At the same time United Airlines is trumpeting to Wall Street that employee morale has never been better, workers say the move by management to curtail retiree benefits has ruined their trust in the company.
“We’re concerned about United Airlines and its future business if management doesn’t make good on promises,” said Sara Dela Cruz, a spokeswoman for United’s flight attendants.
More than 2,500 flight attendants retired in the first half of 2003 after the airline said workers retiring after July 1 would receive reduced medical benefits, Dela Cruz said.
In January, however, the airline announced it wants all retirees to pay a greater share of their medical benefits, regardless of their retirement date.
“We believed United was on the road to recovery, with a new sense of cooperation and collaboration between the union and management, and that has been destroyed by this decision,” Dela Cruz said.
United management told analysts a far different story Tuesday during a J.P. Morgan Chase & Co. conference in New York.
A 2003 survey of United employees showed that their attitudes toward management and the company were better than they have been since the survey began in 1995, United’s chief financial officer, Jake Brace, said in a speech.
In an interview afterward, he said the Elk Grove Township-based airline has not surveyed employees since attempting to pare retirees’ medical benefits.
“We tried to avoid pursuing it,” Brace said of the proposed cuts. “It hurt us to do that. … But to come up with a business plan that attracts the kind of financing we need to exit bankruptcy, we did it.”
Critics say bad morale could cripple United as it attempts to emerge from bankruptcy this year.
“If you have employees working against you, you’re doomed,” said Ray Neidl, an analyst at Blaylock & Partners.
Some go further, suggesting new management might be in order.
Bill Repko, head of restructuring at J.P. Morgan, said such criticisms are common toward the end of a bankruptcy, when a company must make its hardest decisions.
“It’s a reaction which is understandable,” Repko said of the call for new management, but he defended United’s team.
“The whole United population, from management to the guys on the ramp, have done an outstanding job in the face of ridiculously difficult circumstances,” Repko said.
J.P. Morgan and Citigroup have agreed to provide $2 billion in exit financing for United if the airline receives a $1.6 billion federal loan guarantee.
Although flight attendants have led the cry against United’s attempt to reduce retiree medical benefits, other unions have supported them on picket lines and in court.
The International Association of Machinists and Aerospace Workers and the Aircraft Mechanics Fraternal Association joined the Association of Flight Attendants last month in a successful request of the bankruptcy court for an examiner to investigate United’s plans.
The court last week approved Chicago attorney Ross Silverman as the examiner. He declined to comment Tuesday about his investigation.
Many workers are afraid that United might have its eye on more than retirees’ benefits.
Last year, United workers agreed to $2.5 billion in annual labor cost reductions. Even Chief Executive Glenn Tilton’s salary was about 20 percent less than what he agreed to when he took the top job in 2002.
His 2003 salary was $745,749, and he did not receive a bonus, according to a filing Tuesday with the Securities and Exchange Commission. In 2002, Tilton was given a $3 million signing bonus.
Some employees worry that the company will come back for more concessions.
“Now that you have management lying to recent retirees, it has active employees questioning whether United will lie to them as well,” said machinists union spokesman Joseph Tiberi.
That should be the least of their worries, said Aaron Gellman, a professor at the Transportation Center in the Kellogg School of Management at Northwestern University.
United’s underfunded pension problem poses “a much bigger threat to morale,” he said. “If the pensions can’t get funded, it’s much more hurtful to current employees.”
United and other companies have asked Congress for pension relief, and United has filed multiple applications with the Internal Revenue Service for pension funding waivers.
Brace told analysts Tuesday that United has “no current intention to terminate a plan.”
The airline estimates it could be required to pay about $4.1 billion into pension plans by the end of 2008, including about $1.1 billion in 2004, according to the SEC filing.
Pension relief is considered key to United receiving a government loan guarantee.
But, Brace said, even if the loan guarantee falls through, “We’re going to get out of bankruptcy, one way or the other.”
