UAL chief using Wal-Mart as a business model

ual747mech

Senior
Nov 26, 2002
279
0
Here's the business plan folks!!
UAL chief using Wal-Mart as a model
February 24, 2003
BY TAMMY WILLIAMSON Business Reporter

Want a picture of the new, post-bankruptcy United Airlines?
Think Wal-Mart, said Glenn Tilton, chairman and chief executive of UAL Corp., United's parent company.
The mega-discount chain has transformed itself over the years from a mostly rural, dry-goods retail chain to include groceries, food and gasoline. Now the biggest company in the world, Wal-Mart used its nationwide presence and dominance in many smaller U.S. cities to branch into new types of services, with success.
United can do the same in the airline sector: offer more travel products for its customers--all kinds of customers. Why should I leave anyone out? he said.
Tilton said to achieve that goal:
*United should continue to be a major international airline, and continue service and partnerships with foreign carriers to international destinations, for which United is well-known.
*United Airlines, or the main line, as Tilton calls its, would still exist and keep its hubs in Chicago, Denver, Los Angeles and other major cities.
*United Express regional jet service, which would expand, would continue the routes that take people to smaller, underserved cities--like Cedar Rapids, Iowa, for example.
*The missing piece of United's offerings, and the key to its so-called transformation, is also the most controversial part. It's the plan to create a low-fare carrier--currently code-named Starfish--that United would own and run to compete against successful, discount airlines like Southwest Airlines, JetBlue, Frontier Airlines and ATA.
How it would work: United would replace its main-line service from Chicago to Las Vegas, for example, with its discount carrier. Tilton said people think of United to fly overseas, but probably don't think of United as their first choice to Las Vegas or other tourist get-aways.
No major airline has ever succeeded in making a discount carrier work, including United, which abandoned its Shuttle by United shortly after the Sept. 11, 2001 terrorist attacks. Also working against the idea are some of United's labor unions, some of whom don't like the idea of employees who would work for the discount carrier getting paid less than their United counterparts. Labor unions represent about 87 percent of United's 73,000 workers.
Tilton said United competes with one or another of the discount carriers on 72 percent of the 175 U.S. routes it flies daily. United must get its discount carrier airborne as soon as possible, he said. Tilton and his executives have about two months to get everyone on board, because the company wants to file its bankruptcy reorganization plan in U.S. Bankruptcy Court by May 1.
Tilton discussed his vision, and why he thinks he can make it work, in an interview Friday.
Q. United and Wal-Mart? How are these similar?
A. If you think of the way Wal-Mart leveraged their strength, it's their footprint, it's their position in the market. United: our footprint, our position in the market.
We've got the feeds, got the regional carriers, got the routes, got the destinations. This would be optimizing access to customers, as Wal-Mart did.
This is not remarkable stuff. All I'm doing is resegmenting my market.
Q. Delta Air Lines and Continental Airlines are among the many who have failed at the discount carrier business. What makes you think United can pull it off?
A. We should have done it a long time ago. Southwest, Frontier, etc.: They're growing. We're not. They represent a very real threat. More and more we see them appealing to business route travelers (which were once the bread-and-butter of the major airlines.)
We gave these guys the opportunity to teach us a lesson we should have learned ourselves.
Q. Starting a low-fare carrier seems to be the fix-it du jour for the major airlines. Delta is starting another discount carrier, called Song; Air Canada has Tango, and now your largest competitor, American Airlines, has said it's thinking of starting one. This is on top of the discount airlines already out there. Aren't you worried that more discount airlines will hamper United's chance at making one work?
A. It's competition. It's business. I can't think of a business that hasn't gone through this. We have a wonderful platform upon which to execute the discount carrier.
Q. Who do you have to convince to get this plan into motion?
A. There are four groups of people in this: current stakeholders, bankers, employees and the capital markets. We have to convince them all.
Q. Some of your employees have been the most resistant to the idea. In a recent letter to workers, the head of the pilots' union said it is opposed to having separate wage scales for employees working at United's main line and United's discount carriers. How will you overcome their resistance?
A. You're going to change one way or another. You're either going to create the change, or the market is going to change you.
If you think about what has been happening to employees in main-line carriers--what would you tell an employee on the front-line of American or Northwest or Delta--what's been their recent experience? You worry about your job security and you worry about your seniority and you worry about that moment when you've reached the bottom of the list and you're next to be furloughed.
Why is that happening? The company is shrinking its schedules, and it's shrinking its jobs. Put another way: We're not finding a way to compete. The value proposition here is we find a way to compete. This business proposition is for United employees--whether they be current United employees or furloughed United employees who would really like to be recalled. But that's not going to happen because the company continues to shrink.
Yes, it is entry-level. But so is United Express. They feed employees into the main-line carrier (United Airlines). But they start there (at United Express). They get out of flight school, start there, and they're obviously starting at a very low wage and they work their way up. This concept is exactly the same: The only difference is we would own it within United, while United Express is owned by a separate airline, Air Wisconsin.
Q. Some workers will argue they're still doing the same job, whether they're working at United or at United's low-fare carrier. You're traveling all over, meeting with employees. How are you going to win them over?
A. You keep talking. It isn't as hard as you might imagine. The discussion we have with employees about it focuses on, 'Well, why not? How would you rather change? Would you rather change by competing and growing, or would you rather change by shrinking?'
 
Tilton is listening too much to those McKinsey consultants!

C'mon Glenn, you can do better than this!

Walmart doesn't have unions, is not a cyclical business, doesn't care what the competition is doing, has increased productivity so well that they represent 25% of the national improvement in productivity over the past few years (source: TIME) etc etc etc..

Most importantly, Walmart does not try to capture every retail spending dollar (i.e. luxury spending).

In a word: focus.
 
[blockquote]
----------------
On 2/24/2003 9:04:34 PM ual727fo wrote:

I have always wanted to work for Wal-Mart. Yippee!!
----------------
[/blockquote]

Guess they'll start hiring retired 'seniors' as greeters at the jetways...
 
[blockquote]
----------------
On 2/25/2003 12:50:40 AM UnitedChicago wrote:

I agree with you Mr. Hell. What - are cats and dogs getting along?!
----------------
[/blockquote]

Been known to happen. Kudos.

UA is a fabulous franchise. They just need someone to lead them out of the darkness.
 
[blockquote]
----------------
On 2/24/2003 10:22:12 PM mga707 wrote:

[blockquote]
----------------
On 2/24/2003 9:04:34 PM ual727fo wrote:

I have always wanted to work for Wal-Mart. Yippee!!
----------------
[/blockquote]

Guess they'll start hiring retired 'seniors' as greeters at the jetways...
----------------
[/blockquote]


You know the sad thing, that may actually be a good idea to boost customer satisfaction levels. LOL
 
STARFISH?! Isn't a starfish a slow-moving brainless bottomfeeder? A starfish is something you dry out and use as a decoration, not FLY on.

Management has failed in negotiations with labor, failed at acquiring US Air, failed at starting Avolar, and now wants to start something called "Starfish." My sympathies to UAL employees.
 
[blockquote]
----------------
On 2/25/2003 10:35:07 AM Winglet wrote:

STARFISH?! Isn't a starfish a slow-moving brainless bottomfeeder? A starfish is something you dry out and use as a decoration, not FLY on.

[/blockquote]

...a whole 'nother thread...
 
[blockquote]
----------------
On 2/25/2003 12:06:18 PM mga707 wrote:

[blockquote]
----------------
On 2/25/2003 10:35:07 AM Winglet wrote:

STARFISH?! Isn't a starfish a slow-moving brainless bottomfeeder? A starfish is something you dry out and use as a decoration, not FLY on.

[/blockquote]

...a whole 'nother thread...

----------------
[/blockquote]
I thought a starfish was Sponge Bob square pants buddy.
 
OK, let's set-up a "halo" operation that's going to piss-off employees and destroy yields by taking passengers away from the mainline.

Wait, didn't we try this before? I think it was called "Shuttle by United" or "Avolar" or . . .