While everyone else is making money — $200 million or more for the quarter for American, Delta, and Southwest — United lost $600 million and says it’s not their fault.
If it wasn’t for the same bad weather the airline faced, they say they would have only lost $400 million.
When it comes to an airline that believes their customers are the problem, they’re clearly doing it wrong.
So what do you do? Be more like the cool kids, Southwest and Delta. In all things, and certain in the frequent flyer space.
From United’s earnings call:
Michael Linenberg – Deutsche Bank AG, Research Division
Okay, good. And then just one other question here. And I guess maybe this would be for you, Jim, as well. You look at how Delta is sort of rethinking their frequent flyer plan and then basically now sort of changing, tying the miles there on — basically tied to revenue paid. And it’s not unique. I mean, I think, JetBlue, Virgin America, Southwest, they’re also along those lines. Is that something that you may be looking at or studying? Is that something that makes sense given your network, your customer base? Any thoughts on that would be great.
Jeffery A. Smisek – Chairman, Chief Executive Officer, President, Member of Executive Committee and Member of Finance Committee
This is Jeff. Clearly, frequent flyer — or our frequent flyer program is evolving and as are others. And what we’re trying to do is better align the benefits that we deliver to our customers through the frequent flyer program with the benefits that the customers deliver to us from their flying, including the profitability of their flying. And I believe that you will see evolution of our program over time. We can’t talk about specifics at this point in time, but clearly, this is an evolving process. And frequent flyer — our frequent flyer program is becoming much more sophisticated and is better aligning the benefits bidirectionally.
It’s good to know that ‘the benefits will be aligned bi-directionally’. (Seriously, that’s how he talks.)
But the on-the-ground folks understand how much more nuanced a frequent flyer program needs to be than just “rewarding people who spend more” since those aren’t the customers whose behavior you will necessarily influence at the margin to drive incremental business and profits.
And United’s IT is so bad — remember that they’ve imposed revenue requirements already for elite status but partner tickets don’t count even when they’re sharing the revenue and business travelers in managed travel programs often have expensive tickets whose fare United MileagePlus cannot see.
The IT on a real revenue-based program is hard, and I’m skeptical United would be up to the task any time soon. They may ‘move in that direction’ and have already taken great pains to make more expensive awards… more expensive.
I just wonder how much longer Smisek’s opinions on such mattes will carry sway in any case. At some point his board has to decide to do something different — that if you’re losing half a billion dollars a quarter, the solution might be to change management rather than change customers.
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