The big three airline credit unions are bracing for turbulence as the industry restructures and faces more agonizing cutbacks.

So far the three largest airline credit unions, which combined have $4.2 billion in assets, have been able to withstand the industry's $2.1 billion in losses in 1993. But they are taking extra steps to secure their future by diversifying their customer bases, adding new products, and aggressively marketing loans.

"The mind-set in the industry is that it is still fraught with problems and employees feel that," said Robert Bream, president of United Airlines Employees Credit Union.

Expanding the Field

United has broken a more than 50-year-old tradition by allowing employees who leave United to remain members, and for the first time it's accepting family members, too. The $1.9 billion-asset credit union has had little choice because loan demand is softening and the airline sponsor is cutting more workers.

"We pride ourselves on being an employee benefit," Mr. Bream said. "We didn't want to dilute that relationship."

Traditionally a plain-vanilla credit union, United also has been adding products. Last year it started offering credit cards and now it is looking into offering checking accounts and installing automated teller machines, Mr. Bream said. The credit union has also stepped up its loan marketing efforts.

"We're sending out more fliers and working on telemarketing," he said.

Less Optimistic than Most

The changes are intended to drum up more business among a customer base with low confidence.

"Employees of airlines aren't as optimistic as society in general" because of layoffs, Mr. Bream said.

The problems in the industry haven't had a dramatic impact on United's balance sheet. Last year, loans fell 1.6% to $620.2 million, according to figures from Ferguson & Co. And net income fell 5.9% to $28.4 million, down from 1992's record income of $30.1 million. Lower investment yields caused the decline.

Mr. Bream is concerned about an upcoming employee buyout package. If it goes through, employees will get stock in the company in exchange for pay cuts. The pact would stop job cuts, but lower paychecks could bite into savings, he said.

Bolstering Capital

Delta Employees Credit Union, Hapeville, Ga., may let former employees join the credit union, and is trying to sign up employees' family members.

Delta Air Lines Inc. plans to slash about 20% of its 72,000 employees over the next three years. In anticipation of the cuts and a potential jump in delinquency, the credit union has beefed up capital to 12%.

"We can take some pretty good-sized hits if we have to," said W.J. Williams, president of the $840 million-asset institution.

For 1994 Mr. Williams sees more pressure on the bottom line as loan demand slackens. A repeat of last year's performance, when the credit union's net income jumped 15.2% to $16.2 million and loans grew by 11.6%, will be difficult to match.

Meantime, American Airlines Employees Federal Credit Union not only added family members to its customer base, but is targeting the young adult children of employees - "the people who borrow," said John M. Tippets, president of the $1.5 billion-asset group, the sixth largest in the country.

So far the credit union has made about .300 loans to the grown children of employees.

Refinancing Boom

Last year the credit union's loan portfolio jumped 30% to $700.4 million, largely fueled by refinancings. For 1994 Mr. Tippets said he expects loan growth to hit 20%.

The airline has been shrinking over the years, creating anxiety among the membership, he said.

Despite cuts, the credit union can grow by offering more products and increasing service personnel, he said. This year the credit union started offering 30-year fixed mortgages and next month will offer checking accounts for the first time.

While the three biggest airline credit unions have tried not to stray from their original customer base, others have expanded to serve outside groups.

One example is Eastern Financial Federal Credit Union, which served employees of the now defunct Eastern Airlines.

But since 1974 the group began diversifying so it could survive without the airline. It now includes 1,400 groups and has $836.8 million in assets.

Kansas City, Mo.-based Members America originally served employees of Trans World Airlines. It now serves about 30 groups, though about 65% of its customers are affiliated with the airline. The credit union is actively seeking other groups to add.

"We wanted to get groups that don't have the same cyclical ups and downs of the airline industry," said Dennis Pierce, president of the $680 million-asset institution.

Despite the diversification, loan demand remains low - the group has a 30% loan-to-deposit ratio - and last year net income fell 36.8% to $9.6 million.

Western Federal Credit Union, Los Angeles, originally served employees of Western Airlines before it was bought by Delta. It serves former Western employees who now wear Delta uniforms and 137 other groups.

"If your sponsor is stable and isn't going to go anywhere, there's no reason in the world to look for outside groups," said Vern Elliott, vice president and chief operating officer of the $302 million-asset institution. "But if your sponsor in on shaky ground, it makes sense to diversify."

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