Windfall for Managers Accompanies UAL Exit From Bankruptcy
Aero-Views OPINION by Kevin R.C. "Hognose" O'Brien
It's good news for
everybody at United Airlines (and it proves the first of our
Cynic's Predictions for 2006 wrong) as the airline exited
bankruptcy on Friday. But it's better news for some than it is for
others. While flight attendants barely kept a much-diminished
pension plan, and managers continued to prod other workers for
greater givebacks, a Wednesday decision by the bankruptcy judge was
good news for 400 top United executives. They'll split a giveaway
of 8% of the new shares, valued at $152 million.
That amounts to $380,000 each, if it was evenly distributed. But
it won't be evenly distributed. The lion's share is going to CEO
Glenn Tilton, CFO Jake Brace, and other top dogs. They justify it
by claiming hardship -- the top eight execs "only" take home $3.5
million in salaries (not counting other perks and bonuses, of
course).
US Bankruptcy Judge Eugene Wedoff found the plan legal, if
distasteful. "It may very well be that we have a culture in this
country that overpays management ... but United is just one
enterprise that functions in that environment," Wedoff said.
United survived the post-9/11 downturn in the industry, although
the stock dropped in value from nearly fifty to around ten to
twelve dollars. It held that value well into 2002 but in the second
half of the year lost almost all remaining value. United's stock
(UAL) plunged the last half-inch into the penny-stock range in
December, 2002, as management stumbled their way into bankruptcy.
Since then the stock has remained depressed as one deadline and
promise after another have come and gone.
UAL stock closed Thursday at 65 cents.
Greg Davidowitch, the leader of the UAL group in the Association
of Flight Attendants, sounded bitter over the new pension
agreement. "Within the context of bankruptcy and today's political
climate," his statement said, "this agreement provides a foundation
of retirement security for flight attendants." Translation: "not
very good, but it's the best we can get, and it could have been
worse."
While it might not be a very good deal, it's better than the Air
Line Pilots Association and the International Association of
Machinists and Aerospace Workers did for their members.
FAs will now contribute to a new defined-contribution plan to
replace the empty husk of a defined-benefit plan that UAL fobbed
off on the PBGC last year, after having sucked the cash out of it
in previous years. The company will contribute two percent of FA's
wages to the plan, and will match a further three percent. By 2008
-- if the airline survives -- the company contribution part will
increase to three percent, but in no circumstances will it go any
higher than six percent overall, matching and company contribution
both. The plan is retroactive to Jan. 1.
Despite the pension tension and the executive stock
feeding-frenzy, if United survives, it will not be because of the
executives at all but despite them, and because of the people who
make the airline go, out in the real world: Pilots, flight
attendants, gate agents, low-level managers, and mechanics. And the
word is that the nearly 60,000 employees who run United's 3,400
flights to 200-plus destinations, must be doing something
right.
Readers of Business Traveler magazine -- a sampling from a group
of 60,000 road warriors who subscribe to the magazine in the USA --
voted United tops in the magazine's annual poll. United's Mileage
Plus frequent flyer program -- the members of which, unlike the
pilots and FAs, haven't lost their benefits -- also scored tops in
the poll.
In fact, Mileage Plus
was the top frequent flyer program in the magazine's poll last
year. And every year in the last ten. Business Traveler (www.businesstraveler.com) has
conducted this poll annually for 17 years.
If the rank and file of United can keep keeping the Business
Traveler readers happy, then one day the airline might look back at
the early years of the twenty-first century as the bottom of the
cycle, and Friday, January 20th, as the day things started looking
back up.
If not, well, at least things started looking up that day for
Glenn Tilton and Jake Brace. Cha-Chingg!