Predicts A Different Company Come This Autumn

Blue skies
Smiling at me
Nothing but blue skies
Do I see

Bluebirds
Singing a song
Nothing but bluebirds
All day long

--Irving Berlin

If you hear that tune in Chicago these days, chances are, it's being sung by United Airlines CEO Glenn Tilton. But the chances are equally good that not everyone close to United's bankruptcy ordeal is singing the same song.

"Our employees will be able to turn all their attention to the consumer, to the customer, to competition," Tilton said on Thursday, predicting his airline will emerge from the protection and supervision of a Chicago federal bankruptcy judge before the ordeal enters its third year.

Tilton (right) was quoted by the Chicago Tribune.

As United's bankruptcy has stretched longer than anyone in the company and most of those closely observing had thought possible, the airline has lost $4 billion. Tilton and company have been able to negotiate $7 billion in annual cost savings, but critics of the airline tell the Tribune a more aggressive leadership team could have done it months ago. Tilton said he originally pictured a bankruptcy lasting about 18 months.

"They had the wrong guy bringing them into bankruptcy, and he's no better to bring them out of bankruptcy," William Brandt, a turnaround expert with Chicago-based Development Specialists Inc., told the Tribune. Brandt's company provides management and consulting services to financially troubled businesses. "They need to rethink this whole thing top to bottom, probably change the board."

But Tilton says the groundwork he and his managers have laid down makes United a much better competitor -- and just in time. He points out Delta's new, aggressive fare structure. "We're in far better shape today to deal with Delta's Simplifares than we would have been two years ago," Tilton told the Tribune. "We're in better shape because over the last two years we've learned this is not a short-term phenomenon, and we're going to have to compete on the basis of fare-value for business."

But University of Chicago Law Professor Douglas Baird, an expert in bankruptcy matters, isn't sure United's changes and its new ability to compete will be enough. Remember, United is now the nation's second-largest carrier, behind American.

"It's really not known" Baird told the Trib. "We don't know in this post-regulatory environment, once the impact of 9/11 is over, and SARS is over; once traffic comes back to normal, and we see what the steady price is going to be on fuel and so forth. Nobody really knows if the country can support more than one hub-and-spoke carrier."

The Voice Of Experience

Then there's Gordon Bethune, who recently left Continental Airlines in a long-running feud with moneyman David Bonderman. Bethune knows a little something about bankruptcy, having guided the Houston-based carrier out of that maze himself back in the mid-1990s.

"Bankruptcy court won't fix your company," he said. "A judge, quite frankly, doesn't know the front end of an airplane from the back," he told the Tribune. Bethune declined to comment on United's efforts but said that too many companies ignore fundamental problems. "It's not about just low cost," he said.

Take, for instance, last year's bankruptcy filed by ATA Airlines. "Look, you can make a pizza so cheap that no one is going to want to eat it. And you can make an airline so cheap no one is going to want to fly it," Bethune said.

But Tilton told the Chicago paper that critics could well be overworking the problem. "The issue is really a seat and an experience," Tilton said. "If Marriott can afford a suite of products that goes from luxury to economy, so, certainly, can we. It's really all about customer expectations."

FMI: www.united.com