This article from NYTimes.com has been sent to you by psa188@juno.com. United's Chief, 3 Months on Job, Faces Daunting Task December 12, 2002 By MICHELINE MAYNARD With only three months of industry experience under his belt, United Airlines' chief executive, Glenn F. Tilton, has begun the daunting task of hauling his company out of Chapter 11 bankruptcy, and critics are already jumping on him for the few maneuvers he has tried. Even in the best of circumstances, Mr. Tilton, a former ChevronTexaco executive, would face an uphill battle as an outsider in an industry where the management culture is xenophobic. Unfortunately for him, he is also mired in the worst financial crisis ever to touch United and has no time to figure out a rough-and-tumble industry that has been brutal to outsiders even in calmer times. "Here's a guy who - after the ship struck the iceberg and all the compartments were full of water - was handed the helm and was not only told, `Right the ship' but `bring it into port,' " said Robert W. Mann Jr., president of R. W. Mann Inc., an airline consulting firm in Port Washington, N.Y. "It's almost a no-win proposition." Industry executives and analysts say airline newcomers have a particularly hard time figuring out which course to follow for many reasons. Along with the issues faced by any service-oriented business, like dealing with consumers and with stiff competition, the airlines are known for a combative atmosphere and an overwhelming emphasis on seniority. Also making airlines particularly difficult to manage, these experts say, are the myriad government safety regulations, the constant need to update technology and equipment, and the frequent entanglements with unions. "It is an enormously complicated system, different from any other business," said Robert L. Crandall, the retired chairman and chief executive of American Airlines, whose airline career spanned three decades. "I don't think it's fair to say that nobody who comes in from the outside succeeds," he said. "But inviting someone in from the outside means a very long learning curve." Mr. Tilton does not have that luxury. He came onboard in September after a lengthy search in which several industry veterans declined to be considered - it was said because they were skittish about dealing with United's unions, which control 55 percent of the airline's stock and hold two of the three employee board seats. Mr. Tilton chose to make relations with employees his top priority, even over the company's pending application for $1.8 billion in loan guarantees from the Air Transportation Stabilization Board. Rather than become the airline's public face in its most critical hours, Mr. Tilton remained behind the scenes, communicating with employees in person and through a telephone hot line. Last week, as a decision by the loan guarantee board drew near, Mr. Tilton flew to San Francisco to meet with mechanics, hoping he could persuade them to reverse their rejection of concessions the company thought would help it win the loan guarantees. He made the trip not knowing that the board was planning to rule that day, a signal some read as an indication that Mr. Tilton and his staff were out of the industry loop. That trip earned him waves of criticism. Even some of United's 13,000 mechanics were unhappy that he met with groups of about 80 at a time, instead of en masse in a hangar, as a former chief executive, Gerald Greenwald, once did. "Everybody wants to see the pope, and he should have done that," said Charlie Stewart, a lead mechanic and shop steward for the International Association of Machinists. In an interview on Monday, shortly after the bankruptcy filing, Mr. Tilton defended his choice of emphasizing employee relationships even above a public campaign for the loan guarantees. "I don't think you can bludgeon your employees into performance," he said. This week, he has held still more meetings with employees in Chicago, Denver and San Francisco, even as the company announced that it would cut pay and would seek further concessions from union members. Mr. Tilton, who led Texaco through its own financial crisis before the merger with Chevron, said he was not daunted by his lack of airline industry experience. "I think frankly business is business, and this is a very straightforward march," he said. "What you have to do to win isn't at all different than what you have to do in any other business." The track record for executives who come to airlines from other companies is certainly mixed, even for those who were successful elsewhere. Among those who were intrigued, only to depart in frustration, were Mr. Greenwald, the former Chrysler president who ran United in the 1990's; Carl C. Icahn, the billionaire financier who invested in T.W.A.; and notably, Warren E. Buffett, the fabled investor who fulfilled a lifelong aviation desire by purchasing a stake in US Airways. Still, few chief executives have been set upon in the way Mr. Tilton has been by his competitors, including American, Northwest and Continental. They successfully argued for rejection of the loan guarantees, saying United's projections for the industry were too optimistic and its concessions from unions too stingy to warrant approval. Mr. Tilton found himself the target of barbs from Gordon M. Bethune, Continental's chief executive, who called him "clueless" about the industry days before the United application was rejected. Mr. Tilton, laughing, said he did not take Mr. Bethune's jab seriously, adding that the exercise was a valuable lesson for himself and United's employees. "Our competitors have made their intentions and opinions known," he said. Indeed, the attacks Mr. Tilton has encountered in his short tenure pale beside the verbal and legal battles that Sir Richard Branson, the founder of Virgin Atlantic Airways, has engaged in during nearly 20 years in the business. Sir Richard won millions from British Airways in a dispute over tactics that, he contended, his big competitor used to thwart the company. "Our rivals said, `How on earth can an entertainment entrepreneur get into the airline business?' " Sir Richard recalled by telephone from the terrace of his home on Necker Island in the Caribbean. Echoing the perception that a boys' club of United States airline executives schemed to thwart Mr. Tilton's bid before the loan guarantee board, a collaboration that Mr. Bethune has denied, Sir Richard said he underwent similar torment. "It was a boys' club in the dastardly English way of being polite on the outside" and arranging to do harm behind the scenes, he said. "Anybody heading an airline has to know that you can strip a lot of profits from your rivals very quickly, and then they'll go after you." But among the biggest domestic airlines these days, there are scant profits to be had rather stiff wars to attract passengers and battles with unions to win concessions. Mr. Tilton, the third United chief executive in 14 months, is vowing to stick with the company through the bankruptcy process and is seeking help in mapping the airline's future. On Monday, United said it had retained McKinsey & Company as consultants, and yesterday Mr. Tilton announced that Douglas A. Hacker, a former chief financial officer who had been in charge of another airline unit, would take a new executive position over airline strategy. For the moment, United's directors, including union representatives, have voiced satisfaction with their rookie chief executive. "I have not heard negatives from anyone on our board," said John Van de Kamp, a United director and former attorney general of California. And Paul Whiteford, chairman of the master executive council of the Air Line Pilots Association at United, and one of the board's employee representatives, added: "This board is acting with consensus in a very businesslike manner. There is no tension or animosity among the board members." Of Mr. Tilton, Mr. Whiteford said, "He's learned very quickly what needs to be fixed and what doesn't have to be fixed." Even Mr. Stewart, the mechanic, said he was impressed by his encounter last week with Mr. Tilton in San Francisco. Despite Mr. Tilton's lack of experience, "we felt he is the guy, we trust him," Mr. Stewart said. At the same time, he added, "we told him we've heard this before." Mr. Tilton pledged that he would continue to be candid as he learned more about the airline business and mastered United's challenges. Indeed, he said this week that the airline's employees faced two choices: join with him in his drive to fix the airline, or risk seeing it liquidated in a Chapter 7 proceeding. Mr. Tilton said he had no doubt that employees would join him. "You have to be aligned," he said. "That's not clueless, that's simple good business." http://www.nytimes.com/2002/12/12/business/12OUTS.html?ex=1040704053&ei=1&en=9452772ad9457f7c 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