Originally created 06/18/04

United Airlines CEO coaxing carrier back from brink



CHICAGO -- When Glenn Tilton took over the leadership of United Airlines in 2002, skepticism abounded that a career oilman could learn the airline business fast enough to pull the carrier out of its dangerous dive.

Industry experts questioned how Tilton could persuade employees to agree to drastic wage and benefit cuts, raise United's operating performance sharply and reshape it into a cost-competitive airline.

United's emergence from bankruptcy is still not assured after a more than 18-month stay in Chapter 11. But the unflappable Tilton has used diplomacy and people skills to help achieve the first two objectives and is chipping away at the third.

Whether the former Texaco CEO and ChevronTexaco vice chairman ultimately succeeds as United's chief executive officer may hinge on an imminent decision by the Air Transportation Stabilization Board on United's application for a $1.6 billion federal loan guarantee. If the bid is rejected, United would likely need a cash infusion from an outside investment group that's almost certain to demand more cutbacks - and new leadership.

For now, the 56-year-old Tilton gets a grade of "incomplete" along with acknowledgment from even his skeptics that he has taken solid advantage of the leverage of federal bankruptcy law to pare United's out-of-control cost structure down to a manageable size.

Morningstar Inc. airline analyst Nicolas Owens is among those who credit Tilton with doing a good job so far, particularly in avoiding labor or operational turmoil.

"He's shown a willingness to sit down and listen, which is not something that his predecessors were known for," he said. "And something United is doing particularly well is they're continuing to focus on the customer and maintaining a good-quality product in the face of all this restructuring."

What Tilton has failed to do is come up with a way to stop United's losses that have now reached a staggering $9 billion in four years.

"He may have made some progress with tactical issues but there has been no new strategic vision under his leadership that I can see," said Ron Kuhlmann, an Oakland, Calif.-based transportation consultant for Unisys R2A, downplaying the creation of United's new discount carrier Ted this year. "United is in retreat."

If Tilton is unable to see his recovery plan through to completion, it won't be for lack of confidence or effort. In an interview with The Associated Press last week, he said the carrier's undisclosed new business plan is so strong he expects United to exit bankruptcy by year's end "with or without" the loan guarantee - the first time the CEO has made such a declaration publicly.

Logging more airplane time than many pilots, he travels constantly to New York and Washington - where he was closeted in talks with the ATSB on Thursday - and throughout United's worldwide network to talk up the business plan, nurture key contacts and boost employee morale and customer confidence. The CEO introduces himself to United employees on airport concourses, visits passenger lounges, drops into cockpits and greets people in galleys - a personal style he says comes naturally.

"It's a job of perpetual motion," he said at United's headquarters near O'Hare International Airport following recent trips to Singapore and Frankfurt. "It's very invigorating. ... I benefit from it because I enjoy it," he added, referring to the frequent hospitality duty.

While still a relative newcomer to the airline business, Tilton brings a unique mixture of experience to the job. A native of Washington, D.C., he grew up mostly in Latin America, learning Spanish and Portuguese, and graduated with a degree in international relations from the University of South Carolina.

He was exposed to the world of diplomacy through his father's mysterious embassy jobs in Buenos Aires and Rio de Janeiro that turned out to be something more: CIA station chief.

"It finally dawned on me at age 16 that he didn't seem to be making much career progress," Tilton recalled wryly. "The other kids that were coming up and giving me the secret handshake because their dads worked for mine knew more than I did."

Taking a marketing job with Texaco right out of college, he spent more than three decades with the oil giant and endured a couple of challenges that helped prepare him for United - living through a Chapter 11 restructuring when he was head of Texaco's U.S. refinery business and then becoming chairman and chief executive at the time of its merger with Chevron.

The bespectacled CEO shrugs off most criticism with an even temper, but allowed that he finds some sniping at United's situation irritating and takes note of those who predict failure.

"I distinctly remember suggestions from industry pundits that it was impossible that we would reach" agreements with employee unions last year on $2.5 billion in annual labor concessions, he said. "So I find it both curious and encouraging that that skepticism has now been replaced by a perception that more needs to be done."

Retired Texaco president and CEO James Kinnear, a mentor and friend, said Tilton was a big motivator during the oil company's bankruptcy.

"He is extremely good with people," he said. "The people who work with him and for him really love the guy. And he's intuitive. ... It does not surprise me that in dealing with the labor unions and the whole spectrum of people who work at United, he's done a good job."

Union leaders declined to comment for this story. One cited concern about impending change at United if the bid for government backing fails and particular sensitivity in the wake of the latest painful concessions on employee retirement benefits.

If there is one thing Tilton would like to change about the marathon bankruptcy restructuring, it likely would be the runup in oil and jet fuel prices, which is benefiting his old industry while costing cash-needy United an additional $750 million this year. He joked that "my timing wasn't all that great" in changing industries.

Regardless of setbacks, he remains steadfastly passionate about the job that United and its employees have done in the air while the airline has been shaking up its finances and fleet.

"This company continues to perform at a higher level than it ever has historically - both in the context of on-time performance, reliability and customer satisfaction," he said. "Those things don't happen typically in a restructuring."

On the Net:

www.united.com