How airline workers' savings were hijacked by ESOPs
Published May 3, 2007 10:21 PM
In Employee Stock Ownership Plans (ESOPs), there are two winners: the banks and
the corporations. As employees facing layoffs, our goals of saving our jobs and
investing in our futures may lead us to accept all kinds of schemes to help
“save the company,” and we may end up achieving neither goal.
Take United Airlines, for example. In July 1994, the Air Line Pilots
Association (ALPA), the International Association of Machinists (IAM), and
non-union employees at United “purchased” 55 percent of the company
in the largest ESOP in history. They gave the company concessions valued at $5
billion over six years, including wage cuts of 12 to 15 percent. The stock
itself could not be sold, and workers who quit prior to retirement paid heavy
penalties and taxes.
And what did United’s “employee-owners” receive for these
concessions? In the late 1990s, some workers received a few dividend payouts,
ranging from a few pennies to a few hundred dollars. But what’s worse,
the workers did not gain a majority voice in the company decision-making for
their so-called majority ownership from 1994 to 2000.
Two things happened that underscored the fallacy of the ESOP. First, United
Airlines made $8 billion in net profit during the economic boom of the late
1990s while employees struggled to survive under concessions. And second,
overcapacity in the airlines industry left workers carrying the burden when the
industry collapsed. In fact, 20,000 jobs had been cut at United by the end of
On Feb. 1, United emerged from Chapter 11 bankruptcy protection, under which it
had operated as a debtor in possession since Dec. 9, 2002. It was the largest
and longest airline bankruptcy in history. In bankruptcy the legal ownership of
the corporation is up for grabs. That’s what a debtor in possession
The workers’ legal right as principal creditors should entitle them to
assert their rights to run the company.
This may strike some as a novel idea, but a number of flight attendants brought
this to the attention of the UAL unions. It never received a hearing and by
2003 the company was using the bankruptcy courts to get as much as 23 percent
more in wage concessions. Of course, the workers’ stock was worth
nothing. The company also demanded work rule changes, including workdays of up
to 14.5 hours, for less pay. It then terminated our defined benefit pension
Even under threat of losing everything, it’s still a bad idea for workers
wages, healthcare or any other benefits for stock options. At United Airlines
we learned the truth about ESOPs by losing billions.
It didn’t have to be that way. The lesson we learned at United is that
class-conscious workers in positions of leadership have to be educated on the
question of workers’ control. It’s an idea that is right for the
Michelle Quintus has been a flight attendant at United Airlines since 1995.
She is also a New York City representative and organizer for the Association of
Flight Attendants- CWA.
Articles copyright 1995-2012 Workers World.
Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.
Workers World, 55 W. 17 St., NY, NY 10011
Email: [email protected]
Subscribe [email protected]
Support independent news DONATE