How Bad an Airline is United? Just Ask its CEO

Jeff Smisek promised frequent flyers “changes we’re going to like.”

And I don’t think Continental, now doing business under the name United Airlines, gets enough credit for two of the things that are actually good since the merger between the two airlines —

  • The elimination of “Starnet blocking” or “throttling” (United used to tell customers that award seats on partner airlines weren’t available even when the partners were offering the seats but when United didn’t want to pay for them)
  • Much more generous “award routing rules” or the ability to fly just about any way you want between two cities based on what seats are available with miles instead of being highly limited in what flights can be used.

The reason they can’t really get the credit they deserve for these two items is because they’ve taken so many steps backwards — a “passenger service system” that simply doesn’t work, that can’t even always issue tickets correctly; a disaster combining the airlines onto a single system (and some of the longest phone wait times in history that resulted); major changes to its upgrade procedures that prioritize single trip revenue over loyalty; changes to how elite status is earned; elimination of benefits to million mile frequent flyers that they promised they would not eliminate; actual insults of loyal frequent flyers. And the list goes on.

This isn’t just “over-entitled” frequent flyer griping. Smisek now acknowledges it.

Mr. Smisek, in an interview, called 2012 “awful” for United. The company lost money, was hit by a wave of canceled and delayed flights, and infuriated many customers by mishandling changes to its passenger reservation system and dramatically modifying its frequent-flier rules. Two reservations outages, last August and November, inconvenienced fliers and fueled questions about United’s ability to manage itself.

But… wait for it… it’s the employees’ fault!

Among other things, he said he is working to fundamentally change employees’ thinking about the company. “For far too long, we’ve operated this company as an airline: Airlines don’t make money,” Mr. Smisek said. He wants employees to view United as a business. “That means constantly looking at ways to do things smarter and less expensively.”

If only his employees would see things as clearly as he does, United would be great! And it’s the employees standing in the way of more cuts, so they can do things less expensively.

How are they shaving costs now?

“Our costs clearly are too high,” said the CEO, a lawyer who started at Continental Airlines as general counsel in 1995. United is seeking reductions large and small. It revamped its employee shuttle-bus system at Chicago’sO’Hare International Airport, an effort expected to save $2 million over five years. New luggage handling procedures at Houston’sBush Intercontinental Airport are shaving $400,000 a month. The catering team rebid the contract for the heated nut cocktail served in first class by switching to split cashews from whole ones, a savings of $200,000 a year. “Customers don’t care if it’s a whole nut or split in half,” Mr. Smisek said.

(Emphasis mine.)

He doesn’t even value United’s hot nuts.

Which is apparently ok because customer complaints aren’t as bad as the month following the integration of United’s and Continental’s computer reservation systems.

Customer complaints about United filed with the department in April were down by more than a third from the year-ago month. Still, there were more than for any competitor.

And yet he acknowledges that they are still very bad.

The airline’s score on the annual J.D. Power & Associates poll of passenger satisfaction published in May improved slightly, to 641 out of 1,000 possible points, from 625 the year before, but United rated second to last among traditional airlines in North America in both years. United says its own customer-satisfaction scores are up fivefold from the nadir reached last July.

“It’s measuring off a low base to say it’s materially improved,” Mr. Smisek conceded. “Last summer was bad.”

The biggest mistake, and the way forward?

Mr. Smisek said that, in retrospect, the company “changed too much too quickly.” …

Mr. Smisek said he takes inspiration from Delta, “which is doing quite well, which I’m delighted with because they’re two years ahead of us’ in absorbing its 2008 acquisition of Northwest Airlines.

Be afraid. Be very afraid.

(HT: Joe Brancatelli)


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About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I haven’t found them to be quite that bad, have certainly improved since the initial merger. Upgrades seem to be on par with pre-merger and phone waits as a 1K are minimal, usually answered straight away.

    But I expect domestic upgrades in their present form to be a thing of the past in the near future, so am enjoying it while i can. But Economy Plus should stick around, they seem to be making money on that and in my view is a good product.

    But catering has certainly suffered. Regional upgrade routes like HNL-IAH now only have one entree choice and the Japanese meal on the NRT routes has been re-catered and has gone from wonderful to horrible.

    I actually like the MM policy, as it automatically makes my wife 1K, or at the very least Gold should i drop status from 1K next year once the revenue milestones take effect. But I take that with a grain of salt because they can always change the policy later.

  2. My Dad flew airplanes for United for 36 years back when United was a great airline – he started as a Flight Engineer in the DC-3 :).

    It is really sad to see what the company has disintegrated into. Forgetting all the frequent-flyer-related issues you have mentioned, United is simply an operational nightmare. I have access to their Intranet – their On-Time Performance goal is 80%……..i.e. 1 percentage point better than a C average. If my college kids had that as a goal, they would get a swift kick in the butt.

    I fly Delta now. Say what you will, but they are an absolute star operationally. When I buy a ticket, I know I’m going to get where I’m going on time and intact almost 100% of the time.

    I really hope that UA can recover.

  3. shit, theyve been flying me for free around the world for a few years (writing from the philippines). no complaints here. nickel & dime fees are demeaning though

  4. @Mr. Cool

    Agreed, the international awards are still amazing. (Please don’t change that…)

    Thai first on an A380 + Asiana Quadra business this year for me. I could never afford to fly that way otherwise.

  5. Yes I also like their international awards!

    Plus they are almost the only one flies me to my hometown, a inland city of China, by award miles…

  6. Forget about all those frequent flyer perks, just focus more on customer service (no more flight attendants saying “we’re here for your safety only”, we want service with a smile)and it will be a much better airlines.

  7. @Gene – HNL to west coast. Not a business heavy market, so maybe not a good indicator. Of course, i thought when they prioritized non-elites using miles for upgrades, that HNL upgrades would go to honeymooners and that sort of thing using their miles for a special occasion. But it has never materialized, even with the smaller capacity 737s it is usually an easy upgrade as a 1K.

    I also don’t find it terribly difficult to find the R space using the RPUs to IAD and IAH, EWR is tough though. But i have learned to be very flexible for all my UA flights to give the best chance for an upgrade.

  8. @Mr. Cool @Andy – same here. When i travel to Asia for work, my wife always goes with me, always in F or J on TG and UA, never have a problem securing a seat, sometimes she just travels on a different flight than me or i book it the night before when space invariably opens up.

    She has done 3 trips already this year on the A380 with Thai. And i have booked all of her trips online and have changed her tickets online several times when a better cabin or flight opened up. I really don’t understand what all the complaining is about.

  9. United won’t get anywhere until they fix their IT issues. They are massive, and can’t be overcome by good customer service. In fact, good customer service is impossible if computer systems and operations are constantly crashing.

    I hit a United computer meltdown last week flying out of Philadelphia and was stuck there for almost two days. You guys wouldn’t believe the chaos.

  10. Gary –

    What prompted you to write this post, now?

    At the very least, you could title it “How bad an airline WAS United? Just ask its CEO” When we are almost 7 months in to 2013, and UA CEO is referring to 2012, it is fairly clear that he is referring to historical problems, and not the current state.

    I realize Milepoint does not get anywhere near the traffic of FlyerTalk, especially in the UA forum. But if you go take a look at FT there is plenty of evidence that things are improving. (I and many others also acknowledge that UA still has more to work on…)

    This post just does not seem like your normal educational / informative approach – it seems like some latent hostility on your part…

    Maybe I am reading that wrong though…

    Lark

  11. I am a silver with united and use them mostly to fly to Manchester UK. Whereas Continental used to have 2 flights a day, they have now trimmed it to one flight a day which obviously makes good business sense as the flights are usually 100% full. We actually waited once on the tarmac because someone’s tray table wouldn’t stow and there was not one seat he could move to!
    But together with this the service has deteriorated terribly and every time I fly I have another story with them.
    Jeff- my advice – if you want to run a business then learn to compete and excel in all areas. This will bring you traffic.

  12. @Lark how has UA improved? Horrible catering, the CO culture of thier FA’s are still around (closing the curtin and ignoring the passenagers) and the true lack of customer service.

  13. Gary quit picking on United. To prove that you are not biased, you need to feature a story / analysis of how Skypesos is the most worthless US based frequent flyer program for the international traveller

  14. I disagree with many of the statements here.

    But I do agree that flying UA now as a 1K is not as nice as a few years ago. However, that is largely to do with reduced capacity (a sensible thing IMHO) and a better economy. Upgrade percentages were a reflection of this. A few years ago they threw unreasonable quantities of love and bribery at 1Ks and they don’t need to now.

    My issue is that what they are doing in the name of improvement is pretty well the opposite of what I regard as an improvement. For example, the new seats are less comfortable; I don’t want wifi but I do want entertainment, moving maps and Channel 9 which appear to be going away; the new planes are cramped and have particularly dreary decor.

    In fact, I think the food, at least in international economy, has improved. It seems maintenance is slowly catching up with UA’s legacy of under-investment.

    What UA needs to focus on is its front line staff, particularly at check in and on the planes. These people are often almost Stalin-esque in their approach to passengers. I always try to smile and keep up with the pleases and thank yous, but the hostility emanating from so many of them kind of kills that. Furthermore, it appears that UA management could not care less about this aspect of their business and does not even talk of addressing it.

    I’m looking forward to lifetime Gold status this year, when my slavery to UA will end.

  15. Gary, you realize United is a business, right? And it’s goal is to earn a profit. So when they haven’t made money recently, wouldn’t it make sense that cost cuts and other changes would be in the works?

  16. I stopped flying United out of Boston 15 years ago as I could already see a change in the attitude of both ground and air staff. I tried Continental, and remained Platinum with them for 12 years. When the merger was announced, I was hopeful. I flew United between BOS and SFO and knew instantly this would be tough going – they were worse than I remembered. I used my 700,000+ miles that I still had accrued on Continental and haven’t boarded a United-Continental aircraft since. JetBlue and Delta are taking great care of me, so I have no regrets.

  17. @Lark — I think this WSJ article percipitated the coment. http://online.wsj.com/article/SB10001424127887324049504578545681212270480.html?mod=dist_smartbrief

    I’m still not sure if Smisek’s comment about the problem with United that it was being run as an Airline vs. as a Business is a bad thing or a good thing… running it as an airline was clearly not working anyway, but aside from cost cutting, I don’t see him talking more about it. Logically, a business would be looking for discriminators to put it above the competition, as well as cost cutting. Right now UA really has 3 discriminators: Its mileage awards which are great (thanks to Star Alliance), its Economy Plus (still seems to me to be Industry leading), and its leading the US Airlines with introduction of new aircraft (aka 787-8, commitments for 787-10, A350).

  18. I really hate United. Last month, they cancelled a flight in which I paid partly with a credit card and partly with gift cards. They ended up refunding my credit card pretty quickly after. However, for the gift card, they hadn’t reimbursed me until after I called them a month later.

    When they gave me a replacement gift card, it was actually a travel voucher rather than a gift card. The difference being, a travel voucher expires in 1 year, whereas the gift card I had expires in 5 years. They said there is no way their systems can give me a replacement gift card and the travel voucher is all they can do.

    As bad as AA is, I may be back to buying gift cards from them and using Delta as my go-to airline.

  19. I flew United (biz class) two weeks ago for the first time; ATL to DEN to LAX. Dreadful. I’m sure miles-better than coach — but I was surprised how … un-elite it was. (Have done a couple Delta biz-class flights a year for the past ten years; one IcelandAir Saga Class JFK to Heathrow, so I’m not a total newbie.)

    I was SO relieved to fly Delta biz class back LAX to ATL: way-nicer plane (much newer, obviously), (much-more) comfortable seats, attentive staff, TVs in the seat backs (the United planes didn’t have TVs at all!?). The thing that most pleased me on returning to Delta was — of all things – the bottle of water sitting on my armrest when I boarded!

    The staff on United was certainly nice, when they came by, but maybe United should send each one on a biz-class trip on Delta to see how it’s supposed to be done?

  20. Any CEO that blames its employees for poor performance after being at the helm for several years should realize, s/he is the reason the company sucks.

    I wish Gordon would come out of retirement and fix what his successors have broken.

  21. Personally, I like the new UA.
    Awards are great – available AND changeable close in unlike DL at less than 72 hrs notice.
    The family member you book awards for gets upgraded too! a big plus.
    We get upgraded like DL on awards as a PP and 1k.
    The route network is better
    The new PQDs will cut out the crowds on upgrades

    If AA/US combine, then we can at least live with AA and UA.

  22. “Mr. Smisek said that, in retrospect, the company “changed too much too quickly.” …”

    Hey, dumba$$, that’s what probably thousands of your customers were SCREAMING at you for months last year. Maybe next time you will LISTEN.

    And blaming the employees? God, what a clown.

  23. The quality of the food in business and business first has become much worse. They are serving the same dishes, but they don’t taste as good. Probably using lower quality meat, cashews…

  24. Flew United Denver to Palm Springs August 14,2013. With boarding pass in hand with assigned seat needed for medical condition, I was called to the desk by a young man who told me families had priority over me. I explained I needed my aisle seat due to medical condition — his response? To yell, “do u want to get thrown up on. Now sit down” I sat down while my wife went to get the young man’s name & badge number. He made her wait standing for some time (we are 64) until he decided to print me a new boarding pass with the same seat assignment I had originally. He shoved it at her without saying a word. These sad little people clearly have had little training in common courtesy. I won’t be flying them again.

  25. I am a Hk resident and lucky enough to be surrounded by excellent carriers. I fly Cathay pacific regularly but even a cheap Asian airline like air Asia is miles better than united. I flew from Newark to panama and was growled at by grumpy crew, they tried to charge money to watch the tv and then they messed up my return which I have only now just sorted out. Really poor. I’m happy not to live in the USA and have to rely on on of these carriers.

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