This article from NYTimes.com has been sent to you by psa188@juno.com. At United, a Seeker of Solutions January 5, 2003 By MICHELINE MAYNARD THE job of chief corporate strategist is an ulcer-inducing occupation at most any airline these days. For Douglas A. Hacker, it may be even worse. He was hired to map out a future for United Airlines just two days after the company filed for Chapter 11 bankruptcy protection early last month. Mr. Hacker, 47, is charged with charting United's course as it tries to emerge from bankruptcy. He will decide the routes, aircraft, customer services and other methods that United, the world's second-largest airline after American, will use in trying to regain financial health. If that isn't enough responsibility, until United hires a marketing executive, he's filling that job, too. "My participation in the process is really to point toward the exit from bankruptcy and articulate the exit strategy and work the exit plan," Mr. Hacker said in a recent interview. Before he was chosen as United's executive vice president for corporate strategy, Mr. Hacker had been acting informally for months as a corporate strategist, as a close adviser to the airline's chief executive, Glenn F. Tilton. In a meeting on Mr. Tilton's first day as chief executive last September, Mr. Hacker - who was United's chief financial officer from 1993 to 2000, when he was selected to run a United subsidiary - gave his new boss a short paper on industry competitiveness. Two days later, Mr. Tilton, an oil industry executive with no background in the airline business, asked for another memorandum, then another. Soon Mr. Hacker was writing reports regularly for Mr. Tilton on various industry topics; the two men called them homework assignments. "As we got together and talked about the challenges," Mr. Hacker said, "it was clear that I could be a valuable resource." One reason, he said, was the two years he spent off to the side of the parent airline. In the fall of 2000, Mr. Hacker was named president of United Loyalty Services, a collection of company units that included United's frequent-flier program, some e-commerce ventures and other investments. He was, for example, United's point man in the creation of Orbitz.com, the Web site founded by major airlines to compete with other sites offering discount fares. Mr. Hacker said his two years at United Loyalty let him see opportunities, which he calls "white space," and pursue them. But his departure from United's senior ranks made some industry watchers wonder if he was being shoved aside to promote Frederic F. Brace III, the current chief financial officer. The two executives, who joined United after working together at American Airlines, denied that there was any such move, and they remain close associates. Likewise, United officials said Mr. Hacker's new job is not a sign that he may ultimately replace Mr. Brace, whom some analysts and competing airline executives have blamed in part for United's dire situation. But Mr. Hacker has returned from an exile of sorts, his Elba being an office building on the very northern tip of Chicago, 20 miles from United's headquarters in Elk Grove Township, Ill. He has since moved back to the home office, in temporary quarters. There he sits squarely in the middle of the crisis at United, which like other airlines was already hurting before the Sept. 11, 2001, attacks, in which it lost two planes. He is already planning his first big move: the creation within United of a low-fare airline to compete with Southwest Airlines and JetBlue. United hasn't said when it plans to start the airline, or what type of planes it will use. But Mr. Hacker envisions a separate operation with lower labor costs, aimed at leisure travelers whose priority is low price, while the parent airline remains roughly as it is, relying largely on business travelers still interested in perks like frequent-flier miles and the opportunity for upgrades. "We want to leverage the United brand as much as possible," Mr. Hacker said. "This is not about the shrinking of the brand." As such, he is defying conventional wisdom in the industry, which says United must become far leaner and much smaller to survive. "We don't argue with a little smaller, but we think we've got a shot at being No. 1 or No. 2 in relevance," he said, referring to importance to customers. "We've been jockeying back and forth with American in terms of brand relevance for a long time now." Mr. Hacker has an intimate understanding of American Airlines, having begun his airline career there after graduating from Harvard Business School in 1980. He chose the industry while in graduate school, when he and a team of classmates collaborated on an industry study for Frank Lorenzo, the founder of the Texas Air Group, whose cost-cutting and clashes with unions were legendary. The experience taught him that "the industry is fun, and I sure never wanted to work for Frank Lorenzo," Mr. Hacker said, chuckling. Instead, he was hired at American by Michael J. Durham, then a corporate finance executive who became president of Sabre Inc., American's electronic reservation system, which has since been spun off as a separate company. Mr. Durham, now a consultant, calls Mr. Hacker a "very, very thorough thinker" who joined him on many trips overseas in search of financing for American's growth push in the 1980's. "Our challenge was to finance very heavy capital expenditure programs for a company that had a pretty weak debt rating and not particularly broad access to capital markets," Mr. Durham said. "We were forced to do a lot of creative and interesting financing." Mr. Hacker rose to treasurer at American and spent a year outside the industry before joining United in 1994. He and his wife, Linda, a former banker, have a son, Andrew, 12. Mr. Hacker is a fanatic golfer and avid fly fisherman, his friends say. No matter what action he recommends for the airline, analysts agree that he must act swiftly. "These guys are losing their shirts already," said Robert W. Mann Jr., an industry consultant in Port Washington, N.Y. "What's in this new plan that's going to be better for them than what they had before?" He isn't sure that Mr. Hacker's insistence on preserving United's traditional business travel model, even when accompanied by a low-fare airline, will work when corporate travel departments are pinching pennies. "I don't think business travelers are ever going to go back to what they used to do," Mr. Mann said. Sandy Rederer, an industry consultant who has known Mr. Hacker since he was at American, said he feared that Mr. Hacker might be wasting his time starting the low-fare venture when United needs so much attention. Last week, United, which must meet lenders' terms by Feb. 15, warned employees to expect significant layoffs. "I don't see any motivation for United to waste resources on a new operation that they don't really need," said Mr. Rederer, president of Aviation Planning and Finance in Arlington, Va. "I'd try to get the costs down as much as possible at the mainline airline and continue to do what the airline has done for many years" - to offer various classes of service based on what customers are willing to pay, he added. Although acknowledging the various points of view, Mr. Hacker said United could not survive only in its existing form, as the parent and its commuter airline, United Express. He said the low-fare airline is necessary to propel United back to profitability for the first time since 1999. "Everybody understands the need to have a product like this," he said. But whatever vision he creates for United, he said, it's not likely to look like the world of 2000. "There aren't people who are willing to pay those big numbers to fly out to meet venture capitalists and start their dream company." http://www.nytimes.com/2003/01/05/business/yourmoney/05PROF.html?ex=1042867922&ei=1&en=20b770b8c721a697 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