Jun 21, 2016, 9:45 am
Last edit by: sbm12
06/21/2016 Investor Call Presentation
Alternate link to presentation if the ir.united.com site continues to act wonky.
Alternate link to presentation if the ir.united.com site continues to act wonky.
United Airlines Outlines Value-Driving Initiatives
Expected to drive $3.1 billion in incremental value by 2018;
$300 million earnings benefit anticipated from continued reliability improvement
Updates second quarter passenger revenue guidance
CHICAGO, June 21, 2016 /PRNewswire/ -- As United Airlines continues its efforts to create the world's greatest airline, the company is hosting a call for investors today to provide an update on initiatives the company is implementing to improve its financial performance. Additionally, United will share its current network and commercial objectives. The company also now expects second-quarter 2016 consolidated passenger unit revenue to decline 6.5 to 7.5 percent compared to the second quarter of 2015, a change from its earlier expectations of down 6.5 to 8.5 percent.
"We continue to accelerate our business performance while making strides in earning back the trust of our employees and customers," said Oscar Munoz, president and CEO of United Airlines. "With the renewed engagement of our 86,000 aviation professionals, a great global network, a highly flexible fleet plan and a healthy balance sheet – all of the building blocks are in place for United to unlock its full potential."
Value-Driving Initiatives
The company will update investors on initiatives currently underway that are expected to drive more than $3 billion in incremental value to United by 2018 through a combination of cost savings and increased revenue. These initiatives include:
• Commercial Enhancements: Improvements across the commercial organization will drive approximately $1.5 billion of value through increased customer segmentation, updates to its MileagePlus program and modifications to its revenue management system.
• Cost Structure Improvements: Upgauging aircraft and installing slimline seats, combined with continued sensible cost management, will drive approximately $1.3 billion of benefit.
• Strong Operational Performance: The company expects approximately $300 million of value from running a more reliable airline. This operational improvement will grow United's share of premium customers, reduce costs associated with delays and cancellations, decrease the number of passengers re-accommodated on other airlines and improve schedule utility.
Sustained Improvements
Since the beginning of the year, United has achieved significant improvements in its on-time arrival performance, finishing first or second among industry peers all year. United has achieved top-tier performance in baggage handling for 19 of the last 24 months.
As United continues its focus on elevating the customer experience, it recently announced the all-new United Polaris business class, free snacks and transformed airport clubs. And on July 1, United will introduce illy premium coffee on board all flights. Additionally, the company is expanding its industry-leading route network with new service to several destinations across Europe and Asia, including its new flight between San Francisco and Singapore.
For employees, the company has delivered new contracts for the pilots, IAM-represented employees and dispatchers this year and new and improved tools. These and other enhancements are delivering improved service to United's customers, with the company achieving record-high customer satisfaction scores in three of the last four months.
Webcast Information
The investor call will begin today at 9:00 a.m. CT. A live, listen-only webcast of the presentation and question and answer session will be available at ir.united.com. The webcast will be available for replay within 24 hours of the conference call and then archived on the website for a limited time.
Expected to drive $3.1 billion in incremental value by 2018;
$300 million earnings benefit anticipated from continued reliability improvement
Updates second quarter passenger revenue guidance
CHICAGO, June 21, 2016 /PRNewswire/ -- As United Airlines continues its efforts to create the world's greatest airline, the company is hosting a call for investors today to provide an update on initiatives the company is implementing to improve its financial performance. Additionally, United will share its current network and commercial objectives. The company also now expects second-quarter 2016 consolidated passenger unit revenue to decline 6.5 to 7.5 percent compared to the second quarter of 2015, a change from its earlier expectations of down 6.5 to 8.5 percent.
"We continue to accelerate our business performance while making strides in earning back the trust of our employees and customers," said Oscar Munoz, president and CEO of United Airlines. "With the renewed engagement of our 86,000 aviation professionals, a great global network, a highly flexible fleet plan and a healthy balance sheet – all of the building blocks are in place for United to unlock its full potential."
Value-Driving Initiatives
The company will update investors on initiatives currently underway that are expected to drive more than $3 billion in incremental value to United by 2018 through a combination of cost savings and increased revenue. These initiatives include:
• Commercial Enhancements: Improvements across the commercial organization will drive approximately $1.5 billion of value through increased customer segmentation, updates to its MileagePlus program and modifications to its revenue management system.
• Cost Structure Improvements: Upgauging aircraft and installing slimline seats, combined with continued sensible cost management, will drive approximately $1.3 billion of benefit.
• Strong Operational Performance: The company expects approximately $300 million of value from running a more reliable airline. This operational improvement will grow United's share of premium customers, reduce costs associated with delays and cancellations, decrease the number of passengers re-accommodated on other airlines and improve schedule utility.
Sustained Improvements
Since the beginning of the year, United has achieved significant improvements in its on-time arrival performance, finishing first or second among industry peers all year. United has achieved top-tier performance in baggage handling for 19 of the last 24 months.
As United continues its focus on elevating the customer experience, it recently announced the all-new United Polaris business class, free snacks and transformed airport clubs. And on July 1, United will introduce illy premium coffee on board all flights. Additionally, the company is expanding its industry-leading route network with new service to several destinations across Europe and Asia, including its new flight between San Francisco and Singapore.
For employees, the company has delivered new contracts for the pilots, IAM-represented employees and dispatchers this year and new and improved tools. These and other enhancements are delivering improved service to United's customers, with the company achieving record-high customer satisfaction scores in three of the last four months.
Webcast Information
The investor call will begin today at 9:00 a.m. CT. A live, listen-only webcast of the presentation and question and answer session will be available at ir.united.com. The webcast will be available for replay within 24 hours of the conference call and then archived on the website for a limited time.
United "earnings initiatives" call - 21 June 2016
Jun 22, 2016, 9:53 am
#76
FlyerTalk Evangelist
Join Date: Jul 1999
Location: ORD/MDW
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After seeing this week's PowerPoint I think it will take longer than I thought before. Ah, the struggles a public company faces trying to right itself for the future while appeasing unforgiving investors every 90 days. Even if management really wanted to do the right thing, they probably couldn't.
Jun 22, 2016, 10:47 am
#77
Join Date: Feb 2009
Location: CLE
Programs: UA 1K MM, DL Plat
Posts: 982
But there are plenty of CEOs of publicly-traded companies that tell the Hunter Keays of their industries exactly where they can shove it, and do the right thing by both customers and investors for the long-term.
The problem with the airline business is that it is so haunted by the ghosts of its money-losing past, and so overwhelmingly held by a small~ish number of institutional investors, that most execs are petrified of doing anything to remind investors of the past. So that means focusing on the "forward looking" strategies that are a lot easier to defend right now, even if they ultimately end up destroying long-term value and taking years (or decades) to correct.
Jun 22, 2016, 10:50 am
#78
Join Date: Jan 2005
Location: New York, NY
Programs: UA, AA, DL, Hertz, Avis, National, Hyatt, Hilton, SPG, Marriott
Posts: 9,454
After seeing this week's PowerPoint I think it will take longer than I thought before. Ah, the struggles a public company faces trying to right itself for the future while appeasing unforgiving investors every 90 days. Even if management really wanted to do the right thing, they probably couldn't.
I think there may have been an unreasonable expectation about yesterday's investor call, as if it was going to result in some kind of major customer-oriented change for passengers. One has to consider the audience... the analysts and greater investor community at large whose opinions and outlook directly influence the market value of the enterprise. Oscar essentially reiterated things we already knew were coming and/or reflect general industry trends: revenue benefits of 'basic economy' fares; hints at 'further segmentation' (read: PE); E+/FC upsells; CASM improvement from adding seats to existing fleet and upgauging; ongoing cost benefit of reducing fleet of 50-seaters; cost benefits from achieving a more reliable operation; new CC agreement with Chase; improved RM software; new demand forecasting techniques; efficiency improvements (though increased direct costs) through new labor contracts; etc. To top it all off, the big-ticket $3.1b number represents the full run of the initiatives, synergies, etc. from 2015 forward. In other words, many of these savings have already been realized (and no doubt paraded to the same group).
None of these things are game-changers or should come as any surprise to people who are actually paying attention to UAL and the broader industry. What struck me, on the other hand, was Oscar's candor and acknowledgment of some of the very real factors plaguing United and leading to its underperformance. It wasn't typical CEO-speak (how often do you hear them describe something as "crappy" or say that a program run by the company "sucks"?) and he also hinted that United is looking to take a more aggressive role in competing with other carriers in contested markets.
I am cautiously optimistic that he "gets it". I didn't take a whole lot of negative out of yesterday's call.
Jun 22, 2016, 11:54 am
#80
Join Date: Sep 2008
Location: SF Bay Area
Programs: None - previously UA
Posts: 4,867
Increased reaistance to rebooking elite customers will not help with winning back high revenue premium customers and would be a pretty stupid policy IMO. However I have less issue with them not rebooking kettles on basic economy fares on other carriers. Where and how the line gets drawn should be made clear though.
Last edited by goalie; Jun 22, 2016 at 3:35 pm Reason: quote of previously deleted post removed
Jun 22, 2016, 12:12 pm
#81
Suspended
Join Date: Feb 2009
Posts: 693
Increased reaistance to rebooking elite customers will not help with winning back high revenue premium customers and would be a pretty stupid policy IMO. However I have less issue with them not rebooking kettles on basic economy fares on other carriers. Where and how the line gets drawn should be made clear though.
being made clear is most important.
Jun 22, 2016, 12:43 pm
#82
Join Date: Feb 2008
Programs: 6 year GS, now 2MM Jeff-ugee, *wood LTPlt, SkyPeso PLT
Posts: 6,526
My "bonus" is actually greater on Delta (because I'm PLT, not Gold as on UA), and to the extent that mileage programs impact me, they drive me from UA and towards Delta and VX, where my status is more valued.
To get people to come back United will have to (1) outperform AA and DL and foreign carriers, and (2) will have to do so for a long enough period that it impacts the poor brand perception.
United never fully recovered from the SVH, but it was kept alive by having hubs in places (SFO/LAX) that benefited enormously from the second tech boom, and it also rolled out the ITPE product which gave it a lead for a while for premium passengers.
Other carriers have simply gone away, had to merge when they lost large numbers of their premium passengers. Delta and foreign carriers are going to keep pushing UA, and AA may get its crap together (I think parker has to go at some point) but its not bleeding enough to really help out Oscar at this point.
That United has been doing this badly at the TOP of the cycle is a bad sign for what happens in the next few years, with growth slowing and increased competition. I wish Oscar the best, but with cretens like Hunter Keay pushing for short term moves that hurt further in the long term, I have a hard time seeing how he pulls it off.
Increased reaistance to rebooking elite customers will not help with winning back high revenue premium customers and would be a pretty stupid policy IMO. However I have less issue with them not rebooking kettles on basic economy fares on other carriers. Where and how the line gets drawn should be made clear though.
Jun 22, 2016, 12:51 pm
#83
Join Date: May 2011
Posts: 5,814
Jun 22, 2016, 12:55 pm
#84
Join Date: Apr 2005
Location: MBS/FNT/LAN
Programs: UA 1K, HH Gold, Mariott Gold
Posts: 9,630
I am *SPECULATING* but a line in the presentation (and from slide 12) indicates they have a "new agreement".
Impact of credit card rate escalation due to new agreement
Jun 22, 2016, 1:08 pm
#85
Suspended
Join Date: Oct 2004
Location: Bay Area
Programs: DL SM, UA MP.
Posts: 12,729
A skeptical view of Oscar's strategy to improve financial performance, mostly at the expense of the costumers.
http://viewfromthewing.boardingarea....on-gonna-cost/
What would "enhancements to improve the customers' ability to redeem miles" mean, extra fees to redeem awards?
http://viewfromthewing.boardingarea....on-gonna-cost/
What would "enhancements to improve the customers' ability to redeem miles" mean, extra fees to redeem awards?
Jun 22, 2016, 1:09 pm
#86
Join Date: Jan 2005
Location: New York, NY
Programs: UA, AA, DL, Hertz, Avis, National, Hyatt, Hilton, SPG, Marriott
Posts: 9,454
At least the forthcoming Polaris program involves a major improvement to the soft product service standard (sorely needed) to coincide with the new seat coming to market. I can deal with a non-industry-leading business class seat, as long as it's flat. Paired with a big upgrade to the service both in the air and on the ground, I believe the in-progress period for the mods will be much easier to bear.
I'm not terribly confident they are going to get their act together quickly. I was treated well as an EP (dropped in 2015) on the LAA side, but for every shiny new 77W, 319 or 738, there are an awful lot of Airbii with no MCE, small F cabins and no power.
Plus, as you note, Doug Parker is still running the show and absent some sort of Smisek-esque scandal, he's going to be at the top of AA for at least a few more years.
That United has been doing this badly at the TOP of the cycle is a bad sign for what happens in the next few years, with growth slowing and increased competition. I wish Oscar the best, but with cretens like Hunter Keay pushing for short term moves that hurt further in the long term, I have a hard time seeing how he pulls it off.
Last edited by goalie; Jun 22, 2016 at 3:36 pm Reason: please quote the member's name when quoting multiple parts of their post
Jun 22, 2016, 1:13 pm
#87
Suspended
Join Date: Feb 2009
Posts: 693
Since everyone is now "revenue based" its just not a factor driving business at all. E.g. I had a paid F trip SFO-ATL-SFO. My $671 to DL got me 6039 SkyPeso, my $388 to UA on the way back got me 3104 MileageMinus Miles.
My "bonus" is actually greater on Delta (because I'm PLT, not Gold as on UA), and to the extent that mileage programs impact me, they drive me from UA and towards Delta and VX, where my status is more valued.
To get people to come back United will have to (1) outperform AA and DL and foreign carriers, and (2) will have to do so for a long enough period that it impacts the poor brand perception.
I'm not sure that it CAN be done at this point. CO turned around in another era (cheap fuel, good economy) and did so because it had retreated to fortress hubs. These factors gave CO time.
United never fully recovered from the SVH, but it was kept alive by having hubs in places (SFO/LAX) that benefited enormously from the second tech boom, and it also rolled out the ITPE product which gave it a lead for a while for premium passengers.
Other carriers have simply gone away, had to merge when they lost large numbers of their premium passengers. Delta and foreign carriers are going to keep pushing UA, and AA may get its crap together (I think parker has to go at some point) but its not bleeding enough to really help out Oscar at this point.
That United has been doing this badly at the TOP of the cycle is a bad sign for what happens in the next few years, with growth slowing and increased competition. I wish Oscar the best, but with cretens like Hunter Keay pushing for short term moves that hurt further in the long term, I have a hard time seeing how he pulls it off.
I might also add that United is particualary bad in IRROPS for non-status passangers flying in J/F. Yet, these are the people you want to attract as long term customers. The 1K may get help (or know enough to self help) but the exec who paid $5600 for his seat, and is now messed over, well s/he is not going to book UA again.
My "bonus" is actually greater on Delta (because I'm PLT, not Gold as on UA), and to the extent that mileage programs impact me, they drive me from UA and towards Delta and VX, where my status is more valued.
To get people to come back United will have to (1) outperform AA and DL and foreign carriers, and (2) will have to do so for a long enough period that it impacts the poor brand perception.
I'm not sure that it CAN be done at this point. CO turned around in another era (cheap fuel, good economy) and did so because it had retreated to fortress hubs. These factors gave CO time.
United never fully recovered from the SVH, but it was kept alive by having hubs in places (SFO/LAX) that benefited enormously from the second tech boom, and it also rolled out the ITPE product which gave it a lead for a while for premium passengers.
Other carriers have simply gone away, had to merge when they lost large numbers of their premium passengers. Delta and foreign carriers are going to keep pushing UA, and AA may get its crap together (I think parker has to go at some point) but its not bleeding enough to really help out Oscar at this point.
That United has been doing this badly at the TOP of the cycle is a bad sign for what happens in the next few years, with growth slowing and increased competition. I wish Oscar the best, but with cretens like Hunter Keay pushing for short term moves that hurt further in the long term, I have a hard time seeing how he pulls it off.
I might also add that United is particualary bad in IRROPS for non-status passangers flying in J/F. Yet, these are the people you want to attract as long term customers. The 1K may get help (or know enough to self help) but the exec who paid $5600 for his seat, and is now messed over, well s/he is not going to book UA again.
i'd say i'm a personal testatment to giving airlines second chances. i ditched UA last year and went 100% aa the first 6 mos of the year cuz i was finally fed up. i did numerous trips PEK-DFW-SFO, that's how much i hated UA (versus flying nonstop). then my schedule forced me onto UA...it wasn't so bad and then i decided i'd give them a few more chances and this year i feel like the experience has improved. keep the trend and they keep me. screw it up and i'll be connecting in seattle or dallas.
Jun 22, 2016, 1:20 pm
#88
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Join Date: Jul 1999
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Re: irrops rerouting:
I think it is bad policy to overtly mistreat non-elites in these situations (although with pmUA it was easy to conclude part of the elite value proposition was visible mistreatment of those lower in the pecking order, for entertainment purposes). Those are potential future loyalists you're alienating. UA ought to be trying to treat everyone well, not just the topmost customer echelon. (In fact they are now reaping the horrid whirlwind of catering to tippy-top elites and bottom-feeding bargain-chasers, and "firing" everyone in between.) Worse to fawn over J/F and give Y the back of the corporate hand, as today's J customer may be down the back next week on a family holiday.
Humane service need not be a scarce resource reserved for a select few established loyalists. You don't convert many new fans that way.
Humane service need not be a scarce resource reserved for a select few established loyalists. You don't convert many new fans that way.
Jun 22, 2016, 1:24 pm
#89
Join Date: Aug 2007
Location: Chicago: ORD, MDW
Programs: United Million Mile Flyer, Hilton Silver, Marriott Gold, DL, AA WN
Posts: 514
Let's face it. A CEO can always lay out great looking plans for investors and when reporting to investors or to the Board, it is easy to put the best face on everything. Jeff did it for years!
I believe that long-term United will eventually regain its place among the big three. It will take time and a lot of ups and downs. The other airlines will also sooner or later face challenges of their own making. However, in the end, all I see is the same service across the board for more money.
At least Oscar has some plans.
On the other hand, we have to face it: Except for the customer that will willing and/or able to pay a steep premium fare in the future, the rest of us are going to sit in the back (or at least in a down-graded E+) - and be happy with what little -if anything- we get.
From time to time we will all face the same delays, irrops, content and unhappy employees, good and bad service, changing and unchanging rules. We will all do what we have to - and we will get used to it - even if we sometimes ponder the days of excellent service and pampered elite status. Only in the future, I will look for the best fare and routing for the best cost and benefits - whether it is on United or another carrier. As long as they don't further diminish my Million Miler status, I admit that I am partial to United.
And when I find myself on the side of misfortune in future travel - at least it will be for least expensive fare and without having invested time, miles, and a lot of money to get to the same place that others will have invested a lot in.
I believe that long-term United will eventually regain its place among the big three. It will take time and a lot of ups and downs. The other airlines will also sooner or later face challenges of their own making. However, in the end, all I see is the same service across the board for more money.
At least Oscar has some plans.
On the other hand, we have to face it: Except for the customer that will willing and/or able to pay a steep premium fare in the future, the rest of us are going to sit in the back (or at least in a down-graded E+) - and be happy with what little -if anything- we get.
From time to time we will all face the same delays, irrops, content and unhappy employees, good and bad service, changing and unchanging rules. We will all do what we have to - and we will get used to it - even if we sometimes ponder the days of excellent service and pampered elite status. Only in the future, I will look for the best fare and routing for the best cost and benefits - whether it is on United or another carrier. As long as they don't further diminish my Million Miler status, I admit that I am partial to United.
And when I find myself on the side of misfortune in future travel - at least it will be for least expensive fare and without having invested time, miles, and a lot of money to get to the same place that others will have invested a lot in.
Jun 22, 2016, 2:31 pm
#90
Suspended
Join Date: Feb 2009
Posts: 693
Re: irrops rerouting:
I think it is bad policy to overtly mistreat non-elites in these situations (although with pmUA it was easy to conclude part of the elite value proposition was visible mistreatment of those lower in the pecking order, for entertainment purposes). Those are potential future loyalists you're alienating. UA ought to be trying to treat everyone well, not just the topmost customer echelon. (In fact they are now reaping the horrid whirlwind of catering to tippy-top elites and bottom-feeding bargain-chasers, and "firing" everyone in between.) Worse to fawn over J/F and give Y the back of the corporate hand, as today's J customer may be down the back next week on a family holiday.
Humane service need not be a scarce resource reserved for a select few established loyalists. You don't convert many new fans that way.
I think it is bad policy to overtly mistreat non-elites in these situations (although with pmUA it was easy to conclude part of the elite value proposition was visible mistreatment of those lower in the pecking order, for entertainment purposes). Those are potential future loyalists you're alienating. UA ought to be trying to treat everyone well, not just the topmost customer echelon. (In fact they are now reaping the horrid whirlwind of catering to tippy-top elites and bottom-feeding bargain-chasers, and "firing" everyone in between.) Worse to fawn over J/F and give Y the back of the corporate hand, as today's J customer may be down the back next week on a family holiday.
Humane service need not be a scarce resource reserved for a select few established loyalists. You don't convert many new fans that way.