Looking For Merger, Added Charges
Believing United
Airlines needs competitive change, Chief Executive Glenn Tilton
wants to pursue everything... from a merger, to charging passengers
who want their luggage to come first off the plane, according to
the Chicago Tribune.
In his first interview since laying out a provocative five-year strategy approved
by United's board last month, Tilton (right) maintained that change
is difficult, but necessary, if the airline is to remain
competitive on the global stage and survive the ups and downs of
the airline industry.
Tilton wants to examine new ways to squeeze money out of the
carrier. But he's getting nothing but resistance from United's
unions and industry observers.
"All those difficult decisions, it's why we're here," Tilton
said last week.
United plans to invest $4 billion in complex new information
systems and to upgrade its planes, check-in areas and other aspects
of the business that affect passengers, Tilton said.
United is also looking at whether to divest its cargo business
and frequent flyer program and its San Francisco maintenance base,
and charge for new a la carte fees for special service.
United appears to be using an Air Canada strategy, which gained
billions of dollars after it emerged from bankruptcy in 2004 by
turning its maintenance division and frequent-flier program into
separate businesses, analysts say.
"Every management team needs to address it," said Kevin Crissey,
senior analyst for US airlines with UBS Investment Research.
But the sale or spin-off of these assets contradicts some of its
bankruptcy plans, according to United's flight attendant union.
"It has only now become clear that the sale of these assets is
not only a viable option, but that a timely sale would have avoided
the need for severe concessions and, perhaps, avoided the
bankruptcy altogether," wrote Greg Davidowitch, president of the
United master executive council of the Association of Flight
Attendants, which represents 17,000 United workers.
Davidowitch called on United's board to direct management to
engage in "meaningful negotiations" to restore wages and benefits
that workers gave up during bankruptcy and to allocate a
proportionate share of the proceeds of any asset sale to the flight
attendants.
"We're giving notice that we're laying claim to a portion of
that money," he told the Tribune.
United replied it couldn't sell its Mileage Plus, the world's
second-largest airline loyalty program, while the carrier's future
was in jeopardy.
"Who is going to buy
the loyalty program of a company in bankruptcy when the whole value
of the program is tied to creating a connection to the company,"
said spokeswoman Jean Medina. "The increase in value of Mileage
Plus is directly related to our exit from bankruptcy and subsequent
successful execution of our performance agenda."
United plans to treat the $800 million program as a stand-alone
business by year's end.
Among those under consideration United is looking at additional
charges for: curbside-to-curbside baggage service, fees to check a
second bag and allowing mainstream passengers to "rent" for a day
the perks available to elite customers.
"While a la carte pricing is successful for some budget
carriers, it could backfire for United if passengers feel like
they're being forced to pay for something that was once free," said
Michael Boyd, president of the Boyd Group.
Tilton told the Tribune he his looking at mergers with equals,
and would like more exposure in New York and a presence in Latin
America that could be operated from its hub at Washington-Dulles
International Airport.
Workers shudder at the mention of this because of the specter of
lost jobs and bitter fights over seniority, which determines job
assignments and pay levels.
"Would you rather merge or wind up in bankruptcy, again?" Tilton
said he bluntly told United employees when the topic was broached
in an open forum. "Can we agree on one thing: We all want to
grow."
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