NYTimes.com Article: Two Unions Say United Plans to Create Low-Cost Airline

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Two Unions Say United Plans to Create Low-Cost Airline

January 30, 2003
By EDWARD WONG






The pilots' and flight attendants' unions at United
Airlines lashed out yesterday against the company's plan to
create a low-cost carrier, accusing executives of
dismantling United.

The unions said they were vehemently opposed to the
proposal, under which the new carrier would operate with
separate pay scales, work rules and seniority lists.

In a letter to the union membership, Paul Whiteford,
chairman of the United chapter of the Air Line Pilots
Association, said that even though United had not made any
announcements about its new carrier, it had told the union
of its plans. The letter said executives had proposed
"giving away some of our most modern narrow-bodies to
another company and allowing that company to operate a
large part of the United network with non-United
employees."

In an interview, Mr. Whiteford said that "if this is what
they want to do, it's a nonstarter," and that the creation
of such a low-cost carrier would "lead to the death of
United Airlines."

The Association of Flight Attendants largely echoed the
hostility of the pilots to the plan. It added in its
statement that United was proposing to shift 20 percent to
40 percent of its flights and workers to the new carrier.

Mr. Whiteford said that the pilots were not wholly opposed
to competing with low-cost carriers like Southwest
Airlines, but that they did not want United to operate a
separate company.

Since the airline, a unit of the UAL Corporation, filed for
Chapter 11 bankruptcy protection on Dec. 9, United's chief
executive, Glenn F. Tilton, has said he wants to create a
low-cost carrier to recapture market share lost to airlines
like Southwest, JetBlue Airways and Frontier Airlines.

United has not publicly given out detailed information on
its plans for that low-cost carrier, but it is expected to
present a reorganization plan to its board today that would
further explain the operation.

"We believe that a low-cost carrier, fully integrated into
a global hub-and-spoke network for the first time, will be
a critical and dynamic element in United's future
strength," the company said yesterday in a written
statement issued in response to Mr. Whiteford's criticisms.
That implies that the new carrier will connect into
United's hubs, like Chicago and San Francisco.

United once tried running a low-cost carrier - Shuttle by
United - to compete with Southwest in California. It
eventually shut down the operation because it could never
get the costs low enough. Mr. Tilton has said that United's
second try would use a different business model.

Mr. Whiteford's statements came one day after Delta Air
Lines said that service would begin April 15 on its own
second attempt at a low-cost carrier, Song. Delta said
Song's pilots would work under the same pay scale and labor
agreement as the pilots in Delta's main operation but would
work more productive hours each day.

Its first attempt, Delta Express, will shut down when Song
starts up.

Robert W. Mann Jr., an airline consultant based in Port
Washington, N.Y., said that the hostility from United's
pilots seriously endangered the company's chances of
successfully emerging from its Chapter 11 bankruptcy
reorganization.

The pilots voted on Jan. 7 to accept a 29 percent pay cut
until May 1 as part of $70 million a month in concessions
from all the labor groups. United is now negotiating with
its five unions to get $2.4 billion a year in concessions
over five years.

"It increases the probability that the thing goes to a
meltdown in Chapter 7 if you have public insurrection in
the ranks," Mr. Mann said, referring to United's chances of
having to liquidate its assets instead of reorganizing.
"The issue from Day 1 has been ensuring that employee
morale does not deteriorate."

But Mr. Whiteford, in his letter to members, pointed out
yet another morale deflator. United, he said, is trying to
cut back the pilots' pension plans and fold them into a
universal plan covering all the labor groups. He said
United wanted to eliminate a tax-deferred trust fund set up
solely for the pilots that had swelled to $2.2 billion at
the end of 2001, the last year for which public data are
available.

Joe Hopkins, a United spokesman, said the company had no
comment on the pension issue.

http://www.nytimes.com/2003/01/30/business/30UNIT.html?ex=1044936075&ei=1&en=18bc8f3890278398



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