By Kathy Fieweger CHICAGO, May 1 (Reuters) - The search for yet another chief executive at United Airlines, rarely an easy task for any large company, is particularly difficult at the No. 2 U.S. carrier, where labor unions hold substantial sway, industry observers said on Wednesday. Jack Creighton, the chief executive of United's parent, UAL Corp. (UAL), on Tuesday said he would step down after the "weeks and months" of a nationwide replacement search. The announcement's timing caught some analysts by surprise, and comes as the airline is trying to bail out from an industry record $2.1 billion loss in 2001 and $510 million net loss in the 2002 first quarter. Shares of Elk Grove Village, Illinois-based UAL were down 35 cents, or about 2.5 percent, at $13.74 in afternoon trade on the New York Stock Exchange. Most other shares in the airline sector were higher. Creighton, a board member at UAL and former timber executive, took over as CEO in October. His predecessor, James Goodwin, was ousted by angry unions following a public relations disaster that swirled for weeks. The airline's board of directors has retained Russell Reynolds Associates to help find a new CEO. Aviation industry experts said the search could take at least six months, especially given the de facto veto power held by the pilots and machinists. Both unions have seats on the 12-member UAL board due to a 1994 employee stock ownership plan that gave workers 55 percent ownership. "When Creighton took the interim CEO position six months ago, our expectation was that his tenure at the top would be a relatively short one," said Merrill Lynch analyst Michael Linenberg. "However, we were surprised by last night's news, given that there is much work to be done on the labor front." United is starting to go full throttle on a plan to seek wage concessions from all labor groups. The request for "shared sacrifices" comes after industry-leading contracts were granted to various workers represented by the International Association of Machinists and Aerospace Workers, UAL's biggest union. The airline says its labor costs are too high, especially given shrinking revenues. It might apply for federally backed loan guarantees as part of an as yet undefined financial recovery plan. "The next CEO at United would do well to follow in Jack Creighton's footsteps," said Tom Buffenbarger, president of the machinists' union. A pilots' representative also called Creighton "a breath of fresh air." RESTORING THE BALLAST Analysts also saw Creighton's resignation as a signal to labor that it must cooperate on concessions. The airline's message is: "We need to get something done so we can get a new captain on board this ship," according to Linenberg. United, buffeted even before the Sept. 11 attacks on New York and Washington slashed travel demand, is listing financially but the ship is not yet sunk, analysts said. Analysts noted the airline has plenty of cash and unencumbered assets, too. Its cash balance grew in the first quarter to nearly $3 billion -- an increase of $300 million -- and its daily cash burn was halved to $5 million from $10 million in the fourth quarter. Speculation on possible CEOs centered around Greg Brenneman, a former executive at Continental Airlines Inc. (CAL) who heads his own Texas-based turnaround and equity investment firm, TurnWorks Inc. TurnWorks this year tried but failed to bring off a merger between Hawaiian Airlines Inc. (HA) and Aloha Airgroup Inc. "He's at the top of my list," said one UAL bondholder who asked not to be identified. In a 1998 edition of the Harvard Business Review, Brenneman wrote an article entitled "Right Away and All at Once: How We Saved Continental." He could not immediately be reached for comment. THE MURKY DEEP Labor strife and its potential to whip into typhoon-like fury is no stranger at United. After handpicking Creighton's predecessor, Goodwin, unions became irate last fall when Goodwin sent a letter to employees warning of United's potential demise. Goodwin himself was chosen as CEO in 1999, after unions refused to back the expected promotion of John Edwardson. Edwardson was the heir-apparent to Gerald Greenwald, a former Chrysler executive brought on as part of the 1994 ESOP. Another former chief at United, Stephen Wolf, was widely castigated by unions during his tenure. Wolf later left to run US Airways Group Inc. (U) -- which also has been losing huge amounts of money -- with Rakesh Gangwal. Both Gangwal and Wolf have also left US Airways. Richard Aboulafia, senior analyst at Teal Group, said US Airways -- hiring David Siegel as chief executive in March -- appears to be heading toward a bit of badly needed calm on the labor front, which United could also use. Old airline tactics like threatening to downsize, merge or fold aren't working, he said. "I would think (UAL) would perhaps want to emulate US Airways and find someone who is conciliatory, to lessen the alienation and make everyone realize it is a team effort," Aboulafia said. "Obviously they need someone who is willing to make it about team work, who can speak to the workers and makes clear that it is in everyone's interest to have a business model that works." Shares of United remain 50 percent below Sept. 11 levels. Shortly after an American Airlines plane bound for Dominican Republic crashed in November, the shares hit a low of $9.40. (--Additional reporting by David Bailey in Chicago) ©2002 Reuters Limited.