The restructuring of UAL Corp.’s United Airlines, which was in danger of going under in 2002, was put in the hands of an oilman.
Despite widespread skepticism that an industry outsider could steer United through the complexities of the airline industry, CEO Glenn Tilton successfully led a more than three-year restructuring that enters a new era Wednesday with the company’s departure from Chapter 11 bankruptcy.
In a wide-ranging interview Tuesday with The Associated Press, Tilton credited United’s journey “from the abyss to resilience” to the commitments of employees and other stake-holders and said all have combined to create “a sense of hope within the company that wasn’t there previously.”
Here are some excerpts from the interview:
AP: What are your feelings as United comes out of the biggest and longest airline bankruptcy in U.S. history?
Tilton: I think my feelings are a sense of closure on that chapter of our work, and a definite feeling of transition from that chapter to the next. I’d say that my dominant feeling is now it’s really time to fly, to move forward.
AP: Was it more difficult than you expected?
Tilton: The environment in which we restructured was more difficult than anybody could have imagined — the external environment, which created a complexity that we couldn’t have anticipated. The back door of 9/11, Iraq, SARS, oil prices.
AP: What surprised you, good or bad, about the restructuring?
Tilton: (After) a career in the energy industry, I’m accustomed to the unexpected event. But all of them coming in that compressed period of time — that was surprising to everybody in the industry.
AP: How close was United to liquidating at the start of the process?
Tilton: The company was so dysfunctional, it had come off such a difficult period of time ... It was close.
I think the story of this restructuring when it’s written will have one word, and that’s consensual. The real story of this bankruptcy, as much as what happened, is what didn’t happen. No strikes, no litigation, two rounds of consensual agreements, a consensual deal with the PBGC (Pension Benefit Guaranty Corp.) and replacement pensions consensually negotiated with all labor groups.
AP: How have high oil prices changed the airline industry?
Tilton: High oil prices have forced everybody to reckon with them, and have in essence been an equal opportunity margin compressor. It is the one thing we all must do.
AP: Do you still expect United to make an operating profit in 2006?
Tilton: It’s going to depend on oil prices. We’ve put ourselves in a position to be able to compete with the effect of high oil prices in 2006, competitively with peers. The way we want to be measured is how we perform relative to peers. I’m confident that the work that we’ve done will put us in a position to have a competitive result whatever the market environment may be.
I don’t think the issue, until the industry sorts itself out, is so much competing profitability stories as it is resilience stories.
AP: You’ve spoken a lot about the need for consolidation in the industry. What form do you expect it to take and when?
Tilton: There are two forms. No. 1, I think capacity is going to continue to be subject to the pressures of oil prices and competition. That, in effect, is a form of consolidation as people retool their business plans ... organic consolidation through restructuring. The other, we’ve seen an example of with America West and US Airways, which is a real form of consolidation. ... If in fact there is going to be a larger consolidation from a move to take significant redundant capacity out of the network hub structure, that will be a more traditional version of what happened with America West and US Air.
AP: How likely is it that United might merge with another U.S. airline as soon as this year?
Tilton: It’s a very unpredictable landscape. I think the best thing for United to do is to continue to get its house in order and prepare itself for whatever opportunity presents itself, and to make a decision at that juncture that would be best for our new shareholders. ... The appropriate way to describe my perspective (on possible mergers) would be attentive rather than in pursuit of anything.
AP: Do you envision Ted getting significantly larger?
Tilton: Not significantly. I think Ted’s already grown to a size that has surprised a few. We want to make sure that we continue to offer Ted to markets where Ted’s the right product.
AP: How do you explain your thinking on the management stock plan, which some unions and outside critics maintain is excessive for a company that has asked its employees for many concessions in bankruptcy?
Tilton: It is in everyone’s best interest for management to have a higher portion of their compensation at risk, and tied to the performance of the company’s stock. In this case, the value of the plan is purely theoretical and depends on the performance of the stock over the next four years. Importantly, all of our employees will share in stock in the new company.
AP: Some analysts have expressed concern about the possibility of labor upheaval at United again now that the company is out of bankruptcy court. How likely is that?
Tilton: I think it’s highly, highly unlikely. I don’t see anything other than continually improving performance by our employees, and that’s been our experience throughout the entire restructuring.
AP: How would you characterize current management-labor relations at UAL?
Tilton: All now looking forward to the future. Focused on realizing the potential of two things: United and the restructuring. ... I think we have created now a sense of hope within the company that wasn’t there previously.
AP: What do you see in the future for U.S. airlines?
Tilton: A continued period of getting our collective houses in order, creating competitive platforms, and then turning our attention to the realization that we’re going to have to compete globally. The other thing I think is going to happen is technology is going to continue to make a big difference in the industry.
AP: How long do you expect to be in this job?
Tilton: I’ve got about 18 months left on the contract and I’m going to fulfill that. Everything I’ve said this company’s going to be capable of doing, I’ll be here to put this company on that course. I don’t consider the restructuring to have been my work. It’s what comes next that will be my work.
AP: Would you consider staying beyond that if the board wanted you to?
Tilton: It’ll be a conversation I’ll have with the board, I’m sure.