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A Tenacious CEO Keeps United Flying

Glenn Tilton has won the grudging respect of airline employees while forcing draconian cost cuts, colleagues say.

July 24, 2005|James F. Peltz | Times Staff Writer

On a sunny December day in 2002, nearly 100 United Airlines employees gathered at the carrier's San Francisco maintenance base to square off with their new boss, Glenn Tilton.

United was in dire trouble. The giant airline's losses were mounting and its service was dreadful. Years of squabbling between executives and union workers had reached a fever pitch, with each blaming the other for the company's slide.

Now a new chief executive -- a man who came from the oil industry and had never run an airline -- faced the rank and file. One worker piped up to him: "All of these mistakes by management over the years, and not one apology."

Tilton shot back: "OK, everybody be quiet for a moment. Ready? I apologize." Recrimination about old mistakes, he added, was an "albatross" around United's neck, "and we have to let it go."

The exchange neatly summed up Tilton's belief that United couldn't be fixed unless he first persuaded the employees to look ahead, not back, and see that its high costs, lofty fares and subpar service would no longer fly in an industry flirting with ruin.

"The company was so mired in the past," Tilton said in a recent interview, "that our culture wasn't able to face the facts going forward."

Since then, the 57-year-old Tilton has led a campaign to transform United that has caused the employees more pain than they probably could have imagined that day in San Francisco -- but for which Tilton does not apologize.

In largely uncompromising fashion, he has shoved through wrenching changes, including slashing 24,000 jobs and wringing $3 billion from the remaining 58,000 workers' annual wages and benefits, to keep the nation's second-largest airline from flying into oblivion. The last of those concessionary contracts, with ground workers represented by the International Assn. of Machinists, was ratified last week.

At stake is the future of a company that serves 70 million travelers a year and is the busiest airline at Los Angeles International Airport, but one that has lost $10 billion since 2000 and is now under bankruptcy protection.

In the process, Tilton almost single-handedly created a crisis of confidence in America's corporate pension system when he also dumped United's underfunded employee retirement plans, with their $6.6 billion in liabilities, into the lap of the federal government. The move sparked congressional hearings and calls for legislation and put the formerly low-profile executive -- the son of a CIA agent who once aspired to work at Langley himself -- firmly in the national spotlight.

Tilton's relentless cost cutting has helped keep United afloat, and the airline's on-time performance and customer service have rebounded dramatically, an improvement Tilton credits to the airline's employees.

Tilton's backers say his aggressive efforts to openly and bluntly communicate his strategy with United's employees -- even though that strategy hurt their wallets -- has earned him their grudging respect.

"People have rallied behind him," said James O'Connor, a 21-year board member of United's parent, UAL Corp., and the director who led the search that landed Tilton. "People are taking him very seriously because they know he has tremendous resolve."

But the gains have been achieved at considerable risk to both United and the flying public. In May, United narrowly avoided strikes by its mechanics, flight attendants and other ground workers protesting Tilton's effort, actions that could have severely damaged the airline while throwing the nation's air-traffic system into chaos.

Critics fear that Tilton's corporate high-wire act is alienating the employees he needs to achieve a long-term turnaround at United. The airline's flight attendants' union is still threatening to strike over the pension issue and wants Tilton, who is also UAL's chairman, thrown out.

"They brought in a guy to run over the unions, and he did it," said Bill Brandt, CEO of Development Specialists Inc., a management consulting firm in Chicago. "Can you imagine that he'll now be a leader to whom these people cleave in the coming years? The answer is indisputably no."

But if Tilton can pull United out of bankruptcy and make the carrier profitable again, its lower labor costs and other streamlining steps will make the airline "a force to be reckoned with," said Alan Sbarra, a principal of Roach & Sbarra Airline Consulting in San Francisco.

Irresistible Offer

When United went looking for a new CEO in August 2002, even the headhunter who proposed Tilton for the job quietly urged him not to take it. The airline's history of dysfunctional labor relations and the sheer complexity of its problems, he said, were too daunting.

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