SF Gate: United counting on discount unit

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Thursday, February 13, 2003 (SF Chronicle)
United counting on discount unit
Riva D. Atlas, New York Times


   United Airlines plans to shift about 30 percent of its domestic capacity
into the new discount airline that the carrier hopes to form as it maps
its emergence from bankruptcy, executives said Wednesday, giving their
most detailed public accounting of United's recovery plan.
   Representatives of the airline's unions said they still have reservations
about the proposal -- particularly over the process of identifying the
workers who would be assigned to jobs at the discount carrier, which has
been given the code name Starfish.
   In an interview, Glenn Tilton, the chief executive of United, a unit of
UAL,
   said Wednesday that pilots and other workers assigned to the lower-fare
unit would have to take wage cuts.
   "This strategy gives us the opportunity to create two things: prosperity
and jobs," Tilton said. "The strategy that is the alternative to this is
to dramatically shrink."
   The discount airline would operate from all of United's hubs, which
include San Francisco, Los Angeles, Denver, Chicago and Washington.
United's intention is to use the new carrier on all its routes that are
dominated by low-cost rivals like Southwest Airlines, said Douglas Hacker,
United's executive vice president for strategy. For example, he said, all
of United's service to and from Las Vegas might be provided by the new
airline.
   Unlike Southwest, which operates on a point-to-point basis, the new
operation would be integrated into the hub-and-spoke system of United's
existing full-price airline, said Pete McDonald, executive vice president
for operations. United, he explained, needs to feed the discounted flights
into its main system so that passengers on international flights, for
example, can reach their ultimate destination on a United-brand plane.
   Tilton said United would give the new carrier "a different feel" designed
to appeal to younger passengers and use it as a laboratory for
experimenting with innovations in service.
   Representatives of the unions Wednesday said they were still at odds with
United over many aspects of the plan for the discounted carrier.
   "We recognize that for a low-cost carrier to succeed, there has to be a
modification of salaries," said Eliot Sloane, a spokesman for the Airline
Pilots Association. "What we object to is the creation of a separate
airline with a separate seniority plan." Airline pilots' compensation and
schedules are based on how long they have flown for a particular company.
   United hopes to come to terms with its unions by March 17, the deadline =
in
bankruptcy court for filing a motion to terminate its labor contracts,
said Rich Nelson, a spokesman for the airline. Negotiations could continue
with the unions for approximately 45 days after that.
   If there are no agreements by May 1, temporary wage concessions that the
unions agreed to shortly after United's bankruptcy filing in December
would expire, and the bankruptcy court could cancel the airline's labor
contracts.
   Frederic Brace, United's chief financial officer, said he was optimistic
about reaching agreements with the unions. "There is common ground," he
said. "There is an understanding that people will work more for less
money."
   Talks are furthest along with the International Association of Machinist=
s,
Tilton said, although he declined to handicap the chances of the overall
success of the negotiations before the March deadline. The gulf is
greatest with pilots and flight attendants, he indicated.
   Staffing the discount carrier is a major point of contention between
United and the unions. Some of the pilots for the unit, Tilton said, could
come from United's 1,500 furloughed pilots; their pay would be comparable
with the salaries paid at other low-fare carriers.
   "Eventually, employees working at the low-cost carrier could get hired
back" to the full-price airline, added Hacker.
   Nelson, the United spokesman, later said the executives did not mean to
imply that pilots now flying these routes would be replaced by furloughed
pilots. Indeed, said Brace, the mechanisms for selecting who would be
shifted to the discount carrier, with its lower wages and tougher work
rules, "is all under discussion."
   A spokeswoman for the Association of Flight Attendants, Sara Dela Cruz,
said the union was afraid that jobs would be lost through the creation of
the discount carrier. "As a union, our first priority is to preserve
jobs," she said.
   A spokesman for the machinists, Joseph Tiberi, said the union had been
meeting with representatives of United daily. "A discount carrier is
definitely one of the topics, but there has been no resolution yet."=20
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Copyright 2003 SF Chronicle

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