Copyright 2000 Gannett Company, Inc.
USA TODAY
May 25, 2000, Thursday, FINAL EDITION
SECTION: MONEY; Pg. 3B
LENGTH: 986 words
HEADLINE:
Code names, quiet dinners helped keep $4.3B secret Months-long talks were
leak-proof
BYLINE: David Field
DATELINE: NEW YORK
BODY:
NEW YORK -- It started in an airport Hilton, progressed to Washington's
posh Four Seasons Hotel and was announced to the world Wednesday
at New
York's decidedly upscale Waldorf-Astoria.
The US
Airways-United Airlines merger is not only the biggest
airline
combination proposed in decades -- it was the best-kept
airline secret in
years.
Behind that veil of secrecy was a cast of hundreds who had
one
thing in common: They all knew, had worked for and either trusted
--
or feared -- one man: US Airways Chairman Stephen Wolf.
Wolf and
United Chairman James Goodwin knew each other from Wolf's
time running
United. "And one day in October or so, Stephen called
me, and we agreed to
meet," said Goodwin, a few hours after announcing
the $ 4.3 billion
combination.
"In November, we met in a conference room in the Chicago O'Hare
Hilton, in a room I reserved in a blind name," he recalled, while
on a
train headed for Washington, D.C.
Wolf said, "I didn't go to Chicago
to sell US Airways.
"We had been trying to buy every airline in the
world, but couldn't
find one that we wanted to buy and could buy," he
recalled separately,
from a plane leaving New York's La Guardia Airport.
"So I went to talk about an alliance with Jim (Goodwin) and,
out
of blue, Jim began talking something else," he said.
By February,
Goodwin said, "the conversation was serious, and
Stephen invited me to
Washington and we had dinner in his room
at the Four Seasons Hotel," a
Georgetown hostelry known for its
$ 300-plus-a-night rooms.
"That's the kind of hotel that Stephen likes," Goodwin said
of
Wolf's legendary upscale -- and upmarket -- tastes, which include
an
unparalleled knowledge of fine wines.
At this dinner, Wolf served a
California Chardonnay, "but I liked
it. I'm not the kind of expert that
Stephen is, even though I
enjoy the finer things in life," Goodwin said from
the train.
He had gone to New York's La Guardia, also, only to find it
socked
in by deteriorating weather. So one of the captains of the air
travel industry dashed for the train.
Tarheels and Yellow
Jackets
By the time they met for the February dinner, Wolf said they had
given the two carriers code names from college basketball: UAL
was
"Tarheel" (after North Carolina), while US Airways was "Yellow
Jacket" (for
Georgia Tech).
To keep the deal secret, Wolf trusted only his two
top lieutenants,
airline CEO Rakesh Gangwal and Executive Vice President
Larry
Nagin. US Airways "has always been run by those three guys,"
says
a consultant who has been an adviser to US Airways.
"When people ask
how we kept it secret, well, we're as bewildered
as anyone," Wolf says.
Goodwin assigned two top lieutenants to work the deal, while keeping
it from most of United's hierarchy. At United, though, Goodwin
concedes,
keeping such a secret is a cultural shift. Under Goodwin's
predecessor,
Gerald Greenwald, the company prided itself on open
communications with its
employees. It was so open that candor
helped scuttle a possible deal with
America West Airlines.
"After that (America West leak), I decided
that we would conduct
our affairs properly," Goodwin said, although "we
never hid
the board from any of this, and that included the employee
members."
While talks progressed, Wolf, Gangwal and Nagin also were
facing
a threatened labor dispute and were working out new labor contracts
between US Airways and the Association of Flight Attendants.
Following Wednesday's announcement, Wolf characterized US Airways'
union reaction as "bittersweet." Bitter "because our airline
is going
away, but sweet because our people will stay with the
strongest airline."
Goodwin says he was encouraged by the first response of United's
unions.
Unions at both said they have concerns about the
proposed takeover,
which they heard about for the first time late Tuesday.
"We are cautious about this deal," says Roy Freundlich, spokesman
for US Airways' pilots union. "It's a positive to say there will
be no
layoffs, but it's not enough."
United Airlines Pilots Association
spokesman Ken Bradley says,
"If you were to go out and poll 10,000 pilots
right now, you'd
get reactions all over the map. But seniority is a major
concern."
United's union leaders will meet starting Tuesday in
Chicago to
review the financial and legal implications of the deal, Bradley
says.
Top merger-acquisition lawyers
But the takeover
was still just a discussion back in February
and March, as US Airways was
working out its labor contract.
"We spoke on the phone a few times
and met once or twice in lawyers'
offices," Goodwin says.
Not
that these were just any lawyers. They were two of the oldest
and
bluest-blooded merger-and-acquisition firms in New York: Cravath
Swaine and
Skadden Arps. Both offices feature the kind of richly
wood-paneled
boardrooms, expensive carpets and other trappings
you'd expect from such
old-line firms, says one participant.
To Wolf, though, the talk of
fancy surroundings is "just not
something I think about. After all, I grew
up in East Oakland,
Calif., and I know downscale."
A trace of
this background shows in his determination to get this
done: "This deal
won't get blocked. We will get
this deal done."
For Goodwin, Wolf remains "something of a mystery, a very smart
man who is a sphinx, although he uses that mystique very well
in
dealings with people.
"As for myself, I have learned from that and
have learned that
even though I know everyone at United and have worked with
almost
everyone, I have had to distance myself from people," Goodwin
says. "But now it is becoming my airline, and we are progressing
slowly
and steadily toward where we want to be. I like to think
I am making my
mark."
Contributing: Donna Rosato in New York and Keith L. Alexander
in Washington
GRAPHIC: PHOTO, B/W,
Mark Lennihan, AP; All smiles: James Goodwin, left, of United's parent UAL and
Stephen Wolf of US Airways shake on their deal at their New York press
conference Wednesday. UAL is purchasing US Airways for $4.3 billion.
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