Why United Airlines will fail again

[bluejuice787]

I'm not happy with senior executive salaries in corporate America, but Tilton is receiving market compensation for what he's done. It wouldn't matter if UAL emerged this year or next, Tilton would still receive a ludicrously high (by our standards) compensation package. Unfortunately, ludicrously high compensation packages are the norm in corporate America.

But let me throw this back in your court. Since you think that more needed to be done at UAL, tell everyone what you would have done if you were 'king for a day.' I wouldn't change too much (I'd fire a lot of middle managers and replace them with ones who understood how to use positive motivation, at least on occasion), but I'm not the sharpest tool in the shed. You seem to think that you're a lot sharper than UAL's senior management; let us know what changes you would make.

OK what is "market compensation for what he has done"? We 300+ million Americans need to get rid of the idea that a corporate leader needs to be compensated the way they do.

This is a bit philosophical but stick with me...The Japaneese and Germans have managed to accomplish much greater with far less spent. They also seem to do it with an eye down the road. In other words they have business plans that extend beyond this year and sometimes 5 to 10 years. Todays leaders in America look entirely at near term stock. This is one of the reasons we are so infatuated with the day to day market. It is also the reason many of todays big businesses are "shells" of the past. (United still has wonderful "rank and file" employees but the rot at the top is destroying any real hope of a future) The reasons they do this is because of the type of compensation. Just look at the vesting schedule of Tilton and the others. By anyones standards that is out of control.

What would if I were King for a day...Well I would ask for two years...If granted I would not accept any stock compensation. I mean that, I would start by not accepting compensation that is detrimental to the long term survivability of the company. I would take my work to the rank and file and interface with them. I woulnd not wear designer suits and hide in an ivory tower. I would be honest with my people about the failures of our company and I would not make excuses. I would encourage my people by being a part of them rather than a leader from "on high". I would encourage each of my employees to envite as many of their frineds and family to come fly with us and see that we are sincere about service. I would try to get rid of the complexeties of multi-tier service. I would emphasize the extreme importance of every single customer to my people...not just the mileage plus whatever. Trailer park or High Roller they are allEqually essential.

That would be day one.

 

[IB6 UB9]

OK what is "market compensation for what he has done"? We 300+ million Americans need to get rid of the idea that a corporate leader needs to be compensated the way they do.

This is a bit philosophical but stick with me...The Japaneese and Germans have managed to accomplish much greater with far less spent. They also seem to do it with an eye down the road. In other words they have business plans that extend beyond this year and sometimes 5 to 10 years. Todays leaders in America look entirely at near term stock. This is one of the reasons we are so infatuated with the day to day market. It is also the reason many of todays big businesses are "shells" of the past. (United still has wonderful "rank and file" employees but the rot at the top is destroying any real hope of a future) The reasons they do this is because of the type of compensation. Just look at the vesting schedule of Tilton and the others. By anyones standards that is out of control.

What would if I were King for a day...Well I would ask for two years...If granted I would not accept any stock compensation. I mean that, I would start by not accepting compensation that is detrimental to the long term survivability of the company. I would take my work to the rank and file and interface with them. I woulnd not wear designer suits and hide in an ivory tower. I would be honest with my people about the failures of our company and I would not make excuses. I would encourage my people by being a part of them rather than a leader from "on high". I would encourage each of my employees to envite as many of their frineds and family to come fly with us and see that we are sincere about service. I would try to get rid of the complexeties of multi-tier service. I would emphasize the extreme importance of every single customer to my people...not just the mileage plus whatever. Trailer park or High Roller they are allEqually essential.

That would be day one.

Do that and I might consider going back. Something tells me though...

 

[WhiteCloud]

UAL's business tactics towards their contractors, employees and customers will be the ultimate cause of their failure.

 

[FlyUnited]

I give up. It's apparent that these guys have some serious hair up their nether regions and no amount of FACTS is going to change how they look at United. It's also obvious to the casual reader that they must have pinned some hopes upon United at some point in their lives to have such a serious and continual obsession with all things United. I wish you luck in your lives guys......you need help. Oh, and thanks for the 'congratulations' that most aviators give when they see their comrades get through something as daunting as we have been. Hope to see you on my jumpseat someday (I suggest you don't mention your screen names)

 

[bluejuice787]

I give up. It's apparent that these guys have some serious hair up their nether regions and no amount of FACTS is going to change how they look at United. It's also obvious to the casual reader that they must have pinned some hopes upon United at some point in their lives to have such a serious and continual obsession with all things United. I wish you luck in your lives guys......you need help. Oh, and thanks for the 'congratulations' that most aviators give when they see their comrades get through something as daunting as we have been. Hope to see you on my jumpseat someday (I suggest you don't mention your screen names)

FlyUnited-

I did not mean to offend you. I cannot recall ever posting anything related to United before (I could be wrong). I am simply giving an opinion. Not an attempt to gloat at the failure of my fellow pilots. My airline (JB) is the subject of nearly daily scruitny from many sources...some credible and others not so. I try not to take it personally and try to see the forrest through the trees. Perhaps you can use your influence as a pilot to remind your leaders of what you feel is the best route to long term success.

 

[FlyUnited]

http://www.whartonjournal.com/media/paper201/news/2006/01/30/News/Ted-Discovers.Success-
1519708.shtml?norewrite&sourcedomain=www.whartonjournal.com

Ted discovers success
By: Vik Krishnan & Vinayak Naik, WG'06 & WG'07

Issue date: 1/30/06 Section: News
How can an airline that charges for on-board food, offers beverages in measured quantities, and has a funny name be a success story?

Apparently, when your only choices are either to sink like Independence Air or book a permanent berth in bankruptcy court like US Airways, you start questioning the fundamental way you do business and improve your game. Of course, if you have a team of battle-hardened industry veterans supported by top notch Wharton-grade consultants, your odds are perhaps better than most. The fact that you are part of an industry colossus like United had its advantages too: established route structures, excellent aircraft maintenance facilities, and above all, easier brand association.

This is precisely how the story of Ted, the low cost carrier (LCC) within United Airlines, was described by Sean Donohue, the head of Ted and United Express; Allen Will, Director of Finance at Ted; and Andrew Watterson, Director of Mercer Management Consulting\'s Aviation Aerospace and Defense Practice.

The basic premise was simple: utilize just one aircraft type (Airbus A320), concentrate on leisure traveler dominated routes eliminate costly frills like food, increase capacity by replacing the first class cabin (usually filled by customers redeeming frequent flyer miles or upgrading from cheap fares anyway) with Premium Economy, and what do you get? PROFITS!

However, the path to profits was far from easy. From negotiations with possibly the strongest union in America, the Airline Pilots Association (ALPA), to rationalizing the Byzantine fare structure, to attempting to change the in-flight customer service, several key changes were necessary.
Enter Mercer Management Consulting with its team that included Wharton\'s own Vik Krishnan (WG\'06) and Matt Chou (WG\'07). For six months, this team of consultants helped Ted define specific attributes of the product offering, pricing structure, distribution strategy, marketing plan, and even the on-board seating configuration. Who knew that launching a new airline involved establishing guidelines for the amount of beverage a customer would be served, or developing an in-flight safety video that took safety seriously, but at the same time communicated the airline\'s relaxed brand image?

A creative agency also helped Ted develop a teaser campaign in the launch city, Denver, in which Ted performed \'random acts of kindness\' like paying for people\'s coffee at Starbucks, buying fans hot dogs at Denver Broncos football games, and even carving out the letters "T-e-d" in a crop circle in an unsuspecting farmer\'s corn field. The campaign, which cost less than $100,000 and won the prestigious 2005 EFFIE award for Integrated Marketing Communications, and received significant local and even national media attention. A lot of people wanted to know: "Who\'s Ted?"

Since Ted\'s February 2004 launch in Denver in the airline has expanded to United\'s other main hubs at Chicago O\'Hare and Washington-Dulles, has added aircrafts, and is now flying to Mexico and the Caribbean. In contrast to much of the industry, Ted broke even in 2005, even with elevated fuel prices.

While United\'s emergence from Chapter 11 restructuring this week is a positive development, the future of Ted is far from rosy. Several new challenges present themselves. The launch of Sir Richard Branson\'s Virgin America in the next year or so is a potent threat that could change the economics of the LCC industry in America. The industry veteran, Southwest, has declared open war in Ted\'s home turf of Denver. Add to that high fuel prices and the inherent challenges of changing company culture, and you have a horizon that becomes increasingly cloudy. However, Ted seems to be bracing itself for these renewed challenges. Tighter control on costs, quicker aircraft turnarounds - through the pioneering use of dual-end jet bridges to facilitate boarding and deplaning of passengers from both ends of the aircraft - and possibly fuel hedges, are some of the action items that Ted is working on.

The future of the U.S. aviation market, according to Ted, is a system of three to four legacy carriers with international routes complementing their domestic hub-and-spoke systems, and two to three LCCs providing point-to-point services for the budget traveler. With the backing of a stronger United, and a favorable reputation in the leisure market, Ted may very well be the first-of-a-kind success story of a legacy carrier\'s LCC unit surviving and thriving in this brutal industry.
How can an airline that charges for on-board food, offers beverages in measured quantities, and has a funny name be a success story?

Apparently, when your only choices are either to sink like Independence Air or book a permanent berth in bankruptcy court like US Airways, you start questioning the fundamental way you do business and improve your game. Of course, if you have a team of battle-hardened industry veterans supported by top notch Wharton-grade consultants, your odds are perhaps better than most. The fact that you are part of an industry colossus like United had its advantages too: established route structures, excellent aircraft maintenance facilities, and above all, easier brand association.

Ted started as an experiment within United two years ago. Its quirky name is derived from the last three letters of UniTED, and Sean was the first to admit that he originally believed that the name was the product of someone's wicked sense of humor. However, the name grew on the airline's management team, and United's employees have embraced their 'little sibling,' and view Ted as an opportunity for them to have fun at a time when very few legacy airline employees have much to celebrate.

The basic premise was simple: utilize just one aircraft type (Airbus A320), concentrate on leisure traveler dominated routes eliminate costly frills like food, increase capacity by replacing the first class cabin (usually filled by customers redeeming frequent flyer miles or upgrading from cheap fares anyway) with Premium Economy, and what do you get? PROFITS!

However, the path to profits was far from easy. From negotiations with possibly the strongest union in America, the Airline Pilots Association (ALPA), to rationalizing the Byzantine fare structure, to attempting to change the in-flight customer service, several key changes were necessary.
Enter Mercer Management Consulting with its team that included Wharton's own Vik Krishnan (WG'06) and Matt Chou (WG'07). For six months, this team of consultants helped Ted define specific attributes of the product offering, pricing structure, distribution strategy, marketing plan, and even the on-board seating configuration. Who knew that launching a new airline involved establishing guidelines for the amount of beverage a customer would be served, or developing an in-flight safety video that took safety seriously, but at the same time communicated the airline's relaxed brand image?

A creative agency also helped Ted develop a teaser campaign in the launch city, Denver, in which Ted performed 'random acts of kindness' like paying for people's coffee at Starbucks, buying fans hot dogs at Denver Broncos football games, and even carving out the letters "T-e-d" in a crop circle in an unsuspecting farmer's corn field. The campaign, which cost less than $100,000 and won the prestigious 2005 EFFIE award for Integrated Marketing Communications, and received significant local and even national media attention. A lot of people wanted to know: "Who's Ted?"

Since Ted's February 2004 launch in Denver in the airline has expanded to United's other main hubs at Chicago O'Hare and Washington-Dulles, has added aircrafts, and is now flying to Mexico and the Caribbean. In contrast to much of the industry, Ted broke even in 2005, even with elevated fuel prices.

While United's emergence from Chapter 11 restructuring this week is a positive development, the future of Ted is far from rosy. Several new challenges present themselves. The launch of Sir Richard Branson's Virgin America in the next year or so is a potent threat that could change the economics of the LCC industry in America. The industry veteran, Southwest, has declared open war in Ted's home turf of Denver. Add to that high fuel prices and the inherent challenges of changing company culture, and you have a horizon that becomes increasingly cloudy. However, Ted seems to be bracing itself for these renewed challenges. Tighter control on costs, quicker aircraft turnarounds - through the pioneering use of dual-end jet bridges to facilitate boarding and deplaning of passengers from both ends of the aircraft - and possibly fuel hedges, are some of the action items that Ted is working on.

The future of the U.S. aviation market, according to Ted, is a system of three to four legacy carriers with international routes complementing their domestic hub-and-spoke systems, and two to three LCCs providing point-to-point services for the budget traveler. With the backing of a stronger United, and a favorable reputation in the leisure market, Ted may very well be the first-of-a-kind success story of a legacy carrier's LCC unit surviving and thriving in this brutal industry.

 

[IB6 UB9]

I give up. It's apparent that these guys have some serious hair up their nether regions and no amount of FACTS is going to change how they look at United. It's also obvious to the casual reader that they must have pinned some hopes upon United at some point in their lives to have such a serious and continual obsession with all things United. I wish you luck in your lives guys......you need help. Oh, and thanks for the 'congratulations' that most aviators give when they see their comrades get through something as daunting as we have been. Hope to see you on my jumpseat someday (I suggest you don't mention your screen names)

I wish no ill will on anyone, and hope the best for the employees at United...everywhere for that matter. What sticks in my craw, though, is the bashing of the LCC's...the same ones that are hiring the castaway expendable employees of major airlines. Picture this if you may, an individual spends the better part of his/her career trying to get the time and credentials to be competitive and hopefully "win the lottery". When the planets and stars align just right one day it happens, only to have disaster strike and we see thousands of furloughs, pay slashed, work rules abolished, blah blah blah. While furloughed, you hear of fellow employees picking up overtime, ALPA and DW doing absolutely nothing except exactly what upper management is doing at these carriers (stealing from the employees), etc. You go out and get a job back in the industry instead of pounding nails and you get denied the jumpseat because you "are bringing down the industry". Shat like that. If there is such a thing as unity at United, NWA, Delta, I would like to see it. You say "thanks for the 'congratulations'......as daunting as we have been". I say where was my congratulations when I got out of the unemployment line as some of my former employees were out whoring the overtime and denying the jumpseat? I'd say some of us have been through just as "daunting", as you put it, experience. That being said, a sincere congratulations to the employees at UAL. I hope you resume/return to a long and prosperous career.

 

[hellas]

Going Global

im not with united but go pick up a Forbes magazine if you want to know where the legacies are going and what this administration is doing to help the beliguered industry........Global airlines ...3rd world pay....huge profits

 

[bluejuice787]

im not with united but go pick up a Forbes magazine if you want to know where the legacies are going and what this administration is doing to help the beliguered industry........Global airlines ...3rd world pay....huge profits

Forbes magazine as well as many other periodicals in the finantial world care much about the same things as coorporate raiders...short term gain.

 

[AA717driver]

I don't think anyone (except a few pathetic individuals) would wish UAL or any other airline out of business.

Regards,

AA

AA--Actually, in the late '90's a couple of UAL pilots in the COS C-130 AFRES squadron cornered one of their squadronmates and said: "Why don't you guys (TWA) just do the right thing and go out of business?"

That's who I want flying with me in combat...

Sorry, AA, but there's plenty of that sentiment out there. The UAL people are getting a very small taste. You just haven't been in a position to experience it--I hope you never will.

Andy--I am ex-TWA. You guys have a long way to go. Hope you don't take that route.

Also, I forgot who called G4G5 a RJ pilot. He's not. He's a GV captain. Besides, RJ pilots work harder than any Legacy pilot ever thought of working.TC