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UAL Pilots' Chief Opposes New Carrier...

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Heavy Set

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Joined
Nov 28, 2002
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More UAL news also found on Yahoo Finance - not very surprising...


Associated Press
United Pilots' Chief Opposes New Carrier
Monday February 24, 7:10 pm ET
By Dave Carpenter, AP Business Writer
United Pilots' Chief Voices Strong Opposition to Low-Cost Carrier


CHICAGO (AP) -- United Airlines' pilots union reiterated strong opposition Monday to the company's proposal for a low-cost carrier even as United pushed ahead with the concept by naming an official in charge of it.
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In the latest sign of dissent within bankrupt United over starting a discount airline, pilots' union chief Paul Whiteford sent CEO Glenn Tilton a letter saying the sides are "miles apart" on the planned carrier "with no progress in sight."

Meanwhile, a United executive told a bankruptcy court judge that the airline is looking into the possible closure of its hubs in Los Angeles, Denver and Washington as part of its reorganization plan, Dow Jones Newswires reported. Senior vice president Gregory Taylor said the company was asked by its board of directors to consider the hub closures as an alternative, along with the possible sale of the airline's Pacific operations.

Company spokesman Joe Hopkins, asked to comment on the testimony, insisted that United has no intention of closing any of its five hubs and is exploring various restructuring alternatives at the request of the creditors' committee that oversees it in bankruptcy. Tilton has told employees repeatedly that he wants to keep all the hubs.

If Tilton's current strategy fails to gain the backing of labor, creditors and the bankruptcy court, however, the world's second-largest airline would have to scramble to put together another plan in order to avoid liquidation.

Other investment firms reportedly have held exploratory talks with members of the creditors' committee about possible financial stakes in United in the future. One includes Texas Pacific Group, a Fort Worth-based private equity firm, according to people familiar with the matter.

Texas Pacific declined to comment, and United attempted to downplay the talks. "Equity financing is essential to United and our significant constituent groups, including our unions, as we successfully exit Chapter 11," the company said in a statement. "Conversations with interested parties continue and will continue to take place."

Whiteford, who represents United's 9,000 pilots, disputed Tilton's numerous recent statements that the Air Line Pilots Association and the company are in general agreement on the elements of United's restructuring.

"Let me be clear: ALPA and the company do not share a common vision for a low-cost carrier," he said. "We question the business wisdom of the concept; we are concerned about the execution risk inherent in your program, and we are fundamentally and unequivocally opposed to any separate airline entity within United that operates under a separate labor agreement, seniority list or corporate structure."

"We are miles apart on this issue -- and several others -- with no progress in sight," Whiteford said in the letter, which was sent to other union leaders.

United had no immediate response.

Specific plans for the low-fare carrier, including a name and launch date, are being worked out. But in the latest evidence that management is intent on going ahead with the airline -- code-named Starfish -- the company announced on a recorded hot line that 19-year United veteran Sean Donohue will be vice president in charge of the low-cost carrier along with another executive from outside the company who has yet to be selected.

United plans to shift about a third of its capacity to the separate airline in order to better compete against discount rivals such as Southwest Airlines and JetBlue on many of its routes.

Despite the poor track record for such carriers, Tilton has told employees in a series of recent meetings that the market has changed and that creating a discount airline is the only way for United to avoid shrinking significantly, including giving up routes and laying off thousands more workers.

Besides having the goal of making United more competitive, the carrier's creation would help the company reach its stated objective of lowering annual labor costs by $2.56 billion. United can seek to have its strategy and terms imposed on the unions in bankruptcy court -- a process it says it plans to proceed with on March 17 -- but at risk of alienating workers.

Like the pilots, the flight attendants' union has resisted the low-fare carrier concept, concerned about jobs, seniority and whether it makes good business sense. The flight attendants plan to issue their own contract proposals later this week.

The machinists' union has refrained from public comment on the concept. But Randy Canale, president of the union district representing baggage handlers and public contact workers, told members earlier this month that the separate carrier "could prove to be the only viable alternative to a competitively irrelevant, shrinking UAL" -- United's parent company.

UAL shares rose 4 cents to close at $1.10 on the New York Stock Exchange
 

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