On-Time Performance Excellent, But Workers' Frustration Growing

Source: Rocky Mountain News
Author: David Kesmodel And James Paton

When it comes to keeping flights on schedule, United Airlines has been outshining almost every other major U.S. carrier.

It also has a solid track record in handling luggage, and its rate of consumer complaints, while far from outstanding, has improved.

But as bankrupt United gets ready to take the ax to wages, benefits, jobs and pension plans, experts wonder just how long employees will feel motivated to shine on the job.

A big drop in service could push away customers and cripple the huge carrier, which warned again this week it's at risk of shutting down next year without steep cuts in labor costs.

Some frequent fliers say they've already seen quality decline, including one who said he's heard flight attendants grousing about labor-contract issues. Other fliers say they're amazed at how well United attendants and other employees are serving them in tough times, and company executives agree.

In interviews and in private, United workers say morale is waning, but they say they're trying to keep their frustrations from spilling into the workplace.

Rebecca Anthony, 41, a Denver-based flight attendant, said she loves her company and her job. But the career she began eight years ago has been losing its luster. Attendants aren't just bracing for further pay and benefit cuts - they also face potential work-rule changes that could mean more time away from home.

"People laugh when we flight attendants say we love to fly and we love people," she said. "But I do. With most crews, we're still out there trying to be great. But behind the scenes, it is hell now trying to manage our private lives and our finances. Most passengers never know that because we're still doing what we do best.

"We're about at the straw that broke the camel's back."

The cutbacks are forcing sweeping financial and lifestyle changes for United workers and retirees. For example, Anthony, an eight-year employee who now makes about $40,000 a year, is putting her modest house near Golden on the market.

Anthony, who is single, hopes to sell the home for about $250,000 and downsize by buying a townhouse in Arvada or Lakewood.

Clint Taylor, 54, a Denver-based aircraft mechanic, said senior employees are fretting about declines in their retirement savings because of likely lost pension benefits. Like many, he might have to stay in the work force much longer than expected.

"You put 20 years in, and all of a sudden, they decide they can't pay this pension when you're so old you can't go in another direction anymore," said Taylor, who joined United in 1985. "They're putting people in their 50s and upper 40s in a hard situation because you've put so much time into the company. It's basically age discrimination."

Fuel costs force more cuts

UAL Corp.'s United says it has tried its best to avoid having to ask its workers to make further sacrifices to help the company stay aloft. In 2003, United obtained $2.5 billion in annual concessions to help it avoid liquidation.

The carrier, which filed for bankruptcy in December 2002, set its sights on winning U.S. loan guarantees of more than $1 billion to help it climb out of Chapter 11 protection. But in June, a federal board rebuffed its third such bid.

That denial, plus record jet-fuel prices and rock-bottom fares across the sector have again prompted United to seek labor concessions. United now wants $725 million more in wage and benefit cuts and productivity improvements from active workers. It also intends to terminate its pension plans and replace them with less-generous 401(k)-style benefits to save more than $600 million a year.

The assets and liabilities of United's pension plans would be dumped onto the Pension Benefit Guaranty Corp. The quasi-federal pension insurer says it would cover $6.4 billion of an estimated $8.3 billion funding gap in United's plans, leaving workers and retirees with losses totaling $1.9 billion.

United, which employs about 6,000 in Denver and is the dominant carrier at Denver International Airport, wants concessions in place by mid-January. If it fails to win agreements with any union, it will ask a U.S. bankruptcy judge to let it void the union's contract and impose new terms.

Chicago-based United's message to its employees is simple: Sacrifice further or this company will fold and you won't have a job.

Pilots face the biggest squeeze in the likely pension terminations. Some have qualified for about $100,000 a year in retirement benefits, and could see that figure slashed by about 60 percent.

Captain Steve Derebey, 53, a spokesman for the pilots' union and a United pilot since 1989, says he expected an annual pension of $66,000 a year upon retirement. Now Derebey, who is based in Seattle, expects $22,000.

"This is not the kind of treatment loyal employees deserve," the pilots' union said.

Labor agreements crucial

Avoiding labor unrest is one of United's biggest hurdles in surviving its trip through bankruptcy, according to Blaylock & Partners analyst Ray Neidl and other industry observers.

The carrier faces a strike threat from one union. The Association of Flight Attendants said it will stage random work stoppages if United voids its labor contract and imposes cutbacks, a big sign of strain in that labor group.

The possibility of a strike is worrisome for management, but it says it's focused on winning concessions from attendants through bargaining. "We take everything seriously," United's chief operating officer, Pete McDonald, said of the threat.

The carrier argued in a court filing this week that a strike would be illegal. What's more, it said, attendants, like the rest of United's workers, "readily recognize that a strike would spell the end of United."

Bankruptcy expert Douglas Baird disagrees with United's legal opinion.

"That's ridiculous," said Baird, a law professor at the University of Chicago. "The idea that you can make someone work under terms of a contract they didn't agree to is something we haven't permitted since the 13th Amendment," which outlawed slavery.

At the same time, he agreed that a strike would be "suicidal" for employees.

Greg Davidowitch, the head of the United branch of the attendants union, warned Friday that "there would be serious consequences" if its contract is voided in court. "I am not aware of any contract in this country where one party rejects the terms of the agreement and the other party continues to perform," he said.

Frustration boiling over

Baird said the strike threat reflects brinkmanship typical in labor negotiations. US Airways has faced similar threats. Still, it illustrates bubbling frustration among rank and file about repeated contract cuts.

United not only should be worried about service slipping, said industry consultant Bob Mann. A bigger concern is that disenchantment could lead employees to flee the company for more stable ground, putting added stress on the airline.

"There may be such high turnover generated that it creates training expenses that these folks can ill-afford," said Mann, based in Port Washington, N.Y. "Mechanics, for instance, may say, 'Hey, I'm outta here. I can do better at a foreign-car dealership than I can do here.' "

Frequent fliers expressed mixed views on whether fading job enthusiasm has begun to affect service at United.

Cory Matthews, who flies at least 100,000 miles or 100 trips yearly, said he thinks some service is suffering at the carrier because of the labor concessions. Some gate agents at Denver International Airport are surly, he said.

"They're being short with people," said Matthews, a Denver-based systems sales engineer for Symmetricom Inc. "The morale looks like it's down, period. I wish they would get through this bankruptcy."

On the aircraft, "it seems like the flight attendants with many years keep providing good-quality service, but the middle to new seem not to care as much."

Employee morale has been "going down the tubes quite a bit" since the 2001 terrorist attacks and the bankruptcy, said Matt Holdrege, another United frequent flier. "More often these days, you see lots of (attendants) huddled together on the airplane talking about union labor issues. This happens a lot on long overseas flights."

Holdrege, a Los Angeles telecommunications executive, said he tells attendants that many Americans have had their pay slashed or lost their jobs, and attendants should be happy to have a job. "But they don't always like to hear that," he said.

Vik Krishnan, a business traveler from Chicago who flies often on United, said he thinks United's customer service "seems almost better" amid the turmoil. On a recent Chicago-Philadelphia flight, a flight attendant went around and thanked each flier in first class for flying United, he said. "Attendants have been great."

John Paasonen, a frequent United flier based in Denver, said he's been "pleasantly surprised at the stable attitudes and overall helpfulness of the staff in Denver despite the pending layoffs."

Said Mike Boyd, an Evergreen-based industry consultant: United's service started "on such a high level that it will take a lot to drag that down."

But if morale worsened, "it could be lethal for the company."

United's flight performance good

McDonald, United's chief operating officer and an employee for more than 30 years, said the company is well-aware of morale problems.

"We can't underestimate how tough this is for our employees," he said. "This is very, very hard."

So far, he said, workers are performing remarkably well in the bankruptcy. "We just couldn't be more proud."

United ranked No. 2 in on-time performance among the nation's six big hub- and-spoke carriers in the 12 months ended Oct. 31.

Its on-time arrival rate was 79.1 percent, behind also-bankrupt US Airways at 80.6 percent. Just three or four years ago, United often ranked at or near the bottom of on-time rankings.

In October, the airline's rate of consumer complaints per 100,000 fliers fell to 0.45 from 1.01 in September, and its ranking among the big hub carriers rose to No. 1 from No. 3.

The head of United's pilots union, Captain Mark Bathurst, said he's "concerned about the psyche of the pilot group. At the same time, you look at operational performance, and I'm quite proud of the job they have done."

United, since filing for bankruptcy, has taken steps to motivate employees amid the tough times. Its Success Sharing program rewards workers with bonuses if the company meets certain performance goals, including departing on schedule and getting customers to say on surveys they'll fly United again.

The company has issued $78 million in bonuses this year because it has hit those two targets every quarter. McDonald said it expects to make its goals in the fourth quarter.

But employees won't get other potential bonuses this year because United is losing money.

McDonald is optimistic the carrier's service won't suffer during the hectic holiday travel period, despite the looming labor cutbacks.

He and other senior executives have been meeting with employees in Denver, Seattle, Phoenix, Boston and other cities to discuss United's challenges and its business plan. Even though it can be tough to take, direct communication is welcomed and appreciated, he said.

United also has reached out to employees by reminding them in a recent daily bulletin about its employee-assistance program. Workers can get free and confidential counsel to handle grief, anxiety, substance abuse and other issues.

The stress United workers feel "is tough to deal with and also can make personal issues that may arise even tougher," Dr. Gary Kohn, United's corporate medical director, said in the bulletin.

Discounters undercut carrier

United says the dramatic industry restructuring under way means it must bring its costs much closer to the levels of discounters such as Southwest, JetBlue and Denver-based Frontier.

For employees, that means a major advantage to working at United is rapidly eroding: higher-than-average compensation and benefits.

Taylor, the mechanic, gets the picture. But he's not happy about it.

"In order for these older companies to compete, they have to do something in the marketplace because they are getting undercut by these upstart corporations," he said. "But there are a lot of things these companies could do that we're not seeing."

Many workers, including Taylor, argue the carrier has too many managers, and say cutbacks would be easier to swallow if they thought better-paid staffers were taking similar-size hits.

The airline contends they are. It is trimming salaried and management staff and it announced this week that nonunion employees would take permanent pay cuts ranging from 4 percent to 11 percent on Jan. 1.

"We're extremely top-heavy," said Taylor. "I've worked at other airlines (including Northwest) not nearly as top-heavy as United is."

Anthony, the Denver-based flight attendant, said the pay, benefits and work rules she enjoyed at United when she landed there eight years ago made the job highly appealing. "It offered so much more than you could find at any other kind of job."

Now, she said, a job at United more closely resembles those at smaller carriers.

But going to another airline is out of the question for Anthony and many other unionized United workers. That's because industry custom requires new employees to start at the bottom of the pay scale.

Anthony said changing careers also doesn't seem appetizing to her. "We could leave United and go somewhere else, but it's not going to be better anywhere else. The climate (in corporate America) is really bad."