UA CFO Rainey on Bloomberg: Global First "Effectively the Same" as J
Feb 28, 2015, 11:15 pm
#391
Join Date: Feb 2008
Programs: 6 year GS, now 2MM Jeff-ugee, *wood LTPlt, SkyPeso PLT
Posts: 6,526
All it did was send me to the GPU / Miles and copay page. Declined to take up the offer (standard $600+15k miles each way- No cash only buy-up offered). If it was something aggressive, or if flying with the wife who seems to appreciate GF more than I, sure I might consider it, but meh...
For reference, the overwater was SIN-HKG-SFO.
For reference, the overwater was SIN-HKG-SFO.
That would be par for the UAfkaCO course. 
Mar 1, 2015, 6:17 am
#392
Join Date: Feb 2001
Location: NYC
Programs: UA MileagePlus 2MM
Posts: 1,567
This thread is becoming genuinely interesting. 
A couple of points -
1. Demise of F on major global airlines?
I will speak just about the airlines I fly regularly, so I have first-hand experience: both AF and LH are the process of upgrading both their premium cabins (F and J). For example, my email inbox receives invites to sample the new La Premiere cabin JFK-CDG on a biweekly basis:
http://www.airfrance.us/US/en/common...-airfrance.htm
In other words, two major European airlines consider there is a sufficient premium market NYC-Europe to justify major investment. And that they need a better J product to compete. And a better F product. And both airlines treat JFK as a premium market. (Hello, UA?) And we can discuss who pays for F in NYC - hint: I do not think it is just Wall Street.
Incidentally, these test-our-new-F emails started after my GF flying on UA became regular. (Which means that their IT works, well, better than UA's.)
One more thing: manipulating the number of products available to enhance the premium value of the product is Marketing 101. (Ferrari routinely limits production numbers of its most valuable cars - that does not mean they will stop making them!) So it probably makes sense to look also at the investment and promotion as the metrics, rather than just the actual number of seats.
2. Wall Street
+1 And the same can be said about Jeff Bezos and Steve Jobs, and quite a few others. Let me put it this way - and this comes from someone whose primary office is on Wall Street: beyond early start-ups, Wall Street tends to reward predictability and bean counting far more than innovation and vision, and has traditionally had a blind spot when customer-centric metrics were concerned. Those three (Herb, Bezos and Steve) all went through periods when Wall Street was betting that they will not succeed. And all three were ultimately hugely rewarded by Wall Street - but only AFTER they were proven right (and Street wrong) in the marketplace.
To paraphrase field marshal Rommel (of all people!), if a general (CEO) listens to his supply officers (read: analysts and stockholders) all the time, he has committed himself to slightly-below-average performance. And a general who knows when to ignore bean counters will always eat the lunch of the one who does not. And if perennially slightly-below-average does not describe Smisek and his team to a T, nothing does.
3. Management
I would be glad to be wrong here, but all indications are that current UA team is just not the right fit to run a competitive global airline. Running UA as pmCO is plain misguided. To stick with the topic of this thread, can anyone name ONE other airline CFO who denigrated his airline's premium - and thus presumably flagship - product (and kept his job). I cannot think of one. Also, the fact that they always seem to be following DL management is an indication that they lack confidence and vision - that they need cover for their decisions. So, of course, chances of them standing up to analysts and Wall Street are zero.
4. Unions
I do have enormous respect for unions, and their traditional role to protect workers from bad management. However, in US airline industry, with seniority as the uttermost rule, they are an obstacle to good management. (When did one know B6 was having morale problems? When employees chose to unionize - that was the signal that management had lost them.) As it is now, the seniority system encourages and rewards bidding time and minimum effort, and discourages enthusiasm; add a well-deserved distrust of management to the mix, as well as subpar tools and you get... Sub-par and Divided, dbaUA.
And while both pmCO and pmUA are full of professionals who are proud of their jobs, and do it brilliantly, UA does not seem to have the ability to weed out those that are, well, sub-par. And genuine enthusiasm for the job seem not to be there across-the-board, sadly, and it shows. (No blame here: who would want to work for Smisek?)
As for youth vs experience, I do not think anyone here wants to return to the FlyMe! era. However, as a passenger, I really do not want to be in a position to feel the urge to assist an FA who is not so fit any more either. (I did assist an FA once, and it did not go well.) Would it kill UA to at least try to mix experience and youth, and have training positions open for senior FAs, like LH does?
5. US Regulatory Environment - and a Global Airline
I have a couple of major problem here: from the arcane passenger transfer rules (that even China figured out a way around), to laws limiting foreign ownership to 25%. Former effectively prevents any US airline from operating meaningful transfer traffic, while the latter... well, let me illustrate with an example:
I grew up in Belgrade, Serbia, and still fly there regularly, so I am and was fairly familiar with JU, Serbian state-owned airline, laughingstock, perennially late, perennially losing money, with 30 being the average age of planes and 57 being the average age of FAs (both in years). Anyone wanted surly and unfriendly and lousy service, you got it there.
All of that changed one day less than two years ago when Serbian government, almost-bankrupt and under pressure from EU to stop subsidizing JU, sold a 49% stake, with management rights, to EY. Here is what EY did: renewed the fleet, upgraded the hard product, upgraded the soft product, fired 75% of the FAs (kept only the best pursers), hired enthusiastic young people instead, retrained everyone - and the airline became the pleasure to fly, with service second to none, young and enthusiastic FAs supervised by more experienced pursers, with top-notch food and wines (all of which are stocked!). And it will be profitable in 2015. Do I need to tell anyone what analysts thought about this beforehand?
Anyway, JU is tiny and still has a long way to go (though 40% growth is nothing to scoff about), and EY is about to try to do the same with AZ. Good luck there, but you get the point.
So, let me ask you guys: what do you think IS the purpose of a 25% foreign ownership limit? For the record, I think (for example) EY buying a stake and managing UA (here snowflake and hell come to mind) would end up the same way Daimler's managing of Chrysler did, but should not that option at least be on the table?
A couple of points -
1. Demise of F on major global airlines?
I will speak just about the airlines I fly regularly, so I have first-hand experience: both AF and LH are the process of upgrading both their premium cabins (F and J). For example, my email inbox receives invites to sample the new La Premiere cabin JFK-CDG on a biweekly basis:
http://www.airfrance.us/US/en/common...-airfrance.htm
In other words, two major European airlines consider there is a sufficient premium market NYC-Europe to justify major investment. And that they need a better J product to compete. And a better F product. And both airlines treat JFK as a premium market. (Hello, UA?) And we can discuss who pays for F in NYC - hint: I do not think it is just Wall Street.
Incidentally, these test-our-new-F emails started after my GF flying on UA became regular. (Which means that their IT works, well, better than UA's.)
One more thing: manipulating the number of products available to enhance the premium value of the product is Marketing 101. (Ferrari routinely limits production numbers of its most valuable cars - that does not mean they will stop making them!) So it probably makes sense to look also at the investment and promotion as the metrics, rather than just the actual number of seats.
2. Wall Street
+1 And the same can be said about Jeff Bezos and Steve Jobs, and quite a few others. Let me put it this way - and this comes from someone whose primary office is on Wall Street: beyond early start-ups, Wall Street tends to reward predictability and bean counting far more than innovation and vision, and has traditionally had a blind spot when customer-centric metrics were concerned. Those three (Herb, Bezos and Steve) all went through periods when Wall Street was betting that they will not succeed. And all three were ultimately hugely rewarded by Wall Street - but only AFTER they were proven right (and Street wrong) in the marketplace.
To paraphrase field marshal Rommel (of all people!), if a general (CEO) listens to his supply officers (read: analysts and stockholders) all the time, he has committed himself to slightly-below-average performance. And a general who knows when to ignore bean counters will always eat the lunch of the one who does not. And if perennially slightly-below-average does not describe Smisek and his team to a T, nothing does.
3. Management
I would be glad to be wrong here, but all indications are that current UA team is just not the right fit to run a competitive global airline. Running UA as pmCO is plain misguided. To stick with the topic of this thread, can anyone name ONE other airline CFO who denigrated his airline's premium - and thus presumably flagship - product (and kept his job). I cannot think of one. Also, the fact that they always seem to be following DL management is an indication that they lack confidence and vision - that they need cover for their decisions. So, of course, chances of them standing up to analysts and Wall Street are zero.
4. Unions
I do have enormous respect for unions, and their traditional role to protect workers from bad management. However, in US airline industry, with seniority as the uttermost rule, they are an obstacle to good management. (When did one know B6 was having morale problems? When employees chose to unionize - that was the signal that management had lost them.) As it is now, the seniority system encourages and rewards bidding time and minimum effort, and discourages enthusiasm; add a well-deserved distrust of management to the mix, as well as subpar tools and you get... Sub-par and Divided, dbaUA.
And while both pmCO and pmUA are full of professionals who are proud of their jobs, and do it brilliantly, UA does not seem to have the ability to weed out those that are, well, sub-par. And genuine enthusiasm for the job seem not to be there across-the-board, sadly, and it shows. (No blame here: who would want to work for Smisek?)
As for youth vs experience, I do not think anyone here wants to return to the FlyMe! era. However, as a passenger, I really do not want to be in a position to feel the urge to assist an FA who is not so fit any more either. (I did assist an FA once, and it did not go well.) Would it kill UA to at least try to mix experience and youth, and have training positions open for senior FAs, like LH does?
5. US Regulatory Environment - and a Global Airline
I have a couple of major problem here: from the arcane passenger transfer rules (that even China figured out a way around), to laws limiting foreign ownership to 25%. Former effectively prevents any US airline from operating meaningful transfer traffic, while the latter... well, let me illustrate with an example:
I grew up in Belgrade, Serbia, and still fly there regularly, so I am and was fairly familiar with JU, Serbian state-owned airline, laughingstock, perennially late, perennially losing money, with 30 being the average age of planes and 57 being the average age of FAs (both in years). Anyone wanted surly and unfriendly and lousy service, you got it there.
All of that changed one day less than two years ago when Serbian government, almost-bankrupt and under pressure from EU to stop subsidizing JU, sold a 49% stake, with management rights, to EY. Here is what EY did: renewed the fleet, upgraded the hard product, upgraded the soft product, fired 75% of the FAs (kept only the best pursers), hired enthusiastic young people instead, retrained everyone - and the airline became the pleasure to fly, with service second to none, young and enthusiastic FAs supervised by more experienced pursers, with top-notch food and wines (all of which are stocked!). And it will be profitable in 2015. Do I need to tell anyone what analysts thought about this beforehand?
Anyway, JU is tiny and still has a long way to go (though 40% growth is nothing to scoff about), and EY is about to try to do the same with AZ. Good luck there, but you get the point.
So, let me ask you guys: what do you think IS the purpose of a 25% foreign ownership limit? For the record, I think (for example) EY buying a stake and managing UA (here snowflake and hell come to mind) would end up the same way Daimler's managing of Chrysler did, but should not that option at least be on the table?
Mar 1, 2015, 11:02 am
#393
Join Date: Sep 2010
Location: San Francisco Bay Area
Posts: 5,825
All it did was send me to the GPU / Miles and copay page. Declined to take up the offer (standard $600+15k miles each way- No cash only buy-up offered). If it was something aggressive, or if flying with the wife who seems to appreciate GF more than I, sure I might consider it, but meh...
For reference, the overwater was SIN-HKG-SFO.
For reference, the overwater was SIN-HKG-SFO.
I would take that offer each and every time.
So, to cross reference the other who buys GF? thread, I guess I would be a buyer of GF, if this counts.
Mar 1, 2015, 11:21 am
#395
Join Date: Sep 2010
Location: San Francisco Bay Area
Posts: 5,825
UA is an international powerhouse, by the way, relative to DL, AA, WN, AS, or any other US based player.
Or do you mean that they should invest millions in improving and expanding their F cabin in the attempt to deliver an F product that is among the best in the world?
My guess is that if UA management thought this investment would result in a higher stock price, then they would do it.
Besides the anonymous and vocal anti-UA sub-community here on FT, I know no one who 'hates' UA (or any airline for that matter).
I do hear complaints and grumbling, and there are times when I think UA could have done better. But hate? No.
The most vocal (almost) hater I know right now is a friend of mine in ATL who is a DL Diamond. I don't even bring up the topic of airlines with him these days unless I want to hear a 10 minute anti-DL rant!
Mar 1, 2015, 2:02 pm
#398
Join Date: Jan 2007
Location: SFO
Programs: United 1K, Marriott Platinum, SPG Platinum
Posts: 1,990
He is correct. There are a lot of people on FT who remember the old days of international first class and want those days back - but it ain't happening. As a good FTer I would rather have more BF seats on the plane in order to increase my upgrade chances. Screw GF. Anyone who is going to pay for GF isn't going to fly a US airline anyway.
Mar 1, 2015, 2:14 pm
#399
Join Date: Feb 2011
Location: SFO
Programs: MileagePlus 1K, Marriott BonVoy Titanium
Posts: 166
Jun 28, 2015, 8:50 pm
#400
Join Date: Jan 2000
Location: London; Bangkok; Las Vegas
Programs: AA Exec Plat; UA MM Gold; Marriott Lifetime Titanium; Hilton Diamond
Posts: 8,745
Agree that stock price (and the factors that drive it) is of primary concern to management. Shouldn't it be?
UA is an international powerhouse, by the way, relative to DL, AA, WN, AS, or any other US based player.
Or do you mean that they should invest millions in improving and expanding their F cabin in the attempt to deliver an F product that is among the best in the world?
My guess is that if UA management thought this investment would result in a higher stock price, then they would do it.
UA is an international powerhouse, by the way, relative to DL, AA, WN, AS, or any other US based player.
Or do you mean that they should invest millions in improving and expanding their F cabin in the attempt to deliver an F product that is among the best in the world?
My guess is that if UA management thought this investment would result in a higher stock price, then they would do it.
Among the most ludicrous statements I have read recently on FT.
Besides the anonymous and vocal anti-UA sub-community here on FT, I know no one who 'hates' UA (or any airline for that matter).
I do hear complaints and grumbling, and there are times when I think UA could have done better. But hate? No.
The most vocal (almost) hater I know right now is a friend of mine in ATL who is a DL Diamond. I don't even bring up the topic of airlines with him these days unless I want to hear a 10 minute anti-DL rant!
Besides the anonymous and vocal anti-UA sub-community here on FT, I know no one who 'hates' UA (or any airline for that matter).
I do hear complaints and grumbling, and there are times when I think UA could have done better. But hate? No.
The most vocal (almost) hater I know right now is a friend of mine in ATL who is a DL Diamond. I don't even bring up the topic of airlines with him these days unless I want to hear a 10 minute anti-DL rant!
Denying the animosity UA is generating amongst its passenger ranks, as demonstrated by its JD Power numbers, is the same mistake management at UA is making. UA is more and more only able to attract passengers due to: 1) captive hubs; 2) corporate contracts (which seem to be diminishing in number); and 3) Kayakers. Those with a choice are fleeing from UA and is is a substantial mistake to ignore that.
Pity you can't do both.
Jun 29, 2015, 12:38 am
#401
Join Date: Apr 2006
Location: SFO
Programs: UA Gold, Mariott Gold, Shangri-la Jade, Hotels.com Gold (does that count?); DL, AA, B6, VX, SPG
Posts: 235
I often complain vocally about UA with my coworkers and have steered several to better airlines (any airline, really) for pricy international J trips. The only people I know who are happy with UA at my work are the GS folks. We have quite a few. The rest of us try to avoid UA whenever we can, which is difficult from SFO.
Actually on every United trip I'll send an email to my workgroup about what new fubars UA has caused - lost luggage, cancelled or severely delayed flights on every one of my numerous trips in the last month, surly or just plain rude personnel, bumps from paid or upgraded first class to middle seats in economy due to the aforementioned cancelled flights or delayed flights resulting in misconnects, strandings at hub airports like IAH and EWR with totally unhelpful personnel (after standing in line for hours at the customer service centers), etc. Even some of the GS folks are thinking of dropping UA because they don't appreciate how UA treats the rest of us.
So no, I don't think it's an exaggeration to claim that people hate UA. I certainly do after this past month. As I've said elsewhere UA has taken an extremely myopic view of customer relations. The shareholders are only interested in short term profits and Smisek likewise is only interested in short term profits because his comp is based on that short term performance. Sure, in a couple years or less United might run out of customers (and employees), but Smisek and the current shareholders will have fled the sinking ship by then.
Actually on every United trip I'll send an email to my workgroup about what new fubars UA has caused - lost luggage, cancelled or severely delayed flights on every one of my numerous trips in the last month, surly or just plain rude personnel, bumps from paid or upgraded first class to middle seats in economy due to the aforementioned cancelled flights or delayed flights resulting in misconnects, strandings at hub airports like IAH and EWR with totally unhelpful personnel (after standing in line for hours at the customer service centers), etc. Even some of the GS folks are thinking of dropping UA because they don't appreciate how UA treats the rest of us.
So no, I don't think it's an exaggeration to claim that people hate UA. I certainly do after this past month. As I've said elsewhere UA has taken an extremely myopic view of customer relations. The shareholders are only interested in short term profits and Smisek likewise is only interested in short term profits because his comp is based on that short term performance. Sure, in a couple years or less United might run out of customers (and employees), but Smisek and the current shareholders will have fled the sinking ship by then.
Last edited by frcabot; Jun 29, 2015 at 12:51 am