Workers Await Verdict on UAL Buyout Loan
At offices in New York, Chicago and Los Angeles, a handful of bankers and lawyers are carefully weighing Patricia Southerland’s future.
Perhaps as early as today, the bankers will decide whether to lend $2 billion to the unions at United Airlines. The unions plan to use the money to buy United’s parent, Chicago-based UAL Corp. Southerland, along with United’s 74,000 other workers, could end up owning the place.
It is a heady thought. “If we could all do it, it would be fabulous,” said Southerland, a 15-year veteran flight attendant for United who was interviewed in San Francisco.
The union offer for UAL faces obstacles: The banks might not loan the money, United’s suppliers--aircraft and engine makers--might not chip in with the rest of the needed cash, or UAL’s board might refuse to sell.
And it won’t be cheap. The buyout requires around $2 billion worth of wage concessions. If they want to buy the airline, employees must work for less pay.
Nonetheless, Southerland supports the buyout. A sale to employees would keep the airline out of the hands of a corporate raider who might fire workers and sell United’s aircraft and routes. She said it is worth the sacrifice. “I really like this job.”
Over and over, in random interviews in Chicago, Los Angeles and San Francisco last week, United employees echoed Southerland’s concerns. They said they wanted to buy the airline--some with enthusiasm, others with reluctance--for one important reason: They want to preserve their jobs.
“We don’t want another Frank Lorenzo or Carl C. Icahn,” said one flight attendant in Los Angeles. Lorenzo, the ex-chairman of the parent of Continental and Eastern airlines, and Icahn, chairman of Trans World Airlines, slashed payrolls at their money-losing airlines and have a poor reputation with airline unions. A union buyout of UAL, the flight attendant said, “is the better of two evils.”
The thoughts of the nearly 50 employees interviewed by Times reporters don’t necessarily represent those of United’s large and far-flung work force. But their comments reflect a wide range of emotions: hopeful, anxious, powerless, discouraged, excited.
A few employees said they have lost interest in the on-again, off-again buyout effort, which started last August. “It has taken too long,” said one flight attendant, who, like many of the employees interviewed, did not want her name printed. “Right now, I am just numb to the whole thing.”
Other employees expressed a sense of powerlessness. “We voted for (the buyout) because it was presented to us as part of a new contract, and it was a good contract,” one flight attendant said. “Now, the whole thing is out of our hands.”
The leaders of United’s unions have done their best to rally support for the buyout as a board-imposed Oct. 9 financing deadline nears. Union leaders have asked their members--the airline’s pilots, flight attendants and mechanics--to write letters in support of the buyout to the UAL board. They can even use a Mailgram service that for $6.75 will send a prepared message to UAL directors.
Some are wearing buttons to show their support. “Be United, Buy United,” is one slogan.
Last week, United’s pilots union sent videotapes of a recent public television program on the buyout to all members. United’s flight attendants and mechanics can view the program in union halls around the country.
The union leaders say the alternative to a buyout is dire. “If our current efforts are unsuccessful . . . a strike by one of the three unions is a very real possibility,” United machinist union President Louis R. Schroeder said in a letter to the airline’s mechanics.
United employees take such predictions seriously. If it weren’t for worry about a corporate raider or a strike, “I think everyone would forget about this thing,” said pilot Michael Rand in San Francisco. “But because of concern about the alternative,” he added, the employees must not stop trying to achieve a buyout.
For Rand, an 11-year United veteran, the proposed buyout is the third attempt. The pilots first tried to buy the airline in 1987. That unsuccessful effort helped force United’s parent to sell its hotel and rental car businesses. Then the pilots, with help from the flight attendants and UAL’s top management, tried for a second time last year. The collapse of that $300-a-share offer triggered one of the biggest stock market plunges ever.
There were indications Tuesday that the latest buyout attempt might succeed. UAL’s shares rose $8.625 to $112 on the New York Stock Exchange after the trade publication American Banker reported that mid-level loan officers seemed prepared to lend the unions more money than needed. But, the newspaper said, the high-level credit committees at the various banks--which must approve such loans--had not acted.
The unions had given the banks an Oct. 3 deadline but Tuesday extended it to Oct. 9 to provide banks with new financial projections that reflect higher fuel prices.
But even a $2-billion bank loan won’t assure success. The unions also need financial support from aircraft and engine manufacturers to finance their offer.
The unions also need approval from UAL’s board. The unions plan to offer $165 to $180 a share for the company, including $150 in cash. That is lower than the $201-a-share price that UAL’s board accepted in April, and it isn’t clear whether the board will sell the company for a lower price.
If the unions clear these major hurdles by next Tuesday and buy the airline, it doesn’t mean that every job is permanently secure. A severe economic downturn, prolonged tensions in the Middle East, and interest payments on its buyout debt could squeeze UAL’s bottom line and force it to lay off workers as USAir and Midway Airlines have already done.
In the interviews, many employees said layoffs due to an economic slump were always possible. A successful buyout would at least end a long period of uncertainty about UAL’s ownership. “Right now, we are in limbo status,” one flight attendant said. “I would like to put this all behind us.”
Times staff writers Jonathan Weber in San Francisco and Tracy Shryer in Chicago contributed to this story.
