How to Succeed in Business, Without Really Succeeding

May 15, 2005

By MICHELINE MAYNARD

HERE'S a pop quiz for you frequent fliers (and disgruntled investors and union members): Who was the highest-paid executive at a major domestic airline last year, taking home $1.1 million in salary and bonus?

Not Gary C. Kelly at Southwest: His reward for running the industry's most profitable company was just $542,000. Nor was it Bruce Lakefield at US Airways, who got $425,000 as his company struggled to avoid liquidation. And forget about Gerald Grinstein at Delta, who earned a mere $250,000 as his airline battled to stay out of bankruptcy protection.

The big payday went to Glenn F. Tilton, the chief executive of United Airlines, which has been operating in bankruptcy since December 2002. Since its filing, it has lost billions, forced its workers to take deep cuts in pay and benefits, and dumped billions of dollars of unfunded pension obligations on the federal government.

And he is still not sure when United will get out of bankruptcy.

Mr. Tilton's compensation has outraged some of his workers, who want him to return his $366,000 bonus. (He did take a pay cut last year, and is taking another this year.) But one could argue that Mr. Tilton is worth every penny of his pay - even if his strategy has not been out of a business school textbook.

In his time at United, which began shortly before the airline filed for Chapter 11 protection, Mr. Tilton has - wittingly or not - used bankruptcy protection as a competitive tool. And he has gained respect in the industry, however grudgingly, for doing so.

If nothing else, United has made itself an airline to be reckoned with - not in the traditional way, through strong operations, but in a completely new way, by leveraging its weakness.

United's bankruptcy, which has lasted longer than any airline case since 1989, has given the company the opportunity to take steps that other carriers have found difficult, if not impossible. Cutting wages and benefits, for one. Renegotiating and rejecting aircraft leases, for another. And the biggest step: terminating its four employee pension plans.

"United has become a much more formidable competitor than we were" when it filed for bankruptcy protection, Mr. Tilton acknowledged in an interview.

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