Fly It? They Own It

In the hours following the news that United Airlines employees had bought a controlling share (55%) of their own company, solidarity was breaking out everywhere. If the scenes were not made for commercials, they sure looked like it: outside United headquarters near Chicago's O'Hare Airport, senior UAL executives were grilling burgers on portable barbecues for mechanics and pilots, while many at the gathering sported buttons that read ASK ME, I'M THE OWNER. Meanwhile, newly anointed chairman Gerald Greenwald, a former vice chairman of Chrysler, was flying coach from New York City's La Guardia to O'Hare and on to LAX and Denver to introduce himself to his new employers. And Mary Beth Andrews, who has worked at United since John F. Kennedy was President, was sharing pizza with co-workers in her balloon-filled Chicago ticket office and delaying her decision to retire. "We don't need champagne," she insisted. "We're giddy enough."

But now that they are in charge, the 54,000 new owners of the world's largest airline must earn their keep and pay their bills. First off, there is the tough new challenge from the king of discounters, Southwest Airlines, coming just when United's profits are starting to rebound after three years of heavy losses. (Last year's hit: $50 million.) All of which raises this question: Can United's new owners stand to fire themselves?

Until he was ousted last week, chairman Stephen Wolf was arguing that layoffs would be required to help put the carrier firmly in the black. Wolf's track record makes his prognosis hard to ignore. He strengthened the airline considerably during his six years at the helm, aggressively expanding United's worldwide route system, adding key gateways like Chicago-Tokyo -- now the airline's most profitable route -- all the while cutting costs by about $1 billion annually over the past three years. Wolf's determination to demand deep new pay cuts and layoffs, which might have triggered a bitter and costly strike, helped bring about the current deal when UAL's board decided to buy labor peace by accepting the employee bid. Under the buyout terms, employees will select three of the 12 UAL directors, who together will possess veto power over certain issues such as asset sales and acquisitions. In exchange, the employees will put up $4.9 billion in wage and benefit concessions over 51(R)2 years, ranging from 8.25% in givebacks for nonunion officeworkers and ticket agents to 14.7% for ground crews and 15.7% for pilots. The whole package will reduce United's labor costs 14%.