United Airlines' 60,000 U.S. employees stand to gain control of the company in return for six years of wage and benefit concessions under a deal approved by its board of directors.
If endorsed by United pilots and Machinists and by shareholders of UAL Corp., United's parent, the deal would create the largest employee-owned company in the nation. Approval could take at least four months.By cutting United's costs, the employee buyout would also allow the company to compete against budget airlines like Southwest and could mean lower fares as United's biggest rivals feel the pressure.
Employees would get at least 53 percent of UAL's stock in exchange for cuts of up to 20 percent in labor costs. United valued the concessions at more than $4.5 billion; its unions put them at $5.15 billion.
The UAL board's approval of the deal, worth $173 per share to UAL stockholders, was announced after the market closed Wednesday. But approval was expected, and UAL rose $4.25 to $148.50 on the New York Stock Exchange.
"For the first time, majority interest in a global air carrier will rest with its employees," said Stephen M. Wolf, UAL chairman and chief executive. "United's employees will share in the company's success and will have substantial incentive to ensure that United Airlines remains a global aviation leader."
Employees hold minority stakes in TWA, Northwest, Alaska Airlines, Delta, Southwest, USAir and Hawaiian Airlines.
UAL, with 83,000 workers worldwide, would become the largest U.S. company with majority employee ownership, ahead of Florida's Publix Supermarkets, with 65,000 workers.
UAL has lost more than $1.2 billion since 1991 but recorded a $15 million profit through the first three quarters of this year. American and Delta are in similar straits.
"Overnight, American and Delta's situation has significantly worsened," said Joseph Blasi, a professor of labor-management relations at Rutgers University in New Brunswick, N.J. "They have to come up with a restructuring which radically cuts their costs and creates a Southwest type of unit. And they have to do it faster because United already has beat them to it."
Harold L. Sirkin, a consultant to the airline industry, said employee ownership may be the key to survival for the Big Three airlines.
"A highly motivated work force is an immense competitive tool," Sirkin said. "And the more ownership an airline places in the hands of its employees, the more likely that carrier is to improve its customer service."
At United, the employees' stake could rise to 63 percent if the stock performs well in the year after the deal becomes final.
Wolf and John C. Pope, the president and chief operating officer, are expected to leave the company. The unions have chosen Gerald Greenwald, the former heir apparent to Lee Iacocca at Chrysler Corp., as Wolf's successor.
Wolf and Pope stand to make a total of more than $45 million from the employee buyout, compensation consultant Robert Salwen said. United spokesman Joe Hopkins would not comment on the figures.