United Airlines appointed former President Barack Obama’s advisor Josh Earnest to lead its communications efforts. Since that time, United’s communications have gotten significantly more professional, and CEO Scott Kirby seems to have benefitted greatly with improved public appearance performances. United has taken industry-leading positions white plains ny limo service on handling the pandemic, and has led the industry on announcements of innovative forward-looking investments like supersonic transport and electric aircraft.
Living in the Washington, DC area and generally following politics, a lot of what United does looks like what happens in our government. By saying this, I mean intentionally using distraction to focus a narrative on a specific target while avoiding more difficult issues. This shiny object tactic can help to get an organization focused and investors excited. Just recently, the airline threatened to pull service from New York’s JFK airport unless they gain more regulatory access. United operates a large hub nearby at Newark airport, and JFK represents a tiny portion of the airline’s production. This effort to get more access to JFK after abandoning the airport in 2015 is the current shiny object. Airlines aren’t government, and underlying this approach are five serious issues that United should be thinking about but doesn’t talk a lot about.
Business travelers, even though traveling less often since the pandemic, value non-stop flights and frequency. When someone else is paying for the ticket, like a company, other service-related features become more important in the decision of which airline to choose. Delta Airlines effectively has no competition for business travelers from Atlanta, Minneapolis, Detroit, and increasingly at New York’s LaGuardia airport and in Seattle. That’s because, at each of these locations, they offer service to more cities and more often than any other competitor. Importantly, no competitor is even close at any of these locations either, though Alaska Airlines is trying to hold its own in Seattle. This local hub dominance, a word that lawyers hate to use, gives Delta a decided advantage over their major competitors. American has similar positions to Delta, though not reaching as many business customers as Delta, in Dallas, Washington’s National Airport, Charlotte, and Miami.
United has this position only at Houston’s Intercontinental airport. Their other major hub positions — Newark, Chicago, San Francisco, and Denver —each have significantly more competition than the hubs at Delta or American. Chicago is basically split between United and American, plus Southwest has a large operation at Midway airport. Denver is used as a hub by Frontier and Southwest, giving United competition on almost every destination served. Newark is the only major New York commercial airport without optical fiber slot controls, making it a place where low-cost carriers, including even Allegiant, keep adding fights there. The sum of this is that United has competitors for almost every one of its customers, something Delta and American don’t have to worry about as much. No shiny object will fix this.
Labor Animosity
United has a long history of acrimonious labor relations. People who say that strong unions come from weak management often use historical United as a prime example of this. To his credit, CEO Scott Kirby has said the right things and seems to realize that partnering with his employees is a good road map. But inertia is a tough thing, and many employees at airlines are geographically scattered, making communications even more challenged.
This rough history complicates a current period when pilots are hard to find, and wage pressure is affecting many roles at an airline. Labor, which typically represents 30%-35% of total costs, is likely to push to over 40% of costs. Airlines, including United, need to find ways to mitigate this while at the same time keeping the employment pool engaged and motivated. While every airline has these current labor issues, at United their history makes solving this even more challenging.
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