Here's the article. However, it's not worth reading. Pure rubish. Uh to who ever wrote this...UA will be announcing much more job cuts I imagine in the coming days. And how has AA gone further than UA in cutting costs? It's been tit for tat. 20,000 layoffs on both sides. UA has cut more capacity. And I'm sure UA will match AA's recent 8,000 additional lay offs.
Time to force change at United
Published October 23, 2002
Even as the financial crisis grows at United Airlines, its managers and workers do not seem to grasp that without fundamental change they will be swept away.
United and its parent company, UAL, say they have $1.6 billion in cash on hand but are spending $7 million more than they are taking in each day. Its latest CEO--the fifth in the last decade--has warned that the company must pare $9 billion in costs over six years to have a hope of surviving outside of bankruptcy court.
Its chances are dwindling.
After much huffing and puffing, United's unions agreed in principle to negotiate $5.8 billion over 5 1/2 years. That isn't hay, but it also isn't enough. Management said this week it is cutting 1,250 jobs by closing three reservation offices, shuttering one maintenance line and turning over some service to its commuter affiliates. United says this will save $100 million.
Based on that math, United is going back to Washington to try once again to convince the Air Transportation Stabilization Board that it deserves a $1.8 billion loan guarantee. It doesn't.
United Airlines is Chicago's own. A lot of people here owe their jobs and their prosperity to United, and its health is critical to the local economy. But United shouldn't get this loan guarantee. Granting it based on this math would reward bad behavior and create a disincentive for United to make more significant, and still essential, financial changes. It would give a government-sponsored competitive edge to United over other airlines that have made more far-reaching cost-cutting efforts, but haven't asked for federal help despite the current abysmal climate and massive industry losses.
The nation's largest airline, AMR's American Airlines, posted a larger loss this quarter, $924 million to No. 2 United's $889 million, and has announced far larger staffing reductions of 7,000 workers. No. 3 Delta Airlines says by April it will reduce staff by 8,000 workers. Neither airline has asked for a loan guarantee.
The ATSB was set up by Congress to dole out $10 billion in loan guarantees to airlines hurt by the Sept. 11 attacks. This was on top of $5 billion given outright to compensate for losses they suffered when the nation's skies were closed. (United has received about $775 million in loss compensation.) The board has properly set a high bar for the loans because many of the problems facing the airlines existed before the attacks.
The industry's largest problem--labor contracts that lock in unrealistic wages even as airline revenues plummet--has been exacerbated by none other than United. In an attempt to buy short-term labor peace with its pilots and mechanics, United granted wage hikes of 22 to 37 percent. Those eye-boggling raises didn't go unnoticed at the other big airlines, where workers demanded their companies match or beat them.
All that set in motion an upward wage spiral just as revenues plunged. The big airlines had bet their financial futures on a fare structure that forced business travelers to pay through the nose for the privilege of flying. After Sept. 11, they stopped doing that. They're still flying, in reduced numbers, but now they're demanding, and getting, the same cheaper fares all those leisure travelers enjoy.
United management and many of its workers don't seem to appreciate how fundamentally the climate has changed. Their latest effort to qualify for federal help offers too little too late.
Unless there is a fundamental change in thinking, a court-ordered reorganization appears to be in order. A bankruptcy judge could insist on more realistic labor contracts, and that may be the only way to save United Airlines.
