But of the club's members - including AMR Corp's hard-talking Robert Crandall - Greenwald has to be considered an outcast who lacks the airline industry's blue-blood lineage. Until last July, he was an executive in the car (Ford, Chrysler) and truck (Czech Republic-based Tatra) business. He was hired by employees - pilots and machinists to be specific - who, after years of trying, finally succeeded in taking control of United Airlines in a concessions-for-equity swap that became the biggest employee takeover in US corporate history. And he's soft-spoken and apologetic for getting 'heated up' in a discussion about the strained US-UK bilateral relationship that would have had Crandall reading the riot act.
Greenwald replaced Stephen Wolf, who many employees considered at best an agent of retribution, and at around the same time president Jack Pope was replaced by John Edwardson. The changes at the top helped to mitigate the fact that many employees did not want to take part in the ownership plan. In the seven months since the buyout, an aura of goodwill between new management and employees has for the most part prevailed.
The honeymoon, however, may be coming to a close. Members of all the worker groups except the pilots have expressed concern about the deal and how it was structured. Greenwald must navigate difficult waters:
1 United's flight attendants, who have yet to agree to foresake $416 million in wage cuts to join the ownership structure because of management's decision to maintain a crew domicile in Taipei, are due to receive the second of two 4 per cent pay increases since the buyout in July. If the increase goes through, this is sure to create ill-will among the groups which have invested. Then comes a full-fledged contract renegotiation at the end of this year that could, if no agreement is reached, in theory end in the spectacle of employees striking against an employee-owned company.
2 The International Association of Machinists, which includes ramp workers and other 'non-skilled' technicians, almost lost a January vote to represent its 10,000 plus members. Though many members voted against IAM because its rival - Amfa - proposed to represent only machinists, many saw the vote as a referendum on the buyout, which Amfa opposes.
3 A group of non-contract workers has initiated a lawsuit in an attempt to abrogate the buyout, which was forced upon them.
Greenwald, whose primary job has been less to offer strategic guidance for the company than to establish a good employee-management relationship, seems undeterred. Without giving away operating numbers, he points to Shuttle by United, the primary vehicle for cost-cutting and a competitive response to Southwest Airlines, as being the most tangible success. He's also taken pride in pulling down 15 primarily international routes - an action he says is symbolic of his independence as a manager and the willingness of his employee-influenced board to work with him.
But not everyone is convinced Greenwald has a full grasp of how to manage in the airline industry, or the total ability to make decisions free of union influence. For example, his desire to negotiate a contract with the flight attendants that will 'seamlessly' weld old and new agreements together with no disputes faces difficulty under the US Railway Labour Act. And Wall Street analysts are still circumspect about an employee-run airline. Investors showed they subscribe to this apprehension when United's stock fell four points after the carrier announced fourth quarter 1994 results which fell short of expectations.
In this interview, Green wald is offering the airline industry an objective view of its practices, problems and potential. He has a common sense approach and decries in disbelief the airlines' self-destructive pricing practices, their inability to form a single, cohesive lobbying block, and the antiquated state of the international aviation bilateral system.
These views, which could wrongly be dismissed as naive, are refreshing because they confront the realities that are holding back the industry's competitive dynamic. His frankness can be disarming: just as the Shuttle was the result of an indepth analysis of Southwest, United's search for higher yields internationally has it imitating British Airways' creation of arrival lounges for passengers arriving in the UK from the US: 'Well, they did it, and now we are too. We're not embarrassed to copy someone else if they have a better way of attracting business travellers.'
For now, Greenwald's success in the car industry, which included negotiating the federal bailout of Chrysler in 1979, appears to be a memory. He may ride into the sunset a failure after his five-year contract at United is up. But if enthusiasm is a key to success, his less than jaded view may keep that from happening: 'I am delighted to be in this industry. To me, it is more exciting than the car business. I think it is wonderful.'
Gerald Greenwald: Oh, I believe that. I think that the day after ownership occurred, everybody started with, 'Wow isn't this exciting.' From that euphoria there has been a temporary honeymoon.
But we're now into fundamentals. I've told employees, I'm hoping to be around for five years. If the stock is high people will like me, if it is low, they won't. It will get high, because we have helped middle management to be coaches instead of bosses, and the employees will learn to take hold on their own. The Shuttle is the best example of what we are going to try to do throughout the company. There were 110 people empowered to design, develop and create the Shuttle, and then they were assigned to it. Then teams were assigned at every airport to meet together once or twice a day to figure out how to make it better.
But I think we are going to solve the feeling of things not being clear or moving fast enough. This company was typical of most airlines. There was not the discipline of a strategic plan. Why? Because there was the view that by the time you put a strategic plan into place, everything has changed so much that you can't use it anyway. So why bother? If you are going to empower a lot of people, you better know where you are trying to go so that when you make a change you make it from a baseline.
We are just now going through a fleet update which I have not seen yet. I have raised a lot of questions: our plans through 2000; plans to replace or ground [aircraft], and what are the economics of the [different] aircraft. I have also asked about the Shuttle after the first 55 737s, when we will get more international authorities and how many aircraft we'll need.
There is a fourth question: when we identified the 55 737s, we went through a tough exercise in the company. Let's identify any place where we do not make money or we don't expect money. And whether it is a 767 or 747, it doesn't matter - bump our way down, and pull out a 737 for the Shuttle. I've raised the threshold to a tough standard now: I want an actual return on routes, not just a break even.
To me the most important contrast is that, on a macro level, there has been a more coordinated trade negotiation between the US auto industry and the US government than in the airline industry. The auto industry has been focusing with the US government on trade matters that are global in nature. They want to open the Japanese market, not for just one manufacturer, just to open the Japanese market.
The UK-US agreement is a window into the problem. [It allows] only two carriers [to] fly between Chicago O'Hare and Heathrow. Now, when the flying exceeds a certain threshold over a 24-month period, a third US carrier will be selected. We want to be that carrier. But if the threshold gets exceeded for several months, guess what happens? The amount of flying gets reduced. So what do you think happens to prices relative to other gateways out of the US and into Heathrow? Is this micro trade management or is this micro trade management?
I just want [the governments] to get out of the way. In other words, there is no way they could stop this by artificially restraining passenger trade. In other industries, this would have been heightened to something really ugly. Believe me.
The airline industry is special, very special. I think it is wonderful - certainly more exciting than the car business. But to say we should therefore have this kind of trade practice? Forget it.
Source: Airline Business
