United Airlines

United Airlines {{Airline codes|UA|UAL|United}}, the major subsidiary of holding company United Air Lines Corporation {{nasdaq|UALAQ}}, is a major airline of the United States.

History

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.

Related Topics:
Air mail - Walter Varney - Contract Air Mail - Biplane - Boise, Idaho - Railroad - Pasco, Washington - April 6 - 1926 - Boise Airport - 2003

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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.

Related Topics:
William Boeing - 1929

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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.

Related Topics:
Registered nurse - Ellen Church - Stewardess

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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 maker (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.

Related Topics:
Air Mail Scandal - 1930 - Air Mail Act - 1934 - Philip G. Johnson - Trans-Canada Airlines - Air Canada - United Technologies - Boeing - William A. Patterson - 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 which still exist today.

Related Topics:
West Coast - San Francisco - Midwest - Mid-Atlantic states - Denver, Colorado

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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 benefited 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.

Related Topics:
World War II - Pan American Airways

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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 http://www.crimelibrary.com/notorious_murders/mass/jack_graham/index.html.

Related Topics:
November 1 - 1955 - United Airlines Flight 629 - Stapleton Airport - Denver - Portland, Oregon - Jack Graham

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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.

Related Topics:
Capital Airlines - June 1 - 1961

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

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Deregulation and labor unrest

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.

Related Topics:
1960s - Transpacific Route Case - 1969 - 1983 - Tokyo - Pan Am

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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.

Related Topics:
1978 - Airline Deregulation Act - 1970s - 1980s

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

Related Topics:
1981 - Frequent flyer program - American Airlines - AAdvantage - Wall Street Journal

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

Related Topics:
1982 - Boeing 767

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Between 1982 and 1987, in response to the reality of a deregulated market place, United attempted to diversify its business, to stabilize its finances and make its labor costs competitive with other airlines. It acquired the Westin and Hilton Hotel chains and the Hertz car rental company, and briefly changed its name to Allegis. The venture was profitable, but the management failed to tame its powerful labor unions.

Related Topics:
1982 - 1987 - Westin - Hilton Hotel - Hertz - Labor union

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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 pilots 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, however the pilots wanted to arrange their work rules, to achieve that. 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.

Related Topics:
May 17 - 1985

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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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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 trans-Atlantic flights. However, the aftermath of the Gulf War and increased competition led to losses of $332m in 1991 and $957m in 1992.

Related Topics:
Pan Am - 1991 - London Heathrow Airport - Gulf War - 1992

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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.

Related Topics:
1994 - Employee-owned corporation - Shuttle by United - Low-cost carrier

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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 and file."

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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 advise from Goldstein could hardly have been objective, if he knew the ESOP had to be successful, for him 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.

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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 commonly known about, until after the ESOP was completed. Once that became known, Cohen Weiss agreed to return the entire $4.12 million.

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United CEO Wolf got a consulting job with Lazard Freres, the very investment company he 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.

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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, alleging they were libeled and defamed and their privacy was invaded, as a result of an August 1994 letter which 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.

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

Related Topics:
1997 - ''Star Alliance'' - Air Canada - Lufthansa - SAS - Thai Airways

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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.

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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, however. 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.

Related Topics:
2000 - US Airways - Department of Justice - Antitrust

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Operation Bojinka and September 11

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.

Related Topics:
Operation Bojinka - Ramzi Yousef - Khalid Sheik Mohammed - January 21 - 1995 - Manila

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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. It is suspected to have been directed towards either the White House or the United States Capitol.

Related Topics:
September 11, 2001 Terrorist Attack - Boeing 767-222 - Flight 175 - World Trade Center - New York City - Boeing 757-222 - Flight 93 - White House - United States Capitol

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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 loses.

Related Topics:
Dot-com - 2001 - Air Transportation Stabilization Board - September 11 attacks

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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.

Related Topics:
Chapter 11 - Bankruptcy - North America - Low-cost carrier

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United has continued operations during its bankruptcy, but 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 canceled several existing and planned routes, and eliminated its entire Latin American gateway and flight crew base at Miami International Airport after March 1, 2004.

Related Topics:
Latin America - Miami International Airport - March 1 - 2004

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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 reconfigured 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.

Related Topics:
November 12 - 2003 - Low-cost carrier - Ted - 2004 - JFK Airport - New York City

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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.

Related Topics:
December 9 - 2004 - Ho Chi Minh City - Vietnam - San Francisco - Hong Kong - Vietnam War - Pan Am - Fall of Saigon

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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 have 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.

Related Topics:
SARS - 2003 - 2003 Iraq war

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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).

Related Topics:
United Express - Atlantic Coast Airlines - Independence Air - Air Wisconsin - US Airways Express

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Most controversial of all, however, was the 2005 cancellation of its pension plan, the largest such default in U.S. corporate history.

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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 http://www.forbes.com/2005/04/20/05ceoland.html. Tilton's overall compensation was in actuality unremarkable, as it did not include stock options, bonuses, and other benefits granted his counterparts.

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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 would file its reorganization and disclosure statement by the end of September, finally returning to normal operations by early 2006.

Related Topics:
August 26 - 2005 - November 1

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United's bankruptcy emergence may also force other airlines to seek the same type of cost reductions that United was able to achieve in bankruptcy.

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