Strife Between UAL, Unions May Deepen With Bid’s Failure

In the wake of another failure by employees to buy UAL Corp., parent of United Airlines, most observers believe that the company and its unions are headed for nasty confrontation and bitter rhetoric.

“There is going to be trouble, one way or the other,” predicted Stanley Aronowitz, a sociology professor who specializes in labor at the graduate school of the City University of New York.

“Either there will be a lockout (of the unions),” he said, “or the unions are going to have to make large concessions, or UAL will sell out to another company on the grounds that it cannot remain competitive with such high labor costs.”

Aronowitz said he believes that UAL Corp. was acting in bad faith throughout the union-led takeover attempt.

“The corporation was . . . playing a game to enter into negotiations with the unions as a means of wringing concessions,” he said. “The deal did not work, so now you (the unions) will have to give back more benefits and wages and make other concessions. That is the next step.”

Joseph R. Blasi, professor in the Institute of Management and Labor Relations at Rutgers University, said he expects a “battle royal between labor and management.”

He maintained that Stephen M. Wolf, UAL’s chairman and chief executive, “wants to turn the employees from investors back into simple workers, and he wants wage concessions from them without giving stock. I expect management to try to sell the position that business will go on as usual--’We’re going to buy more planes, expand our routes and improve service’--but he will have great difficulties in marketing that to his own employees.

“The employees are convinced that the airline must be made more efficient but that they should share in the fruits of any kind of restructuring.”

UAL employees are upset with Wolf for another reason: his sale of his own stock in the company last May for about $150 a share--a statement, in effect, that he didn’t think the unions were capable of financing their $201 offer.

“One of the unfortunate side effects of this thing is that the relationship between the unions and Stephen Wolf has really soured,” said Corey Rosen, executive director of the National Center for Employee Ownership in San Francisco. “He sold his shares at $150 when he said the company was worth much more. They will view him as having been an obstacle rather than an aid in getting this transaction completed.”

Frank Spencer, a professor at the Northwestern University Transportation Center in Evanston, Ill., agreed.

“The employees feel they have been put upon by Stephen Wolf,” Spencer said. “He walked off with all the goodies. He wants the employees to make concessions while he walks off a millionaire.”

Timothy Pettee, an airline analyst with Alliance Capital Management , a New York-based pension and mutual fund manager, predicted that UAL will let its employees strike rather than give in to their demands.

He said it is unprecedented for an airline to have to negotiate new contract provisions with all its unions at one time. But that is the present case at United because the contracts, under terms of the Railway Labor Act, which governs airline labor pacts, are all now in the stage where they can be amended. The unions are expected soon to present tough new pay demands.

The takeover effort was carried out by the pilots’, mechanics’ and flight attendants’ unions at United.

“There is a threat of anarchy at the company,” Pettee said. “There will be a fight for control and--in order to exercise control--management would take a strike, if necessary.” But not every expert interviewed believes that labor chaos is inevitable.

Edmund Greenslet, a Florida-based airline analyst, said the unions still want to buy UAL, despite the setbacks they have suffered--and may try again. A strike, he said, would kill any such possibility.

“If the labor groups push their negotiating demands on management to a point that it results in a strike, the upshot of such a strike would be economic disaster,” he said. “If labor ever wants to come back and restructure the deal, having put the company into a strike would kill any chances of doing that. It would be zero. The banks would not be able to support a deal with the earning power of the airline destroyed.”

And Peter Cappelli, director of the Center for Professional Management at the Wharton School of the University of Pennsylvania, doubts that there will be lasting animosity between labor and management at UAL.

“The recent events,” he maintained, “were useful for labor relations. These (members of the three unions) were working together towards a common goal, and that will be useful in the long run.”