2 Links I Love: United’s New Execs, LAX Solves Its Biggest Problem

Links I Love

I know it’s usually 3 links, but this week it’s only 2 since they’re big ones.

This week’s featured link:
United Appoints New Senior Leaders
It’s taken United President Oscar Munoz a long time, but he’s finally started building out his senior management team at United. Andrew Levy, former President of Allegiant, will become Chief Financial Officer. (Gerry Laderman who is acting CFO will stay with the airline doing what he did before.) Then Julia Haywood, a BCG consultant, will become the Chief Commercial Officer. (Jim Compton is retiring.)

I like Andrew, but more importantly for the airline, Wall St does too. Here’s a quote from Duane Pfennigwerth at Evercore.

While the company’s rush to inflate numerous union contracts prior to his tenure can’t be undone, we’d guess from arms length he will find many opportunities to streamline United’s nonunionized cost structure. It has always been a bit difficult for us to detect low-cost DNA when visiting United at a downtown Chicago office tower. This hire adds credibility to the company’s longer-term cost initiatives, in our view. He can also contribute to ancillary revenue innovation to the extent the CFO has a seat at the table in such matters.

So Wall St is happy with this pick, but the rank and file? It’s a different message. They’ll see his background at Allegiant as a huge red flag. They’ll worry he’ll be there to cut costs too much. Then there’s also his previous stint at Savoy Capital, Frank Lorenzo’s company. Yes, they won’t like any of that. It doesn’t mean he won’t do a good job. It just means he already has a high hurdle to overcome internally.

While Wall St may have liked Andrew Levy, United’s stock did go down after the announcement. I have to wonder if that’s more about the hiring of Julia Haywood. I don’t know her, and Wall St doesn’t appear to either. All I know is her airline experience appears to be solely as a consultant, which concerns me. There are good airline consultants out there, but that doesn’t necessarily translate into them being a good airline exec. United already has a President with no airline managerial experience and now it has a Chief Commercial Officer with none as well. Can she really manage the commercial side of the operation?

Links I Love

Two One for the road:
A $652-million project to move LAX runway will be scrapped after lawsuitLos Angeles Times
There is some huge news out of LAX. It appears the city is about to settle with the surrounding neighborhoods. I’m still waiting to see the MOU, but if this article is correct, LAX will scrap its plan to move the northern runways further north. It’ll also build a park in the neighborhood. In exchange? The gate cap that is hamstringing the airport will be lifted. If that is indeed the extent of the deal, then this is a smart move by the Mayor and it will have huge benefit for travelers.

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44 comments on “2 Links I Love: United’s New Execs, LAX Solves Its Biggest Problem

  1. In reference to your comments about United doing more cost cutting there has been an on-going rumor here in Houston that United will either move its’ headquarters or at least the bulk of its’ Chicago operations to Houston after Obama leaves office.  (It was also rumored that Obama wanted the largest airline based out of Chicago before the Continental/United merger.) 

    United has recently signed a long term large office lease in the new Hines high rise in downtown Houston that will be completed next year.

    1. So UA is planning to hire a bunch of out-of-work energy execs? The relocation costs would be massive and IAH is declining as a hub while ORD remains strong and UA is edging out AA on international traffic.

      Houston really isn’t a “city of the future” either with its massive sprawl and commute times. If UA wants lots of tech-savvy folks, it’s not going to find them in Houston.

      1. I don’t know answers to your question. Just the on-going rumor that has been floating around. For certain though United has leased out large amount of office space in downtown Houston that they will start moving different operations into in 2017.

      2. Anon, Not sure where you are thinking IAH is declining hub? They are adding another terminal and redoing others??? Houston Metro is projected to surpass Chicago in next census. It does have the massive sprawl you refer to and woefully lacks mass transportation as you wrote. However Texas is generally considered a less expensive place to do business in. And cost of living is much less in Houston than Chicago. (However it is rising at a clip.)

    2. It seems like Houston is blaming Obama for everything. The space shuttle not coming to Houston was Obama’s fault, losing the UA headquarters was Obama’s fault, the drop in oil prices is Obama’s fault….

      1. I have never heard of anyone here in Houston blaming Obama for the space shuttles. It was argued that the other cities locations would receive more tourists. Houston did get the “Enterprise”. Also, never heard of it being a “fault” that Obama wanted prestige of largest airline being in his home town at the time. However, at the time merger announced former Mayor Parker of Houston was “faulted” for not being aware that merger was taking place by many. And she appeared to be caught flat-footed at time. It is also suspect that Houston was “faulted” and punished by United when Southwest Air Lines was given approval to fly to Mexico and Caribbean. The day after the Houston City Council voted approval for Southwest after a long lobbying effort by Southwest for routes and against the decision by United, United cancelled the Houston to Auckland route. President Obama carried both the City of Houston and Harris County in which Houston resides during last election. I have never ever heard of any individual in the energy industry fault the President for drop in oil prices. Much less the city in general. Indeed, President Obama signed legislation allowing the US to EXPORT oil for the first time since the late 70’s.

    1. Jeremy – This is going to sound stupid, but it oversees all commercial functions. (See, sounds stupid.) But that means sales/marketing/loyalty/network/revenue in general. Not sure if that’s exactly how United will structure it, but I basically see this as a replacement for Jim Compton as the Chief Revenue Officer. That’s going to be the most important work.

        1. Kilroy – No, not at all. I think of the CCO as the head of revenue.
          Network and revenue management are hugely important.

          1. So is this UA’s way of merging the COO and head of Sales & Marketing into one role? Sorta like Kirby and Isom at AA or Hauenstein and Gill West at DL?

            1. Mike – No, it’s still unrelated to operations. But it is a lot like Kirby and Hauenstein’s roles at American and Delta respectively. There will still be a COO at United.

  2. The biggest problem at LAX is the lack of In n Out on premises. Especially since the In n Out Shuttle doesn’t work any more.

      1. Nathaniel – My guess is actually that In ‘n Out isn’t willing to compromise and you generally have to compromise in an airport location. But I don’t know that for sure.

        1. Compromise? In terms of hours, location, menu? I would love a look at how airports choose the vendors and brands they offer, how they delineate between pre and post security.. Since I think as we travel more now we spend more time in airports because of the TSA..

          1. Nathaniel – I don’t know exactly how, but opening at an airport usually involves compromise. Such a limited menu may also not go over that well.
            It’s all just a guess. In-N-Out never talks about its business, so it’s hard to know.

          2. For In N out in particular, unless they choose to franchise, one would not appear in LAX.

            As far as compromises, here is a article that summarizes a lot of the challenges: http://www.eater.com/2015/11/18/9750940/airport-restaurants and in my experience, this is true of most of the larger airports. At your small to medium airports, most food preparation up to the point of heating/cooking is centralized to a pre-security kitchen and then brought through the checkpoint.

        1. I love that In-N-Out. I can’t tell you how many times I have finished work (did work with with a studio in culver city for nearly five years that brought me out nearly once a week) and enjoyed some animal style before the red eye east.

          The one opposite Fisherman’s Wharf in SF doesn’t.

  3. I find mr pfennigwerths comment about “inflated union contracts” quite repugnant.

    Only if it weren’t for those damned employees making tons of money yeah right.

    The sub United flight attendants just caught up to delta American and southwest in terms of pay after getting robbed by the company for the past 13 years. Let’s not even mention the stolen pensions. How much do these greedy mfers want??

    Although there was a large pay rise the flight attendants contract was concessionary.

    And this guy levy was involved with Lorenzo spit spit. The more I hear the less I like.

  4. It seems to me that LAX got exactly what it wanted. They knew they would lose the runway move, so they negotiated the removal of the gate cap in it’s place. Brilliant move to increase capacity. The community group got suckered by this one. Now, even with the planned traffic improvements, there’s still going to be more traffic at LAX and the surrounding communities.

    1. Does seem the neighborhood lost this one doesn’t it? The original plan that had a people mover that would have moved parking off site is gone too. I am still surprised that an elevated highway connector over Century Blvd was never added to bring a straight connection from the 405 into LAX. This is clearly opening the door for an expansion of terminal 1 on top of the current Park-n-Fly lot plus having DL being creative about adding gates in Terminal 3 never mind the new mid-field concourse.

  5. Concerning United Airlines, Their new huge space located in soon to be completed 601 Main Street, Houston building will be home to what is called United Regional Headquarters. Chicago will be referred to as the Operations Center and will no longer be referred to as Headquarters when the move to new building happens in 2017.

      1. The conjecture was/is that senior management will stay in Chicago. United publicly is leasing five floors in the new 609 Main building. However there is another lease in that same crown jewel building that leasor will not announce.(That new building by Hines Companies will be nicest, most beautiful, LEED Platinum high rise in downtown Houston.) If that space too turns out to be United I suspect that big changes would be coming. Stay tuned.

  6. That’s great news about the gate cap at LAX, but will the unspecified safety improvements to the north complex be as safe as adding a taxiway between the runways? In other words, is a higher standard of safety being compromised here?

    1. Bill – Well, there’s a lot of legalese in the MOU, which I now have. I’m going to write it up further, but basically it says that if the FAA deems it unsafe and they are required to make changes, then that’s how it’s gonna be.

      1. So If FAA says move runway, then they have to move runway? No gate caps and a possible FAA mandated runway move. Win-win for LAX!!

  7. Does anyone know how long it takes for TSA PreCheck to be approved? I applied three weeks ago and haven’t heard anything yet. Thank you.

    1. Joe mine took three days. I was able to track it online and when I saw a Known Traveler number added, I knew I was approved. Once I had the Known Traveler number, I added it to my AA profile for travel before I got official TSA Recheck approval and on my boarding pass I was PreCheck. Check your online progress.

      1. Thank you very much! I checked it this morning. It said they received my application in three days. and that I should wait until 8/27 which will be 30 days before notifying them. Take care.

  8. Reference the LAX restaurant issue, like CF said it’s all about how much the restaurant will compromise. LAX really wanted a Chick-fil-a but not opening on Sunday it’s going to work. The Theme Building is still vacant; rent is too high to make a profit.

  9. This is totally off topic, but has anyone seen AA’s definition of “force majeure”?
    Any condition beyond American’s control including, but without limitation… acts of God…

    1. Pretty much all airlines have this.
      I think it would to preempt travelers who try to claim something based on ‘an act of god’ rather than airlines themselves using it.

  10. Hello, I am not sure how to do a new post, but what do you think about United Air Lines “budget economy” class tickets coming out before the end of the year? Supposed to compete with Frontier, Spirit and Allegient.

    1. Joe – I’m the only one who can write a post on the blog, so this isn’t a discussion forum in that sense. When United actually rolls out a true plan, then I’ll write about it. For discussion where you start your own topics, you can try flyertalk.com or airliners.net.

      1. Okay. Got it. New to the drill here. Not familiar with those sites, but will check them out. Thank you.

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