United Airline’s recent difficulties with animals on board, in which a flight attendant forced a passenger to place a dog in an animal carrier in the overhead bid, resulting in the animal’s death, followed days later sending a dog destined for Kansas to Tokyo, followed shortly thereafter by a flight diversion because an animal was inadvertently on board, has highlighted the customer service problems that have plagued the airline over the last couple of years. The beating of a doctor who was forcibly removed from a United Express (Republic) flight last year was brought up again in social media, illustrating the disarray perception at United.
United’s real problem is the question of who is in charge. Oscar Munoz, the Chief Executive Officer, had a heart attack a couple of years ago and has a varied background, most recently at CSX, a railroad. While he is now fully recovered, that absence resulted in the Board of Directors hiring a new President, Scott Kirby, who is responsible for operations, marketing, sales, alliances, network planning, and revenue management. Formerly President of American Airlines, Scott comes from a different culture than United and was historically viewed as the chief competitor, given the dueling airline hubs at Chicago O’Hare, United’s home, and keystone hub. The United board, which has become more active, has also sent mixed messages regarding corporate governance and key issues and did not name Munoz as Chairman, instead retaining independent leadership.
The question of whom is responsible for these major customer service failures that have negatively impacted the airline remains unanswered, as well as what actions United will be taking to ensure that they don’t happen again. Fortunately, while we haven’t seen any passengers beaten up over denied boarding compensation recently, customer service failures routinely happen on United. An article compared United’s 18 animal deaths last year to only 2 at American. When problems approach an order of magnitude difference between two industry competitors, something is wrong at the top.
What should United’s board do? First, decide who has the ultimate responsibility for these failures, and take appropriate action. Is it the Chairman, the CEO, or the President, who has responsibility for those functions? Is it lower level employees who haven’t been properly trained, or a lack of decision-making authority delegated to flight crews to utilize common sense? There seems to be a pattern of the airline “shooting itself in the foot” more often than it should.
United’s strategy has also raised questions, particularly after comments during last month’s earnings call about competition from ultra-low-cost carriers. United can’t be all things to all people, and if it is not attracting enough business traffic to maintain margins utilizing its traditional business model, it needs to adapt. But with United’s customer service consistently viewed as poor in surveys when compared to American and Delta, it has a more difficult time attracting business customers. And with each well-publicized customer service failure, the carrier will have more difficulty gaining traction.
Management is sending out conflicting signals regarding competing with low-cost carriers while at the same time rolling out a new premium product, newly branded, but at an excruciatingly slow pace for its best customers. The Polaris product should be quite competitive, but execution requires more than just marketing hype. It doesn’t take years for Emirates or Qatar to upgrade their fleets, but this appears to be a multi-year task for United.
The Bottom Line:
United seems to be wallowing, with numerous customer service failures. It wants to introduce world-class products while at the same time competing with LCCs, sending out conflicting messaging.
Since the merger with Continental, the service improvements seen at Continental have all but disappeared. United’s reputation is back in the tank and is still floundering in rebuilding the airline’s reputation, which begins with the fundamentals. Treating people as you would like to be treated wins customers. Poor attitudes don’t, and those attitudes are created by actions at the top of the organization, such as the decision last week to replace bonuses with a lottery and prizes, which thankfully was quickly reversed after negative feedback. But even this switching shows confusing management. It does not inspire confidence.
Change is clearly needed, but the oligopoly among the big 3 doesn’t make it a top priority for United, as capacity restraints and high fares rule the day. They are profitable, so the shareholders are happy – today. But the customer service failures also makes United the most vulnerable of the Big 3 to new competition in the future, something that management needs to address. JetBlue and Alaska are growing, and much of that growth is based on higher service levels, with those carriers stealing high-value business customers. Twenty years from now, which do you expect in a leadership position? Today, we can’t say the answer is United.