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How to 'Save' United? Break It Up and Pray
Thursday, August 24, 2017 -- Such is the state of things that I could write a persuasive screed about any U.S. carrier.
Delta Air Lines lies as a matter of corporate policy and wants to hobble any competitor in which it does not have a fiduciary interest. American Airlines flies decrepit aircraft and runs from competition. Southwest still won't give you an assigned seat and thinks we don't notice the fares hikes that allow it to claim it doesn't charge for checked bags or ticket changes. JetBlue can't run flights on-time and has no vision other than being perceived as slightly less awful than the others. Alaska Airlines has a nasty habit of changing frequent flyer rules without warning and thinks the chimera of an upgrade justifies a mediocre long-haul premium class.
Then there's United Airlines, so hopelessly, fundamentally and irretrievably bad that it's time to break up the unholy mess, start again and pray for the best.
It's not that United in its current form won't be fixed. It's that it can't be fixed. We should stop making believe otherwise.
More than seven years after a self-proclaimed "merger of equals" intended to create a "world-class global airline," United is a failure on every conceivable level. Passengers hate it. Employees hate it. It is a financial laggard, an operational black hole and the competitor with the worst reputation in a universally loathed industry. Its atrocities are so instantly iconic that artists turn them into immediately recognizable political memes. And, yes, United breaks guitars and songwriters build careers off the fecklessness.
Of course, you knew all that. But did you know shares of United Continental Holdings (UAL) have plunged even while the rest of the financial world is at or near historic heights? Since reaching its 52-week high of $83.04 on June 2, it has fallen on 42 of the 58 subsequent trading days. It closed at $61.48 today, down nearly 26 percent in less than three months.
Security analysts and aviation geeks have theories about why United and Continental failed to jell. They will talk about weakness at one hub (Washington/Dulles) and intense competition at others (Chicago/O'Hare, Los Angeles, Denver and Newark in the Metro New York market). They'll discuss United's over-reliance on regional jets, high costs and lack of fare discipline. Smart ones will even recognize the existential fact that United isn't: The airline must once again reposition its Boeing 767 subfleets to separate hubs this fall because it still lacks a crew-management system to integrate legacy United and legacy Continental personnel.
Passengers have their own analyses, of course. We find United's in-flight products and lounges outdated. Even its newest innovation, Polaris, is mostly a mirage. Fourteen months after introduction, the new business class seats are in place on just four routes. Day-to-day operations are a crapshoot and we believe United is incompetent. At Newark, United recently began operations from Terminal B as well as Terminals C and A. Problem is it never told anyone, including its own staff, which is flummoxed whenever flyers ask about being assigned Terminal B departures. Meanwhile, a JoeSentMe member even tracks the tail numbers of United's Boeing 767-300s because he's frequently delayed or cancelled whenever his flight is operated with one. And, of course, the smiles have disappeared from the faces of most United employees, who got a brief morale boost two years ago when the globally despised Jeff Smisek was removed as chairman and chief executive officer.
But none of this is really what's wrong with United. It's not the routes or the service or the financials. The heart of United's problem is its lack of heart. Its lack of soul. It stands for nothing. This ungodly mash-up has no shared history or common goals to motivate 86,000 demoralized employees scattered in about 400 destinations on five continents.
Let's say you are a United employee who started at the airline 30 years ago today. United would have been in crisis, having just fired Richard Ferris after his abortive attempt to turn the airline into a travel conglomerate. You'd have been working for a car-rental guy whose only goal was to get away from United. You would have survived the 1989 Black Friday crash created by a failed leveraged buyout. You would suffered under the rapacious Stephen Wolf, dealt with the rot and drift of the late 1990s and worked around the incompetence of bosses who wasted a year trying to merge United and US Airways. After 9/11, you would have lost your money when an employee-ownership plan tanked in the 2002 bankruptcy. Then you would have been subjected to Glenn Tilton, a self-absorbed oil-industry executive who was paid 1,000 times your salary and crafted a Chapter 11 exit plan so glutinous that The New York Times called it "insanity squared." Then you were thrust into a merger with Continental and under the thumb of Jeff Smisek.
On the other hand, consider an employee who started at Continental Airlines 30 years ago today. Continental was also in crisis, having just botched the mass integration with People Express, Frontier Airlines and New York Air. Frank Lorenzo was back in charge, stripping the airline of assets and upstreaming cash to his personal investment firm. You would have been hammered in a 1990 bankruptcy and suffered through years of givebacks. The arrival of Gordon Bethune was a rare moment of joy until he began believing his own PR and became a bullying blowhard. A well-meaning successor, Larry Kellner, couldn't do much more than keep the carrier running. His successor, Smisek, was a self-involved lawyer who wouldn't deign to look you in the eye.
Smisek's reign over the combined carrier was a nightmare for employees and customers and highlighted by mini-Smiseks bemoaning "over-entitled" leeches getting in the way of their fat paychecks. Smisek's ouster two years ago brought Oscar Munoz, a railroad guy who knew nothing about airlines. With Munoz sidelined by illness and the aftermath of the David Dao incident, you now work for Scott Kirby. He's brought on some old US Airways buddies to squeeze every penny from operations and tell customers and employees that profits matter more than quality or reliable operations.
So what, if you've worked in this fetid swamp of an airline for 30 years, have you ever had a chance to believe in? What could possibly motivate you to do your job--or think that your boss cares if you excel at your job? How can you worry about customers when your boss of the moment is worried about his perks and his money?
United is dead inside, killed by a generation of SkyGods who were always focused on anything but the airline. The heart and the soul is gone. United is falling further behind Delta by the day, racing with American to the bottom and under attack by discounters across the Atlantic, Chinese airlines across the Pacific and smarter, savvier, more cohesive competitors at home.
United Airlines cannot be saved. The only solution is to break it into several smaller airlines. Not because that would guarantee success, but because several smaller, more nimble carriers might have a chance to develop a heart or a soul.
Or even a reason to exist.
This column is Copyright © 2017 by Joe Brancatelli. JoeSentMe.com is Copyright © 2017 by Joe Brancatelli. All rights reserved. All of the opinions and material in this column are the sole property and responsibility of Joe Brancatelli. This material may not be reproduced in any form without his express written permission.