Call United Airlines the coelacanth of the business world. Experts thought the ancient fish became extinct eons ago, but recently the species has been found very much alive.
Yesterday in Chicago, a federal judge approved plans for United to emerge from bankruptcy, now scheduled for Feb. 1. The airline’s revival is good for Denver International Airport, as it’s DIA’s largest carrier and handles over half of passenger traffic.
When it filed for Chapter 11 court protection three years ago, United’s survival was much in doubt mostly because of burdensome pension and labor costs. United’s workers knew they had to adjust or their employer would succumb, so they agreed to significant cuts in wages and retirement pay.
Over 37 months, United has slashed more than $7 billion in annual expenses, eliminated 25,000 jobs and ended its defined-benefit pensions. Its 55,000 employees, including 5,000 in Denver, performed heroically under great duress and ultimately saved their company and most of its jobs. Now United can focus on “winning in the marketplace rather than winning in the courtroom,” CEO Glenn Tilton told The Post’s Kelly Yamanouchi.
Understandably, many workers are angry that United is rewarding 400 top managers, including Tilton, with a $152 million compensation package. Federal Judge Eugene Wedoff overruled the unions’ objections, saying there’s no standard in bankruptcy law for setting management compensation. “It may well be that we have a culture in this country that overcompensates management,” Wedoff said. “But United is just one enterprise that operates in that environment.” If there’s justification for the executive package, it’s that tying managers’ pay to stock performance creates an incentive to make the company thrive in the long term.
United’s long-range prospects remain uncertain. The carrier lost $4.3 billion in the first nine months of 2005 and isn’t expecting to turn a profit until 2007. But its creditors have grown more confident, and the industry outlook appears better than it has been. United has endured its harshest era, but the fight for survival is ongoing. Just ask the coelacanth.
