A Turbulent End to United CEO’s Tenure

The resignation of United Airlines chief James Goodwin on Sunday capped a short and tumultuous tenure as head of the nation’s second-largest airline.

Goodwin’s departure came less than three years after his selection as chairman and chief executive of what was then the biggest U.S. carrier. The 34-year United veteran was immediately replaced by John Creighton Jr., a non-airline executive who serves on the company’s board.

Goodwin, 57, was under intense pressure to step down from the flight attendants and machinists unions, who were outraged over a letter he wrote to employees this month suggesting that United might “perish” next year if it didn’t take further steps to stem ongoing losses that were exacerbated by the Sept. 11 attacks.

Two of the four planes hijacked in the attacks were United aircraft.

Since the attacks, United has cut its flight schedule by about 26% and eliminated 20,000 jobs. Even before the attacks, United and other carriers were facing a steep decline in business as the economy slowed.

Angered by Goodwin’s letter, union leaders called for his ouster last week, saying his comment unduly alarmed the public and investors and was a ploy to gain leverage in contract talks. United’s stock fell more than 20% since the letter became public two weeks ago.

The unions’ push to oust Goodwin carried special weight because the unions are represented on the company’s board and have a say in the airline’s management.

United’s 100,000 employees own more than 50% of the airline, based in the Chicago suburb of Elk Grove Village.

It was strong union support that had persuaded the board of the parent company, UAL Corp., to select Goodwin for the job in March 1999, when he was tapped to replace retiring CEO Gerald Greenwald.

Greenwald’s apparent successor, Louis Hughes, was rejected by the labor faction of the board. Goodwin, then UAL’s president and chief operating officer, was well-liked by workers.

But the goodwill didn’t last long.

For much of last year, Goodwin presided over a disastrous period marked by a series of contentious labor disputes with the airlines’ machinists and pilots.

Thousands of flights were canceled or delayed during the summer of 2000, causing United to become the focal point of passengers’ growing ire about airline service.

The airline blamed much of the problems on job actions by its unions.

Goodwin went so far as to appear on television in ads that publicly apologized for United’s woes.

Seeking to rectify matters, Goodwin then backed a lucrative pilots contract--a move that only angered United’s management, which believed the contract was excessively rich.

Another serious setback for Goodwin was the cancellation of the merger with US Airways Group Inc. The deal, which Goodwin had proposed last year, was scrapped when it became clear that federal regulators were moving to block it on grounds United would control too many routes, particularly in the Northeast.

The failed merger cost United as much as $116 million, contributing to a $292-million loss for the second quarter ended June 30.

Surpassed earlier this year by AMR Corp.’s American Airlines Inc. as the biggest U.S. airline, United’s financial woes only deepened following the terrorist attacks on Sept. 11.

Indeed, the third quarter will be more painful. Analysts estimate that the carrier will post more than $500 million in losses for the period ended Sept. 30. And that is after receiving its nearly $1-billion portion of federal bailout funds.

In addition to layoffs, the carrier has dramatically scaled back its daily departures worldwide, from an average of nearly 2,400 on Sept. 10 to fewer than 1,800 as of Oct. 31.

United has not cut back on its international destinations but has withdrawn plans to launch service from Chicago to New Delhi, a spokeswoman said.

United flies more than 600 jets to about 130 destinations worldwide.

The fallout has hammered UAL’s shares, which have fallen 64% this year. The company’s stock dropped 32 cents to close at $13.93 Friday on the New York Stock Exchange.

“Our immediate goal is to restore United’s financial stability,” Creighton said in a statement.

Creighton’s appointment was supported by the airline’s machinists and pilots unions. Nonexecutive chairman of El Segundo-based Unocal Corp., Creighton also is a retired president and CEO of Weyerhaeuser Co., one of the largest U.S. timber companies.