GOING CONTINENTAL: Jeff Smisek tries to make a cultural connection at United

At Jeffery Smisek's United Airlines, suits and consultants are out, and khakis and blunt talk are in.

Since merging his Houston-based Continental Airlines with Chicago-based United in a $3.2-billion deal that formed the world's largest airline, Mr. Smisek has been working to instill Continental's culture in United's workforce. In dozens of town hall meetings and random tarmac drop-ins, he's preaching teamwork and candor to employees accustomed to labor-management tension and formality.

"His job is dependent on his success at changing that culture," says Helane Becker, a New York-based analyst at Dahlman Rose & Co.

The CEO of United Continental Holdings Inc. knows his merger won't work unless United's 46,000 workers embrace the Continental way. Sure, he has to clear regulatory hurdles, combine reservations and computer systems and check off other boxes on the merger-integration to-do list. Daunting as those tasks may be, none matters more than winning the cooperation of the myriad employee groups-from ticket agents to baggage handlers-who can undermine the intricate choreography of a big airline merger.

"If you get the culture right, everything else will follow," Mr. Smisek, who declined an interview request, said in a recent speech.

But United's pilots and other unionized workers don't seem in the mood for a cultural epiphany. Union leaders are vowing to recover concessions made during United's three-year sojourn in bankruptcy that ended in 2006.

Acceding to expensive union demands would cut into the financial benefits of the May 2010 merger. Rebuffing them in contract talks could cast Mr. Smisek in the role of Dr. No opposite unions with a long history of whipping up rank-and-file fury against United CEOs.

Already, Mr. Smisek has conceded that he probably won't wrap up new labor contracts by yearend, as he had hoped. Talks have snagged on issues of pay, outsourcing and training procedures, among others.

"Pilots are as demoralized as they've ever been," says Wendy Morse, chairman of United's pilots' union, the Air Line Pilots Assn. "We were in favor of the merger, hoping a new CEO would take this thing and run with it. It's no better than it was before. It's an opportunity being squandered."

Financially, United Continental is outperforming most of its peers with strong revenue growth and cost control and an $8.6-billion cash cushion against volatile fuel prices and a flattening economy.

But strained labor relations can change that. Pilots, especially, can influence an airline's profitability.

"These guys have in their right hand every day your fuel burn, and that's 40% of costs," says Atlanta-based aviation consultant Kit Darby, a former United pilot.

And the morale of flight attendants and others who deal with customers influences the quality of service Mr. Smisek can offer the lucrative business travelers his strategy centers on. At least one regular United customer sees improvement since the merger. Evanston resident Ken Harris, a 100,000-mile-per-year flier, is still grateful to the United employees who helped him get through customs in London after losing his passport.

"People are saying yes more than they're saying no," Mr. Harris says.

TIME ON FRONT LINE

Mr. Smisek, 57, a former corporate lawyer, came to Continental in 1995 as a protégé of then-CEO Gordon Bethune. Like all Continental execs under Mr. Bethune, he was ordered to spend time with front-line workers.

While Mr. Smisek shares his mentor's penchant for directness, it's not clear if he also has the common touch of Mr. Bethune, a one-time aircraft mechanic who won the loyalty of Continental workers.

Educated at Princeton and Harvard, Mr. Smisek has the warp-speed intellect to dissect and devise solutions to the many difficulties facing his mammoth airline. But his barbed wit and unvarnished candor take some getting used to.

Mr. Smisek had to apologize to US Airways Group Inc. CEO Doug Parker after saying publicly that Continental broke up United's merger talks with the Arizona-based carrier because "I didn't want (United) to marry the ugly girl."

Regarding the use of outside consultants-a ubiquitous presence at the old United-he had this to say to senior managers: "(M)y general theory is if one of my people hires a general management consultant, that means I should probably hire the management consultant and fire the person." (He did acknowledge that consultants can be useful when specialized expertise is needed.)

A practiced extrovert, Mr. Smisek approaches customers, employees and investors with the same unassuming, straight-ahead style.

Among his first acts was to replace the formal dress code in United offices with Continental's business casual. "Jeff is more comfortable in a pair of jeans than a business suit. He's more about getting things done," says Jennifer Vogel, Continental's longtime general counsel, who retired after the merger.

Mr. Smisek has held 30 town hall meetings with employees, a sharp break from the remoteness United workers came to expect from top brass. He brags about managing "by walking around" airport ramp areas and employee break rooms. On a recent trip to Houston, he passed out water bottles to ramp workers toiling in record-breaking heat.

A lanky Texan who doesn't drawl but easily drops "you betcha" into conversation, Mr. Smisek says candor is key to the culture he's trying to build. "There are two basic, simple rules: Treat other people the way you want to be treated, and never tell a lie. . . .That means open, honest and direct communication."