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 The Brancatelli File

joe SAVING UNITED

BY JOE BRANCATELLI

November 1, 2001 -- This was the week that was at United Airlines: Jim Goodwin, the compromise choice for chief executive three years ago, finally got canned. A 69-year-old board member was appointed caretaker chief executive even though he knows precious little about how to run an airline. It reported a $1.6 billion loss for the third quarter. United’s stock closed on Thursday a shade over $13 a share, a fiscal continent or two removed from its 52-week high of $45.50.

Can you say “Dead Airline Flying?” So can I, but I urge you to hold your tongues.

I actually think United can be saved. In fact, this might be an historic moment for United. Fresh off the departure of another overmatched chief executive, smarting from the worst quarterly performance in its 75-year history, with many of its very best customers gone, with tens of thousands banished from the payroll and its route network withered, United has virtually nothing to lose. It can start fresh, think creatively and roll the dice.

What would I do to save United if I were John Creighton, the retired chief executive of Weyerhauser who took the reins of the airline on Sunday? Here’s just a tiny fragment of my to-do list.

PURGE THE COURT
There are dozens of talented executives at United, but many more are swaggering martinets who care nothing about customers and even less about the company’s employees. While the airline was melting down in the summer of 2000, these poseurs were off planning for a merger that was never going to happen and picking out corner offices in a new corporate headquarters that will never be built. These fools must go. Creighton needs to assess his executive core and immediately weed out anyone who doesn’t take a solemn oath to rebuild United around the precepts of good customer service and decent employee relations.

FIND A SUCCESSOR FAST
One of the most shocking aspects of the airline business is the absolute paucity of top talent with vision and imagination. In fact, Creighton got the big chair almost by default because there was no better candidate inside or outside the company. If history eventually records that Creighton saved United, it will probably be because he found and groomed a top-flight successor who will have led the airline with verve and creativity for the next 10 years.

ADMIT THE OBVIOUS
Creighton would be well served to acknowledge what his fellow top honchos in the “full-service” airline brotherhood will not: There is no proof that a traditional airline is a financially viable proposition. Airline leaders in the mid-1990s were perversely fond of noting that they lost more money during the 1990-1993 airline crash than the entire industry collectively earned up until 1990. By this time next year, you’ll hear similar laments about the current crisis. So why not admit the obvious? Airlines that soak business flyers, subsidize leisure travelers, offer miserable service and ride the boom-and-bust financial cycles are losers. It’s time to recreate United for the 21st Century by starting with the premise that all of Creighton’s predecessors got it wrong during the 20th Century.

ZERO BASE THE AIRLINE
That said, zero base the airline. Instead of trying to “fix” United, concentrate on creating an airline that offers a product people want to buy. And--surprise!--if you invent a profitable airline that is a hit with airline consumers, then you come up with a carrier much like Southwest. Southwest makes money, all the time, come hell, high water, recession, war, terrorism and an endless wave of ill-designed competitive responses from "full-service” competitors. It sells a basic transportation product that people understand. With some creative finagling, the Southwest model is flexible enough to allow some changes: assigned seating, two classes of service on domestic routes, and a dash more flash a la JetBlue. I’m not saying there aren’t other commercial-aviation models that work. But I am acknowledging the elephant in the airport: Almost 100 years after the Wright Brothers, no one has invented another one that has.

CONSIDER CHAPTER 11
It’s only been a week and Creighton has already made a serious mistake: He ruled out a Chapter 11 filing and made avoiding bankruptcy a matter of honor. That is not only intellectually foolhardy, it is also culturally out of step and financially risky. United’s problems--a flawed employee-ownership plan, a melange of plane types and service concepts, a lopsided reliance on hub-and-spoke flying, and vast international networks that might be disastrously affected by nations returning to state support of flag carriers--may be insoluble without bankruptcy-court protection.

RECRUIT FREQUENT FLYERS
Creighton could make friends and influence customers with a few simple gestures. He could grandfather his current crop of elite frequent flyers for 2002, a move already adopted by American, Alaska and America West. Then go further: Go back to all those United elite-level flyers who lost their status in 2000 because they defected or were forced to book other airlines. Write to them, restore their status, and ask them to give United another try. Then go even further: Meet directly with frequent flyers. How about a once-a-week “open house” at O’Hare, United’s hometown hub? Creighton could hold court for an hour or two in a Red Carpet Club and just listen to what his most frequent travelers have to say. He might learn something about his airline and his customers.

In the long run--whatever passes for the long run now that we measure life on the road as the number of days since September 11--Creighton faces an immense task: restoring the financial health and competitive balance of the world’s second largest airline, a huge, creaky, rudderless tub of a carrier. And, sadly, Creighton needs to realize that United, even in its very best days, was never a great airline, just a very big one.

But Creighton has tools with which to work and he has one gigantic advantage: He once ran a company that actually made money while competing in a largely free market. It’s been a long, long time since any airline boasted a chief executive with those kind of credentials.

This column originally appeared at JoeSentMe.com

Copyright © 1993-2004 by Joe Brancatelli. All rights reserved.