock'' -- particularly when employees were barred from
selling their shares until retirement. In any case,
airlines had never generated value for their stockholders.
Donald Washburn, a former executive at Northwest Airlines,
has observed that airlines are merely ''cash accumulators
for other constituencies'' -- the various government
entities that tax it, the cartel that sells it equipment
and the industry's bankers. Its hungriest constituent is
labor, which gobbles up nearly 40 percent of operating
expenses. The employee buyout temporarily lowered wages,
but it didn't change these dismal economics. Arguably, it
weakened United. The pilots had always sought control; now
they could pursue it from inside the boardroom.


As owners, the pilots could pick their own C.E.O., and they
did: Gerald Greenwald, famed for helping save Chrysler and
fresh from running a trucking concern in newly capitalist
Czechoslovakia. When Greenwald told his Czech managers that
he was leaving to take over the new worker-owned United,
one of them stared incredulously. ''We just finished with
all that,'' he said.

Greenwald figured that with workers owning a stake, their
interests would have to shift. So he invited pilots and
mechanics into strategy sessions and consulted with Fortune
to learn how to qualify for the magazine's list of 100 most
desirable companies to work for.

Many pilots caught the spirit. Absenteeism declined. A
captain in Chicago cleaned food trays to shorten turnaround
times. And miraculously the good times started to roll.
United's stock, $22 when the ownership plan began, broke
$90 three years later. (Today it is $12.) Partly, airlines
were the beneficiaries of good fortune: fuel prices were
low and the economy was strong. But they also had learned
to be more efficient, eliminating frills, reducing
commissions to travel agents, reaping savings from
automatic check-in. Unlike in the previous decade, most
avoided the trap of overexpanding. Greenwald strengthened
his hubs and eliminated unprofitable, marginal routes. He
also enhanced United's unmatched network overseas. These
were heady days for the big airlines, as they finally
capitalized on the promises of deregulation.

Except for one little thing. They still could not keep
wages under control.
 

UALX727

Well-known member
Joined
Nov 26, 2001
Posts
234
Total Time
12,000
part 3

Through the 90's, airline wages rose 43 percent, just
slightly above inflation. Not bad until you consider that
air fares rose only 6 percent. This was, significantly, a
time when other industries were holding the line on every
conceivable employee benefit. Only the airline industry,
shackled by 40-year traditions, continued to kneel to its
unions. The regional airlines are a perfect illustration.
These carriers, like American Eagle or United Express, fly
under the majors' flags and serve an essential role
connecting smaller cities to hubs. They also pay their
pilots, most of whom are represented by ALPA, significantly
lower wages. The business has grown smartly, thanks to a
new generation of high-performance jets, but the unions
don't like these smaller planes and the lower wages that go
with them, so they have successfully negotiated ''scope
clauses'' that limit the size and number of regional jets
that a major can hire out.

If it were up to the market, a new-generation, 50-seat
Canadair might fly from New York to Chicago at off hours,
when there wasn't demand for a DC-9 or a Boeing 737.
Presumably, that would result in more flexibility and
choice for customers. But scope clauses, a bit of
protectionism that seems wildly out of place in the 21st
century, make it extremely difficult.

With their hands tied on costs, airlines turned their
attention to revenues. In the 90's, they perfected the art
of ''yield management,'' exploiting computers to monitor
bookings continuously and adjust ticket prices according to
availability. Yield management is why you can pay $1,000 to
fly coast to coast and sit next to someone who paid $200.
It is also why so many people hate the airlines.

It may seem unfair, but to an airline economist, the
passenger -- say a student heading home for the holidays --
who books in advance and the executive who sidles up to the
counter without a reservation are not buying the same
''product,'' even if they are on the same flight. One is
buying a surplus seat, akin to last year's sweater on the
bargain rack. The other is buying that sweater when it's
hot.

It is a good business tactic, but the airlines overplayed
it. During the late 90's, they jacked up the premium for
business fares as never before. I.P.O. money rained on Wall
Street, and plenty of it got spent on plane tickets.
United's San Francisco hub, a gateway to Silicon Valley,
became a gold mine.

Airline unions exploited the boom to demand higher wages,
but the good times for airlines -- flying utilities,
remember? -- were never good enough. In one recent year,
carriers filled 72.4 percent of their seats, just a tad
more than their break-even level of 70.4 percent. What this
means is that on a typical flight, the entire profit was
generated by the last three passengers. From 1995 to 1999,
the industry's best half-decade ever, airlines earned only
3 1/2 cents on every dollar of sales, whereas American
industry typically earns 6 cents. And through the full
cycle -- that is, for all of the 1990's -- airlines made
less than a pitiable penny for every dollar of sales.

If this were another industry, C.E.O.'s would be forced to
resign in disgrace, but airline execs were buoyed. At
United, Greenwald gave the pilots and machinists
consecutive 5 percent wage hikes, the maximum allowed by
the terms of the ownership plan. Then the unions demanded a
''snap back'' to take effect in 2000, restoring them to
pre-ownership levels. Greenwald consented and, remarkably,
so did United's board. It may be unkind to say the company
lived in fear of upsetting its employees, but everyone,
especially at United, knew what the unions were capable of
doing.

Meanwhile, management's relations with the AirLine Pilots
Association deteriorated. As Greenwald neared retirement
from United in 1999, the union nixed his choice of
successor; instead, the pilots tapped Goodwin, a company
man that many deemed controllable. As negotiations started
for the first post-ownership contract, the drumbeat rose
for a more confrontational approach -- rose, that is, for
Dubinsky. The rank and file were mostly unaware that while
out of office, Dubinsky had been busy suing his own union.
He would soon collect a six-figure settlement paid from his
pilots' dues. No matter. With a big negotiation looming,
the union's 26-member governing body voted him in.

United's pilots were counting on a contract by April 2000,
when the ownership plan expired. The deadline was
unrealistic, and it gave Dubinsky a cudgel to wield against
the company. Goodwin compounded his problem when, late in
1999, he and Wolf -- who was now running US Airways --
began to plot a merger. The timing was suicidal.

Dubinsky, as a board member, was informed of the talks but
could not disclose them to the rank and file. He certainly
knew the pilots would oppose a merger, because many would
lose seniority to US Airways pilots. Thus, Dubinsky had
every reason not to conclude a contract until the merger
was announced. By early 2000, wage negotiations,
predictably, had stalled, and United's increasingly
impatient pilots were getting stickers from the union
reading, ''On Top/On Time.'' They put them on flight bags,
in the cockpit, everywhere.

As the deadline neared, Dubinsky reminded his pilots that
they weren't obligated to fly overtime, as they normally
did, and that they should fly ''to the letter of our
agreement'' -- a euphemism for going slow. Late flights
began to mount. Passengers went nuts. Goodwin was living a
nightmare.

In May, he announced the merger, and the war with the
pilots reignited. The nasty labor sore, bandaged but never
healed, oozed with all the ugliness of the past. The pilots
refused to fly overtime; some of them taxied at 3 knots
instead of 15; others flew low, to burn more fuel, or
opened landing gear prematurely, adding to wear and tear.
Delays and cancellations soared; United, notably, suffered
a fourfold increase in delays caused by pilots insisting on
repairing inconsequential items, like a broken coffee maker
or a burned-out reading light.

A pilot in California walked off a full 747, claiming
nerves. An executive from a competing airline tells the
story of a United flight from Los Angeles to J.F.K. when
the captain announced that because of ''low clouds'' he
wanted to recheck his instruments. They sat for three
hours. The pilots were sabotaging their own company.

They did have reason to be upset. United, having grown more
quickly than US Airways, had far more newer hires. Pilots
feared for their careers and were infuriated that their
counterparts at a weaker airline might supplant them --
especially since, they reckoned, management was paying for
the deal with the very money it had saved on pilot wages.

Their anger was, of course, given a significant push from
ALPA. Geoff Garrett, a United pilot from Seattle, says, ''I
never received an order to slow down.'' However, he admits,
there was peer pressure. Pilots who flew overtime would see
their names tacked to a bulletin board, and those who
arrived on time got flack for ''not flying safe.''
Mysteriously, an unsigned publication, The Gardener, began
to turn up in cockpits, often in pilots' sun visors. The
Gardener was a colored sheet written in country vernacular,
reminding pilots to ''fly safe'' and so forth. Many pilots
think it was produced by the Industrial Relations
Committee, a secretive wing of ALPA formed by Dubinsky
during the strike.

I asked Dubinsky about United's dismal summer -- 20,000
flights were canceled and on-time performance fell to 40
percent, disruptions that cost the airline $700 million. He
said: ''The company was short on manpower; we told them
that. And the weather was terrible. Also, our pilots
decided to not fly overtime.'' Does that mean there was no
coordinated effort? ''That's what I'm telling you. If there
had been, they could have taken us to federal court.''

In fact, United's management had hotly debated whether to
do that. Many were in favor, but Goodwin, who had the
longest tenure and remembered the 1985 strike vividly, was
unwilling to further antagonize the pilots.

And so in August, Goodwin agreed to an immediate pay raise
of 22 to 28 percent and to additional 4.5 percent raises in
each successive year through 2004. This pace-setting and
lavish package stunned United's competitors, who had, of
course, been guilty of no less in their turn.

Then the bottom dropped out. By 2001, high tech had gone
bust, and big corporations like Hewlett-Packard, Cisco and
Accenture were taking a hatchet to travel budgets. ''We
aren't talking about single-digit cuts,'' notes Jake Brace,
United's chief financial officer. ''Some of them reduced
their flying by 25 to 50 percent.''

These two grim developments were capped by a third
misfortune when, last spring, the department of
transportation blocked United's merger with US Airways.
Thus, in the space of a year, United had suffered punishing
blows from labor, the government and the economy -- a
modest summary of the industry's troubles since
deregulation. All that was before Sept. 11.
 

UALX727

Well-known member
Joined
Nov 26, 2001
Posts
234
Total Time
12,000
part 4

After the tragedy, Goodwin eliminated 20,000 jobs, but a
cruel twist of businesses with high fixed capital, like
aviation, is that cutbacks often worsen the problem. Though
United saved 23 percent in expenses, it lost a whopping 39
percent in revenue. One reason is that union rules dictate
that each pilot be able to bid for a better assignment (the
bigger the plane, the higher the pay) whenever a vacancy
opens. So while United furloughed 591 of its 10,500 pilots,
it was also forced to retrain hundreds for new assignments,
an enormous waste. ''Now you have a ton of people being
paid and not flying,'' notes Herb Hunter, an ALPA
spokesman. ''When they talk about laying off, you get to a
point of diminishing returns.''

This is why airlines cannot cut their way to solvency;
needing cash to service debt on those $100 million jets,
they must keep selling assets, a downward spiral charted by
the dearly departed Pan American. Realizing this, Goodwin
warned that without concessions from labor, United could
''perish.'' The unions demanded his head.

Over the years, major airlines have improved just enough
for most to survive -- to limp from crisis to crisis, to
turn a small profit occasionally -- but not to build
lasting equity. And increasingly they are haunted by
Southwest, haunted because they can never match it.
Southwest is in a different business from United, and its
model is infuriatingly simple: it flies a single aircraft
type, greatly reducing the cost of training pilots and
mechanics, with no frills or first class, mostly on
point-to-point routes and usually from secondary, less
congested airports. Its Boeing 737's land and take off in
only 20 minutes -- unthinkable for planes connecting
through hubs -- and its pilots usually fly more than 70
hours a month, far more than at American, Delta and United.


The traditional carriers, whose systems are built around
hubs, can't do this. United's Chicago hub, for instance,
draws customers from all over the Midwest, including people
in smaller cities connecting to the coasts. Like the old
phone company, this fulfills a vital need, but it is much
more costly.

Jack W. Creighton Jr., United's new C.E.O., has become the
latest chief to demand concessions from each employee
group. He faces heavy sledding because United's mechanics,
as well as its baggage personnel and ticket agents, are
still working at pre-ownership-plan (1994) wages. They want
a raise, like the pilots got, before they think about
concessions. If the mechanics do not accept Creighton's
offer and vote to strike, Congress, with the White House's
authorization, could impose a settlement. And the White
House has been signaling that it will tolerate fewer
airline strikes in the future.

So is government the answer to shareholders' prayers? Not
exactly. Federal arbitration boards tend to resolve
disputes by slicing down the middle, generally pleasing
nobody. But they do force both sides to talk. And Creighton
has held serious discussions with the AirLine Pilots
Association. For now, they are talking only wage
concessions -- not the work rule amendments that would be
needed for United (and Delta, American, et al.) to join the
rest of the 21st century. But the talks raise the germ of a
possibility.

ALPA is demanding something in return for wage cuts. Since
the value of the employees' stock from the ownership plan
has crashed from $5 billion to about $750 million, they
certainly won't take more of that. But Creighton and the
union have talked about linking wage cuts, in some fashion,
to United's profits or revenues. This brings to mind
something Dubinsky -- at year-end, when he was retiring --
told me over vodkas in a restaurant near O'Hare. People say
the pilots are self-destructive, he acknowledged, ''but we
aren't crazy.'' Meaning even pilots will ultimately do what
is in their interest.

That is what's so interesting about Southwest, which has
been able to co-opt its workers (who also are unionized)
into behaving like owners. For sure, relationships with
unions are multifaceted, but one difference at Southwest
stands out, which is that workers get much of their annual
profit sharing in cash. Maybe you can't eat stock, but you
can eat cash. And if wages were to vary with performance,
not only would United's labor costs stay tuned to the
business cycle but its workers -- just maybe -- would also
start to think differently about their employer. Over time,
they, and potentially workers at other carriers as well,
might be willing to fly more hours, to let the market
determine the schedule for regional jets, to let airlines
design their networks with profits as the main
consideration. It sounds rather radical -- downright
subversive in this industry -- but it is no more than what
deregulation was supposed to accomplish almost 25 years
ago.



Roger Lowenstein is the author of ''When Genius Failed: The
Rise and Fall of Long-Term Capital Management.''

http://www.nytimes.com/2002/02/17/magazine/17AIRLINES.html?ex=1015066350&ei=1&en=dcace9674b1ccce1
 

1900laker

Well-known member
Joined
Nov 30, 2001
Posts
117
Total Time
2700
Well, I'm sure there are gonna be some replies to this one.

by the way, did anyone find it interesting that pilot unions are so powerful, but the RLA was never mentioned? Also, why did he fail to mention the percentage that labor costs make up of the total pie chart? Also, I don't believe I ever saw any discussions about exec's salary increases over this 10 year time period. Is the reader to assume that they remained the same. I know that is not the case at several other majors. But what about the Masters of the Universe at United? Anyone care to educate me. Thanks
 

Huck

Well-known member
Joined
Dec 6, 2001
Posts
1,076
Total Time
11,000
A very good look at the other side's perspective.

Conveniently left out, however, is the fact that sometimes these greedy, controlling, bullying pilots go to work like any normal day and end up dying in extremely violent, painful ways, thus leaving widows and orphans who must live on the stored riches daddy left in the bank. Talk to any career pilot - he/she knows somebody who died in this business (my personal count is now up over 10). Adds a little more gravity to their negotiations, obviously....
 

TurboS7

Well-known member
Joined
Nov 25, 2001
Posts
2,261
Total Time
19,210
From a real world viewpoint, life is cheap, it is like a flower here today and gone tomorrow. Enjoy eveyday and enjoy every flight you never know when it will be your last.
 

vja217

Richmond, VA
Joined
Dec 1, 2001
Posts
65
Total Time
300
Good

I always find it interesting when a comparison is made between a major like ual and a low fare carrier like swa/jbu/airtran etc. The business models are as different as night and day. Obviously UAL will never be a SW so there is very little solved by comparing them.

The key problem that I see with United and most airlines today is that operations doesn't understand management, and management doesn't understand operations. The CEO, the board, and the vice-presidents don't think about how their actions tend to effect the people and the equipment of their airline, and similarly, the employees unions tend not to understand the business and finance involved in running an airline. That is why they are in continual conflict. Who is at fault? Everyone points fingers at each other, because neither group truly understands the other. There are exceptions though, in my opinion. When looking at SW for example, people on wall street sees a great business model, minimal debt, and good accounting and financing; when workers such as pilots, f/a, and ground crew look at SW, they see happy, well-paid people that enjoy working for their company. (By the way, SWA happens to be the most unionized airline and also the most highly-employee owned airline). I think the key reason for this success is simple: management at SW (or JBU or a few others for that matter) understands their people, and the people that work at SW understand what they have to do to satisfy management, and in turn create a succesful airline that can afford to treat them the way SW does.

An airline is the epitome of a team, and as long as one group is in conflict with another, there is slim to no chance for success. That's my 2 cents...

If anyone is interested in reading more on the management side of commercial aviation, I highly recommend reading Hard Landing, by Thomas Petzinger. He does a great job of telling the story of commercial aviation and labor relations in this country in an objective "novel-like" way. It is very interesting, and not a difficult book to read.

Max
 

Cardinal

Of The Kremlin
Joined
Nov 25, 2001
Posts
2,308
Total Time
K's
Considering the usual coverage pilots and unions receive, I thought this article was fairly exhaustive and even approaching well balanced, especially coming from the NY Times. The standard digs about labor costs and working 50 hours/month were present, but the article laid (most) of the cards out on the table. Regarding Petzingers Hard Landing, it's an excellent and informative read.
 

trueblue

Bus Driver
Joined
Jan 13, 2002
Posts
48
Total Time
10000
UALX727,
Thanks for the informative stuff. Another great book related to the 4 part article is "Hard Landing." I can't remember who wrote the book, but I'd recommend it to those who were as interested in UAL's post as I was. Thanks again.
 

nimtz

Well-known member
Joined
Dec 5, 2001
Posts
1,442
Total Time
?
Boy did those pilots spit on any old people and kick a few babies while heading down the jetways. I'm like to see both sides of the story, but there some bs that's just too much for me espcially concerning Goodwin's days. Important things left out or glazed over:
1) UAL did not negotiate in good faith with ALPA before or during the summer of 2000 and at the same time announced the US Air deal leading to
2) The pilots following their contract to the letter. Blame managment for not even being remotely prepared for this.
3) How about the 50 million wasted for cutting the US Air deal?

UAL is at heart a great company. The problem is that managment has stunk since before Carlson. All that company needs is someone to come in and focus on the core business and work with the employee group. Stop looking into mergers or business jet divisions. Look at what happend at CAL. Gordo said well let's move people from Point A to B as safely and comfortably as possible, while talking straight to the employee group (well not as much now). Results are the heardled come back we all hear about. If anything remotely close to that turn around happened at UAL then it would be the 500 lbs guerilla again. It will take effort and some pain (that could be right now), but it will happen.
 

trueblue

Bus Driver
Joined
Jan 13, 2002
Posts
48
Total Time
10000
oops

Next time I'll hit refresh before recommending a book that others had already taken the time to recommend before me. sorry.
 

publisher

Well-known member
Joined
Nov 27, 2001
Posts
592
Total Time
20,000
forget

Overall, this was a very good article in that it gives a perspective not always prevelent.

Most people involved in the operation of an airline have no vision as to how the business of airlines is looked on by outsiders or how they perform in relation to other businesses.

I happened to have come into this business later in life and I can assure you that the public company that I ran was not like this. Our board would have fired everyone and started again. The ROI and ROA are horrific. The profit margin as a percentage to sales, non existant. Grocery stores are the only business I know with miniscule profit percentages.

In order to have a successful labor management relations, there must be trust between parties. Part of that comes from each side understanding the others business perspective and keeping personalities out of it.

Charles Bryan, I think it was, of the IAM, got into a personal battle that took, as much as anyother thing, Eastern to its demise.

The lesson here is that the basic foundation of these businesses has to some extent been lost inb a sea of verbage that is counter productive and that the patient may die while eveyone is fighting over the approach to take for a cure.
 

Jeff G

Well-known member
Joined
Nov 25, 2001
Posts
184
Total Time
5000+
publisher,

Don't forget that it was personal for Frank Lorenzo as well. His desire to break the unions was so strong that he allowed his plan to do so continue even when it would have destroyed the company in the process. In the end, his war on the unions did fatal damage that could not be recovered from. Yes, Charlie Bryan was unreasonable at times, but he didn't run the company into the ground either. Be fair.
 

publisher

Well-known member
Joined
Nov 27, 2001
Posts
592
Total Time
20,000
Maybe

It may have been personal for him too so I would not argue that. I would argue however that Frank Lorenzo did not really run Eastern down. Frank Borman would get more of my vote on that.

By the time Frank showed up, I think that he was pretty amazed at the hostility when he viewed himself as a savior trying to save this really screwed up carrier. Lorenzo looked at this like just another business. Icahn pretty much the same. In a way, my point is that it is not like or judged like other businesses so many who come into management, fail at it.

If it was treated like other businesses , there would be no shareholders.
 

Huck

Well-known member
Joined
Dec 6, 2001
Posts
1,076
Total Time
11,000
Nor employees. We don't all make 300k a year!. I spend ~200 nights a year away from home, and make less than my brother-in-law the Mr. Goodwrench mechanic. By any reasonable cost/benefit analysis, I would have left the profession a long time ago. There is irrationality in many places in this business.
 

Boz

Well-known member
Joined
Nov 25, 2001
Posts
176
Total Time
16000+
I really like the fact that this article points out top pay for the 400 at 300K. Do you have all have any idea what % of UAL that is? All I can say is that out of the 10,000+ guys flying UAL jets is that it ain't a whole lot of us
 
Top