The Brancatelli File
BY JOE BRANCATELLI
September 5, 2002 -- So an oil-industry lifer walks into an airport, meets the caretaker chief of the nation's second-largest airline and, three weeks later, he's running the joint.
I'm telling you, frequent flyers, you can't make this stuff up. That's actually how 54-year old Glenn F. Tilton got named this week as chairman, chief executive and president of United Airlines.
Three weeks ago, Tilton met for the first time with United's interim CEO, John Creighton, at San Francisco International Airport. Creighton, who has only been at the helm since last October, then pitched Tilton, who was vice chairman of ChevronTexaco Corp., on taking over United, which is increasingly looking like the Titanic of airlines. Once Tilton said he'd be interested, the United board didn't waste much time dumping the whole mess in his lap.
We have no idea if Tilton knows anything about airlines--Creighton didn't know anything and he was already on United's board when he took the interim gig--or even if Tilton has been a paying customer on a commercial flight lately. But, hey, the rocket scientists running the other Big Six carriers into the ground boast decades of experience in the airline industry, so maybe Tilton's ignorance is an advantage. After all, can he really do worse? United has lost a staggering $3 billion in the last 18 months and, during the same time, its stock has plummeted from $45.50 a share to less than $3.25.
So let's do what we can to educate Glenn in the realities. Here's my contribution: a list of things he better get real fast if he doesn't want to be remembered as the guy who was forced to break up United for its scrap value.
United management has had a unique ability to take their eye off the metaphoric ball. Anyone out there remember the bizarre Allegis experiment, when United tried to turn itself into a travel conglomerate? How about the chaotic management buy-out attempt that led to the 1989 mini stock market crash? Anyone remember Friendship Express, the low-fare carrier that never was? How about Avolar, the private-jet division that could never be? Or what about United pitching the hopeless US Airways merger while it was suffering through an historic operational meltdown during the spring and summer of 2000? Now, with the airline on the verge of bankruptcy, United management has let itself be derailed again. It's attempting a quixotic code share with US Airways and pursuing a flawed application for a government-guaranteed loan. If Tilton is smart, he'll tell everyone at United to forget about code shares, loan applications and anything else except running the damned airline.
The first words out of Creighton's mouth when he took over were that he wouldn't consider bankruptcy. And now, with the airline threatening a bankruptcy filing, Tilton shows up and says going Chapter 11 isn't a foregone conclusion. Tilton needs to get real. He should put the puppy into Chapter 11 this weekend. There's no longer any shareholder value to protect: at its $3.22 closing price Thursday, United's entire market capitalization is now just $183.3 million. Besides, with huge debt payments soon due and incredibly sparse bookings for the remainder of the year, Tilton is going to need all the breathing room a bankruptcy filing would afford. Best of all, a bankruptcy would allow United to dissolve its failed employee-ownership experiment. Workers have never had any real say in how the carrier has been run, their equity has been destroyed and the entire process was doomed because it never included all employee groups. It's time to start over and the bankruptcy court is as good a place as any to start.
GET A BROOM
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. These fools must go. Two already have: Rono Dutta, the president, and Andy Studdert, the chief operating officer, stepped down this week after disastrous tenures. Tilton needs to assess his executive core and immediately weed out anyone else who doesn't take a solemn oath to rebuild United around the precepts of good customer service and decent employee relations.
GET SOME OLD FRIENDS BACK
United has been hemorrhaging cash and customers since mid-2000, a situation worsened by United's refusal to keep faith with its most frequent flyers. Tilton should go back to all elite-level United flyers who lost their status in 2000 or 2001 because they defected, were forced to book other airlines or just stayed in the office. Write to them, restore their status with no questions asked and beg them to give United another try. Then go even further: Meet directly with frequent flyers. How about once-a-week "open houses" at O'Hare, United's hometown hub? Tilton could hold court for an hour or two in a Red Carpet club and listen to what his most frequent flyers have to say. He might learn something about his airline and his customers.
Tilton ought to realize immediately that United, even in its best days, was never a great airline, just a very big one. He needs to create a corporate culture that stresses quality and commitment. United has an astonishingly good route network, a primary position in the Star Alliance and a core of rank-and-filers who are looking for inspiration. If he leads somewhere recognizable, the airline will follow.
GET A PERSPECTIVE
Tilton would be well served to acknowledge what his new friends at the Big Six 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 the end of the 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 Tilton's predecessors got it wrong during the 20th Century.
GET A PRODUCT
That said, Tilton should zero base the airline. Instead of trying to "fix" United, he should concentrate on creating a carrier 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 at prices that consumers 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 three cabins on some international routes; and a dash more flash á la JetBlue. I'm not saying there aren't other commercial-aviation models that work. But Tilton should acknowledge the elephant in the airport: Almost 100 years after the Wright Brothers, no one has invented another one that has.
And Tilton does have one ace in his back pocket: We frequent flyers, the core of any potentially profitable and successful carrier, are fed up with his Big Six competition. It wouldn't take much for Tilton to win our loyalty.
If he leads--with a clear voice and a commitment to fair products at fair prices--we might not follow. But we sure would be willing to listen to him explain why we should.
This column originally appeared at JoeSentMe.com
Copyright © 1993-2004 by Joe Brancatelli. All rights reserved.