"The Pack Is Watching UAL's Chief"

Sunday, March 16, 2003

The Pack Is Watching UAL's Chief
By MICHELINE MAYNARD
The New York (NY) Times


THE day he was named chief executive of UAL, the parent of United Airlines,
Glenn F. Tilton made a point of meeting with the leaders of the airline's
six labor unions. He wanted to assure them that he was not their enemy, and
they praised him afterward as "proven" and "creative."

Other airline executives, however, were openly dismissive of Mr. Tilton,
noting that he had spent his entire career in the oil business and thus was
unqualified to resolve myriad problems then dragging United toward
bankruptcy. At one point, Gordon Bethune, the chief executive of Continental
Airlines, called Mr. Tilton "clueless."

What the industry didn't realize then was that Mr. Tilton's background had
made him a shrewd diplomat. After earning a bachelor's degree in
international relations from the University of South Carolina in 1970, he
joined Texaco and spent two tours in Europe. The second included a time as
president of Texaco Europe, responsible for government relations in 20
countries.

Now, competing executives are beginning to realize how much they may have
underestimated him. Since the airline filed for bankruptcy on Dec. 9, Mr.
Tilton, 54, has embarked on a strategy that involves winning $2.56 billion
in labor concessions, cutting thousands of jobs and shifting 30 percent or
more of United's capacity into a new low-fare carrier.

The plan has already angered the unions and generated skepticism on Wall
Street. But it if succeeds, executives at rivals may wind up thanking him
for finding a way for major airlines to survive amid diminishing revenue,
soaring costs and fierce competition from low-cost airlines like Southwest
and JetBlue.

Gary N. Chaison, a professor of industrial relations at Clark University in
Worcester, Mass., said other major airlines were paying close attention to
what Mr. Tilton is trying to do. "The question is not whether the strategies
will work for United," he said. "It's whether they will work for them."

A particularly important event is likely to occur tomorrow, when United is
expected to file a motion in United States Bankruptcy Court in Chicago,
asking for permission to abrogate its labor agreements if negotiations with
the unions fail to yield the concessions the company says are essential to
its survival.

United officials said that they had no plan to seek cancellation of the
contracts immediately and that they would continue talks with union leaders,
which could stretch for weeks.

Nonetheless, such a motion would give Mr. Tilton a tool that no airline
chief executive has had since Frank Lorenzo used the bankruptcy code to shut
down Continental in 1983 and reopen it as a union-free carrier. (Afterward,
the law was changed to make such a move more difficult.)

"It's a real brinkmanship game," Professor Chaison said. "It's saying,
`You'll either grant us concessions, or we'll take them.' It's the labor
movement's worst nightmare."

US Airways, which filed for bankruptcy last summer, sought a similar motion.
But it did not apply it, emphasizing negotiations. Still, unions had to
grant multiple rounds of concessions before it finished its restructuring
plan in January. US Airways says it expects to emerge from bankruptcy at the
end of this month.

Mr. Tilton said he did not want to follow that example. In an interview this
month, he said he wanted to do the restructuring only once and "never, ever
come back here" to the brink.

People who know Mr. Tilton are not surprised that he follows his own path.
He always has. Born in Washington, he and his wife, Jacqueline, married when
they were teenagers.

While he went on to become an oil industry executive — rising to chairman
and chief executive of Texaco before it was bought by Chevron in 2001 —
Jacqueline M. Tilton trained as a lawyer, though she does not practice. They
have a grown son and daughter and one grandson.

Mr. Tilton's jousts with labor contrast with the endorsement he received
from labor leaders last September, when he was hired as UAL's third chief
executive in less than a year. His two predecessors, John W. Creighton Jr.
and James E. Goodwin, were ousted by union representatives on the board when
each man predicted that the airline would be forced to file for Chapter 11
protection.

Until recently, United's unions owned most of the company's stock and had
supervoting rights on its board. They lost that power this month when union
members' ownership slipped below 20 percent.

Mr. Tilton said publicly when he joined the airline that it could remain
solvent, though privately, friends say, he had no illusions about United's
eventual fate. Even with a federal bailout, a bankruptcy was probable.
Analysts criticized him for not being more visible in his first weeks at
United, when it was lobbying for federal loan guarantees amid strong
opposition from other airlines.

Instead, he spent the time meeting with employees, trying to gain their
trust for the rough days he knew were ahead.

"He genuinely does care about people and wants them to be his partners,"
said Elizabeth P. Smith, who worked with Mr. Tilton for years at Texaco and
was vice president for investor relations while he was chief executive
there.

Even if United seeks permission to abrogate the labor pacts, Ms. Smith said
she expected Mr. Tilton to continue negotiating until the May 1 deadline
that the airline faces for replacing $1 billion in temporary concessions
with real cuts.

"He would bend over backwards and go up to the last second trying to explain
to you how important it is to be a partner," she said. "He's not the one to
use that big stick if he doesn't have to."

But if time expires, Ms. Smith added, Mr. Tilton will not hesitate to impose
his plan on the unions. "He's a gutsy guy," she said, "and he will do what
needs to be done."

SOME experts still doubt his strategy, particularly the plan to start a
low-fare airline. "The track record of carved-out carriers and
airlines-within-an-airline is dismal," said Robert W. Mann Jr., an airline
industry consultant based in Port Washington, N.Y. Union leaders say it will
result in a second class of workers with lower wages and benefits than those
at the parent airline.

Mr. Tilton is barnstorming the country, outlining his proposal in speeches,
interviews and employee meetings, and touting some promising statistics.
United had the industry's best on-time record and fewest cancellations in
February. And, it had positive cash flow of $1 million a day last month,
versus the $12 million a day it lost in January.

Even so, Mr. Tilton warned Friday that a war could force United to trim its
schedules, impose more temporary concessions and lay off more workers. Such
actions would come "only as a last measure, only as a last resort."

"I need my employees," Mr. Tilton said in the interview, "to do what they're
doing to generate this performance."

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