United CEO: Airline came 'close' to liquidating

updated 1:09 p.m. ET Feb. 1, 2006

CHICAGO - The restructuring of UAL Corp.’s United Airlines, which was in danger of going under in 2002, was put in the hands of an oilman.

Despite widespread skepticism that an industry outsider could steer United through the complexities of the airline industry, CEO Glenn Tilton successfully led a more than three-year restructuring that enters a new era Wednesday with the company’s departure from Chapter 11 bankruptcy.

In a wide-ranging interview Tuesday with The Associated Press, Tilton credited United’s journey “from the abyss to resilience” to the commitments of employees and other stake-holders and said all have combined to create “a sense of hope within the company that wasn’t there previously.”

Here are some excerpts from the interview:

AP: What are your feelings as United comes out of the biggest and longest airline bankruptcy in U.S. history?

Tilton: I think my feelings are a sense of closure on that chapter of our work, and a definite feeling of transition from that chapter to the next. I’d say that my dominant feeling is now it’s really time to fly, to move forward.

AP: Was it more difficult than you expected?

Tilton: The environment in which we restructured was more difficult than anybody could have imagined — the external environment, which created a complexity that we couldn’t have anticipated. The back door of 9/11, Iraq, SARS, oil prices.

AP: What surprised you, good or bad, about the restructuring?

Tilton: (After) a career in the energy industry, I’m accustomed to the unexpected event. But all of them coming in that compressed period of time — that was surprising to everybody in the industry.

AP: How close was United to liquidating at the start of the process?

Tilton: The company was so dysfunctional, it had come off such a difficult period of time ... It was close.

I think the story of this restructuring when it’s written will have one word, and that’s consensual. The real story of this bankruptcy, as much as what happened, is what didn’t happen. No strikes, no litigation, two rounds of consensual agreements, a consensual deal with the PBGC (Pension Benefit Guaranty Corp.) and replacement pensions consensually negotiated with all labor groups.

AP: How have high oil prices changed the airline industry?

Tilton: High oil prices have forced everybody to reckon with them, and have in essence been an equal opportunity margin compressor. It is the one thing we all must do.

AP: Do you still expect United to make an operating profit in 2006?

Tilton: It’s going to depend on oil prices. We’ve put ourselves in a position to be able to compete with the effect of high oil prices in 2006, competitively with peers. The way we want to be measured is how we perform relative to peers. I’m confident that the work that we’ve done will put us in a position to have a competitive result whatever the market environment may be.

I don’t think the issue, until the industry sorts itself out, is so much competing profitability stories as it is resilience stories.

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