fallinasleep

I usually give UA's management (and employees) the benefit of the doubt, but last night I couldn't believe what I was reading as I was catching up on the news.

Article in yesterday's NYT about UAL hiring McKinsey during the bankruptcy process. One of McKinsey's suggestions so far is to reduce certain corporate discounts (wow, I think my neighbor's third-grade son could have recommended that, and he would have been willing to accept a Happy Meal in lieu of payment instead of the couple of million that UA will be spending).

McKinsey is not exactly known for its tactical and operational advice. UA needs a short term, immediate, and sustainable reduction of its cost structure, ideally with the support and cooperation of its unions. McKinsey can't help with that. If Tilton and staff doesn't have a long-term vision to improve revenue for the airline, and needs overpaid consultants to help him figure it out, then he needs to go, too. I guess when you have a CFO who doesn't know how to submit a feasible business plan, you run out of real options, but this is just another waste of money that they don't have.


[This message has been edited by fallinasleep (edited 12-11-2002).]

Beef or Chicken?

You know, I never really understood the merit of a "management consultant" to begin with.

I mean, if consultants are so saavy, why the hell aren't they themselves up and at running million/billion dollar empires that they purportedly have the wherewithal to guide?

Eugene

Well, sometimes they do just that. Jeff Skilling (of Enron "fame") was head of McKinsey's energy and chemical consulting practices before joining Enron and subsequently running it into the ground...

Rudi

well, may be UA believes that McKinsey has learned enough from all stategic mistakes Swissair made 1996 until declaring bankruptcy in sep-2001?

McKinsey was Swissair's main consultant and adviser of their failing strategy: 'growth by buying (49% shares of) other minor (and producing nothing than red-figures) European airlines'

Peter M

Well, that news has cheered us all up a treat!

MEX1K

Wow...you fellow FT�ers make me feel so good about my career choice. As a consultant, I have a perspective on this that you may want to consider. Have you ever had to learn to manage the daily operations of a multi-national company about to go banko and develop a strategic vision for the future at the same time? Perhaps Tilton knows where he needs to concentrate 100% of his time right now without forgetting that the future is important too? Perhaps this was a smart business decision? And as for why we aren�t running billion dollar companies, after spending a significant amount of time building a career, most consultants get offers from our clients and calls from headhunters who are looking for CEO's all the time. The reason many of us have chosen not to run other companies is because we don�t want to have to deal with tactics and operations when our area of expertise is strategy, which, believe it or not, CEO�s in troubled companies have very little time to concentrate on. Like Tilton.

Intrepid

And before this McK consultant?
Arthur Andersen was the domestic name for UAL. Whether Andersen did only accounting, or accounting and consulting I can't tell now but it stirred the UAL pot for years.

RTWSTARALLIANCE

Go figure. Maybe its' just become par for UA.

*HighFlyah*

While I wasn't qualified to join McKinsey's highly regarded consulting practice, I am kinda glad now that I didn't. To scale back corporate discounts... hmm... let's see - that would drive corporate customers elsewhere. What about increasing discounts to lure them back? How about increasing the number of accounts they have and making up for the lower per unit cost by upping the quantity? !


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When once you have experienced being a 1K, you will forever fly the friendly skies with your eyes set on 100% mileage bonus and SWUs, for there you have been, and there you will always long to return, every year!

YVR Cockroach

Why MCKinsey or any other big name consultant? Probably to "independently" validate/backup whatever agenda UAL mgmt. (or whoever did hire them) has.

99ejs

HighFlyah,
Since Fallinasleep posted that McKinsey's recommendation is to scale back "certain corporate discounts," my inference would be that they would be suggesting a more sophisticated discount from the x% off that many companies have. One of my former clients used to remark on the extent to which they were "fleecing" US on discounts because of the high proportion of flights for which US would have been chosen anyway.

I had heard rumors when the US acquisition was announced that McKinsey had helped advise UA on that brilliant idea. To echo Peter M, that's a cheery thought.

*HighFlyah*

Point taken - for what UA is paying them, they'd better come up with a brilliant idea Fingers crossed!


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When once you have experienced being a 1K, you will forever fly the friendly skies with your eyes set on 100% mileage bonus and SWUs, for there you have been, and there you will always long to return, every year!

hobson

Outside consultants are usually employed to validate what one already knows. They are perceived (by whom? the board I guess) as being somewhat independent.

They other thing about consultants in general is that they are brought in to "do something" and then let go. That's part of the deal. They know they won't be part of the go forward process. It's their job to design it, possibly even implement it, but the management will run it.

McKinsey is widely known as an outfit that helps organizations cut costs.

At least one of the models I know they used to use is at least nominally collaborative. That said, I hope UA cut a good deal rather than paying rack rates.

fallinasleep

The NYT article states that McKinsey is apparently a strong supporter of the low-cost Southwest, JetBlue, easyJet model. It's hard to argue with success. I think my neighbor's fifth-grade daughter could have told you that JetBlue was a pretty cool airline. For that matter, any five-and-dime daytrader, if they still exist, could have told you that JetBlue was a good stock.

Nothing against consultants, but I don't think UA needs to pay a few million to have a group of some 20-something kids out of college of B-school to tell them that JetBlue is a well run airline. What UA needs is to complete a new puzzle with the current jigsaw pieces it has. The people who can do this are folks who have real industry expertise. High-level strategy, especially when it isn't thinking out of the box, is not going to fix UA's problems. The clock is ticking...

At a minimum, I hope that the bankruptcy judge is forcing all of the advisors to fly UA during this process. It may be the closest these folks will ever get to understanding the airline. But mainly, it will save UA some of its cash reserves. Every little bit counts.

cesco.g

A FEW MILLION: In Swissair's case it is estimated that all in all McK billed and pocketed in excess of $ 100 million (CHF equivalent)! Advise to help them doing their Kamikaze.