United Airlines Nears Flight Attendants Deal After CEO Munoz Steps In

The tenor of contract talks between United (UAL) and its flight attendants, which have gone nowhere for five years, improved suddenly thanks to the involvement of CEO Oscar Munoz.

"Oscar has an actual vision for the airline: It's a night and day change," said Sara Nelson, president of the Association of Flight Attendants, which represents United's 24,000 flight attendants. "I have worked with a lot of managements. I have never seen a CEO this engaged and this committed to the success of the company."

Nelson said she expects that a deal can be negotiated in the next several months. United spokeswoman Megan McCarthy said, "We are meeting with the AFA regularly and we are fully committed to reaching an agreement."

The turnabout follows the five-year tenure of Jeff Smisek as United CEO and comes at a critical time for the airline, which is resisting a bid by two hedge funds to add six members to its 15 member board.

"You see how screwed up United was under Smisek, but finally we have a turn of events here," she said. Recounting details of a Feb. 4 meeting with Munoz, Nelson said, "He said every decision that needs to be made needs to be run through a filter of 'the human factor.' That was absent with Smisek. He was aloof and not engaged."

Munoz "is a guy who understands that the airline business is about people," Nelson said. "He made more changes in {his first} six weeks than we had seen in five years. That first day we met, it was clear that United management finally was interested in getting a deal."

Two hedge funds, Altimeter Capital and PAR Capital, which hold 7.1% of United shares, said last week that they will run a slate of six nominees for the board, which is up to 15 members after United added three this month. A shareholder vote is expected to occur at United's 2016 annual meeting, which hasn't yet been scheduled.

Most union leaders including Nelson have publicly declared their strong support for Munoz, who has signed a contract extension with pilots and opened negotiations on a contract extension with the International Association of Machinists, which represents agents and fleet service. However, talks with the Teamsters union, which represents the mechanics, have not gone so well, and the Teamsters have said they are considering whether to back the hedge funds.

"The hedge funds are a distraction at exactly the wrong time," Nelson said. "The timing is suspect. And they would not protect shareholder value for the long term."


Multiple sources familiar with the flight attendant negotiations said that a big problem has been AFA's failure to find agreement between legacy United flight attendants and legacy Continental flight attendants, who were represented by the International Association of Machinists.

Currently the two groups work under separate contracts.

In general, Continental flight attendants wanted to work as many hours as possible and get paid well for them, while United flight attendants were comfortable with work rules that didn't require high hourly levels of flying each month, the sources said.

Nelson acknowledged that putting the two groups together has been challenging, but said the real problem was that "AFA couldn't break through because there was no interest {by the airline} in getting a deal. "

Now that has changed.

 

 

 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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