Doug McKeen’s Opening Remarks for Negotiations
Welcome. It’s good to be getting started as we formally commence the section six negotiation process. There is a lot more work ahead of us to craft agreements that are both good for our employees and good for United. To be clear, these are not mutually exclusive goals. We view them as necessary and interdependent outcomes of our work together to create a stronger future for our employees and for our company.
To say that we are beginning these discussions in challenging times is to state the obvious. It’s as if there is some grand conspiracy that finds us yet again negotiating in a bludgeoned economy that has dramatically affected our industry and, as a consequence, our company, our employees and their families.
Unfortunately, history has shown that it’s not a grand conspiracy - it’s the reality of our industry. More than any other sector, we have been affected by extraordinary external events - or what I call “shocks. “ When you consider we’ve experienced eight shocks in the past 18 years - from fuel spikes to the burst of the internet bubble; from 9/11 to SARS and wars - for an average of one shock almost every two years, it’s no wonder that our industry is strewn with the carcasses of failed carriers.
It takes innovative, flexible and profitable companies to survive in our industry - as revenues as a percentage of Gross Domestic Product (“GDP”) have failed to return to pre-9/11 levels. Put another way, the losses brought on in part by the shock-induced free-fall in revenues have swamped our industry’s profits. This is our new reality.
And in times of extremis, it also takes people willing to make the sacrifices necessary to ensure that the enterprise can survive, just as you did through the 1113 process and the requisite bankruptcy restructuring.
As with almost every other legacy carrier, United’s survival depended on its successful restructuring through a bankruptcy process that enabled us to get our airline right-sized and cost-competitive. It was painful because it meant cuts in jobs, pay and benefits and the loss of defined benefit pensions for our people. They were regrettable, there is no question about that. But I can’t sit here in good faith and say they were not required. They were. I also will not tell you we can go back to where we were before. That would have meant failure then, and it would mean failure now.
Our country is going through one of the most turbulent economic times in its history - and the world, now so inextricably linked, is experiencing the bumpy ride right along with us. As news articles confirm on an almost daily basis, our industry is not immune - particularly global carriers such as ours, and again it has been forced to respond by realigning its cost structure. The consolidation and comprehensive cost-saving efforts have resulted so far in 150,000 lost airline jobs in the U.S., contributing to the highest number of jobs our nation has lost since the 1930s. Unfortunately, there are no quick-fixes in sight.
So the responsibility before us is to craft agreements that reflect the reality of our industry and the unprecedented environment in which we continually find ourselves operating. And, the opportunity before us is to realistically explore new ways to strengthen United while helping to ensure that our employees have rewarding jobs that are less vulnerable to our industry’s cyclical downturns.
From our vantage point, there are three main elements we must address. They are:
- Competitive wages, benefits and work rules;
- Meaningful incentive compensation tied to measurable and realistic performance metrics; and
- The flexibility to respond to changes in the marketplace, evolving customer expectations and emerging commercial opportunities.
I want to take just a minute and briefly expand on each of these three goals.
On competitive pay, benefits and work rules: Right now our agreements have the company and our employees at a disadvantage because they’re not competitive. We’re operating with a low-pay and low-productivity model that translates into inefficient contracts. That’s a “lose-lose” proposition and it is unsustainable. We seek a “win-win” proposition:, more competitive productivity levels offset by more competitive pay for our people that translate into competitive contracts for our company. United saves money through increased productivity and employees are paid at competitive levels. This is but one example of the mutually beneficial results we’re seeking.
We also need to be competitive on the benefit front. The hard fact is that even with the pain of Chapter 11, our benefit costs still are not competitive with our industry peers or other similarly sized businesses. Healthcare inflation continues to expand at an unsustainable rate. And, because health care costs keep going up, we need to find a system that’s more efficient and cost-effective. Since health and welfare benefits are a shared cost between us, finding ways to control costs will benefit all of us.
Not only is achieving our second goal - meaningful incentive compensation tied to measurable and realistic performance metrics - the right thing to do, it is an important way to help guard our employees against cyclical downturns. We’re talking about a combination of incentive, productivity and performance pay - designed to put more money in the pockets of our employees when they perform and our enterprise is successful.
All have the potential to reward our employees so that they can more meaningfully share in the success their good, hard work helps create.
- The economic performance of the enterprise.
- The enhanced levels of individual and enterprise-wide productivity.
- Improved operational performance - such as A:14.
Moving away from the traditional pay system toward a more robust pay-for-performance model also will help address the historic “boom and bust” cycles of the industry -more pay for employees when the enterprise succeeds and a more sustainable base cost structure in the lean times which mitigates the impact of downturns.
Again, the goal is to provide employees with more stable careers and reward them for performance, which in turn aligns employees with the company and its goals - another “win-win.”
Our third goal also contributes to our company’s and our employees’ ability to manage through, and even capitalize on, our industry’s cyclical downturns and ever changing dynamics. We need the flexibility to respond to the changes in the marketplace, evolving customer expectations and emerging commercial opportunities. This will help United protect and grow the enterprise…which is the best and only real way to provide job security.
Satisfying our customers and staying on an even playing field with our rivals - here and abroad - also requires flexibility -
- to pursue new products and revenue sources;
- to acquire new technologies;
- to capitalize on open skies and regulatory flexibility; and
- to respond quickly to unforeseen external events outside our ability to control.
Flexibility will help us be strong and agile - seizing opportunities where and when we can - and making sure we not only keep up with the competition, but we have the best chance to get ahead of them. We can’t afford to be shackled with agreements that put us at a competitive disadvantage and leave us standing on the sidelines. That’s not good for our company and ultimately not good for our employees.
- Competitive wages and benefits.
- Meaningful incentive compensation.
- Flexibility.
Three ways our labor agreements can contribute to our enterprise’s success - and, in doing so, to the success of our people - a goal we all share.
Of course, you have to believe it’s worth it - that United has a promising future with the ability to deliver results. Thanks to the progress we’re making together, key indicators suggest that we do.
With an unwavering commitment to safety and a renewed focus on our core performance imperatives - “Focus on Five” - United, and United people, are steadily improving and strengthening our airline. Our plan is working. Our people’s efforts are making a real difference. By the end of last year:
- our operational performance significantly improved;
- we’re leading the field in new and innovative revenue streams;
- our customer satisfaction significantly improved; and
- we are effectively managing our costs relative to our peers.
The sound stewardship of United’s resources means that we are still able to invest in the things that matter to our customers and to our employees’ ability to do their jobs better. We continue to make capital expenditures - from customer-preferred initiatives like IPTE and in-flight entertainment, to aircraft upgrades and infrastructure improvements.
In short, together we are working smart - generating revenues and significantly reducing costs while improving operational performance, increasing customer satisfaction and investing in things that make a difference.
Of course, we all know there is room for improvement. We can and must continue to do better - particularly in the face of a recalibrating global economy and fierce competition - at home and abroad. Competitive, flexible labor agreements are essential to our collective success.
The issues are complex. At times there will be different and strongly held points of view. But rather than obstacles, they can become opportunities. And to help create them, we remain committed to four core negotiating principles:
One: Transparent and fair. Being open, honest and fair in negotiations and fostering a climate of mutual respect and trust.
Two: Respectful and open-minded. Being willing to consider others’ interests and points of view while working constructively and collaboratively to find common ground.
Three: Reasonable and responsible. Considering all fiscally responsible proposals that are competitive with the industry and market realities. And,
Four: Fact-based and solution-oriented. Concentrating on analytically sound solutions that strengthen the entire enterprise, creating opportunities for employees and all of United’s stakeholders.
These are the principles that guided our most recent work together- work that resulted in furlough mitigation and the A 14 program. There is a solid foundation for working together on things that matter to us both. It is in this same “win-win” spirit that we approach these negotiations. Our employees deserve no less.
To get started, we’ll be exchanging openers today. Just as we’ve done in the past, we’re presenting a menu of items that has the potential to help drive customer satisfaction, ease administrative burdens and increase productivity. Some will save money. Some will cost money. Ultimately, through our work together, we expect to modify and narrow the list down to find the right balance of items that can deliver competitive agreements that work for both sides. So there can be no misunderstanding, the list is a menu of options for consideration, not a mandate of “must haves.”
In close, we appreciate that our employees would rather have agreements in place sooner rather than later. We would, too.
Unfortunately, we can’t control the external shocks to our industry and our airline. But by working together there are some things we can control:
We can narrow our list of items to help avoid the potential consequences of a long, drawn-out process.
We can constructively, creatively and realistically work through obstacles to turn them into opportunities. And,
We can craft agreements to help position United as a respected industry leading airline that employees take pride in and that customers value.
That’s our responsibility.
That’s our goal.
And through a commitment to pursue mutually beneficial outcomes through good faith bargaining, we look forward to working with you to achieve it.
Thank you.