Worker Buyout at United
Cimini, Michael H., Muhl, Charles J., Monthly Labor Review
Touted as "a true landmark in the history of American business," shareholders Of UAL Corp., United Airline's parent company, overwhelmingly approved an employee buyout of the Nation's second largest air passenger carrier. The final buyout agreement provides approximately 48,000 participating employees--31,000 represented by the Air Line Pilots Association and the International Association of Machinists, and 17,000 nonunion workers--with a 55-percent equity stake in UAL Corp. In exchange, workers will make $4.9 billion in wage and work-rule concessions over the next 6 years. The employee stock ownership plan is unique in that United becomes the largest employee-owned company in the United States, and one of only a few healthy firms involved in an employee takeover. The concessions should significantly reduce the company's operating costs and enable it to compete more effectively in highly competitive domestic and global markets.
The shareholder vote, which capped 1 year of negotiations between the company and its major unions, was the fifth attempt at an employee buyout since 1987. The initial plan was introduced in July 1993 by a bargaining coalition consisting of the Pilots, the Machinists, and the Association of Flight Attendants. In September 1993, the Flight Attendants pulled out of the talks because of United's plan to establish a base for flight attendants in Taiwan, a move that would lead to elimination of domestic flight attendant jobs. A tentative agreement between the company and the two remaining unions in the coalition was reached in December 1993 and ratified in late March 1994. The final terms of that agreement were renegotiated in May of 1994 to give employees a larger stake in the airline as the result of a drop in the price of United's common stock.
The agreement calls for wage cuts over the next 6 years: 23.7 percent for 8,000 pilots represented by the Air Line Pilots Association, 14 percent for 23,000 employees represented by the Machinists, and 8.25 percent for 17,000 nonunion workers. Although the employees' initial equity stake in the company was set at 55 percent, their ownership share could increase to a maximum of 63 percent, depending on the average market value of UAL's new common stock 1 year after the buyout. …