United Faces Tough Morale Changes

By Staff Report

Jun. 15, 2005

United Airlines executives may be busy worrying about an employee strike, but the company will have to confront more long-term employee morale issues in the next several months.

After rounds of salary cuts and the pending termination of the company’s defined-benefit plan, United will be forced to deal with disgruntled workers and the task of convincing prospective employees that the carrier is a company for which they want to work.

Assuming that it does pull itself out of bankruptcy, United will have to find ways to make up for the fact that its compensation packages are among the lowest in its industry.

“Until those rates of compensation recover, that is going to be their biggest problem,” says Robert Mann, president of R.W. Mann & Co., a Port Washington, New York-based airline analyst.

United pays among the lowest salaries to flight attendants and machinists, two groups threatening to strike. The annual salary for a flight attendant who has worked for six years at United is $26,721, compared with $27,882 at Southwest Airlines and $29,331 at Delta Airlines. Top base salary for mechanics at United is $22.89 per hour, compared with $26.12 at Delta and $32.96 at Southwest.

Management will have to make some huge gestures to get employees to stay, says Richard Gritta, a professor of finance and transportation at the University of Portland. An amped-up 401(k) plan with a sizable match or a competitive profit-sharing program would be a good first step, but it’s going to take more than that, Gritta says.

When asked what United would have to do to improve employee morale, Sara Nelson Dela Cruz, a spokeswoman for Association of Flight Attendants, said nothing less than management stepping down would make a difference.

“This management team cannot run this airline,” she says. After 30 months of bankruptcy, Nelson Dela Cruz says, “they still don’t have a viable business plan.”

While the union would be open to discussion about a high match for its 401(k) plan, that does not address the benefits that have been lost, she says. The association is appealing the pension termination decision.

On May 16 United reached a tentative agreement with the Aircraft Mechanics Fraternal Association, by which the union allowed for more pay cuts in exchange for job security. The agreement is subject to a vote by union members. The airline is still in talks with the Association of Flight Attendants, and the International Association of Machinists on more pay cuts and other concessions. United is talking about adding a match to its 401(k) plan, but nothing has been decided, United spokesman David Dimmer says.

If United does make it through the next few weeks without strikes, industry observers think the bad press about the company will eventually fade from public memory. At one time, industry employees stuck together, but today that solidarity does not exist. Nor is there widespread support among the public.

Striking workers used to be able to rely on the community ostracizing employers for being anti-labor, but that isn’t the case anymore,” says David Gregory, a labor law professor at St. John’s University.

The reality is that since Sept. 11, there has been a huge pool of employees looking for work, Gregory says. “A good mechanic will have portable skills to take to another industry,” he says. “But for flight attendants or ticket people, whose skills really are not transferable, this may be the best they can get right now.”

Jessica Marquez


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