United Airlines announced a new push today to win back business travelers who have been leaving the carrier in droves for the competition. United will have to do more than plead to get these corporate accounts back–
Is it going to be too little, too late?
As United Airlines officials discussed fourth quarter financial results with skeptical analysts today, they pleaded with corporate accounts to return to the fold, arguing that the airline has left its operational woes of the summer in the rear-view mirror.
That invitation occurred as the airline revealed it trimmed its senior officer ranks by 7% in December, and plans to reduce management and administrative staff by 6% starting in February.
CEO Jeff Smisek, conceding that corporate customers “took a detour,” argued that the airline has momentum, and will win back straying business travelers.
United Airlines is still disconnected from reality, even if the carrier is taking steps to improve its lot among U.S. legacy carriers.
The root of the problem is not a bloated white-collar workforce, but the attitude of the white-collar work force, an attitude that has sapped front-line morale and alienated long-term customers. United is fond of saying there is light at the end of the tunnel, but as we near the one year anniversary of Continental-United integration, the carrier is still frankly in disarray.
And that makes a difference to the business traveler.
United is welcome to start a race to the bottom by lowering prices for new corporate contracts, but it has four things working against it. First, American–now lean and mean as it readies itself to emerge from bankruptcy–is not going to go down without a fight. If United adds additional corporate incentives, chances are AA will too. And AA has done well at picking off business from United. My brother’s accounting firm switched from United to American this year as the preferred carrier and AA, it seems to me, has more room to maneuver than does United.
Second, selling more specially-discounted first class fares to get the corporate traveler up front coupled with United’s opaque policy of selling upgrades will further alienate elites. Gary has made this point numerous times and I will underscore it here–elites who are not forced by corporate travel policy to fly United but opt to by choice, even if it requires a bit more money or an extra connection, will not tolerate a program that disparages their business. While corporate travelers are “stuck” flying United, if voluntary elites are antagonized, United stands to lose more than gain.
But it is not that simple. I fly over 150K miles on United each year and I sit next to corporate travelers all the time. They are elite too and they notice what is going on. There is the myth, I think, that corporate road warriors do not even know what is going on–they just fly on the airline their company puts them on. In my experience, that is often not the case. Elite and corporate travelers are often one and the same, so when United weakens elite benefits in order to woo corporate travelers, the end result is actually a wash.
Third, United’s domestic product stinks. I’m sorry–I’ve flown the competition and the differences are stark. First, wi-fi. Delta, American, and US Airways have it, United does not, with the exception of a few aircraft. This will be changing, Jeff Smisek promises us, but it will still take at least two years for United to catch up to the competition. A five-hour plane ride is a long time to be disconnected and United does not even come close to the competition in this respect. And that’s not the only difference between United and the competition. Food is not as good, onboard service is hit or miss, and customer service at the airport can be horrendous (when a simple ticket re-issue often takes 20-30 minutes).
Fourth, punctuality matters. UA has improved its on-time performance of late, but still has a very poor record. Business travelers take note of that. Sooner or later there reaches a point in which people give up on United–I see it everyday on Flyertalk. The culmination of all the post-merger problems has pushed away many customers and corporate travel folks often do have more discretion than awarding company travel to the lowest bidder.
United can dig their way out of it, but the problem will not be solved simply through temporary discounts and a couple employee training sessions. Instead, it will come though a culture change in the company in which United re-evaluates how it thinks about customers and realigns its priorities. The goal should not be to milk the most money out of each consumer on a transactional basis but build the sort of loyalty that will pay off even more in the long run. Loyalty can be won by the investments United is making in its hard and soft products now, but must also come from the top down, pursuing an attitude that each customer matters and putting that attitude into practice through policies like booking passengers who misconnect on other airlines. I call it the Macy’s business model (from The Miracle on 34th Street) and I think United rebooking a passenger on another airline during irr/ops goes a long way to show that customer is valued…especially when it can often save them several hours of waiting.
But that’s just one example. Bottom line, the demographic United is targeting will not be suckered into staying in an abusive relationship through a temporary reprieve on prices. United must show that it truly cares about them, not just their money. The key, of course, is doing both simultaneously, which I am not confident United can find a way to figure out based on their performance over the last year.