Shares of United Airlines fell 5. 9 percent Monday after a veteran industry analyst downgraded the company, citing festering labor discord...
CHICAGO — Shares of United Airlines fell 5.9 percent Monday after a veteran industry analyst downgraded the company, citing festering labor discord he said includes pilots calling in sick and working the minimum required hours.
Analyst James Higgins of Soleil Securities Group said there is “rising evidence” that pilots’ actions contributed to the carrier’s bad December in which it had double the industry average number of delays. He said such actions are legal but threaten the company’s profits.
The airline’s stock fell $1.82, to $29.18 in Monday trading after touching a 15-month low of $27.85, at which point it was down 10.2 percent for the session.
United has blamed the cancellations and delays largely on the worst December weather in its 80-year history, while the pilots union has claimed staffing shortages were at fault.
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Neither the company nor the Air Line Pilots Association responded immediately to requests for comment.
Higgins said his profit and revenue estimates are not much more than educated guesses because United may be forced to offer fewer flights.
Pilots are upset with management, in particular with the $250 million special cash dividend United approved last month, he said.
“The pilots’ anger is manifesting itself in several ways,” Higgins said in a report to investors. “Most notable is a perfectly legal refusal to accept flying beyond amounts specified in their contract. We also believe [United] is facing increasing pilot sick calls, among other actions that hurt operations and earnings.”
As a result of the pilots’ apparent “wide-scale ‘work-to-book’ operation, ” Higgins said, United may have to reduce flights.
The company said Friday its December traffic fell 1.2 percent due to bad weather.
“We believe [United’s] management’s view that weather was a key factor behind the many December flight cancellations, but also think pilot behavior exacerbated the situation.”
Pilots are angry about what they see as excessive pay for United’s top managers while they were forced to take big pay cuts due to the airline’s bankruptcy. They elected more combative new union leaders in October.
Many pilots want the Chicago-based carrier, which has returned to profitability after its 2002-06 bankruptcy restructuring, to rework the five-year contract that doesn’t expire until 2010. United has said it won’t do that.
Airline consultant Robert Mann said the situation is reminiscent of what happened with Northwest Airlines last summer as well as with United during a turbulent summer of 2000, when thousands of flights were canceled.
By relying on volunteerism to cover additional pilot needs that crop up, as other airlines do, it is more vulnerable to labor-related turmoil, he said.
“When the going gets tough and you need a team to play under adverse conditions, you better hope you have team members and not people who have a bone to pick with you,” Mann said.
“When you have a bone to pick with management, sometimes it’s the customers who are the collateral damage.”