NEW YORK (Reuters) - United Airlines (UAL.N) is discontinuing proposed changes to its performance incentive program, the carrier announced on Monday, after employees expressed outrage at the elimination of regular bonuses.
United President Scott Kirby wrote in a memo to employees that the carrier was “pressing the pause button” on unpopular changes to its merit bonus system that would scrap quarterly performance bonuses in favor of lottery drawings for cash prizes, luxury cars and vacation packages.
“Our intention was to introduce a better, more exciting program, but we misjudged how these changes would be received by many of you,” Kirby said in the memo. “So, we are pressing the pause button on these changes to review your feedback and consider the right way to move ahead.”
Kirby’s decision comes at a particularly challenging time for United Airlines as the carrier grapples to reassure shareholders and appease employees amid lagging financial performance compared with rivals’ and demands for better wages and benefits.
United has faced blowback from investors over its decision to ramp up capacity aggressively on its domestic operations. Employee annoyance at management has festered in recent months over a decision not to award one-time cash bonuses in the wake of lucrative changes to the U.S. tax code.
In a research note, CFRA Research analyst Jim Corridore said United would not be able to increase profitability and close its valuation gap against competitors by cutting compensation.
“In what we see as the latest sign that United’s management still doesn’t ‘get it,’ numerous news reports say United is likely to eliminate its attendance and performance-based bonuses with a lottery system which will give a very few employees cash and prizes,” Corridore wrote.
“We would not be surprised to see UAL’s operating metrics start to deteriorate.”
United did not outline what changes it would seek to make to its bonus program. Under current rules, employees are eligible to receive up to $125 per month if all company goals are met.
Under the sidelined proposal, called “core4 Score Rewards,” if quarterly performance goals were met, the company would draw 1,360 employee names for cash, car and vacation prizes ranging from $2,000 to $40,000 in cash value. A top prize tier winner would receive $100,000 in cash.
The carrier employs about 88,000 people around the world.
Roger Phillips, a spokesman for the Air Line Pilots Association, which represents United’s pilots, called the decision to pull the plug on the program “the right thing.”
Reporting by Alana Wise; Editing by Dan Grebler