United Airlines

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United Airlines, the primary subsidiary of the UAL Corporation, is a major airline of the United States with its headquarters located in unincorporated Elk Grove Township, Illinois, near its largest hub at Chicago's O'Hare International Airport.

As of December 31, 2005, it was the world's fourth-largest airline in terms of total passengers transported (behind American Airlines, Delta Air Lines and Southwest Airlines), second-largest in terms of revenue-passenger-kilometers (behind American Airlines), and third-largest in terms of total operating revenues (behind Air France-KLM and American Airlines). It employs around 57,000 people and operates about 460 aircraft.

On February 1, 2006, United emerged from Chapter 11 bankruptcy protection under which it had operated since December 9, 2002, the largest and longest airline bankruptcy case in history.

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Destinations

United Airlines operates more than 3,400 flights a day to more than 200 U.S. domestic and international destinations from its hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C. Template:See

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Routes

United operates extensive domestic route networks concentrated in the Midwestern and Western United States and is prominent in transcontinental, transatlantic, and transpacific service. It is by far the leading US carrier to Hawaii and to Asia, flying 37,191,711 transpacific RPKs in 2004. It is also one of only two US carriers permitted to fly to London Heathrow Airport under the Bermuda II agreement, and the only US carrier which operates its own aircraft from the mainland US to Australia (Hawaiian Airlines flies from Honolulu to Sydney and Continental Airlines maintains a route from Guam to Cairns).

United operates a low-cost leisure airline called Ted. The name is taken from the last three letters of its parent United. Ted serves leisure destinations within the United States and Mexico with 240 daily flights utilizing 56 aircraft.

United has focused for the last several years on its international presence, notably in the People's Republic of China (with nonstop flights to Beijing and Shanghai from its hubs in Chicago and San Francisco.) These routes offer a higher proportion of premium fare passengers while being relatively insulated from the cutthroat competition in the domestic market, especially from low-cost carriers. United has also focused more on Latin America, a region from which it had largely retreated in the last decade, and added new destinations and frequencies to Mexico and the Caribbean and will continue to do so into the next decade.

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Fleet

As of December 31, 2005 United operated 460 aircraft, 230 owned and 230 leased, with a weighted average fleet age of 10.7 years.

United is one of only two US major carriers (the other being American Airlines) which still operate three-class service, mostly on international and high-revenue domestic routes. Most flights within North America and to Hawaii are operated on two-class aircraft, while all Ted aircraft are one-class. United brands its classes as UnitedFirst, UnitedBusiness, and UnitedEconomy. As with most other airlines, however, actual service level depends on the route, flight, and aircraft configuration.

United's mainline fleet features Economy Plus, a forward section in the economy cabin that offers an additional 5 to 6 inches (127 to 152 mm) of space although cabin service is the same. Seats in this section are reserved for passengers on certain high-fare tickets, for Premier members of United's frequent flyer program, and elite-level members of Star Alliance frequent flyer programs. As of August 2005, Economy Plus access was also available to non-elites through an annual subscription fee or a per-flight upgrade fee.

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The Boeing 767 and 757, the A320 and A319, and the 737-300 and 737-500 have common type ratings; flight crews are certified to operate either aircraft without any additional training. The A320 and A319, and to a lesser extent the two 737 types, are so commonly substituted for one another that economy row numbers have been synchronized between the two.

United was the launch customer for a number of aircraft types, including the Douglas DC-10 (with American Airlines) and several Boeing aircraft: the 727 (with Eastern Airlines), the 737-200, the 767, and the 777.

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Alliances and partners

United's regional airline feeder operation is United Express. United Express is the marketing name for several small airlines that operate under contract to fly passengers from small cities in the U.S. and Canada to United hubs. Although the aircraft are painted in United colors, they are separate companies with different crews and management.

UA is a founding member of the Star Alliance, through which it is a marketing partner of 16 other international carriers. It has special partnerships with Star members Lufthansa (including profit-sharing on certain transatlantic routes), and with US Airways (featuring closely linked frequent flyer programs.)

Separately, United currently codeshares with SNCF French Rail as United Ground Link to stations in France and has marketing agreements of varying intimacy with Aeromar, Air Dolomiti (a subsidiary company of Deutsche Lufthansa AG), Air China, Aloha Airlines, Continental Connection (operated by Gulfstream), Great Lakes Airlines, Emirates, Qatar Airways, Shanghai Airlines (commencing May 15, 2006), and Virgin Blue.

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History

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Early beginnings

UAL traces its claim to be the oldest commercial airline in the United States to the air mail service of Walter Varney. Varney's chief pilot, Leon D. "Lee" Cuddeback, flew the first Contract Air Mail flight in a Swallow biplane from Varney's headquarters in Boise, Idaho to the railroad mail hub of Pasco, Washington on April 6, 1926 and returned the following day with 200 pounds of mail. April 6th is reckoned in the United Airlines company history as both its own birthday and date on which "true" airline transport—operating on fixed routes and fixed schedules—began. Varney Airlines' original 1925 hangar served as a portion of the terminal building for the Boise Airport until 2003, when the structure was replaced.

In 1927, airplane pioneer William Boeing founded his own airline, Boeing Air Transport, and soon began buying other airmail carriers, including Varney's. Within four years, Boeing's holdings would grow to include a number of airlines, airplane and parts manufacturing companies, and several airports. In 1929, the company changed its name to United Aircraft - Transport Corp. Image:United Airlines aircraft taking off at Schiphol Airport.jpg In 1930, as the capacity of airplanes proved sufficient to carry not only mail but also passengers, Boeing Air Transport hired a registered nurse, Ellen Church, to assist passengers. United claims Church as the first airline stewardess.

Following the Air Mail Scandal of 1930, the Air Mail Act of 1934 banned the common ownership of manufacturers and airlines. United Aircraft-Transport's President Philip G. Johnson was forced to resign and went on to Trans-Canada Airlines, the future Air Canada. William Boeing's company was broken into three: a parts supplier (the future United Technologies), an aircraft manufacturer (the Boeing Airplane Company), and an airline group—United Air Lines. The airline company's new president, hired to make a fresh start as airmail contracts were re-awarded in 1934, was William A. Patterson, who remained as president of United Airlines until 1963.

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Expansion into a national carrier

United's early route system, formed by connecting air mail routes to one-another, operated essentially north-and-south along the West Coast, and east-to-west along a transcontinental route from San Francisco to the Midwest and Mid-Atlantic states via Denver, Colorado. The early interconnections made at San Francisco and Denver during this early era became the basis of major United hubs in these cities, and still exist today.

During World War II United trained ground crews, modified airplanes for use as bombers, and transported mail, material, and passengers in the war effort. Post-war United benefitted from both the wartime development of new airplane technologies (like the pressurized cabin which permitted planes to fly above the weather) and a boom in customer demand for air travel. This was also the period in which Pan American Airways established a Tokyo hub and revived its Pacific route system that would later be acquired by United.

On November 1, 1955, United Airlines Flight 629, which was flying from Stapleton Airport in Denver to Portland, Oregon, was bombed, killing everyone on board. The bomb was planted by a man named Jack Graham, who was executed a year after the explosion [1].

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The company merged with Capital Airlines on June 1, 1961, making it the world's largest commercial airline and giving it a route network covering the entire United States.

In 1968 the company reorganized, creating UAL Corporation, with United Airlines as a wholly owned subsidiary.

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Deregulation

Image:UA747 HNL 1973.gif United had begun to seek overseas routes in the 1960s, but the Transpacific Route Case (1969) denied them this expansion. It did not gain an overseas route until 1983, when they began flights to Tokyo. By the end of that year, United had flights to 13 Pacific destinations, many of which were with route contracts purchased from the ailing Pan Am.

Economic turmoil, labor unrest, and the pressures of the 1978 Airline Deregulation Act greatly affected the company, which incurred losses and saw a greatly increased turnover in its senior management through the 1970s and early 1980s.

In May 1981, one week after archrival American Airlines launched AAdvantage, the first frequent flyer program, United launched its Mileage Plus. The Wall Street Journal mistakenly reported United's program to be the first.

In 1982, United became the launch customer for the Boeing 767, taking its first delivery of 767-200s on August 19th.

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Strike of 1985

On May 17, 1985 United's pilots went on a 29-day strike claiming the CEO, Richard Ferris, was trying to "break the unions." They used management's proposed "B-scale" pilot pay rates as proof. American Airlines already had a B-scale for its pilots. Ferris insisted United had to have pilot costs no higher than American's, so he offered United pilots a "word-for-word" contract to match American's, or the same bottom line numbers. The United ALPA-MEC rejected that offer because it meant they would not get their deferred pay raise. The only choice left, to achieve parity with American's pilot costs, was to begin a B-scale for United's new-hire pilots. Ferris wanted that B-scale to merge in the captain's ranks, which was more generous than American's B-scale, which never merged at all. In the final hours before the strike, nearly all issues had been resolved, except for the time length of the B-scale. It appeared that would be resolved too as negotiations continued. ALPA negotiators delivered a new counter-proposal at 1220 A.M. in an effort to avoid the strike. However, MEC Chairman Roger Hall, who was hosting a national teleconference with F. Lee Bailey, declared the strike was on at 1201 A.M., on May 17, without consulting the negotiators, who believed they were about to agree on all contract terms with United's management negotiators.

That struggle cost the airline $1 billion, and provoked a long period of labor unrest and financial deterioration that culminated in bankruptcy nearly 20 years later. Dubinsky forced the divestiture of the Allegis hotels and car rental businesses, by making it clear United would never have labor peace until that was done. Allegis divested its non-airline properties in 1987 and reverted to the name UAL Corp. That helped clear the path for the United Pilots to do an ESOP takeover of United, which eventually did happen in 1994.

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Employee Stock Ownership Plan

The fall of Pan Am offered new opportunities for United. In 1991 the company initially expanded dramatically, purchasing Pan Am's former routes at London Heathrow Airport and paving the way for the company's first transatlantic flights. However, the aftermath of the Gulf War and increased competition led to losses of $332m in 1991 and $957m in 1992.

In 1994, 55% of company stock was given to employees in exchange for salary concessions from its unions. The ESOP (Employee Stock Ownership Plan) made United the largest employee-owned corporation in the world. It used the opportunity to create a low-cost subsidiary, Shuttle by United, in an attempt to compete with low-cost carriers.

There were three previous attempts to form an ESOP at United, in 1987, 1989, and 1990. Fees paid to advisors on both sides totaled $145 million for all four ESOP plans. An internal pilots' union report by Thomas Sullivan (U.S. Attorney for northern Illinois), revealed that "pilot union leaders made secret agreements in 1989 and 1994 to pay millions of dollars in fees to lawyers already on the union's staff or on retainer. They did not disclose these fees to the rank and file."

That Sullivan report said that Roger Hall, the United-ALPA-MEC chairman, had authorized a payment of $2 million to Charles Goldstein, who was the union's own staff lawyer, but he did not reveal that to his board. The report also concluded that Hall and Goldstein had violated union rules, and many of United's pilots openly complained that the advice from Goldstein could hardly have been objective if he knew the ESOP had to be successful in order to receive that $2 million fee. Union leaders agreed to let Goldstein keep $750,000 of that $2 million, after he threatened a lawsuit. Hall's predecessor, Frederick Dubinsky, also did not reveal to the rank and file that he had authorized a payment of $375,000 to Goldstein after the failed ESOP attempt of 1989. Both Hall and Dubinsky denied they ever did anything wrong, but Hall did resign upon request of the pilot union board.

The Sullivan report also uncovered a $4.12 million "success" fee to be paid to Cohen, Weiss & Simon, which had been receiving hourly billing payments from the union for its work on the ESOP buyout. Again, that fee wasn't common knownledge until after the ESOP was completed. Once that became known, Cohen, Weiss & Simon agreed to return the entire $4.12 million.

United CEO Wolf got a consulting job with Lazard Freres, the very investment company he had hired to advise United's board during the ESOP buyout process. Stewart Oran, the key legal advisor to the pilots' union during all 4 ESOP plans, received a $5.5 million package to join United's management as legal counsel after the ESOP was formed. Meanwhile, all employees who participated in the ESOP took pay cuts ranging from 15 to 25%. They did that in return for the ESOP stock that they received, which eventually became worthless, when United was forced into bankruptcy. [USA Today, "Workers took pay cut while others got rich," July 12, 1995]

In 1995, Roger Hall and Frederick Dubinsky filed a lawsuit against their own MEC, ALPA National, and named numerous ALPA individuals, including Randolph Babbit, the President of ALPA. They alleged that they were libeled and defamed and that their privacy was invaded as a result of an August 1994 letter that alleged they had been guilty of criminal conduct in relation to the ESOP buyouts. The trial court dismissed 15 of the 18 counts in the complaint, but did sustain 3 counts. Both sides appealed and the appellate court reversed the dismissal of 4 of the 15 counts and sent the case back to the trial court for further proceedings. [Chicago Daily Law Bulletin 7/9/99]

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Turn of the century developments

In 1997, United founded the Star Alliance with Air Canada, Lufthansa, SAS and Thai Airways.

United was a launch customer of the Boeing 777 and had significant input on its design. It was also the first airline to introduce the twin-jet in commercial service.

In May 2000, United announced plans to acquire competitor US Airways in a complex deal valued at $11.6 billion. The offer drew immediate scorn from consumer groups and employees of both airlines. By the following year, regulatory sentiment was against the deal, and United withdrew the offer just before the Department of Justice barred the merger on antitrust grounds in July. The two airlines subsequently formed a partnership that led to US Airways's entrance into the Star Alliance.

May 2000 also saw a bitter contract dispute between United and its pilots' union. Planning for the busy summer season, United had counted on its pilots flying overtime. However, the pilots could not be forced to work overtime, and most pilots refused to fly the extra hours. Although United knew they would have to cancel numerous flights if this were to happen, they did not hire new pilots to make up for the potential shortage. Over the summer, United ended up having to cancel a large portion of its schedule at its major hubs. Eventually, CEO Jim Goodwin and the rest of the management had to get the pilots back in the cockpits and quickly offered the pilots a 48% increase over four years with up to 28% upfront. The large increase in pay and the loss of many of its frequent fliers, especially business travelers, started United on the road to bankruptcy. Coupled with the terrorist attacks of September 11th, 2001 and the resulting economic and tourism downturn, United's economic woes went from bad to worse.

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Operation Bojinka and September 11th

Operation Bojinka, Ramzi Yousef and Khalid Sheik Mohammed's plot against a large number of airliners targeted eight United aircraft flying transpacific routes on January 21, 1995. While this attack was prevented by an apartment fire in Manila, a "descendant" of the project perfected by Sheik Mohammed would cause death on United aircraft six years later.

As part of the September 11, 2001 Terrorist Attack, two United Airlines planes were hijacked, a Boeing 767-222 (Flight 175) that crashed into one of the twin towers of the World Trade Center in New York City, and a Boeing 757-222 (Flight 93) that crashed in rural Pennsylvania. The latter was suspected to have been directed towards either the White House or the United States Capitol building.

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Bankruptcy and reorganization

United benefited from the dot-com boom, which boosted traffic to its San Francisco hub, but failed to keep its costs under control and entered a downward spiral of losses after the bubble burst. In 2001, the company lost $2.14 billion on revenues of $16.14 billion and applied for a $1.5 billion loan guarantee from the federal Air Transportation Stabilization Board established in the wake of the September 11 attacks. When the application was rejected in late 2002, the company was forced to seek debtor-in-possession financing from commercial sources to cover the expected future losses.

Unable to secure additional capital, UAL Corporation filed for chapter 11 protection against bankruptcy in December. The ESOP was terminated, although by then its shares had become virtually worthless. Blame for the bankruptcy has fallen on the events of September 11, which triggered financial crisis in all the major North American airlines. However, the rise of low-cost carriers, labor disputes, and problems within the management structure of the company also contributed significantly.

United has continued operations during its bankruptcy, but has been forced to cut its costs drastically and under delicate terms. Tens of thousands of workers were furloughed, and all city ticket offices in the US closed. It cancelled several existing and planned routes, and eliminated its entire Latin American gateway and flight crew base at Miami International Airport after March 1, 2004.

At the same time, the airline has continued to invest in new projects. On November 12, 2003, it launched a new low-cost carrier, Ted, to compete with other low-cost airlines. In 2004 it launched its luxury "p.s." (for "premium service") service on re-configured 757s from JFK Airport in New York City to Los Angeles and San Francisco. The service is targeted to attract business customers and high-end leisure customers in the coast-to-coast market.

On December 9, 2004, the airline made history when UA869 (747-400) landed at Ho Chi Minh City, Vietnam. The scheduled flight from San Francisco via Hong Kong was the first by a U.S. airline since the end of the Vietnam War, when Pan Am halted service shortly before the fall of Saigon.

Financial pressure on the airline remains heavy. The SARS epidemic in 2003 depressed traffic on United's extensive Pacific network. The soaring cost of jet fuel in the aftermath of the 2003 Iraq war has also eaten away at profits. United has made, withdrawn, and followed several fare hikes on overseas routes, citing rising fuel costs, in 2004 and 2005. Indeed, two days after its triumphant first flight to Vietnam, United announced that it would cut U.S. flight capacity by 14% after the holidays and add more international flights, which are more profitable.

United has taken advantage of its Chapter 11 status to negotiate hard-to-cut costs with employees, suppliers, and contractors, including cancellation of feeder contracts with United Express Atlantic Coast Airlines (which became Independence Air) and Air Wisconsin (which became a US Airways Express carrier).

Most controversial of all, however, was the 2005 cancellation of its pension plan, the largest such default in U.S. corporate history. It renegotiated its contracts with the pilots' and mechanics' unions for lower pay; however, the Association of Flight Attendants resisted until the bankruptcy court ruled in United's favor. Criticism was also leveled at the CEO, Glenn Tilton, for demanding pay cuts from employees while receiving the highest salary of any major U.S. airline CEO[2]. Although Tilton's salary was the highest in the industry, his pay mix did not include the level of stock options and bonuses granted to his counterparts.

Originally slated to exit bankruptcy protection after 2½ years in the third quarter of 2005, United requested yet another extension in light of record-high fuel prices. On August 26, 2005, the bankruptcy court extended the airline's exclusive right to file a reorganization plan to November 1, although it also stated firmly this extension would be the last. United announced at the same time it had raised $3 billion in exit financing and filed its Plan of Reorganization, as announced, on September 7, 2005.

The bankruptcy court approved the restructuring plan on January 20, 2006, clearing the way for United to exit bankruptcy on February 1, 2006, and finally return to normal operations. Its emergence as a smaller, much more efficient carrier has in turn put additional pressure on its competitors to reduce costs and capacity.

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Incidents and accidents

United Airlines has had its share of accidents, much like any other major airline. A selection of these accidents is as follows:

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Brand

United adopted a red, white and blue shield logo in 1936, but its use varied widely and was eventually abandoned altogether in the early 1970s. In 1974, the airline commissioned designer Saul Bass to develop a new logo. The "tulip" logo of colored stripes representing overlapping letter "U"s remains in use today with only slight modification.

The early slogan "The Main Line Airway," emphasizing its signature New York-Chicago-San Francisco route, was replaced in 1965 with "Fly the Friendly Skies." The "friendly skies" tagline was used until 1996, sometimes with other United Slogans such as "The Great White Way to New York" (1971-1972), "The Friendly Skies of your land" (a/k/a "Mother Country") (1972-1976), "You're the boss" (1976-1977), "United we fly" (1977-1978), "That's what friendly skies are all sbout" (1980), "You're not just flying, you're flying the Friendly Skies" (mid 1980's), "United - Rising" during the mid 1990's, and "We Are United" following the September 11th incident. Most recently, United started using the tagline "It's time to fly", voiced over by Robert Redford in their famous animated commercials.

United's theme song is George Gershwin's 1924 "Rhapsody in Blue", which it licensed from Gershwin's estate for $500,000 (as noted in Eldred v. Ashcroft 537 U.S. 186 (2003)). "Rhapsody" would have entered the public domain in 2000, but the Sonny Bono Copyright Term Extension Act of 1998 extended its copyright another 20 years.

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See also

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External links

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Official sites

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Marketing

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Employees

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Credit risk

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History

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Customer relations

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Frequent flyer miles

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Photos

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Virtual airlines

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Fleet information

Members of the Star Alliance Image:Star alliance rechts.jpg
Air Canada • Air New Zealand • ANA • Asiana Airlines • Austrian Airlines • bmi • LOT Polish Airlines
Lufthansa • SAS Scandinavian Airlines • Singapore Airlines • South African Airways • Spanair • Swiss
TAP Portugal • Thai Airways • United Airlines • US Airways • Varig

Regional Members: Adria Airways • Blue1 • Croatia Airlines

Former members: Ansett Australia • Mexicana


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