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United CEO Jeff Smisek Q&A At Star Megado

by on November 21, 2012 · 6 comments

in Mega Do, United, Video Blog Post

After all the jetsetting and antics on two continents, Star Megado 4 culminated with a Q&A session with United CEO Jeff Smisek on the 99th floor of Chicago’s Willis Tower. You might recognize him from the promotional spots they screen before the safety videos on all United flights – but it turns out the guy has a good sense of humor, and after a little light ribbing, he answered some pre-screened questions as well as a few live ones. I took some notes during the session and below you’ll find the general notes on what he had to say.

Were there any revelations? Not really, but it was still good to see an airline CEO interacting with everyday flyers, especially those as invested in the airline experience as Megadoers.

Here’s how he began the session:

I didn’t film the whole session, so here are some notes on what else he had to say.

Now that United has Boeing 787’s, are there going to be new long-haul markets?

Jeff Smisek: Yes, but I can’t tell you exactly what they are yet. The 787 is designed for really long-haul flights thanks to better cabin pressurization, humidity and higher oxygen levels. It was designed to fly out of global gateways both on new routes and to replace higher-volume 777’s on seasonal routes. United only has 2 out of a total order of 50 (and potentially more) so far, so the plans for the new aircraft are still dynamic. As it is, United can fly to over 370 destinations, but it will be expanding thanks in part to the new airplanes’ fuel efficiency and reliability.

Jeff Smisek addresses the eager crowd of Megadoers.

What steps is United taking to bring together 2 very different cultures…ie Continental and United?

Jeff Smisek: Patience. It takes a long time to bring together cultures – so many things need to be brought together including work groups like unions that require new negotiations and terms. The key is to make sure we really mean it when we say we want to make it great place to work, we want to work together, and we want to have a successful culture. I’ve done over 60 CEO exchanges with workers this year, and the other board members and I always talk to crews when we fly. We’re not there yet, but we’re making progress.

Seriously, why SHARES? (This is the website system United uses)

Jeff Smisek: There were many reasons we chose SHARES – it was important strategically to have the intellectual property, website functionality and controls, loyalty program integration and more. Continental spent a lot of time and money and built a lot of applications and functionality off of SHARES – it can go to the market and price our products more effectively and competitively. That said, we didn’t have the front-end of the user experience built in the time we needed to migrate passenger service over to the new system or to train our agents. However, we’ve designed 2 big apps for customers that we’ll be beta-testing next month – a new booking process with a responsive design and easy-to use point and click technology. It was important to get all our operations onto one web site during the merger and we couldn’t wait for the front-end technology to catch up, but we’re doing it now.

What are doing to improve flight on-time reliability?

Jeff Smisek: We’re very focused on operations now, especially after the horrible summer we had. A portion of fleet is under-invested – that’s happens when you go bankrupt. We have some catch-up work and inventory work to do and some preventative maintenance. All of that will bring up reliability for the existing fleet, as will our new orders including those 50 Boeing 787’s and 25 A350’s. We are spending a lot of money, and one of the purposes of the merger was to create long-term profitability and the sustainability of our fleet.

Making a point about consolidation being good for the airline industry.

How much longer until we begin seeing WiFi on board?

Jeff Smisek: It’s true, we’re late to WiFi party, but ultimately that will be to our benefit. We will install all-new satellite broadband WiFi on our fleet, so passengers can be in touch anywhere in world except China and some polar routes. Doing so will also dramatically improve customer service since our customer service can be in touch live with passengers on an airplane – for instance if they need to change something about the in-flight experience, notify them of any upcoming issues such as missing luggage, communicate better with crews, and provide both better business and entertainment options. We will own the broadband itself and the portal, and can control sites, advertising, etc. to make it a better experience for the customers. In terms of numbers, we’ll have 300 airplanes done by end of next year – we’re working on the A319’s now and then the Boeing 747’s, and then we’ll push to finish off the rest as quickly as possible. The 787 does not have WiFi and it’s harder to install on those because of the aircraft’s structure, but Boeing is working to certify the plane for WiFi.

Does social media influence United’s decisions?

Jeff Smisek: Of course. The world has evolved to a point where social media is very important – in both good and bad ways. There is now an expectation of immediacy and responsiveness, as well as changing the way word gets out. It’s a more and more important aspect of society, so of course we’re listening.

Why sell upgrades for tens of dollars even when Premier members haven’t been upgraded? (This was a major Megadoer complaint, especially by uber-elites who watch as non-elite customers can buy upgrades on the cheap instead of having their own elite upgrades clear.)

Jeff Smisek: It’s good for you when we make money – you need us to be profitable so we can provide the best experience. Airline consolidation is a good thing and helps stabilize an industry that has wild fluctuations. What you want is reliability, breadth of network, new product and technology. We can’t deliver those things in a fractured, bankrupt industry. That’s why we need a balance between Premier upgrades and paid upgrades. We need to be able to sell some of those seats up front to be profitable – we need to continue to bring cash in the door.

Do you think the current 10 hubs are the right answer for United?

Jeff Smisek: I cannot guarantee the existence of a hub because each hub has to continue justifying its existence with the traffic. We have very powerful hubs because they do very well for us and we continue to invest in them. I think it’s unlikely we would develop a new hub because it is such an expensive and risky proposition. Right now, our we have ringed the country with some very strong hubs – Los Angeles, San Francisco, Houston, Chicago, Newark and Washington. Those are our gateways to the rest of the world – we can fly anywhere out of those and it’s a strong position for us. Could levels of flying in an individual hub change? Absolutely, but we make sure each does as well as possible and maximize those profits by supporting our people there. Ultimately we decide based on economics of it.

What are you doing to fix boarding process?

Jeff Smisek: No question, it needs some work, but we will be making further changes. What you want is efficiency and recognizing your best customers by giving them advantageous boarding while still accommodating the other flyers – however, we have lots of tiers of elites, and they expect to be treated preferentially. We brought some of this mess on ourselves by charging for checked bags, so we incentivized everyone to bring the kitchen sink onboard with them in their carry on, which slows the boarding process. But airplanes don’t make money sitting on the ground. We have to get them in air, so you’ll see some changes. We don’t have it down right yet, but we’ll be making changes in procedures and in terms of physical changes at airports.

Are you worried about an American Airlines-US Airways merger?

Jeff Smisek: No. I believe airline consolidation both globally and in US is an unalloyed good for airlines and customers. Too long this industry has been fractured and in disarray, with continual bankruptcies and loyalty issues. All of those are concerns. From United’s perspective, we would lose US Airways in Star Alliance, and that would hurt us. On the positive side, we’d have more consolidation and I personally believe that the benefits would outweigh the cost of losing US Airways as a partner. After going through a merger myself, though, I can say that I would enjoy watching that.

Then we came to the live Q&A portion, which was quick with only a couple exchanges. Most were pretty specific to each particular person’s interests, but here was one that affects us all.

United is in Star Alliance – so why do some members like Singapore and Lufthansa not free up some of their premium products for awards for United flyers when their customers get full access to United inventory?

Jeff Smisek: Alliances are complicated and involve bilateral agreements between pairs of airlines, but not everyone has the same deals within an alliance. It’s confusing for customers. We try to make alliances as seamless as we can, but we’re not always successful. For example, different carriers have different lounge networks, so there can be issues with reciprocity. Lufthansa is one of our closest partners, and Singapore is another premier carrier we work very closely with. But their inventory and needs are different from ours and that can create issues for our passengers and awards.

For those of you who want to see the whole session, you can check out the full video from Milepoint TV here.

If you had been there and had the chance to ask Jeff Smisek a question, what would it have been?

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  • http://www.facebook.com/people/Eric-Mueller/717295711 Eric Mueller

    Sounds like you got everything he said, Brian (nice reporting!), but if anyone wants to see the full, uncut presentation, it’s here: http://www.youtube.com/watch?feature=player_embedded&v=u0CsMmyzZug

  • Sdemots

    I am not happy at all how cheaply they are selling last minute upgrades instead of upgrading elites. What is the best way to express that dissatisfaction?

  • Casual Observer

    How does Smisek expect to make progress on 2 very different cultures by threatening them? It seems no small coincidence that on the eve of voting for the pilot contract that he is in the NY Times making a comment that he wants some employees to leave who can’t make the change to his new philosophy.

    But I question the sincerity of an organization tries to blame the employee for systematic mistakes that are in fact executive organizational decisions; in evidence, the Q&A on Shares.

    The very day he was making that NYT comment about getting rid of people, the airline experienced another computer glitch on the Continental 737 with their baggage loading system. That can hardly be blamed on the employee alone. It’s a combination of new technology and new procedures and unfamiliarity and and lack of proper training on new/legacy systems that is the cause for many delays, not the underpaid pilots and crew; in evidence, United Airbus pilots make less than JetBlue Regional Jet pilots.. and have for years.

    I am looking forward to seeing the day when the United and Continental group is in true harmony and United recovers from the bankruptcy and 9/11 tragedies with the help of a Continental add-on.

    It is a recovery example for the rest of the country and a source of pride for us all when they do, but you can’t do it by stepping on your staff. Rahm Emmanuel’s comments about finding opportunity in every chaos has some truth to it. United has the opportunity to lead and Smisek has the opportunity to be a world leader.. as he said and admitted many times though..

    … he is not there yet, and the progress is starting to become questionable.

    When I see Smisek smiling with a lot of United pilots (the old, legacy carrier group), that’s when we can say he is making progress… for sure, and that would be an example for many other corporations to follow.

  • http://twitter.com/benbrooksny Ben Brooks

    Great summary Brian! And thanks Eric Mueller for the link to the entire video which I watched. Good to know that you all asked Jeff the tough questions as many of these I have myself as a UA frequent flier. I actually think Jeff is very smart and as airline CEO’s go pretty solid. His talk at Stanford biz school (on youtube) talks about what he does to drive employee engagement. In an operational/service business it can be very difficult but I think if they can get the new UA back to how the old CO was in terms of employee satisfaction we will see the customer experience enhanced in ways far more important than on-board food, branding, or fare specials.

  • http://profile.yahoo.com/WK2MGBOSCTC4GSNKBMT5SDAWRA Joseph M

    buy a 1st class seat..

  • Pingback: Official American Airlines US Airways Merger Announcement and What It Means For Consumers | The Points Guy

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