From: Adam Rifkin (adam@KnowNow.com)
Date: Mon Sep 11 2000 - 02:35:23 PDT
A Brief History of Adam Rifkin and United Airlines since FoRK began:
United Premier Executive 1996.
United Premier 1997.
United Premier Executive 1998.
United Premier 1999.
# of miles flown on United in 2000 not paid for in frequent flier miles: 0.
Sorry United, you've become Untied. Frequency of flight delays and the
increased cost of your flights lately have made me an infrequent flier.
http://www.nytimes.com/2000/09/10/business/10UALL.html
Even Travelman, a former United 1K member and two-time United
Round-the-World flier, has used United minimally this year...
time for a change in company strategy, folks.
> Righting United Airlines: Nine Flight Plans
> By JULIE EDELSON HALPERT, September 10, 2000
>
> To say that this year has been difficult for James E. Goodwin, the
> chief executive of the UAL Corporation, parent of United Airlines,
> would be a vast understatement. During his one-year reign, United
> has been hit with problems that might well sink many a company.
>
> The trouble began in April, with the expiration of its contract
> with the Air Line Pilots Association. As negotiations dragged on,
> pilots began refusing to work overtime. In June, the union voiced
> opposition to UAL's planned merger with U S Airways, concerned that
> the deal would jeopardize jobs.
>
> From May through August, United canceled 4,800 flights -- 4 percent
> of its total -- because of worker shortages, leaving many passengers
> stranded in airports for hours, sometimes days, with no easy routes
> to their destinations. And weather-related delays compounded the
> problem.
>
> Though the airline has reached a tentative pact with its pilots,
> it faces another potential contract battle with the International
> Association of Machinists.
>
> UAL's convoluted corporate structure has not helped matters,
> either. The board includes, in addition to insiders and outside
> executives, members chosen by union and nonunion workers. Employees
> gained board representation and majority stock ownership in
> exchange for pay cuts in a 1994 restructuring.
>
> Since reaching a 52-week high of $79 in January, UAL's stock has
> plummeted; it closed at $46.63 on Friday.
>
> What can be done to repair United? Money & Business asked nine
> experts who track the airline industry to offer their insights; the
> advice ranged from improving customer service to canceling the
> pending merger.
>
> The airline's officials are scrambling to repair the damage, and
> some relief may be in sight. The pilots agreement is scheduled for
> a vote in October, and Matthew Triaca, a spokesman for the airline,
> said that the negotiations with the machinists union were well
> under way and that he expected an agreement soon on that contract,
> too, helping to smooth labor relations and get flights back on track.
>
> United is also trying to win back customers with bonus
> frequent-flier miles. And it is banking that a dose of humility
> will help, too. In August, Mr. Goodwin appeared in a 30-second
> television commercial apologizing for United's poor service. The
> company has also taken out full-page ads in newspapers. "We are
> working hard to bring the operation back to normal and restore the
> confidence of our customers," Mr. Triaca said.
>
> That is no easy task. No one envies the challenge Mr. Goodwin faces
> in turning around United. Here are excerpts from the experts' comments.
>
> SAM BUTTRICK Airline analyst at PaineWebber.
>
> At the root of the problem is the simple fact that labor has
> excessive structural leverage.
>
> Any union group has a large bag of tricks it can rummage through
> when it wants to express itself. There has been a statistically
> significant change in behavior with the unions, which, while
> consistent with the letter of the contract and letter of the law,
> enables labor to hold management hostage with tens of thousands of
> customers daily -- and that's not right.
>
> We're very concerned by the implications that the recent tentative
> agreement has on cockpit crew costs. It is total capitulation by
> United Airlines management. I wouldn't have agreed to a contract
> that gave the pilots the opportunity to work overtime, but did not
> require them to take it on. That leaves management at the mercy of
> the pilots' willingness to work overtime.
>
> At the core of all this is that labor has significant leverage
> over the quality of the operations. Management needs to be
> empowered more, to curtail job actions. Managing labor expectations
> is a very tricky part of running an airline.
>
> I don't see an intractable problem with customers. Getting
> customers back is very easy. An airline business is a network
> business, and United has a terrific network. People use the airline
> based on its schedule and network.
>
> If you look at the last decade of on-time performance, United has
> never been an on-time airline, yet its financial returns are near
> the top of the pack. They should have frequent-flier inducements,
> and as fall-season loads decline from summer peaks, we could see
> fall sales. They could toy around with some performance guarantees,
> providing frequent-flier miles for excessive flight delays or
> cancellations. It may be administratively tricky, but it has an
> intuitive appeal, providing customers remuneration for substandard
> operations.
>
> If they made me C.E.O., I would call off the U S Airways merger.
> It's time for United to focus on getting its own act together,
> instead of embarking on highly risky operations with integration
> issues that will exceed problems that United saw this summer. I
> don't think they're up to the task of merging. If they can't handle
> their own pilots, they're not up to the task of acquiring another
> airline.
>
> GERALD MEYERS Professor of organizational behavior, University of
> Michigan Business School.
>
> They've got multiple crises going on: industrial and human
> relations. None of them are easy to solve. The first one that is
> amenable to treatment is the public perception crisis. They realize
> that what customers, the public and regulators think of them
> requires a full-blown, singular, all-out initiative, not just
> something that tags onto other things. It requires a crisis team, a
> crisis plan.
>
> They need training in the organization on how to deal with this
> and experts to help them -- an effort by itself. Included in that
> are crisis communications people. They should bring them in. In my
> view they need to look at themselves from the outside and say
> they're going to do better. They have to see themselves as other
> people see them. They're in the public service business. They need
> to keep customers happy.
>
> United should drop the ESOP [employee stock ownership plan,
> created in the restructuring six years ago]. It saved the airline,
> but it doesn't have a future. They should let the unions see they
> will get their money back and return the company to the managers.
> You can't change the management if the unions run it. The board of
> directors is useless. They can't talk about cost reduction.
>
> ESOP's have their problems, and very few are successful. It's a
> source of the current problems. Once the ESOP is dissolved, the
> anger begins to diminish and the internal stuff on who's running
> the company will be minimized. You will have a schedule for how the
> current problems will be resolved over time and make clear there is
> a plan to make the company profitable and distribute the wealth.
> United is not a backward airline. They've got awful labor
> relations. Once that's solved, they will run a good airline and get
> people happy and satisfied and excited.
>
> BARBARA BEYER President of Avmark Inc., aviation consultants.
>
> They desperately need to rebuild their image. At this point,
> everybody's really mad at them, including me. I fly 30,000 to
> 40,000 miles a year with them. I think what they desperately need
> to do is have better control over delays and send their flight
> attendants back to charm school.
>
> If you think about it, the airline is a public utility. The only
> thing that makes it different is passenger service. When it's bad,
> you want to go to another airline. They need to teach employees
> manners. They've lost sight of the service attitude.
>
> They aren't practical about the fact that they are having delays.
> If there's a delay, they should take full- fare passengers off the
> airplane and rebook them. They need more staff at counters.
>
> ROBERT ROACH Jr. General vice president of the International
> Association of Machinists.
>
> We went to a meeting called by Transportation Secretary Robert
> Slater, and the one thing that came out of it was that airline
> carriers need to better communicate with passengers.
>
> We need to better use technology to better communicate with
> passengers at airports. We should advise customers about delays so
> the customer can't scream at an agent. Also, if a customer comes to
> an airport to get on an airplane and pushes employees, he should be
> arrested and not be allowed to fly that aircraft.
>
> And we should make people aware of what they'll confront when they
> start their journey from home. There is anxiety built into flying:
> nervousness, packing, the fear people have of flying. The airlines
> need to start educating you when you buy the tickets about the
> delays. Expect that weather delays are possible.
>
> Agents should make frequent announcements about reasons for
> delays, so people won't get mad. Today, people assume that if
> anything happens, it's labor's fault. That's not the case.
>
> We are negotiating an agreement with no efforts to disrupt United.
> Once the contract is swiftly resolved, it eases the tension. We
> need to move the process very quickly and that's what we intend to
> do. Then there will be no unsettled labor issues and no tension
> between labor and management. There is not a bad group of employees
> creating this. The problems are built into the system.
>
> PAUL HUDSON Executive director, Aviation Consumer Action Project,
> an airline-passenger advocacy group.
>
> The biggest problem is they have a credibility gap with their
> customers.
>
> They have not been meeting their schedules. If you know you have
> no resources to make the flights, cut back the schedule. If you
> can't fly planes on time, change published times to be more
> accurate and reflect the reality.
>
> We've petitioned the D.O.T. [Department of Transportation] for a
> truth-in-scheduling regulation. For flights that are chronically
> delayed, there would be mandatory disclosure of on-time statistics
> by fax or telephone. If most people knew the on- time statistics
> for a lot of these flights, they wouldn't book them. Flights
> delayed over 80 percent of the time would need to be scheduled
> accurately or wouldn't be flown. They would cancel the flight until
> it could be scheduled to run on time.
>
> Lack of spare airplanes and over scheduling are the biggest
> reasons for chronically delayed flights, not labor disputes or
> equipment failures or air traffic control or weather.
>
> They are booking more flights than airplanes and crews can handle.
> I also feel that the government should require mandatory reserves
> of airplanes and flight crews of 3 percent. They are operating with
> less than 1 percent now. They're expecting that 99 percent of
> pilots will show up and that 99 percent of planes will be
> operating.
>
> They should also stop overscheduling, especially at their hub,
> Chicago O'Hare. They schedule more airplanes to take off than the
> airport has capacity to allow. There's no way that can work.
>
> And stop holding people in the airplane for excessive amounts of
> time. This is not necessary.
>
> It also burns a lot of fuel and causes other problems. Most
> passengers would rather be in the airport for excessive waits.
>
> STEPHEN A. GREYSER Professor of marketing and communications at
> Harvard Business School.
>
> At the end of the day, the bottom line for the consumer is that
> company behavior is far more important than whatever public
> relations or advertising the company may put out. I'm not
> suggesting that advertising and public relations are unimportant.
> But by themselves, they aren't going to do the job.
>
> What the company has to do is improve the reality of the customer
> service, and that includes the scheduling. That includes handling
> on the telephones. That includes what happens in the departure
> lounge, and that includes what they do by way of keeping their
> customers who are in the lounge area informed about the truth of
> what's going on.
>
> Many times they are not forthcoming in terms of providing truthful
> information, especially when there's an opportunity for a customer
> to go to another airline. Obviously they hate losing customers, but
> that's short-term thinking. The customer will remember she wasn't
> treated like a customer.
>
> Dealing with the schedules is complicated, but thinning out the
> schedule is something they can do on their own. The first step is
> to reduce the schedule overload. Obviously they've got to fly
> planes to make money. But having large numbers of passengers
> complaining is not good for the company's image or reality.
>
> They also need more people on telephones handling customer
> complaints. From a marketing point of view, they have to focus on
> frequent fliers. They have to develop a statement of fulfillable
> promises backed up by the commitment at all levels of management
> and the airline's operating group, a commitment to true customer
> service.
>
> RANDY PETERSEN Publisher of Inside Flyer magazine, a publication
> for frequent fliers.
>
> The first thing I would do is I would probably resign. I believe
> they mishandled the crisis control. They thought that if they
> ignored it, it would go away. Customers don't go away anymore. I
> would hire another crisis control adviser.
>
> I still fly United and think they're a good airline. But I would
> get all the people who work for the company on the same page. I
> think I would owe an apology to the employees who were put on the
> firing line. I would go back to employees and let them know we let
> them down as a company and make them happy. If you take care of
> employees, they take care of the customers. There needs to be a lot
> of healing. I would spend every single day on the job with my
> employees and the people on the front line, not giving away miles
> or discounts. Those are pacifiers for passengers. It's just
> bribery. That doesn't heal what's wrong with United.
>
> United won't be ready for Thanksgiving or Christmas unless they
> heal themselves. The guy who works the checkout counter in Denver,
> the customer service manager in San Francisco. Those are the people
> I think I would talk to, and as C.E.O., I would not sleep until I
> talked to them all.
>
> SANJAY DHAR Professor of marketing, the University of Chicago
> Graduate School of Business.
>
> The key thing is getting consumer retrial -- the people who left
> United for other airlines. Management should feel confident that
> problems are being addressed and share information that the pilots
> are the highest paid now and that the operations are being
> streamlined.
>
> They should continue using Jim Goodwin but use a more solid
> message to say "these are the things we've done" and come up with
> very tangible things, like what Jacques Nasser did with Ford to
> respond to the Bridgestone tire crisis.
>
> Goodwin has the biggest stake in the company, and he should
> communicate the message. United's top brass have a role to play in
> building confidence within their ranks. They should say, `This is a
> company you should be proud of.' That's reassurance-building among
> customers.
>
> Then you have to get people to try the airline. There could be
> financial incentives, or "buy two fares, get the third one free,"
> or a sharp discount for flying on major routes. They could figure
> out how to recapture a dominant position in routes lost to other
> airlines, and offer a steep discount on those routes. That won't
> start a price war, because you're only offering it on specific
> routes.
>
> ALFRED KAHN Professor emeritus of political economy, Cornell
> University, and chairman of the Civil Aeronautics Board, 1977-78,
> during airline deregulation.
>
> United's problems are a result of excessive congestion at
> particular airports at particular times. There are two major
> remedies that are obvious. First, we have to get some system for
> providing air traffic capacity that is sufficient. So the question
> is whether the F.A.A. and air traffic control system are ideally
> set up to respond to needs for additional capacity. And there have
> been various commissions recommending corporatization of control.
>
> The second is correct pricing. Excessive congestion at certain
> times and places means you are undercharging. All airlines should
> charge more when it's more congested and less when it's not.
> Charges for phone calls are different at peak times than in the
> middle of the night.
---- Adam@KnowNow.ComI love the smell of old warehouse in the morning. It smells like... high valuation. -- Yonald Chery
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