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Jeff comments on loss of "unmanaged" corporate traffic/PRASM at JP Morgan conference.

Jeff comments on loss of "unmanaged" corporate traffic/PRASM at JP Morgan conference.

Old Mar 4, 13, 2:25 pm
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Jeff comments on loss of "unmanaged" corporate traffic/PRASM at JP Morgan conference.

There have been a lot of back and forth on whether UA was loosing High Value Fliers, and today Jeff provided more information than I have ever heard said about who left. His comments on this, and the importance of judging UA by PRASM are below.

He also said stressed that UA intended to increase "ancillary revenues" by 9% Y/Y, and commented on how UA is going to be getting the A350. Now that he is stressing A350 (vs. 787) was interesting.


Comment on PRASM/loss of business travel, and plan to get it back:

Unknown Attendee

Jeff, could you talk a little bit more about the corporate travel trend as you went through integration, you alluded to the fact that some bumps last summer and that maybe had an impact and just as you're having conversations now or if you look at your corporate travel growth relative to your overall revenue growth, what sort of trends did you see and are you seeing there?

Jeffery A. Smisek - Chairman, Chief Executive Officer, President, Member of Executive Committee and Member of Finance Committee

Well, sure. Well, a couple of things. One, you have to divide corporate travel into the managed and the unmanaged corporate travel. Small and medium-size enterprise, the unmanaged and the managed traveler. And there, obviously, there's a differentiation between the 2. Both of those fell off last summer as you would expect them to. I would say that the unmanaged traveler fell off even more than the managed travel. We're working hard to get both back and the way you get them both back is just proving yourself. I mean, as Mark mentioned, he flew yesterday or whenever it was and had no problem. I think many of you, if you fly United, you'll see not only are you not having a problem but actually you're getting an on-time airline and you're getting a continually better customer service. That's what our business traveler looks for. So the proof isn't just talking about, proof is actually doing it every single day and we are doing it and our on-time performance since September has been very good. Our completion factor is excellent. And our customers are also, this year, beginning to see the product investments we've been making sort of behind the scenes for the past couple of years. And they'll just continue to see more and more of those product investments and that's how you get the business back. So the trends we're seeing is the business is coming back. You're seeing our PRASM results. You'll see it in our yields. And that's how you'll judge how well we'll get it back. But we're clearly, as you saw on our year-over-year PRASM chart, you see that returning and we see it returning everyday as well and we expect it to continue to return.

http://seekingalpha.com/article/1244...p=qanda&l=last

Notably, DL reports its February PRASM was + 4.5-5.5%, will be interesting to see if UA matches this since they claimed they have closed the gap... That number will be out this week.
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Old Mar 4, 13, 2:30 pm
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It's operations only with him - don't think he'll ever address the loyalty factor (or lack thereof now). Apparently not important to business travelers.
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Old Mar 4, 13, 2:34 pm
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So, he does know he's losing HVFs.
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Old Mar 4, 13, 2:58 pm
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Originally Posted by UA-NYC View Post
It's operations only with him - don't think he'll ever address the loyalty factor (or lack thereof now). Apparently not important to business travelers.
this is what continental aspired to - a clean & reliable operation. They were able to provide this even using Shares as they shuttled passengers between just two hubs. Unfortunately for the new United, we saw (felt) the results of Co's "focus" on operations, one that was completely wrong for the new fleet and hub structure. They didnt know what they were doing, hving run a far smaller carrier, and were in such a rush to get the SOC that they never took the neccessary time to find out the best ways for the joint operations. The revenue drop off speaks for itself.

Jeffery Smisek is going to need some luck going forward for his enrenched strategy to start paying Prasm payoffs. He is as tone deaf and clueless as ever, unable or unwilling to shoulder any of the blame for his mismangement. His answer above was a C-grade dance response as it didnt specifically address th question.

This, of course,is all excludng his incopetent leadership of the combined company.
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Old Mar 4, 13, 3:03 pm
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Originally Posted by spin88 View Post
And there, obviously, there's a differentiation between the 2. Both of those fell off last summer as you would expect them to. I would say that the unmanaged traveler fell off even more than the managed travel. We're working hard to get both back and the way you get them both back is just proving yourself.
Very interesting...and thanks for the link!

I would really like to know what UA's definition is of managed and unmanaged... In most organizations I know, most business travel decisions fall somewhere between these two!...and I would love to know UA's definition of small and medium size...Hmmmm!
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Old Mar 4, 13, 3:05 pm
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Originally Posted by 1KPath View Post
Very interesting...and thanks for the link!

I would really like to know what UA's definition is of managed and unmanaged... In most organizations I know, most business travel decisions fall somewhere between these two!...and I would love to know UA's definition of small and medium size...Hmmmm!
I bet "managed" is basically anyone they have corporate discounted pricing with.

Unsurprising that those of us who are "unmanaged" bailed somewhat/mostly much more quickly given our flexibility
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Old Mar 4, 13, 3:14 pm
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Originally Posted by UA-NYC View Post
It's operations only with him - don't think he'll ever address the loyalty factor (or lack thereof now). Apparently not important to business travelers.
If you can't deliver on the basics everything else is meaningless. Conversely, if you delivery (pardon the cliche) a clean, safe, and reliable product, the other things are window dressing and work themselves out.

If you're on time, you don't have to worry about IRROPS as often. If you focus on maintenance, you have less cancellations and delays, etc. The ripple in the pond is less severe with shallower waves.

Fact is he's right. If United can't deliver on the basic stuff, they're toast. The reality is when they ran the sUA fleet to sCO levels, the basics collapsed, and everything else was immaterial.

They seemed to have turned the corner on operations. They're working on the labor agreements, consistent standards, etc. They're moving in the right direction.

The next stage is going to be very interesting. In particular how AA/US impacts the revenue model, how the US management changes AA, and how the bankruptcy changes their cost base.

I'm one of the 'unmanaged' business travelers who has complete control over my own travel, and who achieved GS for the last few years. I've been happier given their consistent schedule and improving on time performance. While I agree the onboard experience leaves much to be desired, that will work itself out, but it also doesn't bother me that much. All airlines service standards are pretty much the same IMH.
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Old Mar 4, 13, 3:15 pm
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Originally Posted by spin88 View Post
Both of those fell off last summer as you would expect them to.
I know I'm taking one single snippet from the conversation, but I just don't understand this one. Why would he expect either to fall off during the summer?
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Old Mar 4, 13, 3:17 pm
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What’s seems to be missing is the “how” - as in how is UA going to get these corp flyers back? Smisek says the operational performance is better, but so what? UA isn’t outperforming the competition, so it would seem that the HVFs who have left (and don’t have any complaints with their current preferred carrier) would have no reason to look at UA again, especially considering UA is the one that screwed up in the first place.

Last edited by XLR26; Mar 4, 13 at 3:43 pm
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Old Mar 4, 13, 3:18 pm
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I believe the airline's focus is going to be purely operational - reliability (my flight was on time and my baggage arrived too) and service delivery (the staff aren't treating me like crap anymore). I am not getting the warm fuzzies that UA leadership is able to draw a straight line between HVF (including corporate customers) and the loyalty program and its benefits.

Yes we all want a reliable airline, and yes, we would prefer staff don't dump their crap on us, but if all we wanted was a reliable airline with happy staff, we'd all be flying Southwest.
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Old Mar 4, 13, 3:19 pm
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Originally Posted by spin88 View Post
Jeffery A. Smisek - Chairman, Chief Executive Officer, President, Member of Executive Committee and Member of Finance Committee

... I mean, as Mark mentioned, he flew yesterday or whenever it was and had no problem. ...

Wow. I cannot believe the CEO and Chairman of the company actually said that.

It reeks of desperation.

Look, you bought our product, and you didn't have a problem ... see it's all fine!

Just. Wow.

Last edited by FlyWorld; Mar 4, 13 at 4:04 pm
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Old Mar 4, 13, 3:19 pm
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wow. i think he's wrong in his assessment and strategy. but we'll see the numbers soon. and truthfully, he's already seen them - he wouldn't have made thsoe comments if the numbers weren't good. so if his strategy generates good prasm, we can all kiss a decent frequent flyer program and any value on loyalty goodbye.
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Old Mar 4, 13, 3:22 pm
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Originally Posted by richk_30 View Post
I know I'm taking one single snippet from the conversation, but I just don't understand this one. Why would he expect either to fall off during the summer?
Because business travelers don't travel as much during the summer.
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Old Mar 4, 13, 3:23 pm
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Originally Posted by iflyuaaa View Post
wow. i think he's wrong in his assessment and strategy. but we'll see the numbers soon. and truthfully, he's already seen them - he wouldn't have made thsoe comments if the numbers weren't good. so if his strategy generates good prasm, we can all kiss a decent frequent flyer program and any value on loyalty goodbye.
It will depend on where the PRASM improvements come from - HVF and loyalty customers or Kettles who needlessly dump money into ancillary revenue they have no business spending - $9 on this, $8 on that, $99 on the other.

If the latter provides the jump, then I would guess the data supports unbundling the FFP into bits and pieces that can be sold at POS instead of earned over time.
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Old Mar 4, 13, 3:24 pm
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Originally Posted by wpr8e View Post
If you can't deliver on the basics everything else is meaningless. Conversely, if you delivery (pardon the cliche) a clean, safe, and reliable product, the other things are window dressing and work themselves out.
They delivered on said basics in Q4, yet still greatly underperformed the competition.

There's an arrogance in his thinking - "we have a big network, operations are good, of course they'll come back and fly us". Nothing new of course.

Let's see how the Q1 numbers come out.
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