tommy767
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Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 3:40 am

http://www.chicagobusiness.com/artic...10/311029985/three-ceos-in-trouble

Upcoming cuts at United will be near a billion dollars. Not a good sign. Thoughts?
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KarlB737
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 3:50 am

Here is the heart of the article:

Courtesy: Crain's Chicago Business

"United shares have trailed the broader market and key competitors since United and Continental merged three years ago. Since revenue growth became an issue in July, United stock has lost 2 percent while Delta Air Lines Inc. and US Airways Group Inc. rose 22 percent and 17.5 percent, respectively. With revenue unlikely to improve in the fourth quarter, Mr. Smisek is taking another whack at costs. On United's third-quarter conference call, CFO John Rainey indicated the airline plans cost cuts in the $1 billion range."

I suspect that they will probably cut some costs a little at a time and see what happens.
 
United1
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 3:51 am

Quoting tommy767 (Thread starter):
Upcoming cuts at United will be near a billion dollars. Not a good sign. Thoughts?

Old news was announced on the Q3 conference call.... and actually it's a great sign that they are getting a handle on costs at this point. UA has been on a bit of a spending spree the last few quarters fixing the integration issues.
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AirAfreak
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:00 am

How many more cuts can UA possibly do? The article does not detail much information.

I think someone should give Gordon Bethune a call and offer a nice compensation package to bring him back as CEO. This is my personal opinion as a passenger because those days really were the "glory days" of Continental. I understand there are technical difficulties and no airline is perfect, however, Mr. Bethune really had something positive to offer employees and passengers pre & post-9/11.

Again, this is my personal opinion.
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MaverickM11
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:03 am

Quoting AirAfreak (Reply 3):
How many more cuts can UA possibly do?

Maybe one or two of the zillion HQs UA has in the Chicago area?  I think UA could do lots of buyouts--DL did several waves of buyouts post merger and I don't think UA has done much of that.

[Edited 2013-11-11 20:09:30]
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RyanairGuru
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:08 am

Quoting United1 (Reply 2):
Old news was announced on the Q3 conference call.... and actually it's a great sign that they are getting a handle on costs at this point

Exactly. This is neither "news", nor bad news ... unless you are a ramper.

Quoting AirAfreak (Reply 3):
How many more cuts can UA possibly do?

United's costs have been RISING. They haven't been any real "cuts" until now.

Quoting AirAfreak (Reply 3):
those days really were the "glory days" of Continental

100% agree that those were the glory days, but Gordon has been retired now for a decade so he's been out of game for a while and probably isn't interested in returning. While I have enormous respect for his turnaround of CO I'm not sure what he can do here, other than motivate employees. United has some systemic issues, and while the people at the top aren't helping, the issues run much deeper than just the choice of CEO.
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MaverickM11
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:12 am

Quoting RyanairGuru (Reply 5):
100% agree that those were the glory days, but Gordon has been retired now for a decade so he's been out of game for a while and probably isn't interested in returning. While I have enormous respect for his turnaround of CO I'm not sure what he can do here, other than motivate employees.

   Gordon (and Crandall and Kelleher etc etc) were great in their own ways in their own times, but times are different, and they may not have the answers, or interest, today.
E pur si muove -Galileo
 
ripcordd
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:15 am

This goes to the rumor I heard that UA may file for BK again.
 
JAAlbert
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:19 am

What sort of things will UA cut? UA isn't known for its in flight service - it hardly competes with the other international carriers with it's current offering. Park some planes and drive up yield perhaps?
 
RyanairGuru
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:23 am

Quoting JAAlbert (Reply 8):
What sort of things will UA cut?

Most (all?) of the cuts are coming from the new IAM contract, including outsourcing something like 40 (?) stations.

The on board product is safe, indeed you will note that UA is continuing to heavily invest in its hardware, despite being the only airline in the USA to have 100% flatbed J/F on its transcontinental fleet.
Worked Hard, Flew Right
 
United1
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:48 am

Quoting RyanairGuru (Reply 9):
Quoting JAAlbert (Reply 8):
What sort of things will UA cut?

Most (all?) of the cuts are coming from the new IAM contract, including outsourcing something like 40 (?) stations.

The on board product is safe, indeed you will note that UA is continuing to heavily invest in its hardware, despite being the only airline in the USA to have 100% flatbed J/F on its transcontinental fleet.

I am sure some of the cuts will be will be on the labor side (I am sure there will be some of the smaller mainline stations...ie one of two flights a day... that are currently UA staffed will be farmed out.) Some of it will also be from being able to cut some of the contracted staff that UA had to keep on hand prior to a joint contract being reached. Also now that the pilots have an integrated contract UA is able to start cross fleeting which will help cut crew costs.


Quoting MaverickM11 (Reply 4):
Maybe one or two of the zillion HQs UA has in the Chicago area?  I think UA could do lots of buyouts--DL did several waves of buyouts post merger and I don't think UA has done much of that.

There are about a 1000 people (now that the IAM has ratified their contract) that expressed an interest in an early out package...UA is supposed to start the separation process fairly soon.

It's not just labor though where UA will be looking at cost savings...in fact I would go so far as to say most of the billion or so that they intend on cutting won't be from labor.

Continuing to take delivery of new aircraft will also help (replacing a 757 with a 739ER saves UA 2.5 million a year.)
Now that they have done some of the preventative maintenance that was lacking on the UA fleet they are going to start increasing utilization of that fleet...that will lower costs and generate more revenue.
Adding in 6-12 seats on the Airbi and 738 fleets not only increases revenue but will also lower the CASM on those aircraft.
Bringing the EMB-175s onboard and retiring some of the 50 seat RJs again will cut costs.
Just shifting around the 744s again will add something like 40 million in revenue to the bottom line.

The biggest thing that needs to be kept in mind is that UA is doing this as a profitable airline trying to make itself more profitable. This isn't out of desperation or UA being in any trouble or danger of going away or BK again this is simply UA working on completing the merger process. Now that they heavy lifting is done this is more trimming fat and making sure things are being done as efficiently as possible....this isn't something that the average passenger will notice.

The details will be announced at the investors presentation...
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IADCA
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:52 am

Quoting ripcordd (Reply 7):
This goes to the rumor I heard that UA may file for BK again.

I'd love to be the bankruptcy judge that receives a petition from a company that's made $750 million (even including special charges) in the last two quarters. Humbly, I suggest that you need a new rumor mill.
 
United1
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:54 am

Quoting ripcordd (Reply 7):
This goes to the rumor I heard that UA may file for BK again.

There is no need and no justification for them to...they have around 6.7 billion in liquidity and around 5 billion in assets that they can borrow against if they need more and are a profitable company. BK is really only good if you are short of cash (which clearly they are not) or if you need to restructure contracts/agreements ect that can't be re-negotiated voluntarily.
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KD5MDK
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 7:20 am

Quoting RyanairGuru (Reply 9):
The on board product is safe, indeed you will note that UA is continuing to heavily invest in its hardware, despite being the only airline in the USA to have 100% flatbed J/F on its transcontinental fleet.

Isn't this obviously essential since they will be losing that distinction very quickly?
 
bjorn14
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 9:13 am

Gordon Bethune is not out of the game entirely as he is on the Board at HA.
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F9Animal
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 9:37 am

I still think the old UA is the problem. CO had it together IMO. Merging is not always a good thing, which is clear in this case. I never really thought UA and CO would be a good combination. UA has to change more than just its paint job. Cuts need to really start at the top, and I mean top brass.
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apodino
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 9:53 am

Quoting F9Animal (Reply 15):
I still think the old UA is the problem. CO had it together IMO. Merging is not always a good thing, which is clear in this case. I never really thought UA and CO would be a good combination. UA has to change more than just its paint job. Cuts need to really start at the top, and I mean top brass.

United needs to do two things. One streamline the management at the top which will save them a lot of money in the long run. Secondly, address the revenue problem. I don't think UA has a cost problem, I think they have a revenue problem. They still need to get some joint contracts done. They need to pull money losing 50 seaters out of service. And they need more mainline planes. These things will go a long way toward addressing the revenue problem. It won't happen overnight, but it needs to happen. As I have said before, much of this blame falls more on Glenn Tilton than it does Smisek as he inherited this mess from Tilton. But Smisek made the mistake of focusing solely on international operations post merger, when it is clear that Domestic revenue is killing United, and if US/AA happens, UA could have a major problem on this front.
 
aaexecplat
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 2:25 pm

Quoting F9Animal (Reply 15):
I still think the old UA is the problem. CO had it together IMO. Merging is not always a good thing, which is clear in this case. I never really thought UA and CO would be a good combination. UA has to change more than just its paint job. Cuts need to really start at the top, and I mean top brass.

The merger was supposed to do two things and two things only...to reduce the number of competitors (thereby increasing pricing power) and to remove overlap and therefore capacity (thereby increasing pricing power due to lower supply). The merger DID do those two things. And I also believe CO and UA could and still CAN be a great company. But the reason they are not (IMO) I will explain below.

Quoting apodino (Reply 16):
United needs to do two things. One streamline the management at the top which will save them a lot of money in the long run. Secondly, address the revenue problem. I don't think UA has a cost problem, I think they have a revenue problem. They still need to get some joint contracts done. They need to pull money losing 50 seaters out of service. And they need more mainline planes. These things will go a long way toward addressing the revenue problem. It won't happen overnight, but it needs to happen. As I have said before, much of this blame falls more on Glenn Tilton than it does Smisek as he inherited this mess from Tilton. But Smisek made the mistake of focusing solely on international operations post merger, when it is clear that Domestic revenue is killing United, and if US/AA happens, UA could have a major problem on this front.

I agree that UA has a revenue problem. Big time. They also have a cost problem although to a much smaller degree. Much of the cost problem is due to the new contracts coming online. But let's leave that for another day so we can tackle the revenue problem...

The reason UA has a revenue problem is that they have gone to war with their frequent fliers.

On the MileagePlus front, they first called them overentitled. Then they cut back RDM bonuses by a bunch in a short period of time. They introduced first minimum flying requirements on UA metal, later on they introduced PQD replete with rules that discourage Star Alliance booking an flying. They killed upgrade rates with the silly TODs that communicate to 1ks that their business is less important than selling a $20 upgrade to a discount coach passenger at the kiosk or OLCI in some cases.

And then of course there are the operational issues. Let's assume that a frequent flier is not flexible enough to move business from UA due to the lower value of the elite proposition and MileagePlus program. Those folks have had to endure the tardiest of all the US legacy operations since March of 2012. Shares is great at monetizing all sorts of services and products at different points of sale, but it is very inefficient when it comes to servicing a passenger. When it takes an agent a minute longer to process a passenger record and that happens millions of times a day, then the inefficiencies are staggering. I am sure there is the occasional idiot-savant pmCO agent that can use Shares super fast, but for the average agent, Apollo would have been the better choice because it was faster and more flexible for agents to use and to get the passenger taken care of.

Because the airline has generally been a poorly run airline, many employees have also been markedly less "friendly" than they were as pmCO or pmUA employees, and the uattitude has chased away more passengers, still.

And then, let's talk about the actual quality of the product...their new J seat is nowhere near as nice as the new AA J seat. The catering quality is horrendous. They are cutting meal service all over the place and the domestic F seats on pmCO fleet are in my opinion the most uncomfortable of all the F seats among the legacies. PmUA seats are better, but still not on par with AA or DL. UA also flies more RJs between major metros and more small RJs on long routes than AA and DL. And all the E-135/145s and CR2s don't have a F cabin and flights run by Skywest are bottom of the barrel stuff in terms of cabin cleanliness and quality. It is 2013 and AA and DL have wifi in all their mainline cabins, but UA is just now working on it.

So when it is all said and done, UA told Silvers and Golds that they don't really care about them unless they are buying a full Y fare at any given time. Plats get only marginally more love and 1ks are tolerated for now. Next year, the folks who have traditionally put all their leisure flying on UA will lose status because of PQD. The product and service have been lackluster for over a year and a half, and when IRROPS happens, one can count on some of the worst resolution services in the industry.

There is a reason AA matched UA elites vigorously in April of 2012. There is a reason why AA, DL, and US are all recording record revenue nearly every quarter while UA keeps lagging. There is a reason why UA shows the lowest PRASM growth in the last 18 months DESPITE being the most aggressive carrier in terms of cutting ASMs. There is a reason AA and DL are investing heavily in the flying experience. They are actually increasing amenities and improving cabins. They are adding new, more comfortable and spacious J products.

From a purely econ101 POV, what is happening is that when high volume fliers started leaving, there was greater supply than demand. Which put more pressure on yields to fill the empty seats. The more cuts happened subsequently and the more ASMs were killed by flying more RJs, the more FFs an HVFs left putting yet more pressure on yields. As the announcement yesterday shows, the answer from the Smisek team is "more cuts".

The evidence is very clear....Smisek and his teams are accountants who think they can manage this airline by managing a balance sheet and income statement. What is becoming painfully clear is that reacting to the daily stock price fluctuations and analyst grilling is having UA circling the drain at this point. They need to break free from their current way of thinking and do the exact opposite of what they have been doing. Investing in the flying experience by getting wifi install done pronto...by improving catering across the board both in quality and segment length...by adding amenities to long hauls and tanscons...by not killing off the value of MileagePlus...

It has also been clear to me from the start that Smisek is incapable of thinking this way nor is he capable of admitting he has been wrong and stepping down. Even the employees are now beginning to register that cabins are emptier than they should be and they are beginning to understand the direction the company is headed. It is definitely time for some new leadership. Forget Gordo...Tom Horton will be available very soon and along with him, Virab Vahidi may also be available. Those two did a bang up job at AA while the carrier was in BK, and if they can do for UA what they did at AA, then UA can dominate this industry.
 
Centre
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 2:36 pm

Bring back Glenn Tilton!
I have cut 4 times, and it's still short.
 
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enilria
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 2:37 pm

Quoting RyanairGuru (Reply 5):
United's costs have been RISING. They haven't been any real "cuts" until now.
Quoting apodino (Reply 16):
They need to pull money losing 50 seaters out of service. And they need more mainline planes.

Apodino is exactly right. UA is buying a lot more gas per seat than DL because of their glut of guzzling 50 seaters. That automatically lowers your profit margin. UA is basically at their all-time peak on 50 seaters and DL is down over 50% already with more to go. UA was EXTREMELY slow to that party and lags everybody else on fixing it. I think that was a major management mistake. They were too busy doing nothing and not adjusting their network/fleet. I also think UA puts zero focus on their domestic network other than shuffling about 10 RJs around from one set of backwoods markets to another. Aside from that they really do absolutely nothing domestically.
 
jayunited
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 2:46 pm

Quoting apodino (Reply 16):
Secondly, address the revenue problem. I don't think UA has a cost problem, I think they have a revenue problem.

I think this is one of UA's biggest problems. If we look at how UA has been able to make money in the past couple of quarters what we see it is that it has mostly been based on consolidated traffic while our competitors have been growing. UA burned a lot of bridges in 2012 and it is no secret that both AA and especially DL took advantage of what was a horrible year for UA and as a result UA has lost many customers at the high end and low end. And even though operationally 2013 has been much better for UA the damage has been done and so far neither AA nor DL have made any crucial mistakes for UA to capitalize on as a way to try and win back some of the customers we lost in 2012. 2012 didn't only cost UA passengers is severely damaged the UA/CO brand. Protecting and rebuilding the brand is very important and so far UA/CO has done nothing in 2013 to rebuild the brand. Relaunching the Friendly Skies campaign is good but it does not speak or relate to UA's current brand. Despite UA's operational improvements in 2013 every time a public poll it taken by any major travel or news organization UA is still ranked second to last or dead last. But those polls are not indicative of the service UA has provided in 2013 but of 2012 and the problem UA is facing is most human being don't forget when they have experience horrible customer service, and will hold it against a company for a very long time. And so far in 2013 UA has not done anything spectacular to make UA stand out and have some of those customers we lost think perhaps I should give UA another try. UA has to repair its brand and grow its passenger unit then hopefully revenue will start to grow but so far those things have not happened.

Another major problem that UA has is it's senior top heavy workforce. I know DL did a buyout but i'm not sure how many senior people making top scale took that buyout at DL or what DL workforce ratio is when comparing the number of senior employees to junior employee. But here at UA not only are we extremely management heavy and although UA has said in the past they were going to cut management that still hasn't happened but we have an extremely senior workforce. Then number of people making top scale at UA far exceeds the number of people making what is called "C" scale. UA is a top heavy airline not only from a management standpoint but also from a non-management standpoint. The current buyout offer that was on the table was not good enough for UA to get most top scale employee interested enough to seriously consider it as a viable option for them. Another problem hampering UA's buyout offer is (and I don't want to turn this into a political issue) Obama Care. With the lowball buyout offer UA extended and with all the uncertainty surrounding Obama Care, most top scale employees were simply not interested unless they were at or past the retirement age of 65. But UA has tons of people making top scale who are no where near 65 years of age and there major concern is if they leave UA and take the buyout offer what are they supposed to do for insurance because clause in the buyout that talked about insurance left people with more questions than answers as to what are they suppose to do for health insurance? So for most people the buyout offer was dead before it even hit the water because UA failed to offer people enough money as an incentive to leave the company and because of Obama Care and all the changes to health care in the country that has people everywhere concerned about their health insurance.

So to put it bluntly UA waited to long to offer a buyout. They should have done a buyout years ago before before Obama Care became the nightmare that it is today because now it going to be extremely hard for UA to get top scale employees out the door to make room for junior employees and we all know that junior or "C" scale employes don't cost nearly as much as employees making top scale. So yes DL will continue to outperform UA on the employee cost issue because they were able to lower their employee cost thru a buyout while UA failed to see the numbers they were hoping for because UA waited to long.

I know there are other issues costing UA money but these two issues are extremely serious and UA has to address them.
 
MaverickM11
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 2:49 pm

Quoting aaexecplat (Reply 17):
Tom Horton will be available very soon

Oh good god no. The guy never had control of the carrier, zero strategy, and always seemed to shuffle from one gaffe to the next. All for an obscene paycheck. What. A. Deal.  
Quoting enilria (Reply 19):
UA is buying a lot more gas per seat than DL because of their glut of guzzling 50 seaters. That automatically lowers your profit margin. UA is basically at their all-time peak on 50 seaters and DL is down over 50% already with more to go. UA was EXTREMELY slow to that party and lags everybody else on fixing it

  
E pur si muove -Galileo
 
Rdh3e
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 2:50 pm

Quoting enilria (Reply 19):
Apodino is exactly right. UA is buying a lot more gas per seat than DL because of their glut of guzzling 50 seaters.

United actually pays less for fuel per ASM than DL does on a system basis:

http://web.mit.edu/airlinedata/www/2...uel/Fuel%20Expense%20per%20ASM.htm

You have to remember UA has a more efficient NB fleet and more international operations.

[Edited 2013-11-12 06:54:44]
 
aaexecplat
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 2:57 pm

Quoting MaverickM11 (Reply 21):
Oh good god no. The guy never had control of the carrier, zero strategy, and always seemed to shuffle from one gaffe to the next. All for an obscene paycheck. What. A. Deal.  

Zero strategy? No offense, but with a comment like that, you lose some credibility in my eyes. I am sure that if you spent more than 1 second thinking about this, that there is a distinct strategy that you can see that Horton implemented. And he did so in the face of massive resistance initially from labor.
 
MaverickM11
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 3:06 pm

Quoting aaexecplat (Reply 23):
Zero strategy? No offense, but with a comment like that, you lose some credibility in my eyes.

What's the Horton strategy then?
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stlgph
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 3:18 pm

Step 1?

Separate the roles of chairman, chief executive officer, and president into three separate positions.
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mcdu
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 3:22 pm

On the cost side. I have heard that at DL all operations below the wing is contract services. Is this correct? That is a major cost on the UA side and not sure if the new contract just signed allows for contracting below the wing at UA.
 
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enilria
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 3:24 pm

Quoting RDH3E (Reply 22):
United actually pays less for fuel per ASM than DL does on a system basis:

The RJs aren't included in those numbers. In fact, the reason it looks like that is exactly the problem. UA has basically eliminated its domestic fleet in favor of RJs whereas DL is growing it substantially. UA's remaining mainline fleet is heavily weighted toward long-haul, fuel efficient aircraft. If you were able to compare including all the Cost+ contracts it would be firmly reversed.
 
masseybrown
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 3:32 pm

Based on the last conference call, I'd say UA has identified most of the problems posters have cited in this thread and is addressing them in a more credible manner than a year ago. This gives Smisek a window of opportunity to succeed. If he goes to the board with lousy results a year froim now, then I think he had better buff up his resume.
 
aaexecplat
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 3:50 pm

Quoting MaverickM11 (Reply 24):
What's the Horton strategy then?

The strategy was to create a better product and service than the competition which would allow them to charge a premium for pax flying AA. This should result in better PRASM and yields. The tactics with which they have implemented this strategy are as follows:

1) Renew fleet quickly: Bring new airplanes online with modern interiors, modern seating and economy plus section (new J seats same as CX seat, retrofitting old aircraft with new J product)

2) Improve onboard product: have wifi on all mainline aircraft, improve catering options (walkup bar on new 77Ws, higher quality foods like Three Twins Ice Cream, organic foods), improve catering delivery (pre-order of meals)

3) Invest in airport experience improvements such as renovation of DFW terminals A and C

4) Resist the urge to devalue AAdvantage (at least on the surface) and keep Aadvantage members engaged via promos like ELTA3, status boost and buyback etc. (this is the area where AA has actually stealth devalued)

5) Offer different fare packages to simplify the priing structure and render value for business travelers at price points beyond the full Y fare. This refers to Choice Plus and Choice Essentil, which I have bought religiously from the beginning.

Do you want me to keep going or are you beginning to see how the simple strategy of improving product and service is driving greater PRASM and yield growth at AA than at UA?
 
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1337Delta764
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 3:55 pm

Perhaps UA should consider selling their Chelsea Food Services catering unit to Gate Gourmet. I would be surprised if Chelsea is actually making money. Gate Gourmet would probably love to have catering operations at IAH, CLE, and DEN.
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TonyBurr
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 3:55 pm

And how many Elites has Jeff driven away to the other airlines? How much has that effected the bottom line? And he continues to develop policies which drive away the long time loyal customers. Maybe people will now see what a negative effect Jeff has on the long term life of the airline without Elites.
 
T5towbar
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:04 pm

Quoting jayunited (Reply 20):
Another major problem that UA has is it's senior top heavy workforce. I know DL did a buyout but i'm not sure how many senior people making top scale took that buyout at DL or what DL workforce ratio is when comparing the number of senior employees to junior employee. But here at UA not only are we extremely management heavy and although UA has said in the past they were going to cut management that still hasn't happened but we have an extremely senior workforce. Then number of people making top scale at UA far exceeds the number of people making what is called "C" scale. UA is a top heavy airline not only from a management standpoint but also from a non-management standpoint. The current buyout offer that was on the table was not good enough for UA to get most top scale employee interested enough to seriously consider it as a viable option for them. Another problem hampering UA's buyout offer is (and I don't want to turn this into a political issue) Obama Care. With the lowball buyout offer UA extended and with all the uncertainty surrounding Obama Care, most top scale employees were simply not interested unless they were at or past the retirement age of 65. But UA has tons of people making top scale who are no where near 65 years of age and there major concern is if they leave UA and take the buyout offer what are they supposed to do for insurance because clause in the buyout that talked about insurance left people with more questions than answers as to what are they suppose to do for health insurance? So for most people the buyout offer was dead before it even hit the water because UA failed to offer people enough money as an incentive to leave the company and because of Obama Care and all the changes to health care in the country that has people everywhere concerned about their health insurance.

That's true. The buyouts (on the IAM side) was a convoluted formula that left a whole lot of uncertainty. Many people wanted to take them, but the reasons stated above, and the medical plans that are changing, it left people kind of worried. If they offered more money and some sort of bridged medical, more people would have taken them. Plus many of the members accepted the deal because sUA had retro payments coming to them since there were without a contract for a few years. That, and signing bonus payments for all added to the 177 million special charges.

We also have two more major contracts to deal with: MX and FA's. Both sides seem miles apart. IMHO, that won't be finished by years's end. That will increase spending as well.

Quoting mcdu (Reply 26):
On the cost side. I have heard that at DL all operations below the wing is contract services. Is this correct? That is a major cost on the UA side and not sure if the new contract just signed allows for contracting below the wing at UA

There will be some outsourcing, that's to be expected. Scope was given up. Quite a bit of it. But there will be some insourcing (at larger stations where there was split operations - sUA / vendor for sCO, etc.) as well. About 30 - 35 or so protected stations for the duration of the contract. But you have to remember that DL and AA also have their own outsourcing arms (DGS & Eagle) to get their costs down.

Bottom line is the 50 seaters are killing us. We need a plane like the C Series or something like that. The 319 is too big.
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777ord
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:09 pm

Quoting RyanairGuru (Reply 5):
100% agree that those were the glory days, but Gordon has been retired now for a decade so he's been out of game for a while and probably isn't interested in returning. While I have enormous respect for his turnaround of CO I'm not sure what he can do here, other than motivate employees. United has some systemic issues, and while the people at the top aren't helping, the issues run much deeper than just the choice of CEO.
Quoting MaverickM11 (Reply 6):
Gordon (and Crandall and Kelleher etc etc) were great in their own ways in their own times, but times are different, and they may not have the answers, or interest, today.

Bethune may have been a great business man when he was "CO", but he won't be coming back. The problem does fall on Smisek's lap, but there are tensions between "UA" and "CO"managers and a lot of managing directors who don't do a whole lot. and by that, I mean nothing. Cuts will sadly come, and I for one never agree with layoffs when you post big profits. If they take cuts, then top brass should too.

If you can get the ratified IAM contract... Make sure you read the Letters of Agreement in the back. 70% of the group voted it in... They never read the LOA's.... When you find the one I am referring to (outsourcing). You'll be shocked
 
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:18 pm

If I was a UA investor, Smisek would be in trouble if he DIDN'T attempt to cut costs. Costs are the big problem for UA right now. And much of that is visible on the surface with the struggles to integrate labor. Without full integration you're inefficient. Much of DL's higher profitability has come at the expense of its employees. UA/CO hasn't had as willing of a labor force. It's a race to the bottom. It's too bad it's all about the highest bottom line now.
 
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:22 pm

Quoting aaexecplat (Reply 17):

I agree, completely. UA has declared war on their FFs and in this industry, that just is a really poor decision.

I am lowly Gold, and have been pretty much made to feel like that if I am not a 1K or GS, they would prefer I not fly them. The friendly skies, my eye...
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:24 pm

Quoting aaexecplat (Reply 29):
The strategy was to create a better product and service than the competition which would allow them to charge a premium for pax flying AA. This should result in better PRASM and yields. The tactics with which they have implemented this strategy are as follows:

Everything you listed was the standard bankruptcy playbook: paint the planes, order some new ones, turf the old ones that you can, make a big splash with route announcements from your hubs. That's nothing new. But merger aside, and outside of MIA/DFW, how is AA planning to stay relevant in LAX/CHI/NYC? How are they going to fix the Pacific? Horton's big plan was to increase departures by 20%, which was universally derided.

Quoting aaexecplat (Reply 29):
Do you want me to keep going or are you beginning to see how the simple strategy of improving product and service is driving greater PRASM and yield growth at AA than at UA?

Of course AA's YOY comparisons look great; they were in the deepest bits of bankruptcy last year.
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cle757
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 4:31 pm

UA needs to offer an early out package to all employees with 10yrs or more..and not tie it to ratifiying a contract!
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 5:36 pm

The latest from Smisek & Co. The 30,000 IAM members that ratified the latest TA that took affect November 1st. We got a IOU from the company regarding our retro, signing bonus, current pay raises. We will see them in 2014. The company tells us they are having computer problems. This is totally unacceptable for a Fortune 500 company. This is how Smisek runs this company, nothing but accountants and lawyers. Every sCO system that we have to use on the sUA side now is terrible and out dated. From Shares, Load Planning, Payroll, HR, etc.
 
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 5:48 pm

Quoting ripcordd (Reply 7):
This goes to the rumor I heard that UA may file for BK again.

I've heard this as well. This would allow them to "more effectively" manage their costs at all levels.

Quoting United1 (Reply 10):
The biggest thing that needs to be kept in mind is that UA is doing this as a profitable airline trying to make itself more profitable.

Their goal may be profits, but forgetting about their customers while doing so is a huge miscalculation.

Quoting apodino (Reply 16):
The evidence is very clear....Smisek and his teams are accountants who think they can manage this airline by managing a balance sheet and income statement. What is becoming painfully clear is that reacting to the daily stock price fluctuations and analyst grilling is having UA circling the drain at this point. They need to break free from their current way of thinking and do the exact opposite of what they have been doing.

Nailed it. Spot on. Well said. Great comment.
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catiii
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 5:58 pm

Quoting ripcordd (Reply 7):
This goes to the rumor I heard that UA may file for BK again.

Rumor where? From whom? Based on what financials?
 
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 6:04 pm

Just because you have cash in the bank dosnt mean you cant file for BK look AA and what they did.
 
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 6:17 pm

Quoting MaverickM11 (Reply 36):
Everything you listed was the standard bankruptcy playbook: paint the planes, order some new ones, turf the old ones that you can, make a big splash with route announcements from your hubs. That's nothing new. But merger aside, and outside of MIA/DFW, how is AA planning to stay relevant in LAX/CHI/NYC? How are they going to fix the Pacific? Horton's big plan was to increase departures by 20%, which was universally derided.

1) What other airline has ordered 400+ firm orders for planes in BK to replace nearly their entire fleet in just a few years?
2) Note that you mentioned AA painting the planes, I didn't (because I agree that this is standard BK playbook).
3) What other airline (whether DL or UA) massively upgraded their catering operation and quality?
4) What other airline introduced industry leading J product during BK (as opposed to after...I know DL and UA announced both after BK and merger)

Quoting MaverickM11 (Reply 36):
Of course AA's YOY comparisons look great; they were in the deepest bits of bankruptcy last year.

You crack me up. UA's YOY comps are far SOFTER than AA's due to the system switchover and the resulting loss of fliers in 2Q and 3Q12.

Given that you refuse to give due credit to AA management for any kind of strategy, let's just agree to disagree.
 
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 6:17 pm

For those who say Gordo needs to come back need a reality check. The man is in his early 70s, practically retired, and flourished in the go-go '90s -- mainly on getting new aircraft via debt financing plans and outsourcing to 50 seat regional jets. United needs smart executives that are forward thinking and will actively sail the company through the rest of the decade.

I also disagree with those that say it was Glenn's fault that UA is in such a mess, and Smisek inherited it. That couldn't be further from the truth. UA under Tilton was getting it's act together towards the end. They retired nearly 100 older 737 and replace them with 70 seat regional jets and made better use of the A320 (pulling back Ted.) It was CO that had the limited scope contract with the ERJs (Expressjet) that is now sufficating UA into maximizing profit. I think CO at one point had nearly 300 RJs in their network.

Quoting ramprat74 (Reply 38):
This is how Smisek runs this company, nothing but accountants and lawyers. Every sCO system that we have to use on the sUA side now is terrible and out dated. From Shares, Load Planning, Payroll, HR, etc.

Well put. CO's technology was ancient and it's a giant backhand at the new UA. Pax don't like when sCO pilots hold planes up at the gate for "paperwork", "not loading enough fuel", or "weight balancing miscalculation issues." Or more recently back in July, not ordering enough water and ice for a fully loaded 753 on a 100 degree day on EWR-LAX. It what I remember most about flying CO out of EWR as a kid -- just a giant nusiance. Now I understand why -- lack of investment in technology.
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 6:21 pm

Quoting AA777223 (Reply 35):
I agree, completely. UA has declared war on their FFs and in this industry, that just is a really poor decision.

I am lowly Gold, and have been pretty much made to feel like that if I am not a 1K or GS, they would prefer I not fly them. The friendly skies, my eye...

UA just stinks when it comes to customer service and the way they treat their FFs. I routinely travel 20,000 miles a month and try to avoid UA where possible. They really need to work on their front-line service and increase their ability to retain the high yield customer.
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F9Animal
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 6:32 pm

I just hope they can get it together! The airline has huge potential, and I am hoping the bankruptcy rumours on here are false. The employees have been through enough already!
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airtechy
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 6:42 pm

For the life of me, I don't understand how they adopted that horrendous business class layout.

Jim
 
catiii
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 6:48 pm

Quoting ripcordd (Reply 41):
Just because you have cash in the bank dosnt mean you cant file for BK look AA and what they did.

You're kidding, right? You think that's the only factor that comes into play when doing something as disruptive to your business plan as filing for Chapter 11?

Again, what rumors, based on what financial information, from whom?
 
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DeltaMD90
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 7:05 pm

Quoting MSPNWA (Reply 34):
Much of DL's higher profitability has come at the expense of its employees.

Employees at DL seem to be doing just fine. Labor relations are very good there. Many aren't unionized anymore but the majority ruled against unionization. Was it corporate corruption that screwed the employees or something? Don't think so

Very anecdotal but I've found that DL employees are generally more happy than the UA ones I've seen. Getting more productivity out of employees and lost of unions doesn't automatically mean they're getting screwed over
Ironically I have never flown a Delta MD-90 :)
 
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thebatman
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RE: Chicago Business: Smisek (UA) Is In Trouble

Tue Nov 12, 2013 7:38 pm

Quoting F9Animal (Reply 15):

I still think the old UA is the problem. CO had it together IMO. Merging is not always a good thing, which is clear in this case. I never really thought UA and CO would be a good combination. UA has to change more than just its paint job. Cuts need to really start at the top, and I mean top brass.

To say that this is a "merger" is kind of a joke. More like "you will do it CO's way and like it". Our maintenance programs have just taken a time warp to 20 years ago. Going back to paper log books? Really? UA got rid of that 15 years ago. Don't even get me started on this debacle they call SCEPTRE. As far as the top brass go, how many of them are from UA? Not many. The vast majority are from CO.

Quoting ramprat74 (Reply 38):
The latest from Smisek & Co. The 30,000 IAM members that ratified the latest TA that took affect November 1st. We got a IOU from the company regarding our retro, signing bonus, current pay raises. We will see them in 2014. The company tells us they are having computer problems. This is totally unacceptable for a Fortune 500 company. This is how Smisek runs this company, nothing but accountants and lawyers. Every sCO system that we have to use on the sUA side now is terrible and out dated. From Shares, Load Planning, Payroll, HR, etc.

Exactly my point. Archaic is the word I would use to describe the CO systems we are forced to use. This airline has amazing potential, but you need to get all of your employees on board and happy. Get your contracts in place, merge the seniority lists (fairly) and let's get to work. Don't reject the Teamsters' last offer because you "can't afford it". Really? Let's look at the pilot's contract and take a look at what you can't afford. Give the pilots whatever it takes to make them happy (ok UA pilots - tell me how much your contract sucks, because I'm sure that's coming) and then try to hand out the left over scraps to the other work groups. Not a good idea. If your people aren't happy, you're not going to run an efficient operation. I don't care how much you try to micro-manage and streamline it...
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