UAL's Creighton
Remains Upbeat
In the Face of Airline's Troubles
By SUSAN CAREY
Staff
Reporter of THE WALL STREET JOURNAL
CHICAGO -- After
announcing the largest annual loss in aviation history Friday, UAL
Corp.'s chairman and chief executive, Jack Creighton, sat down in his
conference room to a lunch of soup and salad. Dressed casually in a blue golf
shirt and sports coat, he chatted about his wife's pursuit of a doctorate in
historical archeology.
Nothing about Mr.
Creighton's demeanor during the interview suggested he was worried, even though
the troubles facing UAL's United Airlines -- a severe drop in traffic, an
impending strike deadline for mechanics, a low stock price and the huge loss --
are deep enough to justify outright panic.
"We have liquidity
and we have time," said the 69-year-old former paper-company executive.
Then he reaffirmed the sentiment he expressed when he took charge of the
world's second-largest airline three months ago: "I didn't take this job
to preside over a bankruptcy."
![[creighton]](./UAL_upbeat_files/image001.gif)
Whenever any company has a loss of
$2.1 billion in one year, as United did in 2001, there's a high risk of
failure. But there was a glimmer of hope in the announcement Friday of a
fourth-quarter loss, excluding extraordinary items, of $640 million, or $11.74
a basic share: Wall Street had been expecting the per-share loss to reach
$14.96. Expenses fell 23% from the previous year's quarter, mostly by cutting
capacity, furloughing workers and slashing capital spending. In other good
news, UAL announced it had arranged $775 million in new, private debt financing
and plans to add 127 daily flights to its April schedule. The company has $2.6
billion in cash, other assets it can borrow against, and it could apply for
federal loan guarantees if necessary, Mr. Creighton said.
However, quarterly
revenue sank 39% to $2.95 billion from $4.79 billion a year earlier, because
United, with its big West Coast presence and higher percentage of business
traffic, cut back more capacity and was hit harder than competitors by the
dot-com bust and the effects of weakened corporate profits on business travel.
UAL warned of a "significant" loss in the current quarter.
Investors knocked UAL
stock down $1.27 a share to $13.43 in New York Stock Exchange composite
trading. That's far from its 52-week high of $41.78.
Some analysts believe
UAL is getting a bum rap on Wall Street. Its labor costs, liquidity, access to
capital and current losses "are not materially different from
American's," said Sam Buttrick of UBS Warburg, referring to AMR
Corp.'s American Airlines. "Yet the market has United going bust and is
giving American a free pass."
Still, United's
problems are pressing. The 15,000 mechanics are due to vote Feb. 12 on whether
to accept a contract. If they turn it down, they could walk off the job Feb. 20
unless the union agreed to further negotiations or Congress imposed a
settlement. A strike could cripple the carrier.
Mr. Creighton predicted
that United's planes will be flying Feb. 21. The company's proposal to the
mechanics would bring them up to industry-leading wages and isn't far from what
they had sought. Mr. Creighton says United is putting together a plan to
"communicate the facts and consequences" of the mechanics' vote to
the work force.
Resolving labor issues
is Mr. Creighton's forte. Before retiring in 1977 from Weyerhaeuser Co.,
the Seattle paper-products giants, he orchestrated a turnaround that improved
union relations and transferred much decision-making to workers, even while
shedding one-fifth of the company's operating facilities.
![[UAL's stock]](./UAL_upbeat_files/image002.gif)
Mr. Creighton said he thinks UAL can
borrow from the Weyerhaeuser playbook if it succeeds in its ambitious
short-term goals: settling labor contracts outstanding, winning voluntary wage
cuts, raising capital and getting its fair share of the returning traffic and
higher ticket prices.
Mr. Creighton, no
airline expert, was drafted to this job from a seat on UAL's board. But like a
pilot who knows that passengers want to hear reassurance from the cockpit when
a jet hits turbulence, Mr. Creighton seems determined to exhibit confidence.
After the Sept. 11
attacks devastated airline travel, what UAL's 100,000 workers heard from Mr.
Creighton's predecessor, Jim Goodwin, in a letter was that United would
"perish" this year if it didn't stem losses. "The 'perish'
letter really took the stuffing out of people," said Mr. Creighton. The
day Mr. Creighton took the job, he visited employees in the bowels of Chicago's
O'Hare International Airport and found them "yearning for
leadership." He said, "In lost baggage, a large-proportioned lady
came up and hugged me and said, 'Are you my savior?' "
Although he is only an
interim CEO, Mr. Creighton has more in mind than just a financial recovery. He
says he hopes to set the airline on the road to fostering teamwork among its
management, simplifying operations, repairing relations with workers and
harnessing the potential in its 55% employee ownership. "I'm not here for
a long period of time, but it's incumbent on me to make sure the board of
directors understands what we're undertaking and buy into this renewal,"
he said. Mr. Creighton believes United's strong domestic and international
route network is a strategic advantage that can be parlayed into superior
industry performance.
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Mr. Creighton is
unlikely to solve all the airline's problems in his temporary job. But clearly
he indends to try. A lawyer and accountant by training, he raised his hand for
the position, even though taking it required him to come out of retirement, move
to Chicago and leave his wife behind in Seattle. To boot, he's doing all this
without pay.
His friends don't seem
to understand. William Ruckelshaus, a fellow retired executive, said he asked
him point blank: "Why in heaven's name would you take the UAL job?"
Mr. Creighton's answer: "I have a strong affection for the airline. The
first airplane ride I took, coming home from Army basic training, was on
United."
But Mr. Creighton
doesn't underestimate the hurdles. "This is a challenging job. I haven't
climbed any mountains lately," he jokes, referring to his trek last year
up Mount Kilimanjaro