Employees take over at United: Staff concessions on pay expected to increase profit after the airline buyout
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Your support makes all the difference.UNITED AIRLINES is poised to become an employee-owned company, following yesterday's positive vote by UAL shareholders on a restructuring that will give United workers a 55 per cent majority stake in the carrier.
According to United, which was advised on the deal by CS First Boston and Lazard Freres, 70 per cent of shares were voted in favour of the employee buyout. Existing shareholders will receive a cash payout of dollars 84.81 (pounds 54.22) per share, and will also own 45 per cent of the airline.
Higher profitability is forecast in the coming years as a result of concessions from employees. Pilots have agreed to a 15.7 per cent wage cut plus more flexible working hours, and machinists and other employees have accepted pay cuts of between 8.25 and 9.7 per cent.
The flight attendants did not support the deal, which could lead to future strife between them and the other unions. But United's management believes it has laid the foundations to compete more effectively in the battle raging within the US aviation industry.
The new United chairman, Gerald Greenwald, said yesterday that the deal had solved the carrier's two main problems: a history of poor labour relations and its high cost structure.
The United move has been prompted in large part by Dallas-based Southwest Airlines, the fast growing, low-cost carrier. Southwest has been running full-page advertisements in US newspapers this week, saying: 'Southwest and other airlines have a love/hate relationship. They hate the way we've lowered airfares, but they'd love to have you think it was their idea.'
United and the other long-established carriers, such as Delta, American, and USAir, in which British Airways has a stake, are feeling the heat from Southwest's cheap airfares. Continental Airlines, based in Houston, has set up a low-cost carrier, CALite, and United is to press ahead with the launch of the United Shuttle.
The experiment in industrial democracy has led to some scepticism within US industry. Mr Greenwald has had to endure public sniping from his former boss at Chrysler Corp, Lee Iacocca. But the Clinton administration has been a behind-the-scenes supporter of the buyout.
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