United CFO Rainey Implies Certain Elites were "Over Entitled".
Jun 13, 2012, 1:07 pm
#1367
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Perhaps I should have said guaranteed cash compensation, which is under a million.
Bottom line, if you think UA's executives are over-paid and over-entitled, your perspective of executive compensation for multi-billion dollar corporations is skewed.
They are relatively underpaid compared to executives at similarly sized companies.
If posters have a problem with the strategy they perceive as short term, perhaps they should say that...
I would like to point out that outside of international premium cabin travel, US airlines have failed spectacularly when trying to charge a premium for a higher level of service. We can all talk about how nice it would be if that were to happen, but the reality is that the airline industry is fundamentally is different from consumer electronics and hotels.
While there may be a handful of customers who are willing to pay more for a certain domestic airline experience, you are in the minority. Catering to those customers is an excellent way to kill earnings in the short-term, which does nothing to help the long-term viability of the company.
I understand the comparison of Four Seasons to Motel 6, but I'm not sure I follow the logic in your analogy.
Bottom line, if you think UA's executives are over-paid and over-entitled, your perspective of executive compensation for multi-billion dollar corporations is skewed.
They are relatively underpaid compared to executives at similarly sized companies.
Nope. Attacking the bean counters usually means attacking short term thinking that values easy revenue today vs. building a brand that can attract longer term revenue. Ritz Carlton, Four Seasons, Hyatt, Apple, Zingerman's and others are able to charge a premium for their products because they provide a consistently high level of service. COdbaUA and its bean counters have been consistently looking for ways to cut service to maximize profit in the short term. What they seem to miss is that building a brand is expensive and destroying it is easy. Many of my friends and I were willing to pay a premium (25% or more) to United because of the service we received.
I would like to point out that outside of international premium cabin travel, US airlines have failed spectacularly when trying to charge a premium for a higher level of service. We can all talk about how nice it would be if that were to happen, but the reality is that the airline industry is fundamentally is different from consumer electronics and hotels.
While there may be a handful of customers who are willing to pay more for a certain domestic airline experience, you are in the minority. Catering to those customers is an excellent way to kill earnings in the short-term, which does nothing to help the long-term viability of the company.
There is no "airline business" just as there is no "hotel business" or "restaurant business". UA, AA, DL are not trying to compete with Spirit (or at least they were not), just as Four Seasons does not try to compete with Motel 6. COdbaUA seems to want to charge Four Seasons prices but provide service that is even worse than Motel 6. That is not a model for success.
While it is great to gain incremental revenue from price sensitive travelers, doing so at the expense of one's high revenue customers is a bad strategy.
While it is great to gain incremental revenue from price sensitive travelers, doing so at the expense of one's high revenue customers is a bad strategy.
Jun 13, 2012, 1:10 pm
#1369
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25%? Yeah, I've done that with United. There have been plenty of times when I could have flown AirTran SFO-Wisconsin for $300 and United was $400. But with United, if something goes wrong, I still get on the last flight out of WI. With AirTran? No way. So even if AirTran provided better "service" in flight, even if they had less experience messing up reservations, even if they had a flight at a slightly-more-convenient time, I place high value on United getting me out of Dodge when I need to get home. I place a very high priority on being home instead of an unplanned hotel bed that I have to wake up at 4:30am to catch a 6am first flight out of town.
That's just me. Your mileage may vary.
Perhaps the first to realize this were the railroads. The only thing that kept them profitable was looking at their assets from the standpoint of being a landowner (real estate), and in some cases, getting into the pipeline biz (when you can't beat 'em, join 'em).
Last edited by iluv2fly; Jun 13, 2012 at 4:38 pm Reason: merge
Jun 13, 2012, 1:21 pm
#1370
Join Date: Sep 2010
Location: San Francisco Bay Area
Posts: 5,825
Now if UA (or AA or DL, and maybe SW) has a non-stop or a much better schedule for a particular flight, that would be worth a premium.
I would pay 25% more for UA or AA over spirit or airtran though!
Why would that be nuts? We do a lot of paid-for service on bicycles purchased at shops that offer "free lifetime tune-ups" that turn out to be worth not much more than their cost. That's a whole lot bigger differential than 25% ($0 vs $89).
25%? Yeah, I've done that with United. There have been plenty of times when I could have flown AirTran SFO-Wisconsin for $300 and United was $400. But with United, if something goes wrong, I still get on the last flight out of WI. With AirTran? No way. So even if AirTran provided better "service" in flight, even if they had less experience messing up reservations, even if they had a flight at a slightly-more-convenient time, I place high value on United getting me out of Dodge when I need to get home. I place a very high priority on being home instead of an unplanned hotel bed that I have to wake up at 4:30am to catch a 6am first flight out of town.
That's just me. Your mileage may vary.
25%? Yeah, I've done that with United. There have been plenty of times when I could have flown AirTran SFO-Wisconsin for $300 and United was $400. But with United, if something goes wrong, I still get on the last flight out of WI. With AirTran? No way. So even if AirTran provided better "service" in flight, even if they had less experience messing up reservations, even if they had a flight at a slightly-more-convenient time, I place high value on United getting me out of Dodge when I need to get home. I place a very high priority on being home instead of an unplanned hotel bed that I have to wake up at 4:30am to catch a 6am first flight out of town.
That's just me. Your mileage may vary.
Jun 13, 2012, 1:43 pm
#1373
Join Date: Apr 2004
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I think that because history demonstrates it to be true. The carrier with the largest network out of a specific city will always command a revenue premium. This is because business and corporate customers - who are higher yielding - generally prefer to concentrate their business on as few carriers as possible, namely the ones that offer the most options.
- They use their volume to generate discounts.
- They use their volume to get better service (upgrades, better handling during IRROPS, etc.).
(Loyalty rewards are basically a combination of both.)
Without one of those two reasons, they will pick the best choice for that one flight.
And the network is the single best way to attract customers...
The type of passengers you attract is dependent on your route network.
With few exceptions (mostly found on FlyerTalk), corporate and business travelers will be loyal to the airline that can take them to as many destinations with as few stops as possible. With these travelers comes higher yields.
If you understand human behavior so well, make the business case for why would you give your customers more when they're not willing to pay for it?
Last edited by majortom; Jun 14, 2012 at 2:44 am
Jun 13, 2012, 2:53 pm
#1374
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Not to mention SQ. On almost every flight I've seen SQ is at least $100 more expensive than its *A partners that fly the same routes. And this is in Y. Yet they don't have trouble filling those seats last I checked..
Jun 13, 2012, 3:19 pm
#1375
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They try to concentrate their business for one of two reasons:
Without one of those two reasons, they will pick the best choice for that one flight.
- They use their volume to generate discounts.
- They use their volume to get better service (upgrades, better handling during IRROPS, etc.).
Without one of those two reasons, they will pick the best choice for that one flight.
Without a loyalty program or volume discount program, why would any business traveller care about the airline's overall network, and not just optimize on a per flight basis. If I am in LA and can fly to BKK non-stop on one carrier and YYZ non-stop on another, with more convenient times, why would I rather fly on a single carrier who can take me to both destinations with one-stop?
If you like, I can tell you all of the times it has failed...
Jun 13, 2012, 6:00 pm
#1376
Join Date: Dec 2010
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Some of the world's most successful airlines have the worst loyalty programs. They are successful because their network provides a competitive advantage and they offer a competitive product.
Example: VS for product and network. A simple network with a good product but with a lousy loyalty program versus others.
Example: VS for product and network. A simple network with a good product but with a lousy loyalty program versus others.
Last edited by davewho??; Jun 13, 2012 at 6:03 pm Reason: made additions
Jun 13, 2012, 9:02 pm
#1377
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I only have a couple issues with your posts.
(1) You seem to like to attack people. That's neither constructive or helpful to the advancement of the conversation.
(2) You're just wrong about the comp being under a million. I don't know why you like to keep repeating non-truths when I just shared a link that states exactly the opposite. Why don't you look at the 10-K yourself and get back to me on that.
Last edited by DCEsquire; Jun 13, 2012 at 9:20 pm
Jun 13, 2012, 9:28 pm
#1378
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There is no motivation to concentrate your business and seek discounts or better service if that carrier can not meet the majority of your travel needs.
If you have the best network, you're likely going to offer the best routing for most flights and destinations.
Which is why all successful airlines have broad networks and offer extensive flights and destinations from major population centers.
Some of the world's most successful airlines have the worst loyalty programs. They are successful because their network provides a competitive advantage and they offer a competitive product.
While I agree there's an opportunity to obtain a premium by offering better service in international premium cabins, please provide an example of an airline that has successfully commanded a premium for better service domestically.
If you like, I can tell you all of the times it has failed...
If you have the best network, you're likely going to offer the best routing for most flights and destinations.
Which is why all successful airlines have broad networks and offer extensive flights and destinations from major population centers.
Some of the world's most successful airlines have the worst loyalty programs. They are successful because their network provides a competitive advantage and they offer a competitive product.
While I agree there's an opportunity to obtain a premium by offering better service in international premium cabins, please provide an example of an airline that has successfully commanded a premium for better service domestically.
If you like, I can tell you all of the times it has failed...
if not, understand there are other points of view and you don't have the market covered on opinions and facts. There's more than your world that exists out there.
Jun 13, 2012, 9:29 pm
#1379
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Jun 13, 2012, 10:04 pm
#1380
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