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OPINION: United Begins Its Uphill Climb With New CEO Oscar Munoz
After just under five years of leading one of the world’s biggest airlines, Jeff Smisek had resigned from United Airlines. The writing was on the wall after numerous years of lower than expected returns, unhappy customers and dissatisfied employees, with only needing a scandal with the Port Authority to seal the deal.
As Oscar Munoz begins his transition to lead United Airlines, change seems evident as the new CEO has begun prioritizing what it will take for United to regain lost ground in both the domestic and international airline market. These changes cannot be made easily, and some large issues will be at the top of Munoz’s list moving forward as United hopes to finish the year on a good note and regain the trust of its customers.
Employees’ Lack of Identity
Even though United and Continental have been merged for five years, flight attendants for the two airlines still operate on separate contracts. That means that employees from both United and legacy Continental are only allowed to work on certain routes, airplanes and with certain other crew members. Inefficiencies like this create huge headaches for scheduling departments and employees, but also for customers who notice the small differences that can cause issues for loyal fliers.Happy employees and happy customers go hand in hand, and Munoz seems to believe strongly in this based on a letter sent to all United travelers.
“First, we must focus on our customers. Getting you to your destination, on schedule, can make or break your ability to succeed in a work endeavor or to hug a family member at an important moment,” stated Munoz. “If our performance has not met your expectations, I want you to know I’m committed to learning how to better meet your needs and desires.”
IT Problems Galore
It’s no secret that another major issue has been United’s IT systems, which have crashed on five occasions between 2012 and 2015, resulting in numerous grounded flights across the country and hundreds of thousands of stranded passengers.
Quoted in a Wall Street Journal article, Jim Shelly, an oil-and-gas property owner in Houston stated “It’s roulette every time I try to fly United.” Comments from elite fliers such as this have only scared more flyers away, and deterred from the company’s growth plans. The airline has struggled with its reservation system since the merger with Continental, in which all of United’s Apollo reservations were eventually moved to Continental’s SHARES system. United’s Apollo system dates back to the 1970s, as does SHARES which was developed as SystemONE by Eastern Airlines, showing the rapid aging of both pieces of software. Munoz will face the task of how to manage the tired system, and determine whether or not it can be upgraded and fixed, or an entirely new software will be necessary.
Heavy Competition on the Homefront
2015 was no relaxed year in competing for business travelers. Delta Air Lines announced its plan to offer its corporate clients an on-time guarantee. The airline, which currently has the best on-time statistics in the country, now prides itself on leading both American and United Airlines in getting flights in on schedule. To back up the claim, if they fall behind the other airlines, Delta will be offering refunds to the corporate account up to a maximum of $250,000. American on the other hand has chosen to reward its business travelers with more miles, sticking to its distance-based mileage chart as well as offering increased mileage earning for those flying in business and first class. United on the other hand has struggled in recent years, and in one instance in particular in 2012 when the airline’s CFO described its elite flyers as being “over-entitled.”
Comments like this don’t go away easily, and United is being forced to play catch-up to please its top flyers while traveling. It has been able to introduce Wi-Fi throughout most of the fleet later than its competitors, and is just now rolling out new domestic first class seats that falls short for customers looking for a revolutionary design. Munoz will be tasked will finding the latest innovations to get customers excited about United, and keep them coming back.
United Airlines in in no way in a “sink-or-swim” scenario. The airline posted a record Q3 2015 profit of $924 million, fueled in part by increased passenger demand and record low fuel costs. However, the reality is that this high flying environment never lasts forever, and United will once again be forced to compete as oil prices rise and customers travel less. The airline will also continue to face increased competition from low cost carriers such as Spirit in Cleveland and Frontier in Denver, and will be forced to make difficult decisions on how it wants to move forward. It is a long road ahead for United Airlines, but by taking these initial steps as outlined in his letter to travelers, new CEO Oscar Munoz has the opportunity to restore glory to the once great airline.
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