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EYE-ON-UA
August 31, 2004
Hi, this is Glenn. It's the 31st of August, and I am calling from Chicago with Pete McDonald, our chief operating officer.
In our most recent calls, I have focused on the work that we are doing, and need to do, with our various stakeholders, as we complete a business plan that must be both viable and finance-able. We must have the liquidity and the cash flow that will meet the requirements of those who will provide the company with exit financing from Chapter 11.
And, as you have also heard me say, every one of us … all key stakeholders in United must be held responsible and accountable for our actions, our decisions and the impact they have on our company.
As our business plan evolves, we continue the rigorous analysis of our cost structure, and we continue to benchmark our cost performance against our competitors and – in some cases – companies outside of our industry.
To ensure that we are well positioned to compete, we will pursue every cost reduction opportunity that does not impact safety or the quality experience of our customers. Among other things, this means that we must revisit areas where we had previously thought that we had already squeezed out all of the savings available to us.
Cost will always be an issue for United and always an issue for this industry, regardless of fuel price and other variables that often highlight the significance of cost.
As I said a moment ago, I have asked Pete McDonald to join me again today. As Pete and I have said previously, to remain competitive for the long haul, we need to maintain a relentless focus on continuous improvement and to do everything we can in costs and in revenue management to support the company.
Pete is going to give an update on the work that is currently underway on cost improvement, and he's also going to share his thoughts and perspective on the progress we are making.
[PETE] Thanks Glenn and good afternoon everyone.
I'm pleased to have the opportunity to talk with you again about the work that we have underway across the company. And, as Glenn said, give my perspective on how we are doing.
When I look at the progress of the last two years, and specifically the work that we are doing around cost improvement, I see it from a different perspective from Glenn and others that have more recently joined the company.
I've been with United for 35 years and over that time we have faced many challenges, and we have cut costs many times.
I've worked on the ramp, been in management, worked in San Francisco, in Denver, and in Los Angeles … and I have lived through as many cost-cutting initiatives as we have had downturns in the business.
The problem was that as soon as the business picked up, so did the costs. In the years before our bankruptcy filing, we typically looked at cost only in relationship to revenue. We never looked at cost as the base of our business that could reposition us and create a competitive advantage.
This time is very different. This isn't about improving profitability in the short term. It's about owning a commitment; it's about being held accountable, as Glenn said, for decisions that will take this company out of bankruptcy and onto a different competitive footing.
What we are doing today will give us some of the savings we need, but more importantly, they are changes for the long term. This is a big change for United.
So, as we focus on reducing costs, we are changing the attitude, and then the accountability and responsibility, for making continuous cost improvement as important as anything else we do, except safety.
Our division heads and their teams will be held accountable for delivering on the six year plans that will lock these savings into our forecasts. And, all our employees throughout the company will have responsibilities for the continuous improvements we must deliver.
We have made tremendous progress. We moved our cost structure from among the worst of our peers, to being one of the best cost structures among our peer group. When you take into account our significant cost competitive disadvantage of two years ago, this is an excellent achievement.
As we have restructured and made major strides, so have our competitors, including American Airlines, who are making comparable changes out of bankruptcy. Our competitors will continue to push at their costs, and we expect competition to become more intense going forward.
Glenn says being “even†with our major competitors is just table stakes. And he's right. We've got to do better in every part of this business to succeed for the long term.
As the bar is raised, we know we must reset and re-energize the cost improvement platform. That work has already begun. We have put in place the Business Improvement Initiative with the goal of maximizing cost performance by taking every available opportunity to reduce and contain costs.
Right now, we are getting input from front-line people in every division. We are benchmarking against competitors and other companies that can give us ideas. That work is identifying opportunities to save hundreds of millions of dollars in annual cost savings.
As I mentioned on the last call, one of the first areas we focused on is overhead here at Headquarters and across the company. We know that, in 1995, we were 13 percent more efficient than we are today. We intend to use that as a base line as we do the work to establish a cost that is sustainable and competitive. The other initiatives are:
* Call Center Excellence lead by Judy Bishop, which will deliver $60 million in annual savings.
* Lean Maintenance lead by Greg Hall and the United Services team that will deliver $200 million dollars in annual savings.
* Airport Ops Excellence lead by Larry De Shon -- $150 million annually.
* Fuel Consumption lead by Joe Burns and Flight Operations -- $50 million annually.
* Optimizing distribution costs lead by Scott Brandt and his Sales colleagues -- $120 million.
* United Express lead by Greg Kaldahl and Cindy Szadokierski -- $45 million dollars in annual savings.
The savings we expect from these initiatives are a good start toward reaching the cost structure we must have, but even with this intense focus on cost reduction, it isn't enough.
I know this is hard for all of us. Every one has made sacrifices. And the truth is … it will probably become even more difficult as we go forward.
Cost containment is critical to building a winning company. The good news is the work we are putting into cost containment and the way that we have changed our approach to long-term cost competitiveness will have a significant impact on our future sustainability.
I am heading out to Los Angeles for meetings with employees tomorrow and will be able to talk more about these and other issues with those of you who can attend.
Thanks Glenn.
[GLENN] Thank you Pete, and I do agree with you.
I do believe we are more receptive to change today. And as we become more receptive to change, such as you described, the more opportunities we're going to see at the company.
As we make changes and improvements, we're going to do it through accountability and responsibility. We're going to see the continuous improvement that will determine if we are to succeed or fail.
This is, after all, how great companies behave – they challenge assumptions and the conventional wisdom every day. And that's the opportunity we have at United – to become a great company.
As Pete said, he is headed to Los Angeles to meet with some of you as he did in San Francisco a short while ago. And, I would like to thank all of you who email me, write to me, stop me in the concourse, visit with me as I'm traveling … and share with me your concerns, criticisms and good, constructive thoughts and ideas. I would ask you to keep them coming, and I will reply to as many as I possibly can.
Until we have the opportunity to record a call again, keep your heads up, stay focused, and stay United.
Lost in Translation.....6000 More Jobs.....Makes You Just Sick..... :angry: