Denver Post : Despite gains, United loses ground Worker morale takes nose dive

Kelly Yamanouchi

Sunday May 15 th 2005; Page K1

Bankrupt United Airlines' survival strategy got a lift last week when it made progress on cost cuts and received approval to terminate its pensions.

But those victories have created a more lasting challenge - winning back a better relationship with its employees.

"It's quite obvious it's significantly harming their labor relations," said Doug Elliott, president of the Center on Federal Financial Institutions, a nonpartisan Washington-based nonprofit that speaks out on federal lending and insurance policy.

"Right now they're fighting for their life," Elliott said, so employees may look at United's legal maneuvers as one of the many steps the company had to take.

But, he added, "I'm sure some people will feel scarred for life."

Because of the deep cuts, some onlookers cast doubt on the future success of the airline, which employs 6,000 people in Denver and 60,000 worldwide.

"At least now United has a chance to survive, but the ill will generated from this with its unionized workers will have repercussions that may still doom the airline to failure," said Anthony Sabino, a business professor at St. John's University.

Employees, too, voice frustration.

"The morale right now is as low as I have ever known it to be in 18 years," said Jody Weant, head of the local United flight attendants union chapter. "The company has attempted to pit labor group against labor group - divide and conquer."

United managers "have been playing such hardball for the last year or so," Weant said, "and flight attendants are having to work so many more hours to make up for what they lost."

At American Airlines, pilots union president Ralph Hunter expressed sympathy for its rival's employees.

"We are highly skeptical that stripping employees of their hard-earned negotiated benefits, either through legislation or in Federal Bankruptcy Court, will serve to ensure any organization's long-term success," he said in a statement.

Pay cuts are not new at United, but the mounting layers of concessions have worn on nearly every employee group.

The end of the pension plans and their accompanying takeover by the U.S. government's pension insurance agency would mean reduced benefits for retirees for years to come.

The company also has several more hurdles before it can turn the corner. It must reach agreements with aircraft lenders, secure financing, exit bankruptcy - and, most significant of all, achieve profitability.

"United can't go on losing hundreds of millions of dollars a month," said University of Chicago bankruptcy professor Douglas Baird. But "the workers basically have to decide whether they want to work under these conditions or not."

During the latest round of labor talks, three United unions voted to authorize strikes. Last week, the flight attendants union reiterated its strike threat over the loss of pensions.

Even if United is able to avoid a strike, maintaining good service and holding onto employees at substantially lower wage and benefit rates are big challenges. The company has suffered some attrition.

"The morale of our employees in a service business is very important," Jake Brace, United's chief financial officer, told U.S. Bankruptcy Judge Eugene Wedoff last week. "And we're very concerned about it."