When Glenn Tilton interviewed for the job of United Airlines chief executive nearly three years ago, he reportedly impressed the board by calling himself “a grinder.”
“When he runs into a problem, he has the tenacity to keep attacking it until he solves it,” a former pilots union leader said in 2003 of United’s boss.
This week, Tilton ground past one of his key goals: cutting labor costs. But it was far from easy.
United spent six months making cost-slashing deals with its major unions, including a final, urgently needed “agreement in principle” with the last union Tuesday. Somehow, through it all, the 60,000-employee airline managed to avoid a strike.
In a recorded message to workers Wednesday, Tilton acknowledged the “difficult steps … that many said we could never accomplish.”
Then, true to his reputation, the longtime oil-company executive vowed to press on.
“We will now maintain our positive momentum,” he said.
And there’s plenty more for Tilton to grind through:
United’s CEO – under contract through September 2007 – must resolve sticky lease negotiations on scores of its aircraft, submit a reorganization plan and secure financing to exit bankruptcy.
Most important, he must find a way to fly United, the largest airline operating in Denver, back to profitability.
The latest round of contract settlements along with the recent termination of employee pension plans “really puts us in a very firm position” to exit bankruptcy this fall, United chief operating officer Pete McDonald said.
As United has worked on its cost-cutting, Tilton, who once ran the oil giant Texaco, has gained admirers and critics.
Some admirers are observers who cast a critical eye at United’s ability to cut its costs.
“It’s pretty amazing to think that you can actually reduce your costs in any business by the amount that he’s reduced the costs at United,” said Douglas Baird, a professor at the University of Chicago Law School.
While United still faces many challenges, he said, “It’s an astonishing change. … In that respect, you’ve got to admire the guy.
“Now he hasn’t made a lot of friends among workers in the progress,” Baird said. “The way you reduce costs is you force workers to take multiple haircuts, and doing that in a way that’s going to make them happy with you is virtually impossible.”
Critics include employees who are taking big cuts to pay and pension benefits, as well as others who question what effect United’s deals are having on employee morale.
United must “win the hearts and minds of the employees,” said Dave Frizzell, an official with the mechanics union at United who was on the negotiating team. “Tilton – can he do it? I don’t know.”
At other airlines, leaders gained support of employees with their charisma, he said.
“They would be in the cockpits, they would be in the cabins, they would throw bags … and they were bred to do that,” Frizzell said. “Glenn Tilton isn’t like that.”
United spokeswoman Jean Medina responded by saying, “What you want is a CEO who understands the business and who understands how to be a leader. You want someone who understands the role and the value of our pilots, not someone who pretends to know how to fly the planes.”
Tilton came to United in 2002 “with the goal and the objective to turn around the misfortune that this company had had … and he has been relentless in pursuing that,” McDonald said.
Indeed, the labor cuts United is close to completing come after a round of pay cuts and concessions earlier in United’s bankruptcy. They turned out to be insufficient.
“He had to go back to the well twice, and he’s still losing money,” said Evergreen-based aviation consultant Mike Boyd. “It’s no badge of honor to have slammed pay reductions twice down employees’ throats.”
The mechanics union ratified its concessions with a 59 percent vote Tuesday.
“It’s kind of like you either cut your hand or your foot off, and it’s your decision,” Frizzell said.
The International Association of Machinists is the last remaining group that plans to iron out details of its agreement in principle and submit it to members for a ratification vote.
Some employees continue to complain about Tilton’s pay and other compensation. Last year, he was paid a bonus of about $366,000 under a companywide incentive program and made $1.1 million overall, according to the company’s annual report.
Also, the Association of Flight Attendants at United continues to contest United’s plan to terminate company pension plans and turn them over to the federal pension-insurance agency.
“He’s had a tough job, and it hasn’t been pleasant for anybody, and somebody’s going to have to pay for all of the things that happened to all the employees,” said Darryl Jenkins, a visiting professor at Embry-Riddle Aeronautical University in Florida.
Over time Tilton has made some mistakes, including miscalculating the Air Transportation Stabilization Board in United’s application for a federal loan guarantee, Benchmark Co. analyst Helane Becker said.
As a result, Becker said, “I think he wasn’t as aggressive as he should have been early in the bankruptcy process in cutting costs.
“I think they still have work to do,” Becker said. But “I think he’s done a lot to help get the airline back on track.”
Staff writer Kelly Yamanouchi can be reached at kyamanouchi@denverpost.com or 303-820-1488.
THE BUZZ ON GLENN TILTON
What airline industry analysts and United Airlines employees say about chief executive Glenn Tilton:
Pluses
Avoided strikes by negotiating cost-cutting labor contracts with unions, saving $700 million annually
Has experience operating a company in bankruptcy protection (Texaco)
Reshaped the company by introducing the low-cost Ted division and “P.S.,” an upscale service on certain transcontinental flights
Minuses
Employee morale could be damaged after negotiated pay and pension cuts
Misjudged the likelihood of securing a federal loan guarantee, thus failing to cut costs adequately
United has not yet filed a reorganization plan – or become profitable
STAFF WRITER KELLY YAMANOUCHI
