Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (1) | Ignore Thread Prev | Next
Author: imkeww Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 610  
Subject: Saving United: If I Were Jack Creighton (Speech) Date: 10/31/2001 8:28 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 4
Saving United: If I Were Jack Creighton (A Speech)

I would start out with a forward-looking speech on November 1, 2001:

“My valued employees, customers, and shareholders:

I cannot emphasize more the fact that there is nothing wrong at United that can't be fixed by what is right at United. Today, we are left with a dramatically reduced operation.

I want to be honest with you. The cutbacks we have had to make are not just the result of a weakening economy and aftermath of current events. It would disservice learning to lay blame completely on events out of our control. The crux of the matter is that, even as we encountered tremendous growth and prestige in recent times, decisions were made and actions were taken within the company that worked against a future well-being.

I'm talking about so-called 'strategies' that strayed away from our core business. I'm referring to management and union propaganda and action that were dishonest, uncooperative, and downright selfish. These things led to an inconsistent work environment, despite our successes. They alienated employees, passengers, and investors; they left these key stakeholders in United confused and frustrated.

What makes our most successful competitors so successful? A truly successful airline pleases employees, customers, and shareholders, none at the expense of another. True, as a publicly-owned corporation, our ultimate objective is to accomplish favorable financial results for stockholders, with a primary mission of attracting and pleasing customers. But we must not lose sight of the fact that an airline cannot be run without its employees, and that it cannot be run well without ensuring employee satisfaction.

To this end, I salute Southwest Airlines. I trust that one competitor's praise for another will not be seen as something unreasonable, especially in this time of necessary cooperation and mutual understanding. In a fraction of most major airlines' histories, they have managed to pursue relentless growth. How did they do it? I don't want to underplay their strategic moves, but most importantly they've consistently attracted and retained extremely satisfied employees, who have in turn given superior customer service to repeat passengers, which has in chain attracted investment to keep the airline growing.

Perhaps most crucial is that they've chosen to do one thing, and to do it very well. They have chosen to run their airline as best as they could run it, with an enviable record of near-stellar operational results, and so it follows, solid worker and passenger satisfaction ratings, and an ever-upward stock valuation.

I do not want to underplay our successes, either; but the truth is that despite our former reign as the world's largest airline, we were not the best airline we could have been. I cannot underscore more how being larger does not mean being better. Our status set unreasonable expectations for employees, customers, and shareholders, each who expected the highest pay and benefits, the highest level of service, and a commensurate level of profits, respectively.

Those were expectations we could not meet. Being largest also meant having higher costs, being exposed to greater risks, and being increasingly unable to expand. We also found it harder to run our core business. Our operational results consistently lagged. Our customer satisfaction results were marginal and satisfactory at best. Our stock started becoming less desirable. The prevalent mentality was that if one person did not fly United, another would. Our success seemed as assured as that. No, being biggest was not being best. If anything, our attitude proved it. Fortunately, we are here to learn.

The first step towards recovery is acknowledgement, and I'm glad you are here with me today to do that. Next, we must re-evaluate exactly what kind of airline we are, and how we're going to be what we say we will be.

In the past, we were so large we tried to be everything to everyone. This is reflected in our annual mission statement: 'To be the number one airline in the eyes of customers worldwide.' Not only is this too simplistic, it is unreachable. The fact of the matter is that airline business is cyclical, and highly prone to fluctuations in the geography of economic activity. That is, the constantly changing locations of business make it hard for air transport to remain stable. It is near impossible to be such a global airline as envisioned by our mission statement; so let's accurately asses the market we really serve.

What makes United United? As I've said before, we have great people, great hubs, great planes, great cities. We are a different airline than Southwest. We are a network carrier. Our strongest asset is our nationwide, international route network, which is flown with a fleet of modern, fuel and training efficient, mission-oriented aircraft, and supported by a diverse and talented workforce. Our reputation is one of ubiquity for business travel worldwide. It is the niche we have chosen to try to succeed in.

The market we serve is both global and local. Our international routes are some of our most profitable, but they can only remain profitable if they are filled with domestic passengers, both from home, and from foreign countries. With limited resources, it is near impossible to have a domestic presence in every international market. This is why we've partnered with international carriers, such as our Star Alliance grouping. Much the same way, we are only able to serve the most major markets in our home country, which is why we've delegated out flying to our United Express partners. With lower costs and small, cost-efficient regional aircraft, they can profitably serve those markets for us.

For years, the airfares we've offered have had a tremendous range in price. It was what the market conditions had called for: we charged business travelers who wanted to travel at short notice as much as they were willing to pay, which were very high fares. But we still had to fill empty seats, because most flights had limited demand for business travel. We charged ultra low airfares to leisure travelers, under the conditions of imposing restrictions on their tickets. In essence, the high fares paid by business passengers guaranteed them space on flights, and those premiums subsidized the low fares of leisure passengers, who would have otherwise chosen other airlines with comparable prices.

Because we serve a higher proportion of business markets, both domestically and internationally, we have had a higher share of business traffic than other carriers. As the economy surged in the last decade, we kept track of how much business travel was fueling our growth. It was staggering. So within the last decade, most of the decisions we made dealt with keeping and attracting high fare travel. We renewed our fleet with passenger-favored single-aisle and wide body aircraft, enhanced our premium services both onboard and on the ground, and tailored Mileage Plus for the high-yield passenger.

Even though we focused on the business traveler, we tried to be everything to everyone. Afraid of losing market share in our traditionally strong western region, we established United Shuttle as a low-fare competitor with low-costs and no-frills. Our product became inconsistent. Service provided on those routes was not what customers came to expect from the 'world's largest airline'. The project was plagued with customer complaints, in spite of the hard work of our employees. We tried to capture more of the domestic market by acquiring US Airways, a merger that seemed good on paper until it became apparent we had more important problems to face. Most recently, our innovative idea of entering the fractional executive jet business drew the offense of many.

Given that we've historically had the highest share of business traffic, why is it that we've been performing so poorly? The data for first half of the year showed that, in actuality, United's yield (or revenue generated per passenger) was lower than American's Delta's, and even Southwest's. Where has our share of high-fare travel gone? It is true that we did rely on a lot of the business traffic that grew and subsequently shrunk in the last decade. However, the cost of spreading ourselves too thin over the years paid its toll. We lost many of our most desirable customers as a result of our summer performance last year. Even leisure travelers started to avoid our business after much bad publicity.

It's simple: we lost focus. As a company, the initiatives our leadership was advancing distracted us even more from our core operation. Thankfully, we are here today to refocus on our top priorities. It is a new business environment we face, and we must adapt.

The new economic reality is that air travel will never be the same: with new security measures, it will not be as convenient; it will not be as efficient. Southwest has the business model to cope well with the industry crisis. With only one fleet type, service limited to domestic markets, and settled labor contracts, their costs are controlled. Unfortunately, more than ever, we are struck by the global ramifications of recent events. We have invested heavily in internationally configured aircraft, and most of these aircraft need to keep flying international routes to be paid off. We've already invested in the facilities to maintain our global network. We can, however, take a page from Southwest by focusing singularly on our three key stakeholders, none at the expense of another. We will show that we rely on all travelers, not just business passengers.

Our new mission statement is:
'To provide the highest standards of safety and operations in air transport to and from the United States, countrywide, worldwide, for our employees, passengers, and investors.'

We want to remain a network-based airline. We want to continue to serve global business interests. However, our roots are in the United States, and we will continue to comply with all authorities to ensure safe, reliable air transport. We want to support freedom of choice in the airways, and we want to show that we are a good choice to fly.

Today, we have laid the foundation for a leaner and meaner network carrier.

To our employees: the first thing we must repair is the frayed trust and cooperation between leadership and the labor groups. It was to everyone's dismay that our first round of contract negotiations was not fair and seamless as was promised. Employee stock ownership was intended to create a team-based environment, and generate a true feeling of ownership of the company by individual employees. I realize that although all signs point to this project's failure, your employee ownership is as important now as ever. I sincerely wish no one feels as if their long term investment has been ruined. There is still hope. Employee ownership has shown its strength in our employees' ability to act on their dissatisfaction with leadership, and by the dignity of those who have been affected by our necessary furloughs. They will forever be a part of United.

Last night we marked with remembrance the retirement of our entire Boeing 727-200 and 737-200 fleets. While it is greatly reducing our capacity, this move dramatically reduces our maintenance costs. For instance, a complete engine type is eliminated, and training is simplified. This may seem like an ominous reduction, but I ask you to fret not: for when the lost demand for travel resumes, we will be there, armed with deliveries of new airbus aircraft, with a workforce ready to accept and deploy them.

Avolar, while a well-researched prospect for diversification of our business, would be best left to another management's focus. Present leadership is now singularly focused on establishing rapport within all employee groups, restoring financial solvency, and delivering excellent operational results. We feel that aligning our business with business jets will be valuable sometime in the future, but ownership of one is not necessary.

Let me underpin the point that, while we may have the financial support of the government and numerous financial credit lines, those options are crutches, not cures. They do not lead to financial stability, but merely prolong instability. Already, we carry an unencumbered amount of debt. We would like to grow again, to serve our stakeholders better, but in order to do that, we must have healthy credit. Let's work together in cutting costs so we can trim our debt, so that we can grow again.

I have opened the books for you; we will discuss our numbers together. I have the utmost faith that we can come to reasonable and fair agreements. I want to ensure a good quality of life for all United workers, but we must keep costs reasonable, especially given today's air travel environment. You will see exactly how much of our business traffic has dropped off, and you will be exposed to our strategies for recovering that traffic. Some of the proposals for contract adjustments include an indexing system of wages, where we will tie inflation, stock ownership value, and seniority into pay that revolves, and is amended, quarterly, for the short term as we try to restore stability.

Givebacks will be necessary across the board, and we will share and explain with you the appropriate cutbacks we are making with management, salaried, and non-union workers.

We will institute an 800 number for employees to call-in with suggestions for improving work processes, or with questions or concerns about decisions that have been made. Management will dedicate its time to answer questions on a rotational basis; I will be picking up the phone as often as I can. We will work in earnest to formulate the type of ESOP teams that once existed, and almost become standard.

Over the coming weeks, I will be going to each of our major employment stations to meet with labor representatives. In addition to labor contract negotiations, we will be discussing company-wide strategies for reducing costs and recapturing lost market share, I encourage all of you to attend the conferences where you can, where I will be giving summaries of the progress achieved on a daily basis, and will be taking your questions. I hope we can all work together in assuring expedient and fair review of contract proposals. The sooner we are at agreement, the sooner we can build on that trust.

Lastly, I encourage you all to be proud of your airline, and to proactively show your pride to your customers, to fellow coworkers, and to the flying public at large. Make no mistake: we will come out of this a stronger, if smaller carrier. This is the airline that you built, the airline you will keep flying. Please, promote all the steps we are taking to make travel safer and more bearable. Notify passengers that we have reinforced all cockpit doors. Inform them that we offer free entertainment onboard all our flights. Advise them of the convenience of our new electronic check-in. It is alright to answer questions with, 'I don't know,' as long as you find out. You can say, 'certainly,' in addition to fulfilling our customer's requests. Keep reminding them we appreciate their business. Above all, stay abreast of what's happening. A little goes a long way. An informed employee leads to an understanding customer. Already, buzz about your professionalism and candor in the aftermath of recent tragedies has legitimized itself in our most recent stellar operational results. Show the world that we really are united.

To our passengers: I want to assure you that you will be flying the safest United that's ever existed, a United that is dedicated to getting you to where you need to go. We realize that travel has become a lot less easy, but we've previously rolled out a wide range of innovations to make it easier. In addition to our Easy Travel products, you will find online tools at our website to keep you informed about flight activity, fare sales, and policy changes. You can always call our dedicated customer service hotline as well. We appreciate your understanding as we rework our schedule to better meet your needs with our smaller presence. Your business is important to us, even more now than ever.

To our stockholders: United desperately wants your confidence back. In the coming month's, we hope you will recognize our proactive measures to restore our finances.
When the industry rebounds, we will be poised to take advantage. Despite the threat of competition nationwide in this vulnerable state, United plans on holding its own through the performance we will give achieve for our employees, customers, and investors.

We are currently faced with an unprecedented challenge. But out of challenge, stems opportunity. We can and will meet this challenge: we have the capability. In this unprecedented moment, we can develop unprecedented way of cooperation and communication within United. Let us show the world that life really is a journey—and that flying United means traveling life well. Thank you.”
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (1) | Ignore Thread Prev | Next

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement