Machinists Join Newest Union Bid to Take Over UAL
Unions representing UAL pilots, flight attendants and machinists, in an unusual display of unity, proposed Wednesday to buy 75% of the parent of United Airlines.
The three unions said they stood ready to make hefty concessions over five years to help finance their plan, but they didn’t say how much they are prepared to pay for UAL shares.
UAL’s shares jumped $6 Wednesday, closing at $161.50, on rumors that the unions were set to pay $190 a share for the nation’s second-largest airline. Spokesmen for the three unions declined to comment on details of the proposal, which was announced after the market closed.
The unions were under pressure to come up with a bid by today, when UAL’s board is scheduled to meet. The board said it would consider a recapitalization plan to satisfy a threat from Coniston Partners, a New York money management firm that owns 11.8% of UAL shares. Coniston has threatened to oust UAL’s board unless it takes steps to increase the value of the airline company’s stock.
Paul Tierney of Coniston called the unions’ proposal “very positive.”
“This shows significant progress, but there are still a lot of details to be flushed out,” Tierney said. “There is still a lot to know about the concessions, and the amount of equity the employees plan to invest.”
Tierney said Coniston is willing to invest in an employee-controlled UAL but added that the firm has not been asked to participate. Participation by the machinists, in the past staunch opponents of employee ownership, increased the likelihood that the proposal will succeed, he said.
The unions said their plan calls for union and non-union employees to invest $300 million in the first year and $2 billion over five years. The employee investment includes significant reductions in labor costs, they said.
The unions also said they gave the board documents outlining how ownership in the company would be divided among employee groups, but a spokesman for the unions declined to discuss those details.
“Our objective is to form a unique partnership among the company and all employees that will permit the company to immediately return to the position of the world’s best airline, and to grow and prosper in the future,” the unions’ letter stated.
It was unclear whether the unions intend to offer UAL’s managers a stake. UAL Chairman Stephen M. Wolf, who joined with the pilots in an effort to buy the airline last fall, has actively supported employee ownership in recent weeks with a high-profile campaign that included letters and videotaped messages to employees.
But it could not be learned if Wolf had won over the machinists, who called for his resignation last fall after it was revealed that Wolf stood to receive a personal windfall of $76 million on his stock options if the earlier, $300-a-share bid had succeeded.
In their letter Wednesday, the unions hinted that a change in the way UAL is managed is part of their proposal. “We have delivered to the board’s representatives . . . proposals on the governance of the new company,” the letter said.
UAL Executive Vice President Lawrence M. Nagin said the company would have no comment on the union proposal “until the board has had an opportunity to review it completely.”
The union offer provides a surprising twist in UAL’s six-month takeover saga, because it unites two antagonists, the pilots union and the machinists. Opposition from the machinists helped defeat a pilot-led takeover bid for the airline in 1987 as well as last fall’s joint bid by pilots and management.
