DaviddesJ

Well, pretty much every major international corporation does. But they did make sure to legalize it, first.

If, by some miracle, airlines start making a profit, I'm sure they to will discover the virtues of the Double Irish, and licensing their IP from a SPE in the Cayman Islands.

FlyWorld

Given that the value of their intellectual property is negative, since it destroys value rather than creating it, this strategy makes no sense.

DaviddesJ

You obviously don't spend much time with the tax code. It doesn't have to make sense. That's not even a factor.

aau

The video of the interview is available here.

Hadrian35

Ah, yes, if only taxes were just a bit lower...

AeroWesty

It's certainly noble for Smisek to be investing in technology, product, and facilities, including facilities for employees. It was interesting to listen to how proud he is that United has "high paying jobs", and the respect the employees deserve, with one aspect of respect being providing job security.

But the whole time I was listening I kept asking myself why he keeps outsourcing more functions all the time. I don't think there's been a successful company yet whose core front line people are made up of those who don't actually work for the company. I might be wrong on that point, but I don't think I am.

And other than in the executive suite and some of the more senior pilots, who are the ones at United with "high paying jobs"?

DaviddesJ

Because he's got a big union and workforce problem. It's easier for him to pay market rates for labor (and possibly have more accountability) if he outsources.

Sounds probably true. He's between a rock and a hard place on that one.

star_world

The "core" front line people absolutely aren't being outsourced. There are tens of thousands of UA employees in their "core" hub and focus city airports around the world, and operating all of their mainline aircraft, and that isn't likely to change.

What is being outsourced is the edge - the operations at smaller cities, the smaller aircraft, etc. UA is hardly a leader in this area - it's just part of the business and once one major competitor does it, the others have to follow to have any chance of operating on something close to a similar cost base.

McDonalds and Coca Cola are just two of many good examples of companies who (successfully) do what you were doubting was possible, by the way

DaviddesJ

Franchising isn't very much like outsourcing.

star_world

From the business' perspective, of course not. And that wasn't the question I was answering. But the end result from the customer's perspective is very similar, to some degree. The front-line employees remain responsible for delivering the service to the standards dictated by the "parent" company, and using their processes and procedures.

AeroWesty

As part of the latest outsourcing drive, 90 employees at the United call center in Guam were outsourced. Smisek's message was that, "It’s a disservice to the rest of the employees for us to keep the cost too high because, ultimately, that jeopardizes everybody’s job."

Source: http://www.iam141.org/docs/smisek062113.pdf

I don't know about you, but I consider the call center to be a front line position. It's often the first point of contact with United by the public, and the results from previous outsourcing efforts are legendary.

Where does the definition stop of who's leftover which are considered "core"? Flying is being outsourced. Employees at non-hub facilities are being outsourced. Who decides if/when agents at hub facilities are being paid too much, jeopardizing the jobs of the rest who hold "high paying jobs" with those snazzy new break rooms?

star_world

I don't think you read my response. The vast majority of core functions at United are not outsourced. You introduced the word "core" to the discussion. There are plenty of front-line roles that are outsourced at United - look at all the UA Express carriers - that isn't even a debate.

The business decides that, of course. Just like every other business in every other industry does. Employees hate it, investors love it, customers are neutral about it if there is no change in service.

AeroWesty

Sure I did. I had "core" in my first post you replied to.

What I'm asking is where does it stop? The example I gave of outsourcing the call centers show that there has been a change in service. Despite that, it continues.

Are you sure you read my response?

DaviddesJ

Unfortunately, the results from non-outsourcing are also legendary---inflated wages and poor performance. I fully agree that UA doesn't seem to be doing enough to get high quality results from its outsourced efforts. Smisek, in the quoted example, is too dismissive of what it takes to monitor performance and ensure high quality. They aren't doing enough of that. But they aren't doing enough of it with their own workforce, either---in many cases, because even if they know an employee is performing poorly, there's nothing they can do about it. Just look at the comments in this forum about sUA employees badmouthing sCO, or vice versa. They can do this publicly and how does management control it? The tools for UA management to ensure high quality work from their employees, are missing. Both for their own employees and for outsourced contractors.

dsquared37

For once I absolutely agree with you.

It's time to get rid of $MI/J and outsource the CEO position to India.