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UAL may face turbulence
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January 29, 1997: 6:18 p.m. ET
Employees pressuring company to share portion of its profits
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NEW YORK (CNNfn) - From a balance sheet standpoint, things could hardly be better for United Airlines.
Earlier this week, United's parent UAL Corp. posted record earnings of $1.03 billion in 1996, or $7.68 per share, marking the second consecutive year earnings surpassed $1 billion.
UAL's fourth-quarter earnings increased 67 percent to a record $142 million, or $1.06 a share, excluding debt repayment.
But despite the positive results, problems lie ahead on the employee relations front. United and its pilots went to binding arbitration after they failed to agree on a mid-term wage increase proposal.
Now that UAL has turned a solid profit for two consecutive years, the airline's pilots want them to share the wealth.
Pilots have said they may not work overtime unless they receive a pay increase. They and other employees want to pay for their stock options once so their pay would more quickly return to competitive levels.
Appearing Tuesday on "Moneyline with Lou Dobbs," UAL Chairman and Chief Executive Officer Gerald Greenwald said the pilots' protests center around money, not the employee ownership agreement or the company's culture.
"Our people -- seeing two wonderful years of profits -- think we should divide up more of it right now," he said.
As part of the employee ownership agreement, Greenwald said pilots agreed to take a pay decrease for up to six years in return for 55 percent of the company.
The deal contained a provision for a mid-term increase. Greenwald said the company has to determine how to accommodate those demands and still keep the company healthy.
Greenwald conceded the employee ownership agreement sometimes puts both sides in difficult situations. (251K WAV) or (251K AIFF)
Despite the threat of labor problems, Greenwald is optimistic United can weather the possible turbulence.
"We just finished 1996 when we made more than $1 billion, 48 percent higher than 1995 which was our best year.
"We were able to do what we did, even though fuel prices were high. We see 1997 starting off well. We've got to get through this bump in the road and talk things out with our pilots and employees."
UAL has also been actively lobbying to stop the proposed alliance between British Airways and American Airlines.
Greenwald and four other airline chiefs Tuesday wrote the U.S. Department of Transportation asking for a public hearing on the deal.
Greenwald said he is not opposed to the alliance as long as competition prevails.
"They're going to have this alliance in what is one of the most protected markets in the world. That market has to be opened so we can compete.
"We want the freedom to fly more often from more U.S. cities to (London's) Heathrow. If we can do that, we can compete."
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United Airlines
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