united airlines introduction1
TRANSCRIPT
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UNITED AIRLINES INTRODUCTION
•UNITED AIRLINES is the largest employee owned enterprise in the US.
•In 1994 July, employees represented by the Air Line Pilots Association, the Internal Association of Machinists & non-union employees at United purchase 55% the company.
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TERMS OF THE EMPLOYEE STOCK OPTIONS
•Pilots & machinists accepted pay cuts.
•Non-union employees took 8.25% cuts in pay.
•Employees are guaranteed employment security for 6 years.
•Pilots accepted a two-tier wage plan.
•A “market hiring rate” was to be used in hiring future non-union, non-management staff.
•New recruits were to contribute 25% to their medical plan.
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•ALPA , IAM & non-union employee s each gained the right to appoint one member to the 12-member board of directors & to jointly select , four outside independent directors.
•These governance provisions last as long as the employees own atleast 20% of the company stock. This governance structure should stay in place until approximately 2019.
•Company profits have increased & the value of stock has increased.
•Labor relations have not changed.
•There is little evidence that employees enjoy greater involvement & voice in day-to-day issues.
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•Cultural change efforts have been largely symbolic & incremental rather systematic.
•Supervisors relations in numbers & changed role may have had negative results.
•Employment security has been maintained.
•Union representatives have influenced a number of critical decisions, including the section of CEO.
•Long-term future of ESOP rests on how the parties address several critical changes, facing them in the next 2 years.
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KEY EVENTS•The 1985 pilot negotiations , ESOP be itself in 1994 .
•The 1997 wage reopener , the passenger service agent organizing campaign .
•The regional jet negotiations flight attendants negotiations in 1997 .
•The issue of rest time for pilots flying 777 on pacific routes .
•Past and future leadership succession .
•The renegotiation of bargaining agreements & the ESOP .
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1985 PILOT NEGOTIATIONS
•A 1985 strike by United’s pilots set the stage for the series of events leading upto the 1994 ESOP .
•Effects linger in residual distrust between the union and management , as well as between political factors within the union .
•The issue strike was largely the company’s demand that pilots accept a ;long term , two – tier wage agreement that would allow United to compete on short – haul flights .
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•Union agreed to a modified two – tier provision, the pilot’s success in shutting down the airline & forcing a compromise signaled their considerable bargaining power to management.
•CEO Richard Ferris initiated United’s short-lived effort to diversify the company & make it a “ full – service “ travel business .
•He bought Hilton Hotels & Hertz Rent – a – Car . This diversification efforts was strongly opposed by the pilots & let their first bid to buy the company .
•Between 1997 & 1993 , the pilots made three additional efforts to engineer employee buyout of the airline .
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The ESOP deal :-
The ESOP negotiations focused on the financial accepts of the deal .
This narrow focus is a major cause of many problems .
ALPA was the moving party & was interest in gaining a voice in the governance process & some control over the strategic direction & decisions of the firm.
IAM was primarily interest in gaining job security.
Greenwald stated he was committed to spending upto 50% of his inaugural year with employees.
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TAKING STOP OF THE ESOP
•Recent data published by the Department of Transportation show that out of the 10 major US airline companies.
• United ranks 5th in passengers declined boarding, 9th in on-time performance, 10th in baggage mishandled & 6th in consumer complaints.
•90% of the profits are attributable due to:-
Labor cost, tax benefits of the ESOP
•;
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The increased demand for air travel experienced in the industry.
Savings and market growth associated with the regional jet / United Shuttle arrangement.