Unions Applaud United’s New CEO
United Airlines’ new chief got a lift Monday from Wall Street to go with the endorsements of its unions, producing a rare upswing in both its stock price and labor relations after more than a year of turmoil.
Industry analysts said John Creighton, facing a difficult year ahead in the airline business, needs to convert that goodwill into substantial labor concessions as he moves to convert troubled United into a smaller but again-profitable airline.
Shares in UAL Corp. leaped as much as 10% Monday in investors’ initial, relieved reaction to United’s replacement of James Goodwin the previous day, then settled to a more modest gain on a day when most stocks fell.
Bouncing off last week’s 14-year lows, the stock rose 22 cents, or 1.6%, to close at $14.15 on the New York Stock Exchange. It remained down nearly 70% since January, when United was the nation’s biggest airline and was awaiting approval of its since-failed merger with US Airways.
Creighton didn’t raise hopes for quick improvement when his election was announced Sunday by the UAL board and neither have analysts, who expect the carrier to report a quarterly loss of $500 million to $600 million on Thursday, excluding special items.
“I don’t think it changes anything,” said Helane Becker of the Buckingham Research Group. “They can’t continue to lose this much money and survive.”
Creighton’s lack of operating experience in the airline industry concerns some analysts as United, now the second biggest in the industry after American Airlines, tries to swiftly restructure amid a huge decline in passenger traffic.
But Morningstar’s Jonathan Schrader called the 69-year-old former Weyerhaeuser Co. CEO “a very good interim choice” because of his success dealing with labor unions.
“The fact he’s already gained support from the pilots’ union, the most influential union there, is a promising sign that United and its unions will be able to work together” on necessary cost-cutting steps, analyst said.
While Creighton has avoided specifics, he is considered certain to be seeking wage cuts from the industry-leading contracts that United’s 10,000 pilots won a year ago at the majority employee-owned company. The pilots’ board representative, Rick Dubinsky, joined in Sunday’s unanimous vote for Creighton.
Union spokesman Herb Hunter declined to say whether the pilots will be more amenable to reopening the contract under Creighton than Goodwin. But he called the management shake-up “a good first step,” especially since Creighton said he wants to work with the employee groups.
The International Assn. of Machinists and Aerospace Workers, which represents more than 45,000 United employees, also applauded Creighton’s choice. Still-deadlocked contract talks concerning ramp workers, customer service workers and mechanics, which resume in the next week, had long turned hostile during Goodwin’s tenure.
The Assn. of Flight Attendants, representing about 20,000 United employees, was reserving judgment Monday on Creighton’s selection “until we get some very important questions answered,” spokeswoman Dawn Deeks said.
