fastair

My own opinion is in an attempt to break the IAM. It's only an opinion, if I knew Smi/J's master plan I might be making career changes. CO non organized labor made less than UAL pre merger. Had they given UAL's IAM a new contract with increases over the current chapter 11 amendable contract, the vote to determine representation would have been a slam dunk. Instead, they held a contract off until after they had raised CO to at or above UA labor rates, and spent mucho dinero in a failed campaign to oust the IAM. By increasing non-CBA labor pay while keeping an agitated organized labor at UA on hold, they made the option of "no union" look more appealing than had they signed wage/benefit increasing contracts prior to a certification vote. It also buys time to line up venders, scabs, and other replacement workers like NW did with their mechanics, negating organized la it's strongest tool.

Just one man's theory. I'd do it the same way if I was only interested in the stock price and ran the company. But alas, I don't, and am interested in long term success and harmony.

EWR764

I don't have an answer for that, but a contributing factor has to be that the company was able to achieve some 'low hanging fruit' cost savings without integrating the workforce, so labor was put on the back burner. Then, when the company finally came to the table willing to reach a deal, the hopeful tenor of the immediate pre/post-merger environment had dissipated, and the "fair" proposals the company thought they were making weren't received in kind.

Cost and cost alone. I suspect the anticipated annual savings of the SHARES platform vs. Apollo was a substantial part of the projected cost savings before the merger. I usually don't get so hyperbolic about business decisions. It was a mistake, and they happen. Sometimes expert advisory is wrong, too.

NiceLanding

Yes, without knowing the whole story, it's hard to judge what led to this mistake, although it does seem quite likely that it's already cost them far more in added labor costs and other expenses (as well as lost revenue) than they would have spent keeping Apollo. One would hope that by now they'd be hard at work on a modern replacement for the core SHARES system, but indications are that they intend to patch it, live with lots of its longstanding bugs and limitations, and continue to spend as little money on IT infrastructure as they can possibly get away with.

fastair

The latest GUI is actually very good. It doesn't sell tickets or make reservations very well, but gate management functions are much improved. It is really slow though. Very little desktop or direct processing, it sends HTML to HOU, which then sends commands off site to Shares, then the process is reversed. The "spinning ball" icon is permanently burned into our CRTs already


Shares allows the to sell products like E+ at different prices for different seats on same flight. Apollo did not, which represents a more profitable E+ marketing.

fly18725

Two thingss to consider: There is no "modern" replacement for legacy airline IT systems and Travelport is working hard to kill Apollo.

The direct impact SHARES has on earnings is minimal, though you can't deny the cutover impacted customers significantly. There are clearly some who continue to hold a grudge today, though I don't think this group is large or important enough to impact yields.

halls120

You're overlooking the fact that SMI/J and his crew agressively moved metal around without first moving the spare parts necessary to go along with "rightsizing" the route structure. That isn't a problem you can lay at the feet of pmUA management.

The other problem that SMI/J and crew created on their very own was overly aggressive scheduling last summer. In February 2012 I had a sUA pilot warn me about upcoming summer disruptions. I asked if there was going to be a labor action, and he said no, that management assumed more employees would agree to work overtime than was rational.

NiceLanding

I'm not suggesting a switch back to Apollo at this point, but Amadeus might be worth considering. However, by "modern", I mean something from an IT group that's not tied to the mainframe legacy systems. For example, I seriously doubt that Google plans to simply add a flash interface to the old ITA systems and their ambitions certainly extend beyond consumer flight searches, so they could be a great partner for UA in a next-gen GDS. There are others as well taking a fresh approach moving into the traditional GDS space.

How are you measuring the direct negative impact of SHARES? For example, how are you accounting for the extra labor now needed at gates to get the flights out, or the extra c/s staff to handle the longer transaction times? I won't even talk about the SHARES-related bugs and annoyances that tend to drive business to UA's competitors.

fly18725

Do you have anything sustanitive to respond to the argument instead of attacking the poster?

I think he summarized the situation well, particularly about labor.

Tilton prettied up UAL for a merger, deferring many critical investments post BK. CAL - while well run and well intentioned - wasn't prepared for the everything the merger involved. While the merger is not a catastrophe, the synergies have not materialized as quickly as expected.

Every major network carrier uses a mainframe legacy system. it will take years and billions of dollars for Google, HP, or someone else to develop a reservation system that can handle interlining, sales in multiple currencies, alliance relationships, etc.

Part of the higher airport head count is related to 2 separate work groups, not just the IT system. Tough to streamline until the joint contract is settled.

NiceLanding

And you would have us believe that the years of reliable, on-time service, great elite benefits, service improvements, and even decent financial results were all the result of smoke and mirrors? A house of cards that would have collapsed at any moment if Smisek hadn't come to the rescue?

If this is really true, it seems like Smisek and his financial advisors (including you?) must have done a pretty poor job of due diligence before the merger! CEOs lose their jobs for that, don't they?

fly18725

In my opinion, Tiltom had a near term focus and deferred investments, cut capacity, sold assets and outsourced post BK to improve liquidity and provide a bump to earnings. UAL had a great network and could have survived on a standalone basis, but financials would have looked different as they caught up on required investments.

I can't speak to due diligence, but I think management at both airlines underestimated how difficult certain aspects of the merger would be.

halls120

While pmUA was by no means perfect, my experience on pmUA from 1999-2011 closely mirrors the above, but for all the upgrades mitchmu got.

But even assuming that everything was as suggested by the Father - even if we start from the position that pmUA was a pig with lipstick strategically placed, the SMI/J crew - assuming they are the experienced, savvy management team some here claim them to be - should have done a better job with what they inherited.

The simple fact is that they horribly misjudged what the pmUA customer base would accept, what the pmUA fleet was capable of, and the selection of SHARES as the IT system going forward. Have they had successes? Sure, I give them ^ for converting the ghetto 767s and domestic 777s, and for keeping the food and drink up front on International flights competitive, but by every other measure that I care about, the overall experience has declined since June 2011, marked by the roll-out of the change to a boarding process that wasn't broken in the first place. Only now, 2 years later, is the process back to what it almost was. I never had to monitor my future reservation and seat assignments with pmUA, but now, it's a weekly task. While I like the Y/B/M upgrade transparency, the other aspects of being an elite are far less appealing under the combined airline. UA is well behind the competition in rolling out wi-fi, and offering an updated, modern club experience - which, even after the physical plant is renewed, will apparently offer same same crappy coffee and snack food selections. And now we are beginning to see signs of continued employee sniping across work groups - which doesn't bode well for the future.

Yes, UA still has their network, and because of it, they currently get most of my business - but starting next January, that won't be the case, as the PQD calculation method is sending me a very clear signal that my business is no longer valued as it used to be.

The disruptions of the past two years have forced me to check out the competition, and while the grass isn't necessarily greener at AA and DL, it is being tended by people who actually act like they care about my business, even if I'm not GS level on their airline.

EWR764

I don't think these two concepts are necessarily in conflict. Glenn Tilton was not interested in running (or building) United for long-term independent viability. He succeeded in making United the most attractive merger target in the market, turning it into the real prize for consolidation-minded carriers. He essentially stripped United down to its greatest core assets, slashed costs, and refocused the airline on attracting high-yield business and running a reliable operation without incurring gigantic capital commitments that may not have meshed with the post-merger carrier's plans.

However, at some point, the airline was going to have ramp up its capital expenditures in a big way, starting with an impending need to invest in narrowbody fleet renewal. In Tilton's view, those tasks were best left to the management team at the consolidated carrier United joined up with. Tilton did not particularly care who the suitor for UA was, nor did he want to be part of the day-to-day management of the airline, but insisted that a few deal-breaker items were satisfied. To wit, the name of the carrier was going to be United and the HQ was to remain in Chicago.

United ran a great airline in the late 2000s, but it wasn't going to last forever. The big capex gives investors agita, despite this, management insists that they are positioning the airline for long-term success. Of course, strategy is necessarily a topic for spirited debate, as evidenced regularly in this forum. Regardless, the underlying need to shift focus to the long-term was and remains undeniable.

colpuck

Just like to point out, US switched to FreshBrew coffee.

halls120

And they aren't based in Houston!!!

FlyWorld

^

I think this analysis is spot on, and very well written.

So, here's my question. Everyone's making such a big deal about deferred maintenance.

But, $mi$ek bought it.

Are we to believe that nobody at CO was able to figure out that UA had old planes and deferred maintenance? Nobody had a clue that those old jets would have to be updated and/or replaced? Tilton hid this fact behind smoke and mirrors?

I don't get it.

All you have to do is sit down and look around. You could see the aircraft was old. I'm not a "savvy" CO manager out of Houston, but even my non-savvy non-CO mind was able to learn that the jets were old.