"We're gonna' shrink this airline 'til it's profitable"

I just came across this quote, and I found it quite interesting, and eerily topical.

It's not by Jeff, actually - it's Charles Tillinghast, erstwhile CEO of TWA. Didn't seem to work for them.

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Jeff's just there to "bring the two airlines together" <sarcasm>

I thought he was there to collect his bonuses for now, and if doesnt work out, open up his golden parachute?

Blockbuster also tried it. Didn't work for them either.

Sears / Kmart is trying it right now. It's not working for them either.

It's difficult to think of big companies with big problems that shrink their way to greatness.

This is exactly what Jeffie will do after he manages to destroy two good airline CO and UA.

As this is not specific to United and the quote was from a TWA CEO, please follow the thread to the TravelBuzz forum so that it can serve to discuss what's happening in the airline industry, in general. Ocn Vw 1K, Moderator, United and TravelBuzz.

It sounds like Doug Parker's USAir strategy, before deciding it wasn't working and he needed to merge.

This is exactly what *any corporate executive* will do after he manages to destroy *insert company here*.

There's an old saying in business, "No company has ever cut its way to success."

I don't think that's 100% true. Certainly a common strategy we hear from business turn-around experts is to cut unprofitable parts of a business and focus on the parts that do make (better) money. I see that situation in both the small company I work for presently and in the small company my wife worked for 2 years ago. Each company has a division that's consuming significant resources, is unprofitable, and isn't driving additional business towards the parts of the companies that are profitable. The thing is, I don't know that that strategy is reasonable available to airlines. There are impediments to cutting unprofitable routes.

The other form of cutting that does work is reducing operational expenses. But only if you can genuinely reduce systemic costs. Merely shifting costs into another calendar period looks good in the short term but often increases total costs over the long term as you have to make up the difference "with interest" later. E.g., deferred maintenance. Other types of cuts merely shift costs from one category to another. For example, shutting down a maintenance base saves the costs at that base, but how much expansion of staff and facilities needs to occur at other bases to pick up the slack? And what's the financial cost of increased delays/cancellations if closing a base results in longer average time to fix mechanical problems?

I don't see UA or any other airline doing these types of good cutting. I only see them cheapening their product, raising prices, adding new fees, and hoping that mergers will somehow fix the flawed fundamentals.