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UAL boss seeks sacrifices
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October 29, 2001: 7:36 a.m. ET
New union-backed airline CEO Creighton says labor pacts are on table.
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NEW YORK (CNNmoney) - United Airlines' two most powerful unions praised the appointment of a new chief executive at parent company UAL Corp., even as the new boss was saying that sacrifices by the unions will be necessary.
UAL Chairman and CEO James Goodwin was replaced Sunday with board member Jack Creighton, four days after the International Association of Machinists, whose members own about 20 percent of the company, called for Goodwin's removal.
Creighton, the president and CEO of forest products maker Weyerhaeuser Co. from 1991 to 1997, has been a member of the board of employee-owned UAL (UAL: Research, Estimates) since 1998.
Goodwin angered the IAM with a letter to employees that said the future of the airline was in doubt due to the sharp drop in travel since the Sept. 11 terrorist attack, saying the company was "hemorrhaging" money and that further layoffs beyond the 20,000 already announced were possible.
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Jack Creighton
Named new chairman, CEO of UAL Corp. | |
Creighton, 69, who cited his ability to work with unions as one of his management strengths, said he would meet with the unions in an effort to find solutions to the company's financial crisis. Asked if changes in existing contracts are necessary, he responded that "everything is on the table here.
"Some tough compromises will be required from all of us at United in the short run but I'm confident I can rely on the support, the cooperation of our entire organization as we take the steps necessary to remain the premier airline in the world," he said.
He said he did not see the need for a reorganization under bankruptcy court protection, despite mounting losses at the airline.
"I didn't take this job to preside over a bankruptcy," he said. "I refuse to accept that United Airlines is collateral damage from Sept. 11."
He admitted he didn't know the airline's cash position at this time. Jake Brace, UAL's chief financial officer, said its cash position would be detailed when it releases third-quarter results Thursday.
Analysts surveyed by earnings tracker First Call estimate that UAL lost $10.09 a share in the third quarter, wider than the loss of $1.29 a share in the year-earlier period. The loss per share is expected to grow to $13.21 in the fourth quarter from $2.41 a year earlier, and the loss in 2002 is seen at $25.26 a share.
Creighton did say during Sunday's press conference that United expects the current weakness in both business and leisure travel to continue into next year.
Creighton also is a non-executive board member of oil company Unocal Corp. (UCL: Research, Estimates), though he said he would have discussions with that company about his future role there.
"I am committed to my role at United Airlines, and I will be a full-time chairman and CEO," he said.
The IAM issued a statement saying that a change of leadership was needed at UAL and that it had a good relationship with him during his time at Weyerhaeuser.
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"I didn't take this job to preside over a bankruptcy. I refuse to accept that United Airlines is collateral damage from Sept. 11."
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Jack Creighton
New chairman, CEO of UAL Corp. |
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"He displayed a unique concern for employees there, and we expect United and its employees to benefit from that perspective," the IAM said.
The Air Line Pilots Association, whose members own 25 percent of the airline, issued a statement strongly supporting Creighton as well, although it also thanked Goodwin for his service to the company.
The Association of Flight Attendants, whose members are not included in the company's employee stock ownership plan, did not have a immediate statement on the move, even though the union had called for Goodwin's replacement in the wake of his letter to employees.
Creighton said Goodwin's letter was not the reason for the change in leadership at UAL, although he would not discuss board deliberations that led to the change.
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"No letter was the cause of our situation, just as no letter from me will be the solution," he said. He added that Goodwin had an employment contract that spelled out a severance package and that United would honor it.
United's most recent proxy statement said Goodwin was due a separation payment equal to three years of his annual base pay and annual bonuses.
The proxy said his initial base pay was $725,000 a year, but that that amount was subject to normal increases. It did not specify bonus levels.
While Goodwin and other UAL board members had agreed to go without pay for the remainder of the year, his 2000 salary was $843,528 and his bonus was $225,000, meaning Goodwin may receive more than $3 million under his severance package, plus additional stock compensation and enhanced pension payments. United representatives were not available early Monday to comment on the level of payments.
Goodwin had not been particularly popular with Wall Street, primarily for the lucrative contract with the pilots United agreed to last year. The company shares also lost ground following mounting losses the last year and following its July decision to slash its dividend.
Goodwin's plan announced in May 2000 to buy troubled US Airways (U: Research, Estimates) for $4.3 billion cash was blocked by U.S. antitrust regulators earlier this year, but long before that Wall Street had expressed doubts about the deal, driving shares of both stocks lower.
Goodwin also found little support among analysts or unions for his plans to buy a fleet of corporate jets to sublease on a partial share basis to business executives and operate separately from United. But airline analysts contacted last week said they doubted that another executive would be better able to deal with the carrier's financial crisis.
Goodwin, a 34-year veteran of the company, had been picked with union backing in 1999 to succeed CEO Gerald Greenwald. Greenwald, a former Chrysler executive, had been backed by the unions to take over leadership of UAL at the time of the 1994 employee buyout. But he eventually clashed with the union and saw his heir-apparent rejected by the unions' representatives to the board. 
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Machinists call for United CEO's job - Oct. 24, 2001
AMR 3Q loss soars over forecasts - Oct. 24, 2001
United seeks rebound with fare cut - Oct. 2, 2001
Three more airlines drop top exec pay - Sept. 28, 2001
Airline executives warn of bankruptcies - Sept. 19, 2001
UAL, US Air nix deal - July 27, 2001
UAL makes big purchase of small jets - June 18, 2001
United eyes corporate jet market - April 26, 2001
United Airlines parent slashes dividend - July 4, 2001
UAL picks James E. Goodwin as chairman and CEO - March 25, 1999
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