SF Gate: More United turmoil/Pilots denounce low-cost proposal

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Tuesday, February 25, 2003 (SF Chronicle)
More United turmoil/Pilots denounce low-cost proposal
David Armstrong, Chronicle Staff Writer


   Ailing United Airlines on Monday appointed a chief for its fledgling,
unnamed low-cost carrier -- and flew right into fierce opposition from a
major union and a reported potential investor opposed to the plan.
   United, whose parent company, UAL Corp., entered Chapter 11 bankruptcy
protection Dec. 9, is counting on the low-cost carrier to help it compete
with other mainline carriers, as well as low-fare airlines such as
Southwest Airlines and JetBlue.
   The company reaffirmed that commitment in the face of union and potential
investor opposition, characterizing a low-cost carrier as key to its
recovery in a recorded telephone message to United employees and news
media Monday.
   United, based near Chicago, is the largest carrier at San Francisco
International Airport, accounting for half of all passengers and flights.
   UAL on Monday named Sean Donohue, a 19-year veteran of United, as vice
president for the startup, code-named Starfish. UAL President and Chief
Executive Officer Glenn Tilton said the low-cost carrier would be fully
integrated into United's airport hubs and schedules, but would have its
own management and staff and operate with lower wages and reduced
benefits.
   The Air Line Pilots Association, which represents 8,000 United pilots,
denounced the plan. In a letter to Tilton released Monday, ALPA Chairman
Paul Whiteford wrote:
   "ALPA and the company do not share a common vision for a low-cost carrie=
r.
We question the business wisdom of the concept; we are concerned about the
execution risk inherent in the program and we are fundamentally and
unequivocally opposed to any separate airline entity within United that
operates under a separate labor agreement, seniority list or corporate
structure."
   The flight attendants union, which also has resisted the low-fare carrie=
r,
plans to issue its own contract proposals later this week.
   The machinists union hasn't publicly commented, but Randy Canale,
president of the union district representing baggage handlers and public
contact workers,
   told members earlier this month that the low-cost carrier "could prove to
be the only viable alternative to a competitively irrelevant, shrinking
UAL."
   One reported potential investor, according to the Wall Street Journal, is
Texas Pacific Group, a private equity firm based in San Francisco and Fort
Worth that has invested in troubled airlines, notably Continental Airlines
in the 1990s.
   A knowledgeable source said Texas Pacific has met with United's unions,
but any deal is far off.
   The source said Texas Pacific is not interested in investing if UAL star=
ts
a low-fare carrier. It would prefer a much smaller airline with deep union
concessions on wages and benefits and a unified structure.
   "Equity financing is essential to United and our significant constituent
groups, including our unions, as we successfully exit Chapter 11," United
said Monday in a statement. "Conversations with interested parties
continue and will continue to take place."
   UAL shares rose 4 cents to close at $1.10 on the New York Stock Exchange
on Monday.
   E-mail David Armstrong at davidarmstrong@sfchronicle.com., The Associated
Press contributed to this report.=20
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Copyright 2003 SF Chronicle

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