12/12/2002 - Updated 09:50 PM ET United's new plan: A low-fare start-up By Marilyn Adams, USA TODAY United Airlines, which filed for Chapter 11 bankruptcy protection Monday,=20 has asked employees for $2 billion a year in cost savings through pay cuts,= =20 higher productivity =97 and a separate pay scale for a new low-fare airline.= =20 People familiar with the talks say creation of a new discount-airline=20 subsidiary appears central to United's business plan. Unlike Shuttle by=20 United, a defunct discount subsidiary that competed against Southwest=20 Airlines on the West Coast, the new venture would be national, they said.=20 United spokesman Joe Hopkins confirmed that the airline hopes to have a=20 new, national, low-fare subsidiary flying sometime next year. United CEO=20 Glenn Tilton has repeatedly said that the airline must respond to the=20 encroachment of low-fare airlines such as Southwest, Frontier and American= =20 Trans Air in its markets. United isn't the only airline considering such a= =20 move. Delta Air Lines recently announced plans to alter its Delta Express=20 low-fare subsidiary by using larger planes and changing the name. But=20 analysts are skeptical because Delta hasn't sought union concessions to=20 lower its costs on the subsidiary and because major airlines' past efforts= =20 to run discount subsidiaries haven't made money. To support its plan,=20 United wants unions to agree to a lower pay scale for employees on its=20 low-fare airline, the sources said. Under United's proposal, employees on=20 the low-fare subsidiary would earn roughly what Southwest Airlines=20 employees do. Unions haven't responded to the plan. The $2 billion a year=20 in labor savings over about five years is twice the amount that employees=20 had pledged to give up before United's Chapter 11 filing. The additional $1 billion a year in savings appears linked to improved=20 productivity and a second wage scale rather than more pay cuts. In=20 exchange, the unions, which now have two seats on the board, are expected=20 to seek at least as many seats on the board of the revamped company, an=20 equity stake, profit-sharing or a combination. Before bankruptcy, employees= =20 owned 55% of the company through a stock-ownership plan. Members of the=20 pilots and mechanics unions agreed to give up regular raises during the=20 '90s in exchange for stock. Although employees still have their board seats= =20 for now, the shares they hold and their stake in United have been greatly=20 reduced, and their future stake is not yet known. To preserve some value=20 for employees, the Chicago bank overseeing the stock plan has been=20 aggressively selling shares. To date, State Street Bank has sold about half= =20 the plan's 70,000 shares, so employees now own about 30% of the airline, a= =20 stock plan official said Thursday. Selling the shares and investing in something else "is the smart thing to=20 do," said Ira Levy, who represents the International Association of=20 Machinists on the committee overseeing the plan. Eventually, as the airline= =20 emerges from bankruptcy, the current stock will be worthless and the=20 governance structure will be replaced by a new one. Monday, United won a=20 court order halting the stock sales, but a hearing is set for Dec. 30, and= =20 the bank is expected to challenge the order. If too many shares change=20 hands, the IRS could view it as a change in ownership, triggering higher=20 taxes for the airline. The owner of Roger's Trinbago Site: Roj (Roger James) *************************************************** escape email mailto:ejames@escape.ca Trinbago site: http://www.tntisland.com CBC Website http://www.tntisland.com/caribbeanbrassconnection/ The Trinbago Site of the Week: (TnT News) http://www.tntmirror.com/ (TnT News) courtesy of Roj Trinbago Website & TnT Web Directory Roj's Trinbago Website: http://www.tntisland.com TnT Web Directory: http://search.co.tt *********************************************************