United has plans to rebuild customer trust — and boost revenue per passenger. (Image: United Airlines)
Faced with shrinking revenue per passenger and lower profit margins than its major competitors, United Airlines CEO Oscar Munoz said in a presentation to investors that the company has a plan to improve the airline’s financial performance by $3.1 billion over the next two years.
Much of the effort will focus on rebuilding trust with the airline’s customers – especially its premium passengers, Munoz said. The company will also concentrate on operational improvements to reduce delays and cancellations.
“We’ve been distracted with so much drama and crap for the past year,” Munoz remarked in his presentation. (Part of the drama included his own heart attack and transplant, which kept him out of the office for a few months.)
Link: PDF of Munoz presentation
The airline will make an effort to “re-attract” premium customers that it has lost to competitors by giving them a “consistent experience” aimed at regaining their trust, he said.
Part of that will include taking steps to improve on-time performance and minimize cancellations – and making sure passengers are quickly accommodated when there are disruptions by deploying more mobile tools to United airport staff to handle rebooking. Another part will include paying closer attention to passengers’ needs and opinions; United’s existing passenger survey program will be overhauled, Munoz said, because “it is so damn complex and involved that it just doesn’t make any sense.”
United expects to “upsell” more travelers into Premium Economy seats. (Image: United)
On the revenue enhancement side, Munoz’s presentation predicted that the airline would achieve an increase of almost 50 percent from 2015 to 2018 in “customer choice revenue” per passenger – not from the usual checked bag and ticket change fees, but from “ancillary products including premium cabin, Economy Plus and entry-level fare upsells.” The revenue per passenger from those things is expected to grow from $10.94 last year to $16 or $17 by 2018.
The airline expects to see Economy Plus revenues increase by 20 percent and premium cabin revenues grow by 30 percent in the next two years, Munoz said. He confirmed that United plans to introduce new “entry-level” fares (similar to Delta’s Basic Economy) this year for price-sensitive customers, and also said the airline will create new “bundled” fare products that will allow travelers to customize their ticket purchase; those two product introductions are expected to boost revenues by $250 million in two years.
United continues to replace small regional jets with larger ones like this Embraer 175. (Image: United)
Munoz said United anticipates an $800 million benefit due to fleet changes from its “slimline and upgauge” projects – i.e., using slimmer seats to fit in more per aircraft, and continuing to replace the smallest regional jets with larger models. Those programs will increase the average number of seats per United departure from 105 last year to 121 in 2018.
While United’s international operation is well-positioned – and should improve with its recently announced Polaris business class product – Munoz said the airline needs to improve its domestic network, where it has seen a shrinking share of capacity at its hubs and a loss of premium business to competitors. United plans to increase premium seats in key business markets, overhaul its United Clubs at airports, continue to improve its food and beverage offerings, and bring more customer-friendly enhancements to its mobile app, he said.
There were some things Munoz did not say that might have been expected – he did not announce plans to eliminate any United hubs, for instance, nor did he announce that United will match American and Delta in bringing a true premium economy cabin to its long-haul international fleet.
Screen grab from Oscar Munoz’ presentation. Click to see full version
What do you think? Do you have confidence that Munoz will be able to right the ship at United? Please leave your comments below.
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JD says
June 26, 2016 at 8:31 pmactually, USAir acquired American. Kept American name.
JD says
June 26, 2016 at 8:27 pmDelta is the only legacy carrier left that appears to care about customer service. Too many mergers allowed by the DOJ IMO.
JD says
June 26, 2016 at 8:25 pmUnited’s customer service is a joke. As bad as USAir/American. Recently volunteered to be “bumped” to a later flight. Was told that the flight crew for the flight was on the way and it was delayed 1 hour. Turns out, that was a lie. It was delayed 4 hours total (would not have volunteered if I was not told the flight crew was on the way). Wrote e-mail to customer service. After a week got a e-mail back stating that the delay was due to weather. Responded, never heard back. Also, their in-flight entertainment is a joke unless the plane your on has DirectTV
Salvatore Johnson says
June 23, 2016 at 5:47 pmOne other thing, I would really love to be seated next to Mr. Munoz, I will even sit in the middle seat. Give me the flight between Chicago and Washington and he will never want to fly United again seeing how really bad it is.
Mark says
June 22, 2016 at 8:20 pmI agree. I always look for a United partner when flying overseas. Too bad that they will start flying to New Zealand.
Mark says
June 22, 2016 at 8:17 pmI just flew United. There was no entertainment. On the flight at the gate next to ours, which was going to Hawaii, they told people to “go rent a movie” for the flight! Seriously ? United does not know anything about customer service. Compare them with Hawaiian on the same route.
phoenix00 says
June 22, 2016 at 5:44 pmYou’re right, but asides from the retro paintjob 737, do we see any of Conti’s name mentioned anywhere? No.
Font and colors and logo are nothing without a name. Especially with nothing distinctive about said font, colors, and logo.
To me that’s the definition of a killed brand.
FGS bring back the Tulip. One glance and you think “United”.
Alistar Ian says
June 22, 2016 at 2:46 pmThey didn’t kill the brand. United and Continental merged, and they agreed to keep United’s name and Continental’s font, colors and logo. Look at Delta (with Northwest), American (with US Air) and Southwest (with AirTran). Those brands were killed with nothing left that they ever existed.
R94110 says
June 22, 2016 at 2:46 pmI left United when they routinely cancelled flights from SFO to LAX because they were half full and there was another flight in an hour that was also half full
Not cool.
David A. Gill says
June 22, 2016 at 8:10 amIf they’d widen seats as well as be so concerned about pitch, that would please many of us! The addition of the E-175 is a step in the right direction too. They need to encourage ALL airports to
accommodate, in some way, PreCheck customers, even if the airport is quite small. There are
ways to accomplish this easily!
Dennis S says
June 22, 2016 at 7:25 amI live in San Francisco and was almost a million miler with United and I stopped flying them two years ago; cold turkey. I couldn’t deal with the cancelations, delays and the attitude of the staff. A two day business trip would take three days, because of delays or cancelations. They don’t care about the customer or the experience, only $$ I now fly Delta which is AMAZING. The experience, the service, the food, everything is what the old United use to be and better. It’s sad that I am ok flying an extra hour to connect on a Delta flight, knowing I will get there; the service, club room and service all will be better and no stress and that as a premium customer I will be treated as a loyal customer and a human being.
Tom McNamara says
June 21, 2016 at 10:59 pmOn paper…Munoz doesn’t seem particularly well-suited to turn things around.
His longest tenures have been with Coca-Cola and CSX, which both operator as part of a duopoly in their respective industries. (In CSX’s case it’s a regional duopoly).
But more striking to me is the fact that neither Coke nor CSX rely on “premium products” to support the bottom line as much as the airlines do. Perhaps Munoz has such an eye for talent and can elevate or recruit people to solve this puzzle for him.
Munoz’s pedigree, however, makes him an excellent candidate to re-position United as a regional monopoly, not unlike a Class I railroad. But to do that you need a fortress hub or two and United doesn’t have one.
David says
June 21, 2016 at 10:33 pmHoorah for unions! You think the legacy airlines want these disenchanted, washed-up grumps working their planes?
Kasperlos says
June 21, 2016 at 9:39 pmGlad to see you honestly edited your own piece to include his own health drama. Many of these so-called travel bloggers are easily marked out as comp’d or paid shill hacks. That said aside from their pilots and much of their aircraft fleet, Munoz would be terribly honest if he would proffer to fire most of the battleaxe cabin crews and replace them with Singapore Girls, or at least crew from Japan or Thailand. Munoz, in short, can yammer on all he wants with his power point presentations about getting this or that done. But anyone who has flown for 4 decades knows the shortcomings of U.S. carriers is in their quality of cabin service, lousy lounges, and outdated or at least subpar hard product. It’s not just UAL, but most of the remaining carriers are but Greyhounds of the skies.
Gerald Vineberg says
June 21, 2016 at 7:18 pmWhite man speak with forked tongue!!! Never truer than today. “Slimmer seats “? “Upsell? That & more “down serving” does not build trust but probably makes shareholders drool.
Vicki McKnight LaBarge says
June 21, 2016 at 6:57 pmI have many ideas and have submitted via their survey – which they don’t read. No wonder they are losing customers. They could jump way out ahead and offer better mileage fares than their competition….
Salvatore Johnson says
June 21, 2016 at 6:02 pmSorry but this guy is on drugs and very delusional. United is terrible and people hate it. He thinks they will attract more revenue on an airline that treats passengers like crap? Now that I am a million mile flyer I am very choosy on flights, flying Virgin, Southwest and Jet Blue more. My next flight to London will be on Virgin, because I am sick of terrible service on United.
It’s funny, all the other airlines have the same fare’s, same tight seats but I feel more welcome on Southwest than United. Every United flight seems to be a struggle for flight attendants in a job that they really hate because management has beat the crap out of them.
Sorry but I can’t see United gaining more customers because so many people now hate it.
International Observer says
June 21, 2016 at 5:23 pmYou mean Polaris* nickel and diming…
F. Haggsman says
June 21, 2016 at 5:06 pm“Boost revenue per passenger” does not sound like “building trust”. It sounds like more B.S. nickel and diming to me.
jeff says
June 21, 2016 at 4:51 pmOn time, on time, on time!! Delta has done a very good job with this. UA needs to sort this out.
R94110 says
June 21, 2016 at 4:48 pmHe can build more trust or he can boost revenues per passenger. Not sure how he can do both at the same time, since penny-pinching and egregious extortion and junk fees are the exact opposite of what I consider to be “trust”.
phoenix00 says
June 21, 2016 at 2:49 pmYes I do think he’s the guy for the job. Prior to his illness he was working on improving employee relations which is a great start. I am also aware UA has changed the way they route aircraft to minimize delay impact.
As for international premium econ (or lack thereof), I’m guessing UA wants to test the product domestically before rolling it out on long-haul international.
After they’ve done all this can the please, please please change the logo & color scheme? This one is so generic, bland, insipid, and comes from the brand they killed!