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Not So United At United These Days

News: Analysis & Commentary: LABOR


The ESOP has some nonunion employees feeling shorted

Four years after United Airlines Inc. workers swapped wage and benefit cuts for a 55% stake in their company, most of the carrier's 92,000 employees are flying high. After all, shares of parent UAL Corp. have soared 350%.

So how come 19,000 check-in and telephone reservation agents are so frustrated that they're considering joining a union to get what they want? Mainly because they feel they missed out on the goodies. They say they gave up more than their unionized colleagues in exchange for less stock. And agents hired since the Employee Stock Ownership Plan (ESOP) began in 1994 make $9 an hour and less--even with seniority. "It's a very austere pay scale," says Joseph W. Lewis, a 54-year-old customer service agent in Tacoma, Wash., who makes $7.90 an hour after three years on the job.

The International Association of Machinists (IAM) hopes to take advantage of the resentment and sign up agents in what would be the largest private-sector union drive since 1984. On Apr. 1, the IAM--which already has 26,000 UAL mechanics--filed for a union election, which could come this summer. A victory would allow agents to bargain for higher wages and strengthen their hand when talks begin next year on whether to renew the ESOP in 2000.

The situation is tricky for United, the largest union ESOP company. An anti-union stand would be difficult for CEO Gerald Greenwald, who was actually selected by the unions. For now, he is taking no public position, and United executives decline comment, but the IAM is angered by his refusal to voluntarily recognize the union after a majority of agents signed authorization cards. "Their action was an insult," fumes IAM Vice-President William L. Scheri.

How did agents wind up like this? During ESOP negotiations, former UAL Chief Executive Stephen Wolf hired a team of bankers and lawyers to represent agents. They cut a worse deal, Scheri says, than the IAM did. For example, mechanics would have had a 5% pay hike in 1995 under their contract. They gave up the raise and made other concessions for stock. But agents, who probably would have gotten the same hike, got much less stock and no raise. An agent earning $17 an hour now owns $32,000 in stock, vs. $72,000 for a similarly paid IAM member.

Then there's the "c-scale," the wage structure for agents hired post-ESOP. They start out at less than $7 an hour--and work next to a pre-ESOP agent earning up to $18 an hour. They have no pensions and fewer health benefits. In contrast, unionized agents at Northwest Airlines Inc. start at $10 an hour. And even before USAir Inc. agents joined the Communications Workers of America last year, they earned from $8 to $18.70 an hour, CWA officials say. The disparities have raised United's agent turnover to nearly 50% a year, insiders say. Some workers don't even last through training. "People have gone to the bathroom during the first class and haven't come back," says Pamela A. King, 47, a reservations agent who has been with United since she was 19.RESTLESS. The IAM's drive--its third at UAL this decade--is the latest effort by organized labor to sign up the only major part of the industry that's not unionized. CWA's USAir victory drew in 10,000 agents, and the union is running a drive at American Airlines Inc.

Meanwhile, record airline profits are stirring labor activism. In recent days, Northwest has been forced to cancel up to 70 flights a day as machinists and pilots staged an informal slowdown to protest proposed wage cuts. UAL, which on Apr. 22 reported tepid 1.4% earnings growth because of the slowdown in Asia, is looking to control costs, too. Adding 19,000 members to the IAM roster won't help. So much for peace in the family.By David Leonhardt in Chicago and Aaron Bernstein in Washington, with bureau reportsReturn to top

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