CHICAGO — Last week's news from United Airlines that soaring fuel costs and a half a billion dollar first quarter loss has forced the carrier to trim 1,100 jobs from its 55,000 employee base is a road Alliant Credit Union has been down before.
The $5 billion credit union has deep roots with United, having formed in 1935 as United Airlines Employees' Credit Union. Roughly 71,000 of its 212,000 members are active United employees, said David Mooney, president/CEO of Alliant. The fallout from the Sept. 11, 200l attacks on the airline industry coupled with United's bankruptcy protection filing in 2004 were all factors that weighed heavily in the decision to diversify the credit union's membership to start adding select employees groups in 2003 and undergo a name change in 2004.
"We continue to have a very strong relationship with United," Mooney emphasized. "By our take, however, we've had good success with diversifying and growing."
United and Continental Airlines have both expressed interests in a possible merger. On April 15, United Airline President/CEO Glenn Tilton told employees the airline would certainly consider a merger acknowledging that "the current fuel and economic environment are only accelerating the need for a different approach."
"Consolidation is but one of the changes necessary to achieve sustained profitability, and we have been fully supportive," Tilton said. "The industry has changed dramatically–both globally and domestically–and the old paradigms no longer apply."
Continental Airline Chairman/
CEO Larry Kellner and President Jeff Smisek told their employees on April 15 that while the carrier prefers to remain independent, it is now time to consider other "strategic alternatives." Like United, the airline also reported a first quarter loss but not nearly as high as its counterpart–$80 million.
Mooney said it is pure speculation on how a Continental/United merger would impact Alliant. But it does raise questions about which would be the resulting airline and if that carrier would even want an affiliated credit union.
"There's nothing in and of itself that would lead to any combination to the respective credit unions," Mooney said. "The credit unions are legally and financially independent of their sponsors."
Continental FCU President/
CEO Tom Glatt has said he hopes that Continental Airlines remains independent but foresees growth opportunities should a merger ever occur. Several publications, including the Washington Post and the New York Times, have reported United in discussions with US Airways–an airline also served by $200 million Continental FCU.
As the airline industry struggles to turn a corner, Mooney said diversification is just as timely as it was when Alliant underwent a brand change four years ago. Since then, the credit union has grown its membership from 168,000 to 212,000 and serves more than 100 active select employee groups, he said, adding Alliant is "highly capitalized" and is ranked in the top one percent in the country for return to member. At one time the credit union's loan portfolio was rather thin, Mooney said, but has since boosted its lending.
"Mergers and the likelihood of more mergers–it's hard to say how it will play out for credit unions," Mooney said. "I'm not saying they would be harmed but it certainly creates a certain amount of uncertainty."
As a buffer to the instability often seen in the airline industry, some affiliated credit unions have either expanded to community or trade, industry and profession charters. Because of Illinois' regulations, the TIP charter was not an option for Alliant, Mooney said. Had it been a choice, the credit union would not have explored it.
"Our conclusion is, from a risk standpoint, we wouldn't be accomplishing much by sponsoring a troubled industry," Mooney explained. "In an industry with a shrinking employee base and other problems, [having a TIP charter] would not strengthen us from a growth standpoint."
–msamaad@cutimes.com
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