Next United Airlines CEO Faces Daunting Task

A bailout from Uncle Sam isn’t the only thing being sought by United Airlines. The ailing carrier also is searching for a new chief executive--a job that comes with a double-edged sword of opportunity and risk.

United and its parent, UAL Corp., are headed by Jack Creighton, 69, a UAL director who became interim CEO last summer after James Goodwin resigned under pressure.

While Creighton is dealing with United’s unions to broker a recovery plan and secure a $1.8-billion federal loan guarantee, the airline is looking for his permanent replacement.

UAL offers a chance to turn around an icon of American business--the kind of challenge and potential reward that a risk-taking executive craves. But the risk of failure, and its attendant publicity, is just as great.

“This is really a hot seat,” said aviation consultant Michael Boyd.

United’s new CEO will run what’s still among the most prestigious airlines in the world, with 84,000 employees and $17 billion in annual revenue. But United also is in big trouble, beset with seemingly intractable problems. The company has been hammered by the falloff in business travel and the post-Sept. 11 drop in overall air travel. UAL lost an industry record $2.1 billion last year and is expected to lose more than $1 billion this year.

Yet the CEO’s power to make changes is tempered by the fact that the airline’s employees control 55% of UAL’s stock and have seats on its board.

Despite their shared interest in UAL’s performance and stock price, relations between both sides have deteriorated for years.

That’s why many observers don’t expect United’s next CEO to come from within its own ranks, except perhaps for United President Rono Dutta, who has been praised for such strategic moves as building Los Angeles into a United hub.

Other potential candidates for the post also might be scared off because labor’s clout at United could block a new CEO from making “some of the really hard choices that are necessary” to fix the carrier, said Ron Kuhlmann, vice president at Unisys R2A, an airline consulting firm.

“We’ve been talking about this [search] in recent days, and we couldn’t think of anybody crazy enough to do it,” Kuhlmann said. UAL, which hired executive-search firm Russell Reynolds Associates, declined to comment.

UAL’s board faces another hurdle: It’s “in the market for a new CEO at the same time that Tyco International is looking for a CEO, TRW is looking and Dynegy is looking,” said Peter Crist, vice chairman of Korn/Ferry International, another executive-search firm. “When you have a lot of big fish in the water, you have limited options” in finding the right CEO, he added.

There are several airline executives who might qualify, but UAL’s board might want someone with labor experience from outside the airline business, to bring a fresh viewpoint.

Creighton is a former CEO of timber giant Weyerhaeuser Co. Gerald Greenwald, who ran United from 1994 to 1999, came from the auto industry. Leo Mullin, CEO of Delta Air Lines, was a banker and utility executive. Continental Airlines’ CEO, Gordon Bethune, came from Boeing Co.

Alan Mulally, CEO of Boeing’s commercial airplanes group, is among those being suggested as a candidate, but he’s said he’s not bidding for the job. Another, American Airlines President Gerard Arpey, already is in line to succeed Donald Carty as CEO of the world’s largest carrier.

Here’s a list of other people United might be considering:

* Richard Anderson: Chief executive of Northwest Airlines. He gets good marks for improving the service and balance sheet at the No. 4 U.S. airline--once dubbed “Northworst” by critics. But he already has his hands full: Northwest continues to lose money like most of the major carriers.

* Douglas Steenland: Northwest’s president. Assuming Anderson stays put, Steenland might seek United’s job because he’s unlikely to succeed the 46-year-old Anderson for some time. But he was named president only last year and could be reluctant to jump ship. He and Anderson declined to comment.

* Frederick Reid: President of Delta. Same situation as Steenland in that he’s unlikely to be CEO of Delta any time soon because Mullin is 59. Reid, 51, became Delta’s president only last year but is an airline veteran. “Fred has told his staff that he’s not a candidate for the job,” a Delta spokesman said.

* David Calhoun: President of General Electric Co.’s aircraft engines group. At 45, he’s headed various units at the conglomerate and took over the engines business only two years ago. But GE’s reputation for excellent managers precedes it; former GE executive Bob Nardelli now runs Home Depot Inc. Calhoun declined to comment.

* Gordon Bethune: A proven turnaround artist. He joined Continental when it was near death in 1994 and turned the airline into a heralded comeback story. He might be tempted to fix United, but at age 60 he’s plenty busy getting Continental back to profitability.

* Larry Kellner: Continental’s 43-year-old president. Given Continental’s turnaround, “our management team ends up on a lot of recruiters’ wish lists,” the airline said.

* Karl Krapek: He unexpectedly resigned in January as president of United Technologies Corp., where he also once headed its Pratt & Whitney jet engine unit. Krapek, 53, was in line to be UTC’s next CEO, but he quit for unspecified personal reasons. He couldn’t be reached for comment.

* Greg Brenneman: Formerly Bethune’s No. 2 at Continental and also credited with the airline’s recovery. At age 40 he’s often mentioned as a potential airline CEO. He planned to head Hawaiian Airlines and Aloha Airlines after their planned merger, but the deal fell apart earlier this year. He just became CEO of the consulting arm of PricewaterhouseCoopers. He declined to comment.

* Ron Woodard: Former head of Boeing’s commercial airplanes division until he was fired in 1998 because of costly production snags at Boeing; he was succeeded by Mulally. Woodard, 59, now happily runs a small Seattle maker of industrial motor equipment. He declined to comment.

* Rakesh Gangwal: A former United executive who was chief executive of US Airways until November, when he left to pursue financial management. Gangwal couldn’t be reached for comment.