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Follow the Money, Not the Apologies, at United
October 1, 2015 -- The official United Airlines apology tour has begun and you shouldn't believe a word of it. Follow the money instead.
Three weeks into his gig as boss of United Airlines, Oscar Munoz decided it was time to apologize for its misbegotten merger, its crappy service and its all-around fail as a major carrier. United purchased newspaper ads in some important hub cities and Munoz himself gave an interview today to The Wall Street Journal, the paper that's been least likely to find fault with the carrier during its five-year slide into operational oblivion. United even launched a cheery new Web site that promises to listen to your complaints, suggestions and gripes.
Forget that Munoz has no answers himself--after all, he's the third consecutive newbie to run United this century--or that the apology tour is five years late. It's all self-serving PR and cover-your-corporate-ass sophistry. It's a transparent attempt to divert your attention and soften your bad feelings for a carrier that even I'm tired of calling Worst. Airline. Ever.
Just follow the money, in this case $3 billion that United promised earlier this year to return to shareholders via a buyback. When asked by The Journal about the plan, Munoz blandly asserted that it would continue as announced.
In other words, the airline lagging its competitors in every financial, operational and customer-service category anyone can invent will divert $3 billion in capital to keep Wall Street and the yapping airline-industry security analysts happy.
You and I get an apology that's five years overdue, but the cash that's desperately needed to fix United is leaving the building. Like I said several weeks ago, meet the new boss, same as the old boss.
Nothing at United is changing. Nothing at all. Munoz is either too stupid to realize he shouldn't be parting with cash at this crucial time, too clueless to understand that apologies are required because United faces costly-to-solve problems--or he's already just like Glenn Tilton and Jeff Smisek and Steve Wolf and all the other pennywise, pound-foolish United CEOs before him.
I don't even care anymore which of those options it is. United stinks, it has stunk for a long time and sending $3 billion out the door guarantees that it'll stink for years to come.
I'm all for running airlines like real businesses. In fact, business travelers have been demanding that for years. And I'm all for rewarding shareholders although I could make a good case that United's stockholders are the least deserving owners I've seen in 40 years of writing about business.
But let's get real here: United has $3 billion to give to investors only because it has cheated and starved operations for decades. Continental was mortgaged to the hilt in the years after 9/11 and Smisek choked day-to-day functions when he ran the carrier before it merged with United. United spent more than three years in Chapter 11 and, when it emerged, it skimped on ops to line the pockets of Tilton and his cronies.
These two airlines--and, in all the important ways, United is still two airlines--are desperate for a cash infusion to fund replacements for everything from the insipid in-flight coffee to the calamitous computer systems. Many of its aircraft are aged, costly to maintain and frequently out of service. New planes or old, the interiors range from barely acceptable to absolutely atrocious and the entire fleet needs to be rethought, reimagined and brought to a consistent level of in-flight product. Two major unions still don't have joint post-merger contracts. The computer systems are antiquated and frequently overloaded. Outstations are being outsourced to save a few bucks rather than kept in-house and made better. The frequent flyer program, which once kept otherwise disgruntled United travelers loyal because it was comparatively richer than other plans, is now being squeezed for every last penny of revenue. Corporate customers are fleeing because United's day-to-day operations and reliability aren't up to snuff. Its hub facilities are worn and pedestrian and need considerable upgrading just to bring them up to the level of its competitors.
The first thing Munoz should have learned when he accepted the United hot seat was that he must conserve cash to fund the repairs that the carrier will need to regain its stability, hold on to its remaining customers and compete successfully. Sending $3 billion out the door because it'll make (mostly) undeserving shareholders happy and mollify quarterly results-obsessed airline analysts is tantamount to corporate suicide. And these are the good times. What happens if oil prices shoot up or profitable business travel decreases or there's another terrorism attack? United's metaphoric cupboards are bare in times of record airline profits. What happens when the metaphorical wolf comes knocking at the door?
So we come back to where we started: Oscar is sorry United sucks. Oscar is distressed to learn the merger was "rocky." Oscar wants you to know he really cares. But as for putting United's money where his apologies are, Oscar has other plans for the $3 billion.
Mr. Munoz regrets that the airline he now leads stinks. And, in a couple of years, when United hasn't materially improved, Mr. Munoz will regret sending $3 billion out the door.
Of course, by then, Munoz will be out the door himself and his successor won't even be able to afford an apology tour. There won't be enough cash left to take out newspaper ads and build new Web sites to tell you how sorry the new guy is about United's crappy product.
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