=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2003/02= /13/BU214180.DTL ---------------------------------------------------------------------- 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 ---------------------------------------------------------------------- Copyright 2003 SF Chronicle