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United Airlines

United pilots: Leadership void costly for UAL in 2008

eTN  Dec 29, 2008

CHICAGO - Pilots for United Airlines said today that under CEO Glenn Tilton's watch, United Airlines in 2008 clearly failed in its efforts to regain its former stature as the world's preeminent airline. Over the past year, the airline has been plagued by an appalling lack of leadership and vision among Tilton and his executives. Tilton and his executives have kept United Airlines mired in financial and operational stagnation ever since it exited bankruptcy nearly three years ago.

Based upon Tilton's past performance, the pilots see no signs that things are going to get better in the future under his watch. During Tilton's tenure, the pilots point out, it has been apparent that United does not have a strategy that will enable it to take charge of its destiny.

"In many ways, United Airlines has moved backward," said Captain Steve Wallach, chairman of the United Master Executive Council of the Air Line Pilots Association. "To its pilots, employees and passengers, United Airlines is but a shell of its former self. Rather than using the reorganization afforded by bankruptcy, including the billions of dollars contributed by the pilots and other employees to build upon United's core strengths and brand equity, Mr. Tilton and his executives squandered a rare opportunity to return this airline to its leadership position in the airline industry.

"United has reacted to events, as opposed to anticipating and controlling them. As just one example, as a former oil industry executive, one would have expected Tilton to have taken early and decisive action to hedge against rising fuel costs. The record shows that he failed dismally in this task.

"Mr. Tilton's consistent answer to United's problems has been to penalize those who contribute the most to United's success: its employees and its customers," said Captain Wallach. "While Tilton and his hand-picked executives have continued to receive increasing benefits for themselves, employees have been laid off, and our passengers have been inconvenienced with a series of ill-timed and ill-conceived fees and unpopular cutbacks in service. To paraphrase an old advertising expression, 'This is no way to run an airline,' but that's what you can expect from a former oil company executive, clearly someone unfamiliar with running a service industry, who never before had to care about his employees or serve the needs of his customers."

A look at the Tilton record over the past year tells the story of missed opportunities, lack of leadership and dismal performance:

-- UAL posted a $779 million third quarter loss, $519 million
attributable to poor fuel hedges. The miscalculation on the fuel hedge
is especially disappointing, considering Tilton came to United from
Chevron Texaco, one of the nation's largest oil companies.

-- UAL posted a $542 million loss for the first quarter, $305 million
higher than the first quarter of the previous year.

-- UAL lost $151 million in the second quarter. With noncash accounting
expenses, including a $2.3 billion charge for goodwill impairment and
$82 million in severance costs, the airline reported a $2.7 billion
loss during the quarter.

-- During a time when the industry was attempting to consolidate, United
Airlines and Tilton were jilted by both Delta and Continental. Delta,
which considered a marriage with United, chose Northwest instead.
Continental, which appeared to be on the verge of an announced merger
with UAL in April, left Tilton standing at the altar at the last
minute after calling off talks.

-- Desperate for a merger partner, -- ANY merger partner -- Tilton
attempted to steer United Airlines straight into the arms of US
Airways, an airline known for problems in its management, its service,
and among its employees. Only an outcry from the Air Line Pilots
Association and the subsequent negative reaction from the financial
community prevented Tilton from embarking on the potentially suicidal
mission of a merger with US Airways.

-- United announced in June that it was going to ground "fuel
inefficient" aircraft, despite having no plans to replace them with
newer, more efficient planes. This decision was based on then
record-high fuel prices. Oil prices now are at a four-year low. On
its present course and by the end of 2009, Tilton will have shrunk
United's fleet by 20%. This is yet another example that Tilton and his
executives didn't learn a major lesson from bankruptcy: You cannot
shrink to profitability; you must have a strategy for growing the

-- While United Airlines was losing money, Tilton furloughed pilots and
other employees, cutting back on service and asking passengers to pay
more for less. Tilton's compensation package was reported at $10.3
million. This includes salary, stock grants, options and other added
extras. Tilton's $10.3 million compensation package dwarfs that of the
CEOs of United's competitors: American Airlines CEO, $4.6 million;
Southwest Airlines CEO, $1.3 million; JetBlue CEO, $514,000.

-- UAL doubled the fee it charges passengers for checking a second bag,
essentially raising taxes on passengers and encouraging them to go

-- United announced in August that it would discontinue complimentary
meal service in coach on many flights to and from Europe as a way to
cut costs, only to reverse those plans after passengers protested. The
reversal was an embarrassment to Tilton and his executives, and it
displayed how out of touch they are with our passengers.

-- In a clear and stinging rebuke from the pilots and other employees,
United Airlines' "2008 Employee Survey" showed that UAL employees
don't trust, respect or have faith in the management of United
Airlines. Only 38 percent of United Airlines expressed "Pride in
United," compared with the average Fortune 500 Company, where 84
percent of employees express pride in their employer. Also, 70 percent
of United employees said they were dissatisfied with their jobs, 73
percent are looking for new jobs and 77 percent do not think United is
a great place to work.

"2008 alone proves that Tilton's so-called leadership at United is a failure," said Captain Wallach. "Tilton's body of work during his tenure at United Airlines speaks for itself. It simply is not working. The pilots recognize it. The employees recognize it. The passengers certainly recognize it. The investment community recognizes it. It's time for the United Board of Directors to realize it. United Airlines must free itself from failed leadership and lack of vision so that it can become, once again, the airline for which pilots and employees are proud to work, and on which passengers will want to fly."

United pilots: Leadership void costly for UAL in 2008
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