What’s Wrong with United Continental?

Discussion in 'United Airlines | MileagePlus' started by Newscience, May 4, 2014.  |  Print Topic

  1. Newscience

    Newscience Gold Member

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    This article describes some of the business problems that exist at United Airlines. According to the author, they include a structural deficiency relative to peers, a result of an overly large network and airplanes that are not optimized for the routes they serve. To fix this problem he suggests that United be willing to forego revenues in order to save costs, and that bad IT and poor customer service metrics have made things worse. Network downsizing is recommended.

     
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  2. chitownflyer
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    chitownflyer Silver Member

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    IIRC, this is the same analyst whom encouraged UA's $2 Billion cost cutting program, which has resulted in the lack of IT and poor customer service metrics. Now we are told that United's problem is its network is too large, so they should reduce the size of the network? The depth of UA's network is its greatest asset. Cutting flights like NRT-BKK is a very unwise move, as it is one less international destination served. While it is understandable to have a more standard fleet, customers are unhappy flying RJs on mainline segments. If UA's next cost saving move is to downsize its network, it will continue to loose money.

    United needs to be investing in its product by getting WiFi on planes, ordering new planes, creating a next generation C & F product for the international markets, and improve its in-flight amenities in order to compete with AA & DL. Cutting costs at the expense of the product and downsizing the network are a recipe for more financial problems.
     
  3. Wandering Aramean
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    Wandering Aramean Gold Member

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    Operational reliability is the problem. Full stop.

    Everything after that is gravy.
     
  4. chitownflyer
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    chitownflyer Silver Member

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    And most important to any airline's operation as Gordon Bethune would state," Make Reliability a Reality."
     
  5. Newscience

    Newscience Gold Member

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    Actually, a number of financial analysts have offered praise for United's $2B cost-cutting program (initiated last year), including Hunter Keay of Wolfe Research. Here's an article that provides more details:

     
  6. eponymous_coward
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    eponymous_coward Gold Member

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    None of this improves their on-time performance or any other number of operational metrics that UA fails at. It's good to have window dressing in the form of hot towels, but you probably should wash the windows first.

    Also, their C/F hard product is competitive with LH, AA, BA and others. Dumping hardware before the planned end of life (when you were still planning on amortizing the cost) hurts profit.

    Keep in mind LH and AA STILL do not have 100% lie-flat across the fleet in longhaul C. UA has had that for some time now, and will have it for a while before they do.

    Exactly. Bad customer experiences abound in the UA system.
     
  7. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    The "article" uses this data to justify the claim that United Continental's network is too large:

    "Just how big a problem is United Continental’s size? Consider: United Continental flies 1,623 different route combinations, 58% more than Delta Air Lines and 65% more than American Airlines, Keay and Shojaian say. United also serves 471 airports, versus just 340 for American Airlines and 342 for Delta Airlines."

    Unless United themselves don't know how big their own network is or there has been a massive (and unpublished) ramp-up in their route network in recent weeks and months, this is just bogus data.

    From http://newsroom.unitedcontinentalholdings.com/corporate-fact-sheet

    369 Destinations (airports served)

    I have no idea if United's network is the problem. I know, though, that if I make up bogus numbers, I can "support" pretty much any statement. This reminds me of a quote I recently came across somewhere: "analysts were put on this planet to make astrologers look like they know what they are doing."
     
  8. LETTERBOY
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    LETTERBOY Gold Member

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    I'm not sure that creating a new F product would be a good idea. Have they even decided if they're keeping international F long-term (once the current F equipped planes retire)? The 787s don't have it. If they haven't made a firm decision to keep it, it would be stupid to spend money designing a new product.
     
  9. chitownflyer
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    chitownflyer Silver Member

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    From information I have garnered, UA may move to only a two cabin product of Business and Economy, but it has to compete with other companies offering three class products, so a decision to keep F would help it to stay relatively competitive. If the three major US airlines only offer 2 class cabins, what distinguishes them from each other?
     
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  10. eponymous_coward
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    eponymous_coward Gold Member

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    DL seems to manage just fine without longhaul F, competing in many of the same markets as UA does (including the ultra-competitive NYC and LAX markets). CO did fine pre-merger without longhaul F. UA will actually keep getting F revenue even if they removed every longhaul F seat in their fleet, thanks to to the ATI JV's with LH, LX and NH, as long as those airlines keep F on flights to the USA. The trend among carriers (save for EK) is removing a lot F seats from fleets and from longhaul markets where it doesn't make sense- BA, LH, QF, AA have all reduced or have plans to reduce their F seats in the fleet, for instance.

    So I don't think the case is at all clear for UA retaining 3-class F. It will be interesting to see how it works out for AA.
     
  11. Garp74

    Garp74 Gold Member

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    Just my 2cpms:

    I am the 3-5% every airline wants. I fly United domestically due to being IAD-based. Other than one last-minute purchase to Sao Paolo for $9200, UA is getting none of my international spend (so far over $35,000 for the first 5 months of 2014). Why? Very poor customer service, reliability, and a vastly inferior hard product. They're losing so much opportunity with me, it's a shame.

    (They're still doing ok with me I guess. At last check I had ~$23k PQD with UA and I've done 3 transcontinental RTs in B and E and one Cancun RT in B on UA in the last 11 days.)
     
  12. chitownflyer
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    chitownflyer Silver Member

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    Just to add, I think UA needs to keep 3 class cabins on international routes to stay competitive with other US and international carriers, domestically 2 class cabins are fine.
     
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  13. Captain Oveur
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    Captain Oveur Gold Member

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    Watching the wallet is a sound idea, but you simply can't cut your way to prosperity.
     
  14. LETTERBOY
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    LETTERBOY Gold Member

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    How do you explain DL then? As eponymous_coward notes, they're doing just fine without international F.

    Depending on who you talk to, you may find that many people don't consider them all that different from each other now. So why would removing F make much, if any, difference?

    Why is AA reducing the number of international F seats in their fleet then? And why does DL not have it? If they thought it was necessary to have international F for them to compete, you'd better believe they'd have it (or not reduce it, in AA's case).
     
  15. Seacarl
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    Seacarl Gold Member

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    Something seems off in the original analysis. DL & AA both have a higher proportion of domestic revenue than does UA. So unless UA has a disproportionately high portion of its flying on small aircraft - which maybe it does but then they seem to tout the higher RASM of the small aircraft.

    I think UA's problem is execution, not network. Maybe coupled to that is the unreliability of UX, which to an extent is UA-directed since whenever there's weather, the UA control center cancels UX flights.

    And not investing in product quality. And not having the employees trusting and believing management. Of course some of the customers feel the same way.
     
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  16. Seacarl
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    Seacarl Gold Member

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    It is just a matter of time until Global First is gone. That handwriting is on the wall. No new international aircraft are being delivered with GF installed. The 763 conversions were to 2-class. I suppose we'll see it finally confirmed when the A350 configuration is announced. But I expect that UA will follow DL into being an airline with lie-flat business, economy plus, and coach.

    As it is UA isn't investing in the GF product. They are maintaining it because the seats are still fine and haven't been amortized. But I expect then when the A350 comes, there is no GF, and the 744's retire, and 3-class 763's retire, and maybe the 772's will get reconfigured with a new C seat and F disappears.

    Yup, and I wouldn't be surprised if the Doug Parker American discontinues international First also.
     
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  17. IMRU

    IMRU Silver Member

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    What I often wonder about the "United needs F to compete globally" is what is that based on? I flight LH a bit in Business and on my last three flights, all of the people (in each case they were couples) were there on miles. I asked them - or in one case heard them tell the f/a. Yes it's anecdotal, but you would think there would be at least one person on a flight from FRA / MUC to IAD who paid for F if it was really a revenue generator.
     
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  18. dayone
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    dayone Silver Member

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    Because those F cabins contained more seats than AA could sell. AA's reduction merely shrinks the F cabin to a size similar to other carriers that offer three-class F.
     
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  19. meFIRST

    meFIRST Silver Member

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    I've always said, instead of going after broken cashews and pretzels, how about fixing the FA contract, such that sUA and sCO crews can work each others flights. Mulply that by the flights operated all over and that has to be incredibly expensive.
     
  20. eponymous_coward
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    eponymous_coward Gold Member

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    Except AA is removing the F cabin entirely on their 47 772s, and only keeping it on their 11 (plus 9 on order) 77Ws. They will be going from (47x16 F seats) to (20x8 F seats). That's an 80% reduction in their longhaul F cabin space available.
     
  21. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    You know that every single person in the C cabin was flying on miles? On three flights? Did you go around with a clipboard and do a cabin survey? ;)
     
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  22. Wandering Aramean
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    Wandering Aramean Gold Member

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    And LH is removing it from many planes as well. Even EK and SQ are cutting it on some planes/routes IIRC.
     
  23. LETTERBOY
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    LETTERBOY Gold Member

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    I wouldn't go quite that far as to say, "matter of time" and "handwriting is on the wall," but I do expect that GF will eventually go away.

    This wouldn't surprise me either, but with the merger, he'll have his hands full for a while.
     
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  24. dayone
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    dayone Silver Member

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    As I mentioned, AA is right-sizing its F capacity to match saleable demand. It invested in an upgraded F product on both select international and transcon routes. As noted by Wandering Aramean, the leading foreign airlines are similarly shrinking their F capacity.
     
  25. meFIRST

    meFIRST Silver Member

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    I've had the pleasure (?) of flying Global a few times. On some of their longest routes, on the 777

    My biggest peeves

    - The curtain in the front galley is never closed, therefore light comes in. Somehow US carriers are not allowed to use curtains at the galley.
    - The food is basically the same, less a soup course.
    - The seat is basically equivalent of todays generation business class
    - The people who sit on it tend of United employees and beneficiaries riding for free. The real pax are in Business

    I'm all for removing it from most of the planes, save say the A350-1000, if that also means more business class seats, or better yet a redesign of the stupid 2-4-2 layout . 2-4-2 is fine if its the BA version. UA basically operates a slaveship Business Class
     
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