It hasn’t gotten easier since.
His tenure has since mirrored the roller-coaster ride of the entire industry, as United has gone in and out of bankruptcy, had contentious relations with its unions and suffered steep losses. Even as the airline has sought to cut capacity and reduce costs, it has had only one profitable year since Mr. Tilton took over in 2002.
Now, Mr. Tilton is seeking once more to find salvation in a tie-up with a competing airline. But as United and US Airways resume their merger talks — the third go-round since 2000 — one question remains: Is Mr. Tilton simply trying to make the best of a weak hand?
He has long been a champion of merging airlines to restore consistent profits in the bruising world of airline competition. Along the way, he has held talks with most of the major carriers, courted Continental Airlines and even Delta Air Lines, and rhapsodized at length about the benefits of consolidation.
“If you’ve attended a lunch where Glenn Tilton has spoken in the past eight years, he would dust off the same index card about the need for consolidation,” said Robert W. Mann, an airline analyst based in Port Washington, N.Y. “He has been very consistent, very determined and will not be deterred.”
Mr. Tilton was not available for comment on Thursday.
A combination of United and US Airways would create the second-largest United States carrier by traffic. The merger of Delta Air Lines and Northwest Airlines, completed at the beginning of this year, created the current industry leader.
United and US Airways have not commented, but people who had been briefed on the discussions said on Wednesday that the airlines were discussing a merger. Wall Street investors and analysts welcomed the news. Shares of all airlines rose sharply on Thursday, as investors speculated on other possible mergers.
US Airways shares rose 10.7 percent, to close at $7.55. Shares of UAL Corporation, the parent company of United, rose by 6.75 percent, to $20.23.
“The potential for additional industry consolidation is an unambiguous positive,” wrote Gary Chase, an airline analyst at Barclays Capital. He estimated that a combination of United and US Airways would result in cost savings of $250 million to $400 million a year.
A long-time energy executive, Mr. Tilton joined United in 2002 after serving as chairman of Texaco until it was bought by Chevron. Once at the airline, he brought in a new management team but could not avoid bankruptcy after his application for government loan guarantees after the Sept. 11 terrorist attacks was turned down.
What followed was the industry’s longest bankruptcy proceedings, dragging on for more than three years. While many airlines have sought Chapter 11 protection to restructure their operations, Mr. Tilton used the lengthy proceedings to force pay and benefit cuts on flight attendants, pilots and mechanics, and slashed employee pensions.
Along the way, Mr. Tilton alienated both United pilots and flight attendants, who have called for his resignation.
Capt. Wendy Morse, who represents United pilots, said the merger talks had caused a “great deal of consternation among the pilots.”
Mo Garfinkle, a veteran airline consultant who is close to Mr. Tilton and United, said Mr. Tilton was often not given enough credit. “Glenn was laughed at by people in the industry when he joined, but he is probably the most underestimated and undervalued chief executive in the business,” Mr. Garfinkle said.
The airline industry has been losing money for much of the last decade. It has been pounded by a succession of troubles, starting with the Sept. 11 attacks, followed by the outbreak of the respiratory disease SARS in late 2002, then high fuel costs and finally, a major recession that cut deeply into travel.
Last year, United lost $651 million, a relative improvement from its staggering loss of $5.4 billion in 2008, at a time when oil prices surged. The company says it has been actively working to reduce its capacity, grounding 100 planes and raising new revenue through fees.
On Wednesday, United said that its average revenue per passenger per available seat mile, an industry metric representing how much money it earned from carrying one passenger for one mile, had increased 21.5 to 23.5 percent last month over March 2009. Compared with March 2008, last month’s revenue was 3.2 to 5.2 percent higher.
“A big part of the story here is how we’ve gone from being worst to first in a number of categories,” said Jean Medina, a company spokeswoman.
Perhaps more puzzling about the talks is why United, and Mr. Tilton, are still pursing a merger with US Airways. After all, that airline is not the preferred candidate for United. Continental Airlines would seem a more likely partner since its routes and international network are a far better match. United actively courted Continental in 2008, but Continental eventually walked away from a deal because of United’s poor financial health.
In the end, though, the issue in the airline business may not be who is the better match.
“Airlines are an ego-driven business,” Mr. Mann said. “I joke, but only partly, that the three biggest issues in airline consolidation are: What are we going to call it? Where is it going to be based? And who is going to run it?”
As it turns out, W. Douglas Parker, the chief executive of US Airways, has also been a strong proponent of mergers in the industry. In 2006, he made an unsuccessful bid for Delta, but was rebuffed. Before that, Mr. Parker led America West before it merged with US Airways in 2005.
Since deregulation of the airline industry in the late 1970s, overcapacity has been an issue, and explains why many airlines fail to earn adequate returns.
“We believe the industry needs to evolve into a more rational structure, and that consolidation may be part of that outcome, as it has in telecommunication industry,” said Thomas W. Horton, chief financial officer of AMR Corporation, parent company of American Airlines. “We have an industry that is too fragmented, with too many competitors, and with different ideas of capacity, pricing and strategic activity.”
Mr. Tilton still has many obstacles to overcome to complete a deal. Mergers in the industry are tough to put into practice, and many of the expected savings fail to materialize as they are gobbled up by new contracts and pay raises for employees.
Antitrust issues might also be a challenge, said Severin Borenstein, a professor at the Haas School of Business at the University of California, Berkeley, who served as an adviser to the Justice Department in 2000, when a previous merger attempt between US Airways and United failed.
“Tell me exactly, why you need to be big to compete?” Mr. Borenstein asked. “You also hear at the same time that you need to be small to compete, and that Southwest is eating your lunch. So it’s inconsistent.”
Go to Article from The New York Times »
