United and Continental Airlines: Dumb and Dumber

By Robert Mark on June 30th, 2008

As a marketing-communications guy, JD Power and Associates recent labeling of Continental Airlines as one of the best in the nation for overall customer satisfaction, as well as the Best U.S. Airline award CAL also grabbed from the Official Airline Guide crowd was pretty darned impressive. It’s the kind of brand recognition marketing people live for. And Continental has surely slugged its way through enough  bankruptcies to feel good about reaching this point in the aviation industry.united_continental_alliance_jetwhine_merger

And it is precisely because of Continental’s strong brand that I think that airline’s CEO Larry Kellner and the board of directors at the Houston-based airline must have lost their minds when they decided to hook up with a bottom-feeder airline like United, an airline JD Power ranks at the bottom of the heap too. united_continental_alliance_jetwhine_merger1

If you missed this piece of recent high-level airline strategy,  Continental plans to “cooperate extensively, [with United] linking their networks and services to create revenue opportunities, cost savings and other efficiencies.” Continental also withdrew from the Sky Team alliance ( KLM, Northwest, Delta, Aeroflot and a few more) to join the larger Star alliance with United and 19 other carriers (see reply below). A merger between the two carriers was ruled out a few months ago when Continental said, “No thanks,” to a United offer to marry up.

I’m trying to figure out how the folks at Continental missed all the heavy, truly ugly baggage they’re picking up from United in this deal and why no one seems concerned about the Continental brand being severely tarnished because of this new marketing alliance. If you’re going to join forces with someone, at least make it a brand people respect, which United isn’t. The Star alliance seems to be pretty healthy, but United, sorry …no.

United is the airline that in the same week left an Airbus full of paying passengers locked up on the ground for over six hours during a weather diversion from Chicago O’Hare to Chicago Gary Airport while at the same time opening a brand new Red Carpet Club at ORD to keep high revenue business passengers happy according to United’s chief customer officer Graham Atkinson. Of course, the really lovely part of airline flying that Atkinson is all too familiar with is that when an airplane is left sitting forgotten on some ramp somewhere like the Gary incident, the high-revenue passengers are just as late as the riff raff in back.

United’s CEO Glenn Tilton – a guy who almost from the day he was hired thought his job was to find a merger partner rather then to run an airline – was among the most surprised this year to learn that none of the airlines United tried to talk turkey with wanted anything to do with UAL. No matter how hard United management tries, success just seems to evade them. Maybe those darned flight attendants, pilots, mechanics, ramp and customer service people just need to work a little harder.

Perhaps it’s really because United management can’t seem to keep their eye on the ball. At least they had the good sense to end another major airline-marketing distraction – Ted – and make an attempt to get back to the basics of running an airline. I guess no one at the HQ realized that starting a new airline when you can’t run the one you have is pretty dumb. And of course there was the United Shuttle experiment that failed before Ted … and the failed Avolar foray into business aviation that again dragged United management away from their core business, perhaps one more reason United has had the worst employee relations imaginable for at least 25 years.

Good employee relations won’t solve every problem the airline industry faces surely, but there does seem to be a certain synergy to tens of thousands of dedicated employees working with you, rather than against the management team. It’s worked pretty well for Southwest Airlines so far.

I was taught in Marketing 101 that one of the easiest ways to be successful, is find a person or a company that is already achieving what you want and emulate them for starters. Perhaps the folks at United and Continental might want to check out the Southwest Airlines blog for a few pointers. After 25 year of success those folks in Dallas aren’t just lucky.

But maybe I shouldn’t be too hard on the Continental folks just yet.  It is still early in their dating relationship with United, so maybe they’re hoping a much better invite to the prom will come along. Things could change. At least for the sake of the United passengers and employees who still depend on UAL, we can always hope, because if United falls headlong into bankruptcy a second time, they’re probably not coming out.

Now of course I might have missed something completely here. But why would a good company link up with a loser … just for the money?

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12 Responses to “United and Continental Airlines: Dumb and Dumber”

  1. Evan Sparks Says:

    Since United isn’t doing well and “Star alliance seems to be pretty healthy,” perhaps Continental senses that it can become Star’s U.S. flagship carrier, while Star plans for its own viability by recruiting a much healthier airline should United go under.

  2. Ning Wang Says:

    CAL have two (major)things to gain in such agreement

    1. Access to UAUA’s East Asia network – arguably the most desirable piece

    2. A test drive for UAUA’s premium customers – the contrast in service quality will ensure CAL retain most of its premium customers and possibly grab UA’s premium customers down the road. Even better, to demonstrate that Kellner could manage a combined network better than UAUA’s management

  3. Robert Mark Says:

    I think both of you raised some important questions. But is Star healthier overall than One World or is it only in the sheer numbers of members?

    And come to think of it, how do they track the success of the alliances?

    What I also find interesting is that you both seem to be pointing at CAL jumping in to be ready to pick off the bits from a United carcass.

  4. Gary C Says:

    Check your facts, the fact that you said CO withdrew from OneWorld Alliance sheds doubt on the credibility of the entire article. CO was never a member of OneWorld, they were a member of SkyTeam! Because of the NW/DL merger and their involvement in SkyTeam, they were looking to change alliances. They were talking with AA, but never joined OneWorld!

  5. Robert Mark Says:

    You folks don’t miss anything. Gary is absolutely correct. I should have said Sky Team and not One World.

    The nice part about Web 2.0 is that errors are not always forever.

    Thanks for catching this.

  6. Jamie Says:

    People keep acting like this is a merger; it isn’t. Continental is America’s best legacy carrier. The company already has a bilateral partnership with Alaska Airlines, the only legacy carrier that IS of its caliber, and partnering with United is no more a drag on them than has been their SkyTeam partnership with Delta and Northwest.

    Star Alliance membership aligns Continental with some of the best premium carriers on Earth, including Singapore Airlines (always ranked #1). It also gives Continental’s customers access to extensive service to Australia (which SkyTeam doesn’t have). Linking up with United for codesharing doesn’t mean that Kellner’s team is going to abandon its strategic plan or start emulating United’s standards of customer service… it never emulated Delta or Northwest during its time in SkyTeam. This move is a good one for Continental that will help it stand out in a very competitive market.

  7. Ron Heimburger Says:

    Southwest just celebrated their 37th anniversary.

    They hire good people, train them well, focus them on the customers and their fellow employees, and treat them well (employee events, parties after weekend off-site training sessions, and decent stock options).

    And their management including senior management lead by example.

    They have also never furloughed employees or cut wages (with exception of the first two years when
    Braniff and American tried to use the Texas court system to run them out of Texas).

    Continental has emulated a number of these activities employee bonuses based on activities that retain customers (on-time performance, baggage issues) employee bonuses that drive down costs (perfect attendance, schedulecompletion, etc.) And Continental did turn around a very beat up and worn out employee group afterthe last bankruptcy in the mid 1990s.

    Interestingly enough many of the CAL senior flight crews – continue to use the Proud Bird and Pride in their in-flight announcements and customer discussions. (CAL used the advertising themes of
    Proud Bird with the Golden Tail and Service with Pride in the 1960s and 1970s.)

    And CAL senior management has agreed not to receive their salaries for the last 7 months of 2008 in conjunction with the upcoming flight and employee reductions..

    The UAL EXO crowd would never dream of that.

    Hopefully United will not drag CAL down.

    Take care.

  8. Robert Mark Says:

    Thanks for this Ron. Dragging CAL down is precisely what I would be worried about, unless, as a couple of the readers said earlier, CAL is strong enough to wait to pick up the UAL pieces.

    And wasn’t it Continental years ago that had the “We really move our tails for you,” commerical?

    Rob

  9. Ron Heimburger Says:

    The cancer is spread too far and wide among the UAL employees.

    And the asset base is also worn down much like the PanAm Far East assets that UAL purchased in the mid 1980s.

    I think that the smart thing to do would be to try to heavily code share in international markets to reduce flying.

    I thought that CAL could not get out of their current alliance until at least 9 months after the DAL/NWA deal is consummated likely alliance withdrawl time late 2009.

    Think of what the US airline ownership would be like without the current foreign investment restrictions.(Low market valuations cheap prices.)

    You should start a pool on who is next into bankruptcy.

    Mesa
    Pinncle
    US Air
    UAL
    DAL
    NWA
    AMR

  10. Tilting Says:

    I spent many years on the inside of UA and I think you are spot on with your commentary other than Avolar. It was a solid idea that never got its fair chance. The business traveler is moving in droves to this new class of service and the legacy carriers like UA have become nothing more than the Sears and Montgomery Ward of air transportation– getting squeezed from both ends and will likely suffer the same fate. Incidentally, the pilots supported the idea.

    Back to the main theme, as you pointed out the management team at CO is exponentially smarter and more cohesive than the executive team at UA. Much like Lufthansa has been doing for years CO will pick UA’s pockets in the codeshare. Once you standardize schedules, fares, frequent flyer programs and lounge access the only point of differentiation left is the onboard product and service. All the high end traffic will pick CO metal to fly on when they can because of the better product. UA will be left to collect the leftovers. In the end the economics depend on the pro-rate agreement but rest assured CO will outflank UA and pick up disproportionate value. The playbook already exists.

  11. Jamie Says:

    You’re probably right, Tilting. The message here? Give some serious thought to that CAL stock at $9.80 or whatever it’s trading at today, because the long-term prospects are pretty bright for America’s only legacy airline to still serve meals in Coach.

  12. Jeff Martin Says:

    I can’t wait for the this latest crop of UAL mismanagers to migrate on over to the FAA. It’s a shame this is the business the FAA chooses to emulate in their quest to “run like a businsess.”

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