United CEO tries to clear air; Tilton pay grounds morale, workers say at annual meeting

May 16, 2007
CEO's compensation takes center stage

Margaret Freeman, a 767 captain and 18-year veteran of United Airlines Inc., was the first to face off with the chief executive at the shareholders meeting Thursday.

She was backed by nearly 200 union colleagues, many picketing outside the Field Museum in Chicago, where the company's first shareholder meeting in five years was held.

But instead of focusing on share price and boosting value, employee morale and pay were the issues.

"Employee morale is at an all-time low ... You've been sent a signal that we have lost all confidence in your management," said Freeman. "The employees are no longer behind you."

Applause filled the museum's auditorium.

UAL Corp. CEO Glenn Tilton aimed to tout the latest accomplishments of the company's once-bankrupt airline. Instead, he took hit after hit about his compensation estimated at nearly $40 million. He was forced to defend how that package was determined, directing shareholders to read a lengthy explanation of it in federal filings.

He also said while he earned those stock awards and options by helping to turn around the airline, he insisted those same options could be deemed worthless unless he and other managers continue to steer the airline into more profitable territory.

"We are absolutely open about everything," said Tilton.

He told the workers that employee issues are a priority.

"It is one of the four key items we are clearly focused on, and that's the employee," said Tilton. "We must work together. We care that this is a sustainable enterprise. Bankruptcy is bad for employee moral. Failure is bad for employee morale."

Meanwhile, outside the museum, union employees - including flight attendants, pilots, mechanics and others at United Airlines - wore starched uniforms and walked outside quietly, letting their signs speak for them:

"Fix it now."

"Management feeds from the trough. Labor gets the scraps."

"UAL CEO: $40 million/Labor: $0/This is sharing?"

Regardless if Tilton and others get their millions of dollars now or when options vest, union workers have been railing since March when federal filings showed how the benefits were doled out shortly after emerging from bankruptcy.

While the company reorganized and struggled to survive, the unions conceded salary and benefit cuts of 30 percent to 40 percent. The work force was reduced from around 110,000 to about 60,000, with many pilots and flight attendants still on furlough. Their work loads and hours also increased without extra benefits.

The workers say they lived by the mantra that "share sacrifice" would eventually lead to "shared rewards." It never happened, said Herb Hunter, a United captain and spokesman for the Airline Pilots Association.

"This is all about fairness and equity," Hunter said. "We're not on strike. We're not allowed to do that. We just want to bring about some awareness to what's been happening."

Sara Nelson, spokeswoman for the Association of Flight Attendants, said they're seeking to re-instate what workers have given up. Their contracts continue through 2009-10.

"We are looking to get back to the table to renegotiate," Nelson said. "Both sides can come back to the table. The contracts are amendable at any time."

While Tilton thanked all employees for their sacrifices and dedication, he also warned them that their mission isn't over. To keep the company competitive and viable, more must be done. The company continues previously announced job cuts and restructuring to trim expenses, roughly $400 million this year.

"Today, we are disciplined, we are focused, and we are flexible;" said Tilton. "We can move when the market moves. The only constant in this business is change: change in fuel price; change in domestic competition; change in global competition and geopolitical uncertainty; and change in security issues."

Tilton warned that more competition is ahead and workers must remain vigilant. Low cost carriers, like Skybus, transcontinental fliers like Virgin America, and others will chip away at their gains.

"Competing globally on a level playing field is the only way to secure more stable and sustainable future for all of our stakeholders," Tilton said. "In the end, there is no protection from a global competitive market."

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