This article from NYTimes.com has been sent to you by psa188@juno.com. /-------------------- advertisement -----------------------\ Enjoy new investment freedom! Get the tools you need to successfully manage your portfolio from Harrisdirect. Start with award-winning research. Then add access to round-the-clock customer service from Series-7 trained representatives. Open an account today and receive a $100 credit! http://www.nytimes.com/ads/Harrisdirect.html \----------------------------------------------------------/ United's Lame-Duck Chief May Have to Move Fast May 19, 2002 By EDWARD WONG CHICAGO -- JOHN W. CREIGHTON JR. descended into the bowels of O'Hare International Airport on his first night on the job. He looked around like a newly crowned king among his subjects. United Airlines pilots came and went. Flight attendants wheeled their carry-on bags. Then a stocky woman wearing a United uniform wrapped him in a bear hug. She smiled. He blinked. "Are you my savior?" she asked. That was the idea when Mr. Creighton took the throne on Oct. 29 as interim chief executive of UAL, the airline's parent. Now, as the board begins a search for a permanent chief executive, many industry experts say Mr. Creighton has done what he can to save the airline, even if that has simply meant putting it on life support in the wake of Sept. 11. Under his leadership, UAL eliminated 20,000 jobs, halved its daily cash drain and averted the threat of a strike by hammering out contracts with two branches of the airline's largest union. "I certainly think he has accomplished a lot during his tenure," said Jim Corridore, an analyst at Standard & Poor's. "He's done all that he could, but it's not enough at this time. They need more. They need work-rule concessions. They need wage concessions. They've given out very generous contracts to their union partners, and it remains to be seen whether the unions will work with them." Trying to cut labor costs is likely to be the final test of Mr. Creighton's management career. It is also the iceberg that has wrecked many an airline executive. The task at United, the country's No. 2 airline, after American, is that much harder because everyone knows that Mr. Creighton will leave soon. His successor will have to pick up whatever remains undone. Mr. Creighton had to deal with the bitter legacy of his predecessor, James E. Goodwin. The board dismissed Mr. Goodwin in October because his relationship with labor had soured so badly. At 69, Mr. Creighton walked directly into the chief executive's office from the boardroom, where he had been a director since 1998. "I've been surprised by the complexity of the airline industry," Mr. Creighton said recently over morning coffee at the corporate headquarters. "I've been surprised by the employees having such long memories about human resources or personnel issues." Mr. Creighton came in as an industry outsider. His only service as a chief executive was at Weyerhaeuser, the paper and lumber company based near Seattle. He knew more about the planes schoolchildren throw across the room than those that take people from Utah to Ulan Bator. He had stature, though. He had cut costs at Weyerhaeuser while smoothing out rocky relationships with unions. An avid outdoorsman, he worked for more than a quarter-century with the Boy Scouts of America and climbed Mount Kilimanjaro just last year. One man who recommended Mr. Creighton for the UAL job was R. Thomas Buffenbarger, president of the International Association of Machinists and Aerospace Workers. "At a time when few people were willing to step up to the plate, he did anyway," Mr. Buffenbarger said. "I think he will still command the respect his officer position demands until a successor is found, because that's what he projects." Still, it took Mr. Creighton more than five months to settle the two contracts with the machinists. The second contract was ratified on May 11. In the Twilight Zone world of the airline industry, both sides say they can start discussing cost-cutting now that workers have industry-leading wages. Another union, the Association of Flight Attendants, has already given Mr. Creighton a flat-out "no" on wage concessions. United is considering asking for a loan guarantee from the federal government, which put together a $15 billion industry bailout after Sept. 11. Officials administering the loans will want to see a business plan by June 28 showing that the airline will bring down costs, 40 percent of which are attributable to labor. That would give Mr. Creighton both more incentive and more leverage with unions, even if he is on his way out the door. At United, employees own 55 percent of the stock, and some experts say Mr. Creighton could turn this to his advantage. "He's doing the smart thing under the circumstances," said Michael E. Levine, a former airline executive who teaches at Harvard Law School. "He's saying: `You're the guys with a long-term financial stake in this. You have a problem. If you want to work with me to help solve your problem, I'll be happy to do so.' " But employee ownership has often made life harder for management. For example, the machinists tried to organize a voting bloc at the shareholders' meeting on Thursday to back two proposals from individual members. One would separate the chief executive and chairman jobs, and the other would link executive pay to the rebuilding of the core business. The shareholders passed both proposals, and the board will decide whether to enact them. "Management's responsibility is to the shareholders," Mr. Creighton said. "Our job is to create value. But employees own 55 percent and think, `We should have a say here.' But oftentimes that say is not from the mouth and brain and emotions of a shareholder. It's from the mouth and brain and emotions of the employee." Mr. Creighton's job is complicated by the fact that the unions often take differing positions. After he and Jake Brace, the chief financial officer, held a meeting with union leaders in late April, representatives from the small dispatchers' and meteorologists' unions said they would work with the company. The pilots' union said it would consider concessions. But the flight attendants remained as cool as the ice cubes they serve with on-flight drinks. Bobbie Pilkington, secretary-treasurer of that union's local chapter, called Mr. Creighton "a good guy" and "very likable." She praised some recent decisions, like the dismissal of disciplinary charges against her and four other union leaders for talking to employees in crew lounges. But Mr. Creighton should not expect any wage concessions, she said. "United has a habit - they whine and moan and groan and cry about their labor costs," she said. "But if you look at other airlines, their labor costs are essentially the same." United, however, has the industry's second-highest operating cost, spending 11.24 cents to fly one seat one mile. It lost $510 million in its first quarter - slightly better than analysts had predicted but second in losses only to American. United bled $2.1 billion last year, an industry record. Profitability has eluded the company for two years. Its daily cash drain of under $5 million a day is still significant, though it is half what it was at the end of last year. To reduce that, the company cut capital expenditures, renegotiated some plane leases and consolidated offices. It eliminated some flights, including some to and from the San Francisco Bay Area, that had many empty seats. Capacity was down 17.7 percent systemwide last month from the period a year earlier. Mr. Creighton also demanded improvement in service operations. In March, United's on-time arrivals, baggage handling and seat overbookings were significantly improved from October, when Mr. Creighton took over, according to a Transportation Department report. But United rated the worst in the number of customer complaints. Mr. Creighton has tried to transform the chief executive's role from a sit-behind-the-desk-in-a-dark-suit kind of job. He has visited workers at more than 30 airports and facilities, from Boston to Japan. He passes out his e-mail address and leaves weekly companywide phone messages. The months are slipping by, though, and Mr. Creighton will soon have to push harder on the recovery plan. "Clearly his leadership clout is muted by the nature of the fact that he's announced his resignation," said Kevin C. Murphy, an analyst at Morgan Stanley Dean Witter. "But for the company's purposes, to get this loan guarantee by June 28, you don't need Douglas MacArthur for that. You just need somebody who can lay it on the line and tell the unions how serious the situation is." After that, Mr. Creighton said he intends to return to his wife, Jan, and the forests and mountains of Washington State. Peaks like Mount Rainier await. The air could be thin there, but not as thin as where airplanes fly. http://www.nytimes.com/2002/05/19/business/yourmoney/19AIRL.html?ex=1022843282&ei=1&en=5acef1b557791287 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company