Air Transport World

United: the Chicago colossus begins to stir; proposed purchases of Hertz and Pan Am's Pacific division serve notice that the giant intends finally to live up to its potential.

Chicago--When Richard J. Feris became president of United Airlines in 1974, it was as if a breath of fresh air had blown through the industry. He was an outsider. He had been with the carrier for only three years prior to his elevation; before that, he had worked at Western International Hotels (now Westin), which Unitedhs parent, UAL Inc., purchased in 1970. At 38, he also was the youngest-ever president of a major airline at the time. These two factors meant be brought a totally different point of view to the heavily regulated, somnambulent airline business.

That different point of view showed up almost immediately. After some initial hesitation over exactly how much regulation should be eliminated, United, the biggest airline outside the Soviet Union, supported airline deregulation 100%. It was the first major carrier to do so.

That support shouldn't have been a surprise. Creation of the holding company in 1969 was the first step in the corporation's plan to get a better return for its shareholders. Under Civil Aeronautics Board regulation, returns on investment were skimpy for airlines with average or higher costs. United had average costs. So United established UAL Inc. to look for opportunities outside the airline business. The hotel acquisition was the initial move.

Deregulation advocate

Then the politicians and economic theorists began calling for free-market competition. United joined the bandwagon. By 1976, Ferris had become chief executive officer. He preached from every podium he could find that deregulation was good for the country. It most especially was expected to be good for United, which was itching to use its size to advantage.

But from almost the minute the Airline Deregulation Act of 1978 was signed (by which time Ferris was chairman of the airline), one thing or another prevented United from achieving the spectacular results that it expected from itself, and that others feared.

In 1979, a McDonnell Douglas DC-10 belonging to American Airlines crashed and the model was grounded for weeks. United had the biggest DC-10 fleet in the world. The same year, United's mechanics struck for two months. In 1980, the recession began. Fuel prices startged to soar. In 1981, the air traffic controllers were fired. In 1982, the same factors continued to bother the industry. United insists the airport operating constraints affected it more than other lines, forcing it to ground a third of its fleet at one point.

By 1983, the U.S. was pulling out of the recession and the ATC restrictions

slowly were being lifted. United made money in 1983, but nothing compared with 1984, the first year since deregulation that the corporation came close to its potential. In 1985, however, the month-long pilots' strike will again put a big dent in what should have been very good results.

Dick Ferris is not a patient man. That impatience is evident during non-revenue-producing activities such as appearance at hearings, presentations at security analyst meetings and, yes, press interviews. The impatience is understandable. It took him only eight years to move from president of United to the chairmanship of UAL Inc. He is anxious to see the payoff of his strategic moves, a payoff bedeviled by past, mostly uncontrollable, events.

A big part of the recent past is the pilots' strike. Ferris is reluctant to discuss it. When asked, he states categorically, "We achieved our economic objectives." That means reducing pilots' wages to match those of competitors. Others hint at what the company might be feeling--the settlement terms were so close to United's prestrike offer as to make the one month of minimal operations a senseless waste of time and money. …

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