The Employee Ownership Update
April 21, 2000
United ESOP to Phase Out; Southwest Airlines Plan GrowsBoth labor and management have agreed that the United's ESOP, which now owns 55% of the shares, will receive no further contributions after this year. The plan was set up with an unusual five-year structure (most ESOPs have no end date) and was funded by the company in return for employee concessions (also very unusual in ESOPs). The employees no longer want to make concessions and the airline is unwilling to continue making contributions without them. The plan will not be terminated, however. While new employees will not get shares, current employees will continue to have shares in their accounts until they leave. Until the ESOP drops to 26% ownership, moreover, employees will retain representation on the company's board and certain control rights.
Meanwhile, Southwest Airlines contributed a record 14.1% of employee pay into a deferred profit sharing plan. Employees can choose to use the money to buy Southwest shares, among other investments, and 72% of the plan's assets are currently invested in company stock. Employees own about 13% of the company under the plan. Pilots also get stock options and employees can purchase shares through stock purchase plan.