UAL CEO’s Flight Plan: ‘It’s About Customers’
When Glenn Tilton took his new job, he flew right into terrible turbulence.
Hired five months ago as chief executive of United Airlines and its parent, UAL Corp., he couldn’t prevent the carrier from tumbling into Bankruptcy Court in December.
Now the former vice chairman of oil giant ChevronTexaco Corp. is trying to overhaul United to slash its costs and make it more competitive with discount carriers such as Southwest Airlines.
A key step: forming a low-cost subsidiary airline to capture more price-conscious travelers.
Tilton says the new airline would be vastly different from United’s discount shuttle service of the 1990s, which served only California and the West. The shuttle had a mixed record and was abandoned after the Sept. 11 attacks.
United’s restructuring will be crucial to California, where more than one-fifth of the airline’s 1,700 daily departures originate. Two of United’s major hubs are Los Angeles and San Francisco. About 20,000 of United’s 74,300 employees are based in the state.
But the cost cutting and the new airline are not going over well with United’s unions because the moves portend sharply lower wages.
Meanwhile, United and its competitors are bracing for a war in Iraq that could further depress air travel and send the carriers deeper into the red. War jitters already have sent jet fuel prices soaring.
After meeting with United employees at Los Angeles International Airport last week, Tilton, 54, talked about these issues with The Times:
Question: Assuming there is a war in Iraq, what effect would that have on United?
Answer: It would have an immediate effect on our cash. We would meet immediately with the ATA [Air Transport Assn.] to suggest that the president issue an order to open up supplies from the Strategic Petroleum Reserve.
Q: If the war brought about a decline in passenger traffic, as many expect, what steps would you take to deal with that?
A: We would have to pull the system down accordingly.
Q: You’re talking about reducing capacity and laying more people off?
A: Yes. It all depends whether it’s [more like] Desert Storm or it’s 9/11. The answer ... is going to be driven by the unique character of the event.
Q: Talk about your plans for a new low-cost subsidiary airline. Why do you think it will work better now than the last time United tried such a strategy?
A: Because we’re going to do it profoundly differently. We’re not going to limit it to a shuttle proposition on any one particular coast. We’re going to integrate it into the hub structure we have across the United States. We’re going to let the customer tell us where it would work.
Q: But aren’t you going to retain one of the aims of the old shuttle operation, namely, to entice people to fly the low-cost carrier and then transfer to mainline United for longer legs of their trips?
After all, isn’t this a smart way to squeeze more profit out of business travelers in particular?
A: Absolutely. [They might fly] Phoenix to L.A., L.A. to London. That’s why we like the word integration, rather than the shuttle.
Q: Can you comment on California’s role in this carrier?
A: The West Coast is going to be a very significant market for this new product, without doubt.
Q: Can you get the workforce to agree to this?
A: We already have the workforce, in my view, conceptually agreeing to it. The devil is in the details with respect to the issue of [the new airline’s] separateness. The big, big issue is job opportunities for current United employees and prospective opportunities for furloughed United employees.
Q: Delta and American are talking about doing the same thing with new low-cost airlines. What does that mean for your plans?
A: We feel modestly affirmed that the idea wasn’t as far-fetched as it was alleged to be.
Q: You seem to be dribbling out the details about your restructuring day by day. Why don’t you wait until you have it all figured out and then announce the whole plan?
A: Because that’s the strategy that really works.
Q: You mean it’s evolving?
A: Yeah, sure.
Q: But what about the toll it’s taking on your employees?
A: They say two things: “Be decisive and be fast and just tell us what it is.” And I understand that. The other thing they say is, “Involve us” ... and we’re involving them. We’re making very good progress.
Now, to the guy waiting for the punch line, it must seem tortuous. But I actually think for United it’s going to be the superior process, because we’re going to capture commitment [from all parties] on what it is we’re trying to create.
Q: Still, the pilots’ union is arguing with you almost daily and very publicly. Does that slow down what you’re trying to accomplish?
A: It makes it a more deliberate process. It adds complexity. But I think while we have this moment [in Chapter 11 bankruptcy-protection proceedings], we do have the time to get it right. And we’ll get it right. We will launch [the new airline] properly, and we’ll have hearts and minds around it when we do.
Q: It seems from the outside that your mandate when you took this job was to get all employees of United on the same level. Do you agree that management and employees were talking past each other?
A: Yes and yes.
Q: How far do you think you’ve come in that regard?
A: We have come a long way. When I speak to the employees of the company ... it is with one thing in mind, and that’s success and creating prosperity for all of us. I don’t have any history that sort of modulates what I say and how I say it. We’re going to do good work, and the market is going to determine whether we’re successful or not.
I say frequently this is not about us. It’s about the market; it’s about our customers; it’s about those who make judgments about us.
To compete effectively, we’re going to obviously have to be on the same page. And they know that.
