UAL Chief to Forgo Year’s Pay; Buyout to Net Him Millions
UAL Corp. Chairman and Chief Executive Stephen M. Wolf, who stands to receive a multimillion-dollar windfall as a result of the $6.75-billion employee buyout of the parent of United Airlines, agreed Friday to give up his pay for one year.
Wolf, who led the buyout group, is giving up his $575,000 salary as “an expression of his commitment to employee ownership,” said Lawrence M. Nagin, United senior vice president.
Wolf is set to receive a $76-million windfall as a result of the $300-a-share buyout. He owns 75,000 shares of UAL and has options to buy another 250,000.
Nagin said Wolf intends to donate more than $1 million of his profit to an educational foundation he will form.
The employee group is composed mainly of United’s pilots and members of UAL’s management. Joined by British Airways, it last week outbid Los Angeles billionaire Marvin Davis for the airline. When the transaction is completed, United’s employees will own 75% of the firm, making it the country’s largest employee-owned company.
So far, United’s pilots union is the only labor group that has agreed to participate in the buyout. The airline’s flight attendants have been talking with United’s management about participating but appear far from agreement.
“The talks are not going well,” Carol Holmes, vice president of the United chapter of the Assn. of Flight Attendants, said Friday. “The company has asked for severe wage reductions and changes in work rules.”
Holmes said the value of the proposed concessions exceed the $6 million in employee give-backs that were proposed in 1987 but rejected by the union membership. The company has refused to comment on the negotiations.
The International Assn. of Machinists, representing mechanics and other ground workers, has opposed the buyout.
The purchase agreement gives Wolf the right to choose up to 35 members of United’s management to form a group that will own 10% of the company. British Air will own the remaining 15%.
Documents filed late Thursday with the Securities and Exchange Commission indicate that Chief Financial Officer John C. Pope, who stands to receive $37 million for his stock and options, is part of the management group. They also show that Wolf plans to invite Ralph Strangis, a United director involved in labor negotiations and the buyout talks, to invest in the company.
Bass Interest Indicated
UAL’s current 12 outside directors, who will leave the company if the buyout is completed, will receive $20,000 a year in retirement benefits and unlimited travel on the airline, the documents said.
According to the SEC filing, United will lose $450 million in the first two years after the buyout but should have enough cash to make more than $1 billion in annual debt payments. To meet its projections, United must sell tickets for 66.7% of the seats on its planes. Over the past five years, it has sold an average of 64.3%.
The documents indicate that UAL received an expression of interest in purchasing the company from Texas billionaire Robert M. Bass. But when Bass representatives met with United’s pilots, the pilots said they would rather pursue a buyout with United’s management.
