UAL Selects Oilman to Pilot Troubled Carrier
United Airlines reached outside the airline business Monday and tapped oil-industry veteran Glenn Tilton to be chief executive of the embattled carrier and its parent, UAL Corp. United’s No. 2 and 3 executives also resigned from the airline under pressure from United’s powerful unions.
Tilton, vice chairman of oil giant ChevronTexaco Corp., was elected chairman, CEO and president by UAL’s board. The airline, 55% owned by its employees, is teetering toward a bankruptcy reorganization because United’s financial condition is rapidly eroding in the face of the slump in air travel and United’s high operating costs.
But the election of Tilton, 54, will affect the future not only of United’s 84,000 employees and its millions of customers. It also could have ripple effects for airline passengers, as United is the nation’s second-largest airline behind AMR Corp.’s American Airlines.
Tilton hasn’t yet outlined his plans, but the ways in which he decides to steer UAL--in or out of Bankruptcy Court--also could prompt changes by United’s rivals in terms of service, routes and fares as they strive to stay competitive.
Tilton succeeds Jack Creighton, who became interim CEO last fall. UAL had been searching for a permanent CEO the last few months, and speculation was high that it would pick a non-airline executive to bring a fresh approach to the struggling carrier. UAL lost an industry record $2.1 billion in 2001 and is expected to lose an additional $1 billion this year.
Creighton is a former timber-products executive who had been a UAL director. As the company looked for his successor, Creighton, 70, tried to forge agreements with United’s unions on multibillion-dollar wage and other concessions to help right the airline. He made little progress.
Creighton, in fact, warned last month that United would have to file for Chapter 11 bankruptcy protection this fall if it failed to secure the necessary concessions from its employees, lenders and vendors within 30 days. But some union officials said they were reluctant to make changes until a new CEO was in place.
The Air Line Pilots Assn. and the International Assn. of Machinists--which have representatives on UAL’s board and thus a key voice in choosing the CEO--issued statements vowing to work with Tilton on a recovery plan. But they also had said they’d work with Creighton, and long-standing animosity between United’s management and employees continued to hinder progress.
Now “they have to make huge changes” if United is to avoid filing for Bankruptcy Court protection, said Ron Kuhlmann, vice president of the aviation consulting firm Unisys R2A of Hayward, Calif. United must quickly find ways of generating more revenue and reducing its costs “no matter who the person is sitting at the head desk,” he added.
Tilton said in a statement that “despite the significant challenges we face, United is a company with tremendous strengths on which we can build. Our highest priorities must be to restore employee trust and revive investor and customer confidence.”
Indeed, Tilton is assuming enormous challenges in running United, an Elk Grove Village, Ill.-based carrier that has 1,900 flights a day to several continents. It operates hubs in Chicago and Denver and is the largest operator at Los Angeles International Airport. Among the obstacles:
* Tilton has no airline experience, and little experience as a CEO and in dealing with a heavily unionized work force. Having spent most of his career climbing the corporate ladder at Texaco Inc., he finally became Texaco’s CEO in early 2001 only to have Texaco acquired by Chevron a few months later. Tilton became vice chairman of the new ChevronTexaco under Chairman and CEO David O’Reilly.
* Tilton doesn’t have much time. United faces debt payments and other bills of about $1 billion in the coming months, continues to lose $1 million or more each day from operations and says it’s unable to borrow from the financial markets. United has applied for a $1.8-billion federal loan guarantee to attain more financing, but the government board in charge of the loan guarantees first expects United to secure concessions from its employees, creditors and suppliers.
* While having to quickly come to terms with United’s unions, Tilton also must find others to run the airline in place of United President Rono Dutta and Chief Operating Officer Andrew Studdert. Their roles will be assumed by existing senior managers for the time being, United said.
Amid these problems, “it’s going to be tough, when you’ve had the history these guys have had,” said Rich Gritta, professor of finance and transportation at the University of Portland in Portland, Ore.
Some Wall Street analysts said Monday they knew little or nothing about Tilton.
But one oil industry executive who has worked with him over the years said that Tilton developed a reputation as a strong communicator, especially during the anxiety-filled months before Texaco’s merger with Chevron.
“Glenn is the kind of guy who’s as comfortable with the person on the shop floor as in the board room,” said the manager, who spoke on the condition that he not be identified.
The unions representing pilots and mechanics were longtime critics of Dutta and Studdert. Both resigned Monday “to afford Mr. Tilton wider latitude to fill these key positions,” United said. “This is an opportunity for United’s new CEO to put in place a team capable of managing a multibillion-dollar employee-owned company,” said Tom Buffenbarger, head of the machinists union.
Dutta and Studdert couldn’t immediately be reached for comment.
Tilton, a native of Washington, D.C., earned a bachelor’s degree in international relations from the University of South Carolina in 1970, then joined Texaco as a sales trainee.
He became president of Texaco Europe in 1992, president of Texaco USA in 1994 and Texaco’s CEO in early 2001.
Tilton also was interim chairman of ailing energy trader Dynegy Inc., in which ChevronTexaco has a 24.6% interest. He resigned that post, along with his ChevronTexaco job, on Monday.
*
Times staff writer Don Lee contributed to this report.
