Rival Air Carriers Closely Watch United's Employee-Ownership Plan

AS United Airlines embarks on a historic employee-ownership plan, its rival air carriers may have to adopt aspects of the cost-cutting buyout to remain competitive, airline industry analysts say.

United shareholders must still endorse the plan, in which employees will trade $5 billion worth of wage and benefit reductions for a 53 percent share of the airline.

But if approved, the buyout promises such large operational savings for United that other major airlines will also have to find ways to radically slash costs, the experts say. United plans to use the savings from the buyout in part to build a low-cost subsidiary that would run its comparatively unprofitable short-haul flights.

``I think it's going to be really tough for Delta and American in particular to compete if you've got these very significant cost reductions'' at United, says Jared Kaplan, a Chicago-based attorney who specializes in employee stock ownership plans.

``American and Delta would have to come up with something, and the path of least resistance would be to follow suit'' with some form of buyout, he says.

Because of United's size, the buyout plan would also have an impact beyond the airline industry. The plan may influence industrial relations at companies in other sectors of the economy, the analysts say. United employs 82,000 people, more than any other company where workers own a majority share. The airline is a mainstay in an industry that the Clinton administration says is crucial to the country's economic well-being.

To survive, United States airlines have had to be innovative in management. Companies that weathered the deregulation of the past decade were then hit with a dreary recession, which only gave way to more vigorous growth late last year. Large carriers like United have proven to be lead-footed beside nimbler and smaller low-cost upstarts less bound by union agreements.

The Clinton administration sees United's employee stock ownership plan as a possible model for other faltering companies troubled by labor-management tensions. Stephen Wolf, chairman and chief executive officer of UAL Corporation, United's parent company, has briefed Transporation Secretary Federico Pena Labor Secretary Robert Reich on the company's plan.

Analysts say, however, that the United buyout should be viewed only as a rough model for companies flirting with the idea of employee ownership. One reason is the airline industry is subject to a number of constraints. It is an especially competitive industry, infamous for fickle customers and excessive capacity. And it is particularly vulnerable to the cyclical rise and fall of the economy, analysts say.

Also, it is unlikely that the United buyout will ease the longstanding tension between workers and management. The United scheme should be judged not during its take-off, the experts say, but during its first encounter with foul economic weather.

Ultimately, though, talk of a buyout plan as an exemplar could prove to be purely academic: It is not certain that shareholders will approve the plan, even though both management and most unionized employees support it.

``Hold on! Don't count the chickens before the eggs are laid,'' says Julius Maldutis, an airline industry analyst at Salomon Brothers, a New York-based investment house. ``We'll have to wait to see how shareholders view this.''

Some securities analysts say the buyout plan would not be as beneficial as the sweeping layoffs and assets sales that management poses as the best alternative.