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February 13, 2003
United Provides Some Specifics on New Airline
By RIVA D. ATLAS
nited Airlines plans to shift about 30 percent of its domestic capacity into the new discount airline that the carrier hopes to form as it plots its escape from bankruptcy, executives said yesterday, giving their most detailed public accounting of United's recovery plan.
Representatives of the airline's unions said they still had reservations about the proposal — particularly over the process of identifying the workers who would be assigned to jobs at the discount carrier, which has been given the code name Starfish.
In an interview, Glenn F. Tilton, the chief executive of United, a unit of UAL, said yesterday that pilots and other workers assigned to the lower-fare unit would have to take wage cuts.
"This strategy gives us the opportunity to create two things: prosperity and jobs," Mr. Tilton said. "The strategy that is the alternative to this is to dramatically shrink."
The discount airline would operate from all of United's hubs, which include Los Angeles, San Francisco, Denver, Chicago and Washington. United's intention is to deploy the new carrier on all its routes that are now dominated by low-cost rivals like Southwest Airlines, said Douglas Hacker, United's executive vice president for strategy. For example, he said, all of United's service to and from Las Vegas might be provided by the new airline.
Unlike Southwest, which operates on a point-to-point basis, the new operation would be integrated into the hub-and-spoke system of United's existing full-price airline, said Pete McDonald, executive vice president for operations. United, he added, needs to feed the discounted flights into its main system so that passengers on international flights, for example, can reach their ultimate destination on a United-brand plane.
Mr. Tilton said that United would give the new carrier "a different feel" intended to appeal to younger passengers and use it as a laboratory for experimenting with innovations in service.
Representatives of the unions said yesterday that they were still at odds with United over many aspects of the plan for the discounted carrier.
"We recognize that we need to offer management the tools to make this work, but the more we learn about United's plans for a separate carrier, the less happy we are," said Elliot Sloane, a spokesman for the Air Line Pilots Association. "What we object to is the creation of a separate airline with a separate seniority plan." Airline pilots' compensation and schedules are based on how long they have flown for a particular company.
United hopes to come to terms with its unions by March 17, the deadline in bankruptcy court for filing a motion to terminate its labor contracts, said Rich Nelson, a spokesman for the airline. Negotiations could continue with the unions for approximately 45 days after that. If there are no agreements by May 1, temporary wage concessions that the unions agreed to shortly after United's bankruptcy filing in December would expire, and the bankruptcy court could cancel the airline's labor contracts.
Frederic Brace, United's chief financial officer, said he was optimistic about reaching agreements with the unions. "There is common ground," he said. "There is an understanding that people will work more for less money."
Talks are furthest along with the International Association of Machinists, Mr. Tilton said, although he declined to assess the chances of the overall success of the negotiations before the March deadline. The gulf is widest with pilots and flight attendants, he indicated.
The discount carrier is a major point of dispute between United and the unions. Some of the pilots for the unit, Mr. Tilton said, could come from United's 1,500 furloughed pilots; their pay would be comparable to that at other low-fare carriers.
"Eventually, employees working at the low-cost carrier could get hired back" to the full-price airline, Mr. Hacker added.
Mr. Nelson, the United spokesman, later said that the executives did not mean to imply that pilots currently flying these routes would be replaced by furloughed pilots. Indeed, Mr. Brace said, the mechanisms for selecting who would be shifted to the discount carrier, with its lower wages and tougher work rules, "is all under discussion."
A spokeswoman for the Association of Flight Attendants, Sara Dela Cruz, said that the union was afraid that jobs would be lost through the creation of the discount carrier. "As a union, our first priority is to preserve jobs," she said.
A spokesman for the machinists, Joseph Tiberi, said the union had been meeting with representatives of United daily. "A discount carrier is definitely one of the topics, but there has been no resolution yet," he said.
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