I know there was miss-spellings on my last msg.(as some would lie to =
always point out). I'm working with my new PocketPC and still getting =
use to it.
-----Original Message-----
From: "W Wilson" <wlw-jr@att.net>
Sent: 05/01/2002 08:12:48 PM
To: "AIRLINE@LISTSERV.CUNY.EDU" <AIRLINE@LISTSERV.CUNY.EDU>
Subject: ANALYSIS-United Air search for CEO seen as long voyage
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By Kathy Fieweger
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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.
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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.
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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.
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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.
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The airline's board of directors has retained Russell Reynolds =
Associates to
help find a new CEO.
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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.
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"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."
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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.
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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.
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"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."
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RESTORING THE BALLAST
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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.
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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.
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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.
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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.
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"He's at the top of my list," said one UAL bondholder who asked not =
to be
identified.
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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.
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THE MURKY DEEP
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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.
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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.
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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.
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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.
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Old airline tactics like threatening to downsize, merge or fold =
aren't
working, he said.
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"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."
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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.
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(--Additional reporting by David Bailey in Chicago)
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=A92002 Reuters Limited.