LarkSFO

Fortune: "Everything to know about United's departing CEO"

http://fortune.com/2015/09/09/jeff-s...n_editorspicks

"He was then personally poached by ex-Continental CEO Gordon Bethune in 1995 to join a turnaround team for an airline in the throes of extinction. At that time, Continental was coming out of two recent bankruptcies, it was losing around $55 million monthly, and ranked last in every measurable performance metric, including on-time performance, customer complaints and mishandled baggage.

The result would be one of the greatest turnaround stories in airline history. Continental ended up winning more JD Power and Associates awards for customer satisfaction than any airline in the world, and Fortune would rank it as the world’s most admired airline for six years in a row. Its stock price rose from $2 to $50 during Bethune’s decade-long tenure.

Starting as general counsel and senior vice-president, Smisek was acknowledged by Bethune himself as the airline’s savior. “It’s not like in the movies when some guy saves an airplane from spinning to Earth,” Bethune told USA Today. “But he engineered the salvation of our company.”

Smisek was Bethune’s logical heir, and in January 2010, he became CEO of Continental. Five months later, he would become the boss at United. The merger would tie Continental’s extensive network in Europe and Latin America, and its high customer service ratings, with United’s strong domestic and Asian routes. It was a new company, as the Wall Street Journal reported, of considerable promise."

BearX220

But United is not "in line with the market." It lags the market in every category from operational reliability to earnings to service / amenity levels to overall customer satisfaction to DOT complaints.

Imagine how much better off United would be if it hadn't gone out of its way to alienate so many customers. Usually companies in trouble improve their situations without playing that card. And ironically United is in worse shape now than before it swallowed Dr. Smisek's prescribed medicine.

Smisek's determination to slap his customer base around, and his bizarre calculus that "running this airline like a business" meant attacking almost everyone -- employees, frequent flyers, other airlines, the government -- remains inexplicable. He did incalculable damage.

Lurker1999

Nothing significant will change with regards to the "flyer friendly" changes people take issue with on this board.

The new CEO was chosen from the board of directors which was overall satisfied with the prior CEO's performance aside from the federal investigation as well as the general overall direction of the airline.

I suspect there will be efforts made to use this opportunity to improve labor relations, if possible but the overall direction of the ship will remain the same. On-time performance may be the new metric they'll focus on because they see their competitors poaching customers with that metric. But in terms of perks the race to the bottom will continue globally so there is no need for United to spend money to distinguish itself from the pack in that regard. The driving principle will be, if you want X, pay $$$.

Austin787

I remember hearing about UA employees wanting Tilton gone. They got their wish when Smisek took over. The UA employees then wanted Smisek gone. They got their wish now that Munoz is taking over. Could we see history repeat itself again? That's exactly what will happen if Munoz can't win over employees quick.

cerealmarketer

Makes sense - I guess only John Tague knows the answer - he was a logical successor from the UA side.

clipper.fortune

Rainey's father is a Federal District Judge in the Southern District of Texas . . . I am sure he told his son to get out of Dodge ! (Great Judge by the way . . . )

minnyfly

Ah, the old, tired metrics that are flawed due to its subjective baselines.

But there's only one line I was talking about--the financials. I'd argue is that UA still isn't quite inline yet with it AA and DL in devaluing the product while raising the prices. But it's getting closer. UA still has large changes in the works with fleet renewal, regional fleet transformation, and station adjustments (e.g. JFK). If Munoz can get the FAs and mechanics to agree and finally pull together, UA is in great shape. The framework is there for long-term profits.


If UA had tried to please every over-entitled customer, it would be bleeding money compared to the competition. You can't chase that crowd. Best to dump them on the side of the road. DL and AA are making big profits because of they followed the demand and gave them less for more. That's the basic economics of the industry these days.

PaulMSN

Um, no.

LarkSFO

So pragmatic, and no vitriol?!?

Don't you know this is an internet discussion board?

I think you have succinctly summarized what I would guess is exactly what we will see going forward.

The new CEO is not an outsider brought in to effect change. The board (it appears) believes that UA was and is on the right track.

- Possibly a catalyst to move forward aggressively on the divided labor situation.
- UA was already clearly stating that operational performance has to improve, with their competitors so far ahead, so I do believe that the new CEO will continue the focus in this area (please!)
- I have seen improvements in every other area of the flying experience over the past few months: On ground and in air service, meals in F, even my upgrade percentage (My CPU's have ticked up a bit, and I have been able to use all RPU's and GPU's successfully).
- Hopefully more, incremental improvements in customer facing areas. But I am not expecting anything significant.

PTahCha

There wasn't any pre-video on my flights this past weekend, specifically on 737s with DirecTV. It was either a coincidence, or someone knew something was up.

Or just that they ran out of pre-video ideas.

Boraxo

With all due respect this reads like a puff piece written by the corporate historian. Smisek had no operational skills or any experience running anything. As others have noted, it makes sense to hire a lawyer to run your company only when the key business issues and drivers are legal, i.e compliance with regulatory requirements, litigation, etc. None of those were present here, and there were no real antitrust issues with the UA/CO merger after AA/TW and DL/NW laid the ground.

Smisek may have worked wonders restructuring CO contracts, leases, labor issues, etc. when the company was bleeding cash, but those are not the skills needed to manage the operations of a global enterprise.

I expect the stock price will see a significant bump after the new management team rolls out its own initiatives.

bocastephen

I don't think the new team will be rolling out anything substantially new - in fact, I'd be very cautious about this change and as customers, expect more tightening and a worsening experience given the new CEO is a reflection of the board, as was Smisek.

seagar

Wow, any experienced business leader knows it takes much more effort and cost to gain new customers vs. keeping current customers. A creative CEO and team would have figured out a way to change the program, without dumping the HVF'ers to the side of the road.

First step I would like to see (right, not realistic, but) would be the simple gesture of giving pmUA MM'ers the same benefit they bestowed on the pmCO flyers. A little effort goes a long way to regain trust and it needs to be more than just words for the customers and employees.

LPDAL

Not really.

The safety videos, adverts, and "CEO Introductions" are all on separate removable media which are loaded into the IFE operator's panel (which has a different location depending on the aircraft). It's not a major effort by any stretch of the mind, even given the amount of aircraft with IFE that they operate. It's pretty much ejecting a DVD, although not all aircraft utilize optical media for these purposes.

In any event, given that JS isn't with United anymore, it makes perfect sense that one of the first priorities would be to remove any reference to previous executives who are no longer with the company.

-LPDAL

BearX220

Yeah, I guess on-time performance, completion rate, PRASM, DOT complaints per customer, etc. are old, tired, subjective, flawed metrics. You got me there.

Um... where do you think those customers migrated to? Why do you think DL and AA are making bigger profits? UA policies helped put them where they are today.