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Company Website United Airlines marks its birth with the launch of airmail service by Walter T on April 6, 1926. In March 1931 United Air Lines, Inc. (UAL) was incorporated as a management corporation to coordinate operations of UATCs airline subsidiaries. UALTC changed its name to United Air Lines, Inc. in December 1943. In 1961 United merged with Capital Airlines, absorbing 7,000 new employees and all of Capital's routes to become the world's largest commercial airline. In 1994, UAL Corporation shareholders approved the Employee Stock Ownership Plan, creating the largest majority employee-owned corporation in the world.
United Airlines has undergone many changes in the past several years. A buyout by its employees, losing its rank as the nation's largest passenger airline, and most recently, an attempt to reorganize under Chapter 11 bankruptcy protection after three years of large fiscal losses.
Just a few years ago, bankruptcy thoughts were a world away for employees of the global airline. Like most major airlines, United enjoyed a period of profitability during the mid- to late 1990s. Perhaps the first sign of trouble for United came in 2000. Although reporting healthy revenue growth of 7.4 percent, the carrier's net profit declined 71 percent to $322 million. United's parent company, UAL Corp., had reported a net profit of $1.11 billion in 1999, or 6 percent of its revenue. From there, things got worse. After two years of mounting losses and an initial decision by the Air Transportation Stabilization Board to reject the carrier's application for a government-backed loan, UAL Corp. filed for Chapter 11 bankruptcy protection in December 2002.
The ramifications of the Sept. 11 terrorist attacks--which involved two of the airline's jets--and the initial decline in demand, along with soaring fuel prices and the competition of low-costs carriers, contributed heavily to UAL's $9.1 billion net loss from 2001 through the third quarter of 2004.
In an attempt to compete with up and coming low-cost carriers, in November 2003, United Airlines announced its new low-cost “airline-within-an-airline” – Ted. United chose the name Ted to emphasize that the service is an essential, integrated part of the company - it's the last three letters of the company's name. The company noted the responses from its massive campaign and the Meetted.com website demonstrated positive consumer support. Service began in February 2004 utilizing United line pilots.
Negotiators for the Air Line Pilots Association, which represents United's pilots, had tentatively agreed to 18-percent pay cuts for pilots last year before the bankruptcy filing. Pilots ultimately took interim pay cuts of 29 percent across-the-board, while ALPA and United negotiated a long-term agreement. Pilots, in April 2003, ratified the six-year concessionary agreement. The pay cuts were based on what was, when negotiated, an industry-leading pact in terms of hourly rates.
On Jan.31, 2005, pilots at United Airlines ratified a revised tentative agreement between negotiators of the Air Line Pilots Association and the carrier. The agreement amends the pilots' current collective bargaining agreement, effective Jan. 1, 2005, and will provide $180 million in annual labor savings to the company. United currently has more than 2,000 pilots on furlough, 22 percent of its pilot workforce, but has been recalling small numbers since September 2004.
Like most other major passenger airlines, the carrier continues to reduce capacity, parking planes and furloughing pilots in the process. In December 2004, United told employees it plans to trim domestic flights by 14%, effective Jan. 6, 2005, cutting service at Chicago’s O’Hare International Airport and its four other U.S. hubs.
United, in its quest to reduce costs, approached its unions asking for productivity enhancements, in the form of work-rule changes. The recently ratified labor cost savings agreement grants United these productivity changes. United's employees no longer own a majority of the stock, although pilots are expected to own about 19 percent of the company after it reorganizes.
United Is reducing United’s fleet to 455 aircraft—68 fewer than United flew in August 2004 and a reduction of 112 aircraft or nearly 20 percent of the fleet since 2002.
UAL reported a fourth-quarter operating loss of $493 million, which compares with a $134 million operating loss in the fourth quarter of 2003. UAL reported a net loss of $664 million.
For the full year 2004, UAL reported a net loss of $1.6 billion compared to a net loss of $2.8 billion in 2003.
United's unions already agreed to USD$2.56 billion in concessions early in its bankruptcy. The Air Line Pilots Association said it will continue to demand that the company obtain givebacks from other stakeholders -- including creditors, aircraft lessors and Star Alliance airline partners -- before cutting pilot wages again.
United continues work on its restructuring with a target of $2 billion in savings from labor, non labor and pension costs. These savings are in addition to the $5 billion in average annual savings the company had previously announced.
Also, in January 2005, a U.S. judge granted United Airlines another three months to file its bankruptcy reorganization plan without interference from other parties. Bankruptcy Judge Eugene Wedoff extended United's exclusivity through April 30. The current extension was due to expire Jan. 31. Creditors supported the extension, the airline said.
To view historical information and stay up-to-date with United’s bankruptcy news, FLTops.com members can visit the FLTops TODAY archives.
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