UAL Workers Asked to Join Chairman in Bid for Airline

The chairman of UAL Corp., parent of United Airlines, warned in a Jan. 9 letter to employees that the airline would have to abandon a $19-billion fleet expansion if the board takes on a large amount of debt to fend off a threat from Coniston Partners, a New York money management firm.

In the letter, Stephen M. Wolf urged employees to join him in an effort to buy a majority stake in the airline to prevent a recapitalization that he says could cripple United. Coniston, a major UAL stockholder, has threatened to try to oust the airline firm’s board if it does not come up with a plan to reward shareholders.

Wolf did not point out in the letter that an employee buyout of the airline would likely involve a large amount of debt as well. An earlier employee buyout proposal called for UAL to borrow more than $7 billion.

It is not clear how the employees would finance a transaction. Wolf, in his letter, told employees that it would involve “real concessions to pay for the airline.” Coniston has offered to partially finance an employee deal, but there were indications Thursday that the partnership would not be called on to help.

Wolf is not the first embattled chairman of an airline to warn that a threat from outside would hurt expansion plans. Before NWA Inc. was successfully acquired last June, its ex-chairman warned that a takeover would force its Northwest Airlines unit to cancel aircraft orders. But NWA’s new owners have not canceled orders; instead, they have decided to expand the fleet even further and ordered more aircraft.

Wolf’s letter was in response to stepped-up takeover activity surrounding the nation’s No. 2 airline. On Monday, UAL’s board said that it would consider a recapitalization at its Jan. 25 meeting and hinted that the plan would involve giving stockholders debt securities in exchange for some of their stock.

Since Monday, United’s pilot and flight attendant unions have increased efforts to come up with an employee proposal. Representatives of the two groups met in New York on Thursday with UAL’s advisers. United’s largest union, the machinists, are opposed to any employee transaction that involves much new debt and are not participating in the discussions.