The talk of the US airline industry these days is all about one thing… what’s wrong with United? The airline is underperforming financially and operationally, without question, and has not been able to take advantage of all the benefits that should have come in the merger with Continental. So what is wrong with the airline? Many people think they know, including executives at the airline, but the reality is that it’s a whole lot of things, and it’s not an easy fix. I certainly don’t know all the answers either, but I’d start with the hardest and most important thing to fix: the culture. That’s no quick payoff on that one, but it’ll pay the biggest dividends in the long run.
One favorite pastime for United employees in this merger is to blame Continental. If you listened to many pre-merger United employees, you’d think that United was the greatest airline of all time until Continental came in and ruined it. Talk about seeing the world with rose (er, uh, tulip?)-colored glasses. Let’s be realistic here.
United was a mess for a full decade or, arguably, more leading up to the merger. Awful management, bad labor relations, and a lack of interest in preparing the airline for long term success led United to the bottom of the industry several times. Had things gotten better in the last couple of years before the merger? Sure. But that’s because they couldn’t get any worse. Besides, previous management was so hell-bent on finding a merger partner that they had to improve things so their own shareholders could make money on any combination.
Despite this brief improvement, United was still an airline that had dramatically under-invested in itself. Planes weren’t well-maintained (not unsafe, but they weren’t reliable) and sub-par onboard products ruled the day. Anyone who thinks United was a truly great airline is smoking something. It hadn’t been great since the last century.
Continental, on the other hand, was closer to being a premier airline, but it was a premier regional airline. You had a carrier that was strong only in the eastern half of the country with a good Transatlantic network and a great presence in Mexico. In the rest of the country, South America, and in the Pacific (save for the isolated Micronesia network), Continental was largely an afterthought. This was not a global airline.
But give credit where credit is due. Continental had been left for dead in the early 1990s and its turnaround was nothing short of remarkable. The fact that it maintained that status for so many years after the turnaround is a testament to the people there.
When it comes time for a merger, however, you don’t need people who can maintain a great culture. You need people who can build a new one from the legacies of two existing ones. That still hasn’t happened at United. At this point, what United needs is another turnaround. You might think Continental would be up for another one, but there’s one problem. The people who led Continental through the last turnaround are no longer there. That’s not to say people on this management team haven’t participated in a turnaround. It’s that they haven’t led one. That’s a big difference.
There are several tactical and strategic errors we can point to along the way. A favorite one to point to is the decision to go with the SHARES passenger service system over United’s Apollo system. That has resulted in all kinds of frustrations for passengers and front-line employees alike. But that was just a byproduct of a bigger decision, one to try to pick and choose the best of each airline. That was a big mistake and it only creates a bigger wedge between the two sides. That’s probably one reason why we’ve seen American and US Airways choose a different strategy in their merger.
United and Continental pitched this as a merger of equals, even though the Continental management team was effectively, but not entirely, taking over. They said it would bring the best from both sides. But you know what that does? It gets both sides thinking they’re the best, and then they fight each other to prove they’re right.
This creates deep divisions which don’t disappear once a decision is made. Instead it creates fiefdoms which are hard to penetrate. It’s made even more difficult when physical barriers are put up. In stark contrast to the open layout at Hawaiian’s headquarters, United’s is chopped up across 20+ floors, and you are sometimes require to take connecting elevators to get between them. It’s not conducive to teamwork if even a team wanted to come together.
So what did US Airways/American learn from this? Though US Airways was the acquiring carrier over American from a transactional perspective, US Airways management has quickly come in and said that they would keep the systems that were already in place almost across the board. Once the transition is done, then the team can jointly decide if future changes should be made. This helps to avoid infighting from day one, and it also helps maintain operational integrity.
At American, it’s far too early to say you have one team working together, but at least they’re on the runway. United seems to be sitting in the penalty box, waiting for a departure slot. Of course, building a unified culture is not easy. It takes a big strategy and then a million little pieces of solid execution to get things to start to gel. There is no switch to flip. But it’s the little things can have a big impact.
For example, American just recently announced its new operations center would be named after the legendary and much-admired Bob Baker. Bob oversaw operations at American from 1985 until the turn of the century. American would probably look a lot different today had Bob Baker succeeded Bob Crandall running the airline, but sadly he was taken by cancer. He’s a man who deserves his name on the side of American’s ops center. Legacy American employees can take pride that their tradition is being respected while legacy US Airways employees can be proud to be joining an airline that has such a rich history. (Of course, they need to make sure the US Airways legacy has a place as well.)
At United, you hear a lot of talk but you don’t see this kind of action. The executive team is too busy putting together reasons why the airline is underperforming for Wall Street instead of building a culture. These excuses always seem like a scramble and they don’t often make sense. They blamed the revenue management team a few months ago for revenue underperformance, but the excuses didn’t really seem to add up. On the cost side, United brought in both McKinsey and BCG, two expensive consulting groups with mixed results (that’s being generous) in the airline industry, to create a plan. This is the kind of stuff that’s core to the business. You shouldn’t need a consultant to tell you how to run your airline.
If United really wants to cut its costs, the best thing it could do is to start running a better operation. After all, year-to-date, including regional partners, United has canceled more than 5 percent of its flights. That’s more than American, Delta, Southwest, or US Airways. It also had more than a quarter of its flights delayed with a 72.9 percent on time performance. That barely beat Southwest, an airline with its own real operational issues, and fell far behind industry leaders Delta and US Airways. This isn’t an isolated performance. United hasn’t been a operational leader in recent memory.
Running a bad operation is incredibly expensive, and it creates ill will with your customers. Sure, there are a bunch of technical ways you can look into fixing the operation, but one that impacts it from every angle is the culture. If you have a group of people all working together toward the same goal, things have a way of fixing themselves. Of course, you need to provide those people with the tools to do their jobs to even have a shot at success. See, it’s a lot of little things that add up quickly.
So how do we fix this? I don’t know the full answer. Of course, I don’t work there and I certainly don’t know where the bodies are buried. But the real problem is that management doesn’t seem to know how to fix it either. What I do know is that as long as people are publicly blaming the Continental side or the United side, United is going to struggle.
Working on the culture may not be the top bullet point on the first page of that McKinsey Powerpoint deck, but it’s certainly where I’d start.
[Original engine maintenance photo via Shutterstock]