The first weeks out of bankruptcy for United Airlines saw its traffic rise and its newly issued shares fall.
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The only problem, notes Cathay financial analyst Susan Donofrio, is that “other airlines have not sat idle” in cutting costs and as a result United’s cost structure “is pretty much in line with its peer group as opposed to being dramatically lower as one might expect as it exits bankruptcy”. Continental’s operating costs on a unit basis are about 10% higher, while American’s are 4% lower, she calculates. United shares fell sharply in their first days of trading, reflecting the realisation by investors of the difficult challenges it faces.
But United’s January traffic set a load factor record of 77.7% as domestic traffic rose 3% and Latin traffic barrelled ahead by 15% on flat system capacity.
Still, the airline has not shed all of the employee anger that helped force it into bankruptcy in December 2002. Goaded by a management bonus plan that grants an estimated $115 million in equity to the top 400 management personnel, rank-and-file United workers say that flies in the face of the long-repeated management plea that all employees should share the burden of cost cuts.
Mark Bathurst, chairman of the United Master Executive Council of the Air Line Pilots Association, said as the airline formally emerged from bankruptcy court protection on 1 February: “It’s hard to imagine a situation where one would look at this as a shared sacrifice.” Bathurst said that United workers expected to share in any company gains or profits.
At the militant Machinists union, chapter president Randy Canale said: “The empty suits at [United] headquarters are dropping their bags of money only long enough to pat themselves on the back for a job well done.”
United’s frontline workers as well as “the empty suits” have gained respect for delivering a strong product through the ordeal, although analysts say the challenge now is doing so as United further segments its service offerings. ■
DAVID FIELD / WASHINGTON
Source: Airline Business
