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What Ails United? Help This Beleaguered Airline...  
User currently offlineSFOintern From United States of America, joined Oct 2001, 770 posts, RR: 5
Posted (12 years 8 months 2 weeks 2 days 8 hours ago) and read 3197 times:

What are some of the changes you'd make?

Here are some more "cures" (airliners.net tonic if you will) of mine:

FLEET

United's current fleet make-up is excellent.


  • Aircraft Sales:
    2 Boeing 747-451s (NW could use these and get them at a discount, and they're oddballs in the United fleet anyway)

  • Aircraft Leasing:
    Lease several A32X to Ansett to support its recovery

  • Orders:
    United is not in any position to be making orders, but when the time is right... order the A321-200 to enable 757s to serve longer average stage lengths (B757 is the best performer on those routes)

  • Large RJs:
    Commit to lots of in-depth research on the merits of using Embraer 170 series or 728Jet series aircraft on thin mainline routes--ie ex 737-200 routes and Shuttle routes. Try to ease pressure off UEX.


AIRPORT FACILITIES

Strengthen market position at key airports by:

  • LAX:
    Make sure ex-Shuttle RJ routes provide a better level of service by utilizing the Shuttle concourse (already doing), but make sure customers know they are expecting United Express

  • SFO:
    Consolidate widebody flying to the underutilized international terminal. This will allow them to use ex-shuttle gates as more convenient UEX gates (preferable for potential CRJ operations).

  • ORD:
    Even though Terminal 2 is being turned into an international *alliance terminal, outfit covered walkways to regional aircraft and initiate an inner terminal makeover to ease congestion and make the 'third-world' atmosphere more pleasant.

  • JFK:
    Consolidate operations to one terminal. Move into Eero Saarinen's?


NETWORK

  • Leisure Destinations:

    Demand for travel to sun-drenched destinations is practically constant and dependable. Even though low-yield, study (at least temporarily) flying to CUN, SDQ, MBJ, and other Mexi-Caribbean markets... These markets have sustained the loss of TW and are itching for more competition.

  • Airline Demises:

    An ORD-BRU or IAD-ZRH flight might work...


MARKETING

  • NEW INTERIORS, IMMEDIATELY:
    Pull a Gordon Bethune and immediately install all new fabric, carpeting, and bulkheads. This can be done overnight in almost any station. Efficently allocate the materials, and start modifications!!! The sooner the product is made-over, the more consistent it becomes from the start.

  • ADVERTISING:
    "We are United" was good while it lasted. It's time to move on. Start promoting the "Life is a journey; travel it well. Fly United" slogan, and emphasize key benefits of United, from the little things to the big things. Advertise IFE, PTVs, EasyTravel products as ALL PART OF UNITED'S PLEDGE to make travel more bearable.


RECALL: The Root of United's Dysfunction

What happened in the 1980s? Prior to deregulation in 1979, United was in a dominant position due to Patterson and co.'s guidance (example: the Capitol merger was one of the few successful airline mergers in history). After 1979, the airlines were forced to reinvent themselves. We all know this.

AA adapted particularly well, despite suffering the requisite losses everyone else did at one point or another. Crandall saw a vision for AA as a lean, mean network carrier. He knew growth was crucial to dominating the new market, and so he instituted "B" wage scales to fund a massive acquisition of domestic aircraft (MD-80s). With new airplanes coming in at a dizzying rate, AA was able to infiltrate and destroy markets with vulnerable carriers. We can't underestimate the effect of AA's other business innovations too, like AAdvantage, the CRS, and YM.

Example: AA had been large in DFW, significant in ORD, and small in MIA. In the 1980s, it outcompeted BN in DFW, likewise gained ground on UA in ORD, and moved in to acquire EA's proven Latin American system.

What did UA do? Left with management that wasn't as dynamic as Crandall's regime, it mostly followed, and followed pretty well as one would expect the largest air carrier too. With a "me-too" attitude, United created Apollo, Mileage+, and studied/executed Yield Management. Whereas AA had been growing from a massive expansion, UA had been growing as a natural result of its market position.

But in the mid 1980s, AA (as well as DL, and to a lesser extent NW) was quickly gaining on national market share. Not until Ferris came did UAL have a CEO with the bright-eyed potential of Crandall. Ferris was one of the youngest airline CEOs ever, and he quickly made an aggressive, strategic move by acquiring PA's pacific network for a steal in 1986. That purchase alone had ben a large stimulant of United' growth until today.

He also tried to innovate. The first to conjure up a scheme to have a "travel network" (Allegis) with an airline, car rental agency, and hotel synergy, Ferris impressed many investors, customers, and competitors. However, to fund this massive effort, he would have to get concessions, much like Crandall's "B" scales.

The First Problem

Crandall had been able to accomplish his B scales only because they were completely new. Frankly put, AA's employees didn't see how much they would be screwed. Eventually, distaste for B scales infiltrated every other airline's union.

When Ferris proposed B scales, all the relationships he had with the employee groups crumbled. This was when the cooperative mentality at United first fractured. One unusually self-righteous pilot, Rick Dubinsky, took the proposal to the extreme, leading to the disastrous 1987 pilot's strike that led to massive losses and established unharmonious labor relations.

If Ferris had been able to conceive of a different way to fund Allegis than B scales, it could have succeeded. At the very least, he should have shelved Allegis for the sake of maintaining a civil culture within the company.

The First Problem's Effects

The lost business, compounded with economic slowing in the late 80s, made United lose droves of money and customers. AA gained so much from UAL's mistake, it was estimated AA "stole" something like 5% of UA's market share at ORD immediately after that strike.

More dangerously, it established a tense border between unions and management. In large part due to Dubinsky's stubborness, the employees acquired a new vigilance.

The Second Problem

Dramatic expansion under Wolf proved to be a win/lose situation. While UA acquired strong international coverage and placed orders for many new aircraft, these large cash outlays and expenditures led to massive losses. When the recession of the early 90s contributed to the possilbity of financial failure, Wolf turned once again to concessions from labor groups.

Because of the bad blood from that previous round of negotiations, labor became more militant. Drastic proposals were made to solve the pressing cost problem, eventually leading to the ESOP.

Settling for the ESOP under the circumstances it was accepted was the second problem. An ESOP was a good idea, but not under the conditions it passed.

Employees were given expectations of more representation in management, along with growth of the airline, and expectations for the best during the ESOP either through stock performance, or after ESOP through guaranteed leading wages.

In reality, no effective "employee empowerment" programs were maintained, employee representatives on the board became glorified rubber stamps, and not even all the employees pitched in. The F/A union, a key component to having unity in product, was not included.

Effects of Problem #2

No matter--these fundamental company culture and structure issues would be overlooked. Why? The economy began to boom in the latter 2/3 of the 1990s, and the "lucky" acquisitions of aircraft and international routes made earlier pretty much ran the airline and raked in profits themselves.

Managers saw no pressing need to change the ESOP. Employees worked with the faith that ESOP would work, even if work remained the same and wages were lower. To a large extent, growth of the airline was pretty much guaranteed by its fortunately-gotten assets.... the stock price reflected this growth, so at the moment employees had nothing to complain about.

Management (Greenwald) did not make any deep long-term decisions, other than to establish United as the most savvy alliance dealer and to continually say all was well to the employees.

In reality, UA had been providing a mediocre product all this time, just because it could. Its ingenious hub structure, coupled with strong international markets, kept people flying UA.

There really wasn't much incentive to practice aggressive yield management: even though UA maintained less than-fortress control of its hubs (unlike other carriers), its catchment of business travel, due to its geographical position in the economic upswing, made the financial wheels run seemingly smoothly.

United did eventually recognize that it came to rely on a disprportionate amount of business travelers (see the 'Rising' campaign), but unfortunately made a horrible PR move to alienate everyone else at the expense of "showering the elites with love". (UA has horrible PR, and that's a smaller issue).

Problem #3

This last problem represents the compouding of the first problem (culture change) with the second problem (inefficient ESOP plan) and the developments of a stalling economy.

UA management had not done many things proactively by the time notorious Goodwin joined the gang. They still felt all was well, even if competitors had outfoxed United in innovating. Other majors had found an efficient way of increasing market share by gobbling up regional carriers and deploying regional jets, something United was very slow at catching on to, and is still lagging significantly behind.

As the economy slowed from late 1999 onward, United entered a weaker market with horrible timing. ESOP was about to expire, and the employees had been waiting for what was promised to them: either a new ESOP, or guaranteed leading wage rates to be expected from a "such a successful airline".

United, its managers realized too late, was not in a position to offer the latter. The employees, however, had seen how much the airline had prospered under ESOP and were eager for a piece of the pie. They didn't want another ESOP.

Because only now did managment start to see long-term effects of the ESOP snapbacks, it started to hesitate. It myopically ventured into no man's land by being blatantly uncooperative with labor negotiations.

The most recent problem: What's the core business???

Goodwin and co. early on realized United could not maintain the status quo just by sitting idle. As other airlines became more competitive, United had to start offering a better product. Enter things like First Suite, and Economy Plus. Most significantly, it tried to acquire US Airways to start growth again.

In the meantime, the employees became angry that the airline was holding out on increased wages, and yet making all these expensive decisions.

Management, while now finally focusing on the long term, failed to seem the long term ramifications of this short term issue.

Militance from the unions seen only twice before during the 1987 strike and 1994 ouster of Wolf emerged again... We all know how the Summer from **** went.

What was United's solution to all the lost business from SOH 2000? It's highest profile moves were continuing on with the US Airways merger, followed by going into business jets.

When it was clear to the public and employees alike that United didn't know how to run its own airline (mainly because of employee dissatisfaction), the airline took on a reputation of "callous dominator". It became the poster child of airline criticism, and suffered even more lost business from this bad publicity.

Now, United is left with a dramatically reduced operation. We all know this year's story...

CONCLUSION

United's current problems all boil down to a botched management-union transaction that changed employeee expectations forever. When United turned to ESOP to fix its culture problem, it didn't select the best solution. So, while the airline grew from its valuable acquired assets, it didn't see how much the problems were brewing. Nearly 20 years of blindness...

The key to running a successful airline is to first please employees, who will in turn please customers, which will lead to business growth, which investors will flock to.

In summation, problems came about because the airline did not please its employees. There's no reason why this airline shouldn't be successful were it not for the fact that this first step had been ignored in the past...

Having a comprehensive route network, modern and comfortable planes and hub facilities, and an addicting mileage program are not the only components of a good airline. Things in the background, like self-reliant, satisfied employees, and communicative managers, are required. Things at the forefront, like real customer appreciation and flight reliability matter just as much.

When United can achieve core goals, it will be on the flight path to become a more stable network carrier, offering a solid product.

  • SFOintern

  • 25 replies: All unread, showing first 25:
     
    User currently offlineN1993R From , joined Dec 1969, posts, RR:
    Reply 1, posted (12 years 8 months 2 weeks 2 days 7 hours ago) and read 2906 times:

    Hass - unfortunately, it is recovery proposals like the one you have outlined above that have gotten UAL into this mess in the first place. Sorry to say this, but if UA adopts even one of your ideas, they will accelerate their bankruptcy by at least 50%.

    Let me go through some of your proposed solutions and poke holes in your *logic* (sic).

    a) Why are the 747-451s oddballs? They were delivered to UAL and have operated as UAL aircraft for their entire lifespan. The only visible difference is that the FA jumpseats are a different color from the 747-422s. Ooops, cant have that can we?

    b) Leasing A320s to Ansett? Thats all UA needs. Let's pull our most profitable aircraft off the line and ship them to a fellow bankrupt in Australia. Good move ace.

    c) Orders? UAL has more aircraft on order than your average carrier has ever operated in their entire existence. Spare me future plans.

    d) Larger RJs? Two words buddy - SCOPE CLAUSE.

    e) SFO international terminal? Unlike the UA gates at SFO which are on a long term renewable lease, the gates at the Intl terminal are common use and are allocated on a daily basis at a much higher rate. This is meant to be a cost CUTTING measure I thought?

    f) ORD renovation? Thats all we need. New paint in Chicago while 20000 folks are collecting unemployment.

    g) Saarinen terminal at JFK. Dude, even TWA ditched that rathole. You know you are hurting when you are grovelling to pick up a bankrupt airline's castoffs.

    h) The Carribean is LOW YIELD? EXCUSE ME? Where can I get some of what you are smoking.

    i) ORD-BRU and JFK-ZRH. Yeah, BRU and ZRH are the solution. Sabena and Swissair flew ALL their flights there and we all know how succesful they are.... Oh wait..

    j) New interiors. Did you ever hear the story about the Emperor Nero who sat and played the fiddle while Rome burned? You are getting there pretty damn quick.


    User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4493 posts, RR: 33
    Reply 2, posted (12 years 8 months 2 weeks 2 days 6 hours ago) and read 2882 times:

    As usual, Hass, your analysis is excellent. Have you published this essay in a magazine, online or other? It deserves wider circulation, and of course if it were published you could put it on your resume.

    How to drain a deep well of United employee satisfaction is at this point unclear. Certainly firing Jim Goodwin—by perishing, livestock bombardment or other means--  Big grin was a huge morale booster. Employee criticisms of Goodwin were fair. OK, so Wolf and Greenwald set up the current labor-relations situation with the ESOP. But Goodwin insisted upon pursuing UA-US and other expensive decisions without resolving employee contracts first. He bears responsibility for the public spectacle United became over the past 18 months.

    Whatever means United pursues to improve employee relations, one reality is that wages cannot return to pre-1995 relative levels. The lay of the airline economic landscape has changed for good. United like the other Cartel carriers must deal with that market reality. CSM’s over 10 cents aren’t going to fly when Southwest is storming so much of the market with 7 cents.

    And following the 1990’s policy of gouging non-Southwest markets to make up the yield difference is not going to fly in the new environment either. Sure, UA has high-yield international routes, and can charge somewhat higher fares in non-WN markets. But the wild airfare disparities of the late ‘90s are no longer for economic—and since SOH 2000—political reasons. Communities are still hopping mad over airfares, and now since Sept. 11 businesses and travelers everywhere are re-evaluating their travel.

    So however United moves to address employee dissatisfaction, one tool the airline will not have is higher fares. If anything, continued downward fare pressure will continue in the coming years. United will need to turn to creative forms of compensation, and make a much better effort to communicate with, and consult with, its employees in decision making. ALPA can do its part by assenting to give back part of the SOH blackmail wage settlement. That settlement has already cost UA hundreds of millions of dollars it doesn’t have coming in.

    Finally, just as Jim Goodwin has departed, perhaps it is now time for Rick Dubinsky to depart as well. His tenure at UA has been, IMO, very destructive to the airline.

    Best of luck to all UA employees and management as they seek to renew and strengthen a great airline in the new, uncertain air travel economic environment.

    Jim


    User currently offlineN1993R From , joined Dec 1969, posts, RR:
    Reply 3, posted (12 years 8 months 2 weeks 2 days 5 hours ago) and read 2866 times:

    Finally, just as Jim Goodwin has departed, perhaps it is now time for Rick Dubinsky to depart as well. His tenure at UA has been, IMO, very destructive to the airline.

    Dubinsky is out effective December 31. UA ALPA has elected Paul Whiteford (MIA 767) to replace him as both MEC President and board representative.


    User currently offlineORD From United States of America, joined Jul 1999, 1381 posts, RR: 1
    Reply 4, posted (12 years 8 months 2 weeks 2 days 5 hours ago) and read 2854 times:

    You've got so many flaws with your story I don't know where to begin...

    1. AA infiltrated and destryed markets with vulnerable carriers? DFW was the only one, and they already had a big presence there.

    2. Ferris had been at the top of United since the 70s, not the mid-80s as you imply.

    3. AA did gain share with its 80s expansion, but it lost it all when it dismantled all the new hubs in San Jose, Nashville and Raleigh.

    4. Ferris impressed nobody with the Allegis scheme. That's the very act that cost him his job. He was robbing United and taking its profits to support non-airline related companies. It was a joke.

    5. You don't advertise IFE. It means nothing to flyers. Check the research.

    6. The pilots' strike was in 1985, not 1987.

    I could go on but I don't have time.


    User currently offlineGreg From United Kingdom, joined May 2005, 0 posts, RR: 0
    Reply 5, posted (12 years 8 months 2 weeks 2 days 5 hours ago) and read 2844 times:

    The 320's are probably not the most profitable aircraft. I imagine the fully amortized (and paid off) 733's and 762's are...

    User currently offlineSFOintern From United States of America, joined Oct 2001, 770 posts, RR: 5
    Reply 6, posted (12 years 8 months 2 weeks 2 days 4 hours ago) and read 2843 times:

    Sean,

    What's the solution then, to keep the status quo? Anything is certainly better than that, twinkletoes.  Smile

    United needs to cut costs, but they also need to increase yields. These are the two basic problems that every airline faces. United must not only retain current customers, but attract them. I know, this is obvious. But you can't just cut costs and sit on your ass expecting the same amount of customers. I'm trying to propose investments that will cost less in totality than the things that were cut, but yield more customers.

    I now see the flaws in some of my suggestions, but that's all they are: suggestions. I'll still stick by some of them (more details later...I'm going in between classes and am typing at the library).

    Rebuttal: The -451s actually have different manuals...so from a maintenance perspective they are oddballs. Plus, it doesn't hurt to unload some 74's they don't need.

    Rebuttal: Yes, the A320s are great aircraft, but United doesn't need new deliveries of them right now. United has 67 orders, all A32X except for 5 777-200ERs. AA, DL, CO, NW, and US have more down the pipeline. In otherwords, UA has less orders than your average US major. They deferred 43/67 aircraft scheduled for delivery in 2002 and 2003, yet are taking 24 of those. I'm sure if demand does not pick up, those extra 24 will be useless.

    Note: The 767-200s will not be going away. Their engines, though "oddball" JT9Ds, are the most reliable ones in the fleet. Plus, they may be old, but have extremeley low cycles, due to their service isolation to transcontinental routes.

    Rebuttal: New interior materials have already been paid for. It's a question of installing them in expedient fashion. Question for you: did CO suffer because they sped up their image makeover??? Uh huh.  Smile

    Jim,

    As usual, thank you for your civil discussion. I am distributing this to certain management in SFO that I knew from my summer internship, just to make for some interesting reading, possibly get my name out.  Smile

    You bring up a very good point: high fares and gouging will no longer be the cure to sagging business... United has to really compete in every sense of the word, not just exploit its best customers. Which, ironically, airlines do. =)

    ORD,

    Thank you for your clarifications. I wrote this all from memory in a rather rush job, and I'll try to polish my story.

    I disagree about AA. You underplay their success. AA did not have nearly as much dominance at DFW back then with BN and DL as it does today with just DL. You've got to be kidding that they didn't strike a vulnerable Braniff pretty swiftly.

    And while SJC and RDU failed, AA totally owns MIA now, as well as the whole Latin American market. That's tremendously lucrative... and the result of a swift move on Eastern's assets.

    Also, I'm not saying to solely advertise IFE (I understand pax don't really care)--make it just one of the little things that's part of United's "package" to make travel more bearable. Once travellers notice United goes the extra mile to provide all these little things, they will associate United with better service.

    A NEW SUGGESTION

    Aircraft leasing:

    Emirates just ordered 58 large aircraft. They have A380s on order. What's their largest A/C right now, the 777-300? If they need extra capacity that can't be met by deliveries right now, United can offer a stopgap solution: leasing of idle, very young 747-400s.

    Geez, I'm late to class...ok cutting this short

    ANYONE, please feel free to post your own suggestions also! Like Jim!


    More later.
  • SFOintern

  • User currently offlineSFOintern From United States of America, joined Oct 2001, 770 posts, RR: 5
    Reply 7, posted (12 years 8 months 2 weeks 2 days 4 hours ago) and read 2828 times:

    Oh what the hell, the TA didn't make it. Sweet, more airliners.net time for me!  Big thumbs up

    Sean,

    Some of your rejections actually seem to confirm what i am saying:

    d) Larger RJs? Two words buddy - SCOPE CLAUSE.
    • Oh man. *Which is why only heavy research should be conducted first and foremost*. Large RJs would have to be flown by mainline; pilots wouldn't have it if those were flown by UEX. Ever. Anyone have the CASMs of operating say, an Embraer 170 as opposed to a 737-500 on a 400-900 mile route? United should study that.


    e-g) OK. Agreed. But wasn't SFO trying to get UA to move its LAX/SFO flying to *G...offering lower fees as incentive, just to stimulate the retail/concession business in the IT?

    h) The Carribean is LOW YIELD? EXCUSE ME? Where can I get some of what you are smoking.
    • EXACTLY. UAL has always perceived these "leisire" markets as too low-yield to serve, when in reality some substantial revenues are to be had.


    i) ORD-BRU and JFK-ZRH. Yeah, BRU and ZRH are the solution. Sabena and Swissair flew ALL their flights there and we all know how succesful they are.... Oh wait..
    • DUUUDE, does it even look like I said fly loads of flights there? What was the title of that heading again? Oh yeah: airline demises. AA's picking up some of the slack, right? But is there still some slack to be picked up. That's my question.


    Rather than just witty retorts and one-line quips, can we address these points?


    User currently offlineSFOintern From United States of America, joined Oct 2001, 770 posts, RR: 5
    Reply 8, posted (12 years 8 months 2 weeks 2 days 4 hours ago) and read 2823 times:

    Correction: item e-g should read transcon flying.

  • SFOinternational

  • User currently offlineTango-Bravo From United States of America, joined Jun 2001, 3803 posts, RR: 29
    Reply 9, posted (12 years 8 months 2 weeks 2 days 4 hours ago) and read 2814 times:

    What ails United can be answered in two words:

    No leadership


    User currently offlineSpeedport From United States of America, joined Sep 2001, 284 posts, RR: 0
    Reply 10, posted (12 years 8 months 2 weeks 2 days 3 hours ago) and read 2870 times:

    I agree with many of the other posters. Many of your arguments are flawed.

    You spent a great deal of time talking about how the eighties and early nineties are to blame for ual's current woes. One doesn't have to look back that far.

    United's current problem is simple. A, former, CEO spent most of his time, and lots of United's money, chasing after other business ventures while the core bussiness suffered and was placed in a poor cash liquidity position.

    This same CEO gave a huge increase to the pilots banking on the merger with USAir to pay for it.

    United did nothing to win back those affected by the summer of hell.

    Sept 11 happened.

    Summary:

    United backed itself into cost and operating structure that required flight and fare levels to remain the same. It's like a person making $1,000 a month at a job on a commission basis with $950 going to fixed costs (rent, utilities, cell phone, cable, etc.) It wouldn't take much of a slow down in sales to cause a problem.

    United's short term problem is this: Not enough people are traveling, while those who are pay a low fare. This is causing a need to have more people fly. Our break-even load factor is high because we've backed ourselves in a high fixed cost structure. To survive we must lower these high fixed costs. Simple.

    United in the long term needs to expand, not to low yield, sunny, tourist destinations, but to the east coast where their is money to be made in lucrative markets and feeder routes. United's attempt to merger with USAir wasn't a bad idea. It was just handled badly by a CEO who was way out of his league and who had bit off more than he could chew.

    United must pursue east coast routes again. Either through buying routes in bankruptcy court, intelligent merger, or hostile takeover. It looks like USAir will be able to stave off bankruptcy in the near term but that doesn't mean they will be able to do it forever. There is also a possibility that Wolf will break up USAir and sell of the pieces to make up for the millions he lost due to the drop in stock price.

    Anyway, that's my two cents.


    User currently offlineSFOintern From United States of America, joined Oct 2001, 770 posts, RR: 5
    Reply 11, posted (12 years 8 months 2 weeks 1 day 22 hours ago) and read 2795 times:

    Speedport:

    Oh, one doesn't have to look that far, but failing to do so is VERY myopic. Unfortunately, it's exactly your type of attitude that typifies the fundamental flaw of UAL's "problem solving capacity": to address only short-term issues.

    Some of your points repeat what I have said:

    United's current problem is simple. A, former, CEO spent most of his time, and lots of United's money, chasing after other business ventures while the core bussiness suffered and was placed in a poor cash liquidity position.

  • Is this not what I said? The fact that this led to inflated costs is a given, and does not need to be restated. Hmmm... how about the headline The most recent problem: what's the core business???

    United did nothing to win back those affected by the summer of hell.

  • Exactly what's trying to be addressed here.

    United backed itself into cost and operating structure that required flight and fare levels to remain the same...

    United's short term problem is this: Not enough people are traveling, while those who are pay a low fare. This is causing a need to have more people fly. Our break-even load factor is high because we've backed ourselves in a high fixed cost structure. To survive we must lower these high fixed costs. Simple.


  • TOO simple. United is already dispatching service cuts, furloughs, and wage renegotiations. Remember the points that Jim brought? Here's what I said in response to him:
      "You bring up a very good point: high fares and gouging will no longer be the cure to sagging business... United has to really compete in every sense of the word, not just exploit its best customers. Which, ironically, airlines do. =)"
  • United can't just lower costs and then sit pretty. No. The game HAS changed. We can't completely rely on biz pax anymore. The business plan has to change. We're going to have to focus on the "commoners" more.

    United in the long term needs to expand, not to low yield, sunny, tourist destinations, but to the east coast where their is money to be made in lucrative markets and feeder routes.

    United must pursue east coast routes again. Either through buying routes in bankruptcy court, intelligent merger, or hostile takeover...


  • OMG. Why repeat history? A merger is not the solution; even acquiring assets would be tough for a demoralized workfore to swallow. While I do agree United should pounce on any valuable east coast assets that should come up for sale, first, you must please employees before you go on a buying binge. That's exactly what Goodwin did NOT do.

  • You said it yourself: United is faced with the problem of having too little business pax and too many fare sale pax. But you missed the larger problem: United does not have any of the loyal, low-fare pax, who provide significantly and more stable yields than fare salers.

  • How does United attract more of these? By providing real service, and service more leisure destinations as well. Leisure destinations have more yield than business destination filled with fare sale pax. Guaranteed. Then United will have a more stable mix of pax. It all goes back to what Jim said.

    --keep reading--

    Well, I didn't post the second half of the Historical Root of United's Dysfunction article because I didn't want to be repetitive. (Which is why I said "here are some more of my suggestions". Maybe repeating this will give clarity to the purpose of my article.

    SOLUTION FRAMEWORK

    United's current problems all boil down to a botched management-union transaction that changed employeee expectations forever. When United turned to ESOP to fix its culture problem, it didn't select the best solution. So, while the airline grew from its valuable acquired assets, it didn't see how much the problems were brewing. Nearly 20 years of blindness...

    How can United ensure its long-term survival?

    These main goals are obvious:

  • RESTORE EMPLOYEE CONFIDENCE

    Establish rapport and trust again between management and unions, and negotiate fair contracts. Don't exclude any details in showing employees their role in the company vision: employees must believe their role in how the company will grow again.

    Creighton is attempting to address this issue first and foremost. So far, he has:
    • Opened the books to the unions
    • Given a weekly CEO update

    Most important of all: Make it clear the operational goal is for CONSISTENCY. With better reliability, there will be less service disruptions, employees' jobs will be less stressful and hectic than when having to deal with late flights.

  • RESTORE CONSUMER CONFIDENCE

    Keep making reliability a number one priority, as United has been doing recently. Ensure product consistency by setting service standards for UEX now that more and more markets are serviced with these affiliates. Don't overpromise and underdeliver.
      It's about managing expectations.

    Make it clear the operational goal is for CONSISTENCY. With better reliability, there will be less passengers complaining, and more being satisfied and getting on their merry way. Prove to passengers this commitment.

  • RESTORE INVESTOR CONFIDENCE

    Simplify cost structure. Reduce debt obligations. This is what Creighton is doing right now. Avolar is actually making an initial good show; hopefully it will be enough to attract an outside majority investor so that United won't have to pour in additional funds.

    Make it clear the operational goal is for CONSISTENCY. Investors like to see a company that is well run, has high productivity, and continuously streamlines operations.

  • INNOVATE & LEAD

    Recognize market opportunities, and capitalize on them. For example:

    • While UA has shrunk in the west, it should capitalize on retrenchments in the east (US Airways markets), where the economy is more stable than the technology/import-export focused west coast. This means making aggressive bids for any assets that might come into play (US Shuttle). Also, capitalize on any retrenchments in the west.

    • Large RJs. Look into them. The ERJ-170 shows amazing prospect for formerly packed domestic routes... Be the first US major airline operator. Make mainline pilots fly them. These low-cost assets could be the key for UA shoring up the west coast, and gaining ground in the east.

    • Make United Business excellent. This has to be something completely new. Perhaps promote the whole experience (ie access to Arrivals lounges, etc.) Delight the high-yielders. Service standards must improve, and above all: must be standard.

    • Increase yields by becoming more attractive to elite flyers. Compensate for less-convenient schedules by offering larger F class cabins. Doesn't hurt to reduce coach capacity in the short term... Economy Plus is a good thing.

    • Increase yields by attracting normal passengers as well. Do the opposite of alienating "the commoners", make them ALL feel appreciated. Reputation goes a long way.

    • More stable leisure traffic. Start serving high-demand leisure destinations (ex: Cancun) to diversify operations and reduce risk of system shocks on traffic.

  • RECOGNIZE & PROMOTE POTENTIAL

    United should actively inform employees, customers, and investors of the assets it has, and how it will continually strive to use those assets as efficiently as possible.

    The key to running a successful airline is to first please employees, who will in turn please customers, which will lead to business growth, which investors will flock to.

    In summation, problems came about because the airline did not please its employees. There's no reason why this airline shouldn't be successful were it not for the fact that this first step had been ignored in the past...

    Having a comprehensive route network, modern and comfortable planes and hub facilities, and an addicting mileage program are not the only components of a good airline. Things in the background, like self-reliant, satisfied employees, and communicative managers, are required. Things at the forefront, like real customer appreciation and flight reliability matter just as much.

    If United can achieve these goals, it will be on the flight path to become a truly stable network carrier, offering a solid product.

    Agree/disagree? Comments please.

  • SFOinternational

    Maybe you should read these posts, which many other solutions: (maybe I'm barking up the wrong tree here)

    http://www.flyertalk.com/forum/Forum50/HTML/009060.html
    http://64.226.5.116/forums/ubb/ultimatebb.cgi?ubb=get_topic&f=11&t=000054


  • User currently offlineDeltaSFO From United States of America, joined Nov 2000, 2488 posts, RR: 22
    Reply 12, posted (12 years 8 months 2 weeks 1 day 22 hours ago) and read 2747 times:

    SFOintern.....

    You seem to be overlooking one thing... most, if not all of the service enhancements you suggest require United to fork over large amounts of cash... precisely what UA has to avoid doing.

    Before they start worrying about service enhancements, they need to ensure that they're actually going to be around for passengers to enjoy said enhancements.

    I think United's problems run a lot deeper than just service cuts.

    First of all, their financial problems are endangering their very existence. United is swimming in red ink and they're going to need BIG concessions from their unions, and given the recent rhetoric emanating from ALPA and AFA, I don't think they're going to be very cooperative. Buying new planes or reconfiguring existing planes with more F seats or remodeling O'Hare will, as Sean said, simply accelerate their demise.

    Second, enhancements in tangible service will do little to change the terrible intangible service that United currently offers. More F seats and more C seat pitch are all well and good, but when the agent checking you in treats you like he is doing you a favor by checking you in, passengers, especially the high yield ones, will continue to fly United only as a last resort.

    To that end, it's a nice gesture on Mr. Creighton's part to make a weekly Code-a-Phone address, but it's meaningless to the rank and file of United's workforce given what they've been through. Can you blame them?

    Unfortunately, your morale is infinitely higher than that of the average United employee. Morale, along with the prospect of being on their financial deathbed, is the biggest problem at United, and until they can figure those out, they've got no business talking about spending money on service enhancements or expanding into NE markets.



    It's a new day. Every moment matters. Now, more than ever.
    User currently offlineDmjm0817 From , joined Dec 1969, posts, RR:
    Reply 13, posted (12 years 8 months 2 weeks 1 day 21 hours ago) and read 2737 times:

    I'm just glad that I work for AA......  Smile/happy/getting dizzy
    We keep thanking God that Bob Crandall was our former CEO and that he left us in good hands with Don Carty.

    DJ




    User currently offlineSFOintern From United States of America, joined Oct 2001, 770 posts, RR: 5
    Reply 14, posted (12 years 8 months 2 weeks 1 day 21 hours ago) and read 2731 times:

    DeltaSFO--

    You're not looking at the heart of the article!!!  Angry

    In fact, if you take out all my SUGGESTIONS that require $$$... you'll see I'm saying almost exactly what you are about helping United recover. That's exactly what I've been saying.

    Except you make it sound hopeless--but it's not.  Pissed  Pissed  Pissed  Pissed

    The culture needs to be changed

    Scratch all my service improvements. Okay. Geez, if you're going to nitpick, let's NOT innovate at all. They're not meant to be concrete, just as suggestions for helping United grow again after it recovers financially. Take that for what you will.

    Can't you see cutting costs in only a short-term solution? Eventually, you're going to have to change the WHOLE way of doing business. UAL's current business model is antiquated.

    Remember:
    You have to spend money to make money.

      FACT:


    • In June 2001 *even before 09/11*, United's yield at 12.04c was lower than Southwest, Delta, American, and even ALASKA.



      Source: AIRLINE FINANCIAL QUARTERLY REVIEW (from DOT)

    Is that scary or what? You know what it was due to? Too many fare salers, too little biz pax, and not enough NORMAL pax.

    You can't just cut costs and expect them to come. United has to please employees first, and then start pleasing ALL *its* passengers.

    Please, look to the crux of the article. Actual employees at Flyertalk and USaviation seem to.

    That's it for today from me.

  • SFOinternational

  • User currently offlineN1993R From , joined Dec 1969, posts, RR:
    Reply 15, posted (12 years 8 months 2 weeks 1 day 21 hours ago) and read 2723 times:

    Cut out the Shuttle yields and then compare UA to the rest of the market.



    User currently offlineDCA-ROCguy From United States of America, joined Apr 2000, 4493 posts, RR: 33
    Reply 16, posted (12 years 8 months 2 weeks 1 day 20 hours ago) and read 2721 times:

    SFOIntern: United can't just lower costs and then sit pretty. No. The game HAS changed. We can't completely rely on biz pax anymore. The business plan has to change. We're going to have to focus on the "commoners" more.

    Jim: This is a major corporate-culture and profit-philosophy change that United wants to make if they are to survive in the new economic order. For too long, United and the Cartel carriers have viewed low fares as an evil to be tolerated only when necessary. The entire profit and marketing philosophy has been structured around high business pax fares.

    Gouge the business pax to subsidize some lower-cost leisure seats has been the philosophy since Bob Crandall invented super savers to destroy charter airlines in the '70s, and the first generation low-fare carriers in the '80s. But both economics and the fallout from terrorism are undermining this profit philosophy: business pax arent' all that willing to pay $500-$2500 anymore.

    Leisure pax also don't consider the "leisure" fares UA and other Cartel carriers offer to be all that low. They know that Southwest can fly them BWI-BUF for under $100 roundtrip. So a $230 rt leisure fare on UA from IAD-ROC isn't low enough to keep the Rochester leisure passenger from driving 60 miles to Buffalo. UA must get its leisure fare down to around $130-140 to compete with the New York Thruway and BUF.

    In order for UA to make money in this situation, both cost structure and profit philosophy, as well as the marketing philosophy to "power" them, must change. Otherwise UA must become business-pax only and drastically reduce capacity to serve this smaller market.

    SFOIntern: You said it yourself: United is faced with the problem of having too little business pax and too many fare sale pax. But you missed the larger problem: United does not have any of the loyal, low-fare pax, who provide significantly and more stable yields than fare salers.

    Jim: Low-fare pax provide stable yields because the reasons for low-fare travel are stable: people continue to love their loved ones in faraway cities, and want to get away from it all, no matter what business they're in, or what the economic circumstances are. If they can afford it, and feel safe, they'll do it. Simple as that.

    Southwest understands that. That's why they're sitting on 300 days of cash and didn't even consider laying anyone off after Sept. 11.

    SFOIntern: How does United attract more of these? By providing real service, and service more leisure destinations as well. Leisure destinations have more yield than business destination filled with fare sale pax. Guaranteed. Then United will have a more stable mix of pax. It all goes back to what Jim said.

    Jim: Most importantly, the new situation requires a *philosophical* change. United must commit itself to low fares as a positive strategy, not a reactionary evil to be given grudgingly when Southwest forces them to. The mindset that says, low-fare carriers are to be destroyed whenever possible, has to end. UA has to say, *we* will become a low-fare carrier of choice. We won't just take low fares away from our customers if we manage to destroy a given low-fare carrier. We must adopt low fares *as a good thing,* and thus teach our employees to ardently pursue the needs and feelings of low-fare pax just as they do the needs and feelings of business pax.

    Not that most airline employees aren't professional today, but there really is a sea change in thinking needed. United must figure out how to market the same blue-and-gray airplane, and the same courteous employees, to two different clientele's at once.

    In United's case, adopting the Southwest "fun and humor" culture won't work. UA is a different product. Not that anyone doesn't enjoy a laugh. But UA must market and price itself, and serve, the low-fare traveler as if he were the business traveler. Quality and solicitude for *all travelers* as an *integral part of the United traveling experience and profit philosophy* is needed.

    Jim



    User currently offlineN1993R From , joined Dec 1969, posts, RR:
    Reply 17, posted (12 years 8 months 2 weeks 1 day 20 hours ago) and read 2717 times:

    Airliners.net is a classic example of what happens when the lunatics take over the asylum.

    United as a low cost carrier? Cmon guys, even Herb Kelleher would laugh you out of town on that one.


    User currently offlineSpeedport From United States of America, joined Sep 2001, 284 posts, RR: 0
    Reply 18, posted (12 years 8 months 2 weeks 1 day 20 hours ago) and read 2745 times:

    I agree with DeltaSFO.

    Cosmetic changes, such as you have suggested, will cost money United doesn't have. You also suggest we go after "commoners," your sediment not mine, in one paragraph and in another suggest we reward business fliers with an expanded first class.

    So on the one hand you suggest we spend money on appearance items and on the other hand you suggest we reduce our yield by expanding first class.

    1) Savvy business travelers will simply purchase coach tickets and use cheap upgrade certificates to ride in first class. Additionally, we will have less seats to sell in coach. We would consequently have to raise coach fares in order to beakeven. This would put us at a tremendous competitive disadvantage.

    2) If we spend all kinds of money on appearance items and the competition doesn't, then we will be at a competitive disadvantage here as well. I'm sure our adversaries will see this as an opportunity to offer fare sales we won't be able to match. One way to profit is to kill your competition. Don't think for a moment that AMR or DAL haven't realized this.

    Just these two suggestions alone would drive us into bankruptcy faster than Goodwin could imagine.

    You seem to have planted your feet in two worlds. One being utopia and the other being academia. One can easily sit and conjure up all kinds of ideas, put them on paper and revel at how brilliant they are.

    Communism started out by someone articulating a utopian idea and it has been kept alive by academic reasoning. Just because it looks good on paper doesn't mean it can be executed in the real world. Have you ever seen an example of Communism discharged the way Lenin envisioned it should be? No. And you never will, but that doesn't stop countries from trying or academics from pontificating.

    I'm sure you ideas on paper look good to you.

    United, like most other airlines, has a fixed cost structure which cannot be cut away it less the entire system far apart. I believe we are at that level now. As a matter of fact some airlines saw an increase in operating costs, 6 to 9 percent, after they cut. In a fixed cost structure like the airline industry you cannot cut your was to profitability. You have to expand your revenue base.

    We can no longer afford to bully our way into markets like we tried to do at MCO, where we got our butts kicked I might add. We have to take routes away from someone who already has market presence. United has the best route structure in the West of any airline. We also have the worse route structure in the East of any airline. Anyone who has tried to move our passengers along the east coast knows this to be true. Therefore our area of expansion is clear. Acquiring USAirs eastern routes would be the biggest thing to happen to United since the 4 airlines merged into one. Anyone who can't see that should stick to pedagogical exploits and leave the real world to those of us who live in it.

    As far as your progression of confidence goes, I agree. Employee moral must be restored first, followed by consumer confidence, followed by investor confidence. Items two and three were shot down today by item one being forced into a 30-day cooling off period.


    User currently offlineN1993R From , joined Dec 1969, posts, RR:
    Reply 19, posted (12 years 8 months 2 weeks 1 day 20 hours ago) and read 2707 times:

    You seem to have planted your feet in two worlds. One being utopia and the other being academia. One can easily sit and conjure up all kinds of ideas, put them on paper and revel at how brilliant they are.

    Speedport my dear, that has summed up poor Hass in a nutshell. He means well, but he has no clue what the real world is like. The bulk of his knowledge comes from the fact that he read "Hard Landing" by Tom Petzinger - a great book no doubt, but one that suffers from much of the same malaise - all talk and little action to back it up.

    I will disagree however where you say that the cost structure cannot be further reduced. The ALPA salaries are ridiculously high and need to be reduced to approximately the same proportion to other costs as they were in 2000. Once that is achieved, UA will be in a much better position to address a more realistic CASM/RASM spread, even with diluted yields in the 0.115 range.



    User currently offlineAgnusBymaster From United States of America, joined Feb 2001, 652 posts, RR: 0
    Reply 20, posted (12 years 8 months 2 weeks 1 day 19 hours ago) and read 2689 times:

    Just answer me this one question:

    Where do you find time to write all this?


    User currently offlineLadevale From , joined Dec 1969, posts, RR:
    Reply 21, posted (12 years 8 months 2 weeks 1 day 16 hours ago) and read 2666 times:

    What ails United?

    After the United/USAir merger failed, I suggested over at planebusiness.com that United had far to many internal problems to solve before considering another merger or acquisition. Above all, it had "to figure out how to provide a consistent product (i.e., on-time arrival, completion factor, on-board amenities, baggage handling, etc.) to their customers. Next, they should finally figure out a way to formalize processes that have always been vexing to their employees, and troublesome to their customers, such as the flight attendant scheduling system and the 1K reservations line." It is somewhat encouraging to see that there is finally something SFO Intern and I can agree on.

    What SFO Intern doesn't realize, however, is that this is easier said than done. Take the consistency initiative. How many work processes are we looking at? How many of them need to be fully formalized in order to achieve some desired level of consistency? For each of these work processes, does United have a manual that describes every aspect and procedure of that work process? How long has it been since that manual was updated? Are the people in charge of that work process required to keep such a manual and to keep it up-to-date with any policy changes? How is the description of the work process and any changes to it communicated to those who participate in the work process? Per the manual and in practice, how is the work process itself monitored for consistency? Have these monitoring procedures been automated so that managers/supervisors can more easily identify inconsistencies? Depending on what United already has on hand, one is looking at the very least at a reevaluation of the manual, a revision, and a period of retraining to acculturate all relevant employees to the new policies and procedures.

    Most companies usually bring in consultants to do much of this work for them. Consultants relieve supervisors of the burden of doing the training themselves and in particular employee cultures, such as United's, they often get a better reception. Consultants, however, cost money, lots of money. As someone pointed out earlier, United has to figure out a way of cutting costs, not adding new ones.

    Some companies, like American, decided years ago to set up in-house training departments, which operate independently of the human resources department to provide all kinds of consulting services and training. However, I don't think United ever realized the necessity of doing something like that. They could have called on those people now to try to bring order to some of their more chaotic operations, such as reservations, baggage handling, and airport operations. Of course, if they had any people like that one would expect that they would have already done something.

    So, you see, it is one thing to call for consistency in the delivery of United's product - a worthy goal, and quite another to bring consistency to the product. It will not happen overnight. And, it will not happen unless United hires an outside company to study its work processes and to implement a renovation and formalization of those processes with a low level of consistency.

    Consistency, however, is not at the top of United's concerns at the moment. They had their window of opportunity before Sept. 11 to put something in motion, but now management has to remain focused on one thing and one thing only - how to bring their labor costs in line with the rest of the industry. Here, I agree with what everyone else has been saying.

    Frankly, I don't know how they are going to do it. Their mechanics want to strike and probably won't settle, the PEB notwithstanding, unless they get a pay raise on par with what AA's and NW's mechanics received. The mechanics are not being unreasonable. Problem is that United has already given their share of the pie to the pilots. Will the pilots give it back? Who knows? Miraculously, they could realize that the company is in some serious trouble and needs some kind of concession from them. I hope Creighton is a very good negotiator, but his failure to reach an agreement with his IAM buddies is not a good sign. Then, there are the flight attendants. Yeah, they screwed themselves with a 10-year contract. But, eventually, their bill is going to come due. And, United is going to have to pay up. How cooperative will the FA's be if United cannot secure concessions from the other work groups?

    Until United resolves this pressing problem, it really cannot think about rebuilding its product. It simply cannot commit the resources until it knows how its labor costs are going to shape up.

    In the meantime, of course, the rest of the industry is not likely to stand still. While United struggles in the meantime, AA and BA move closer to a transatlantic alliance that I predict will result in AA and BA offering a co-branded business class product that resembles BA's "sleeper pod" business class product. One also has to imagine that Delta is in a better position than United to move in on US Airways markets. In Chicago, American has already moved aggressively to steal some of United's more lucrative corporate accounts. Prior to Sept. 11, AA was touting its all-jet regional operations at Chicago and its covered boarding. Now, it has an even stronger argument to make given all of United's well-publicized problems.

    No matter what United does then, it is going to be playing catch up. And, I am not so sure, as I might have been before, that its vested franchises will be enough to save it. AA's and BA's codeshare agreement and the open skies agreement between the UK and US will likely affect the value of UA's Heathrow franchise the most. In the Pacific, UA is still quite strong. But, looking to the future, two of its premier markets in the Pacific look highly vulnerable. An AA/Cathay codeshare agreement could do to Hong Kong what AA/BA will probably do to Heathrow. In Australia, Qantas has done a good job all on its own of making Australia inhospitable to the Star Alliance and to United. United still hasn't seen the full effects of losing its feed from Ansett. More services to Japan are probably also on the horizon. With the new runway at Narita, competitive services are likely to be launched from BOS and JFK (AA). All of these services will tend to erode some of United's strength in the Pacific.

    There are a number of actions that United could take to secure its position in the face of such challenges; but given their current financial position I just don't see how they could carry out some of these actions before it is too late.


    User currently offlineRayChuang From United States of America, joined Jun 2000, 7993 posts, RR: 5
    Reply 22, posted (12 years 8 months 2 weeks 1 day 11 hours ago) and read 2643 times:

    Folks,

    I think the answer is very obvious: UA desperately needs a leader with the vision of Gordon Bethune to turn around that airline.

    With proper leadership, careful marketing to bring back premium passengers, and careful changes in their fleet, UA could become a major force again in the airline industry. UA should do especially a major makeover of their international service to entice O & D passengers from Europe and Asia.

    One thing Bethune did was to provide financial incentives for better customer service. Put that in place and the airline will be better in a few months.


    User currently offlineN1993R From , joined Dec 1969, posts, RR:
    Reply 23, posted (12 years 8 months 2 weeks 1 day 11 hours ago) and read 2639 times:

    One KEY difference that slips everyone's attention when they compare UAL of 2001 to CAL of 1994 is that whereas CAL was burdened by LONG TERM DEBT but had favorable operating margins, UAL has no significant debt issues but has OPERATING MARGINS that are dragging it down.

    You can restructure longterm debt in a bankruptcy and that is what Gordon did. You cannot however restructure your CASM without attacking your variable cost components. The biggest variable cost component is labor. If labor does not give concessions, then CASM cannot go down. If CASM stays where it is, then the breakeven load factor rises exponentially (because the discretionary passenger dilutes the overall yield, hence increasing the breakeven) and THAT is where you begin playing with fire.

    Mark my words. If UAL does not get SIGNIFICANT pay concessions from their pilots (and I mean 30% or so) within the next 6 months, they will be either liquidated, sold piecemeal or restructured into an avatar completely unlike its past.


    User currently offlineSFOintern From United States of America, joined Oct 2001, 770 posts, RR: 5
    Reply 24, posted (12 years 8 months 2 weeks 1 day 7 hours ago) and read 2621 times:

    While I do agree with you all that the pilot's contract needs to be adjusted haste-post-haste (I never argued this), I [b]disagree[/b] that United can't start thinking of capital or cultural company-wide improvements until then. You provide very real raw data and data analysis, but I have yet to see any other suggestions for saving United other than the most pertinent and obvious: the pilot's wages are killing the company, and are making other employee groups expect more.

    Don't jump to conclusions about any business plan rethinking; I understand that trying to set costs and operations like WN is exactly what United *cannot* do. United as a low-fare carrier IS preposterous. It must, however, try to attract more of the typical loyal WN traveler. (While still attracting more biz travellers). It's not impossible to have this passenger mix; Alaska does it, and look at their high yields.

    I'll repeat again. The pilot's wages are a SHORT-TERM issue. Yes, they are the most pressing need. But in the end, if United doesn't change its culture there's no use for making it drag its lifespan out. History will only repeat itself if the "boldest" move you can make is to cut pilot wages.

    For the LONG-TERM, you have to convey a vision. This is so true of ANY company in ANY industry. This is not ACADEMIA. It's human nature. Humans want and need to be led or inspired to function at their best.

    Sure, you can tell the employees "in order for our company to survive, we MUST have these pay cuts." But obviously, that's not the way to do it. It's like Jimmy saying the company will perish. You can't convince them by sugarcoating the truth.

    Once again, management has to convey a vision. "Why do we want to keep this company alive?" Management should address this question and make it clear. How else, besides lowering our costs, will renegotiating fair labor contracts improve the company?

    Employees want to see exactly what management will do with the money saved by their concessions and/or less-than-premium wages. They won't be satisfied with just an explanation that better finances will lead to growth, followed by more investment. They want that which they were never given before -- a solid vision; a specific plan for growth accomplished by getting costs in line.

    The lack of eastern coverage may be the biggest drain on United's ability to serve its current target customer (the globetrotting businessman), but by no means should United restrict its vision for growth.

    RJs, with lower CASMs, are the wave of the domestic future. United needs to fully grasp this, and plan ahead before it is left behind again, for example. United may be able to successfully penetrate the NE and recapture some of the west with these.

    We all agree that United needs to remain competitive. But it CANNOT do that by just following everyone else. OK, it is too hasty to be thinking about major, capital-intensive initiatives, but there needs to be some product-focused goals that the company needs to set for its employees and achieve to win back customers.

    The best investment, once again, that United can make in its product is DIRECTLY through employees. If they're satisfied, they can be given better training; training that costs, but could improve service standards significantly all around.

    The notion of improving morale and changing the company culture *is* idealistic, yes. And to N1993R and DeltaSFO --too idealistic. However, it's the only way to nip the TRUE problem in the bud.

    Hypothetically: OK, United is granted wage concessions? Lower CASMS enable United to churn profits again. United starts to grow. It enters the NE. It grows as the economy rebounds, capturing a new wave of business travel. Employees will want more money again. But what happens in the next downturn?

    History has shown that recessions happen in short spurts, and are preceeded and followed by longer periods of normal or extraordinary growth. The problem as I see it with the major airlines is that they have, in the past 20 years, profited only from lowered wage costs set in place when the companies were in the doldrums. As economic climates improved, they were able to rake in significant profits. But soon after they felt comfortable granting employees higher wages, they were hit with another slowdown yet again.

    Who's the only one that's been able to remain consistently profitable despite the recessions that every other airline is ill-prepared for? Southwest.

    Now, United cannot become a Southwest. But, it can take some of the best aspects about its culture. What Southwest has is employees putting faith in the leadership from management, and commitment from employees dedicated to providing consistent service that management sets as top priority. It's exactly what United has lacked.

    Eventually, United must change its culture. Additionally, because the demand for future business travel is to an extent unpredictable, United must depend less on the business traveler, although don't get me wrong: it still needs to please them as much as ever. Striving for consistency (by culture change -- and thereby internal reorganization) will please all customers.

    Lastly, I admit that this is all "academia" and VERY optimistic. I have no experience to back my statements up (an summer internship hardly counts), but only lots of time and sacrifice dedicated to research and observation. And that's NOT limited to just Hard Landing mind you.  Laugh out loud

    So Sean "my dear", and the rest of you: criticize me all you want about not understanding the real world. At least I know this for sure about the real world: problems that repeatedly arise need to be traced back to their root and dealt with from there. This is a framework for a more HUMAN approach, rather than a pure number-crunching "problem solved" situation.

    In the long run, a United with cut costs is just not going to cut it.

    That's my story and I'm sticking to it.

    Happy thanksgiving everyone.


    User currently offlineRibbon-Demon From , joined Dec 1969, posts, RR:
    Reply 25, posted (12 years 8 months 2 weeks 8 hours ago) and read 2575 times:

    All I care about is whether there are cute F/A's or not!

    United doesn't have as many as Delta.

    ~Ribbon-Demon~


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