United Airlines: When Great Expectations Go Awry

Managing expectations.
It sounds like such a simple thing to do.
But in practice, it is hard for many people and/or companies to do.
Why? Ego. The desire to be the best, the first, the biggest, the whatever.
Instead of underpromising and overdelivering, these individuals or companies do just the opposite. They promise everything. They are going to be the biggest, the greatest, the best. Everything's coming up roses. Strike up the band!
Nothing wrong with that if you can then ...do it.
But these same companies are also the ones that tend to minimize potential problems. They tend to overlook the details. They think they are smarter than everyone else. Sometimes they even punish those who have the guts to point out where the plans with suspect foundations are flawed.
Then, the inevitable happens. The companies disappoint. Or delay. Or change the rules of the game so that their failures don't look as bad as they really are. Or they blame third parties.
But after awhile, what you have is not what was promised.
The flamboyant Ben Baldanza, CEO of Spirit, got a lesson in managing expectations on Wall Street last fall. His overexuberant guidance and the airline's subsequent less-than-stellar performance led to a sharp sell-off in shares of its stock.
We've noticed that since then Ben has been much more careful with his guidance comments on the earnings calls.
This particular case of "not managing expectations effectively" was easy to see, and relatively easy to remedy.
But in the case of a company making ongoing representations and promises that instill perceptions -- and expectations -- in its customers and its employees, the negative effect of "overselling" and underperformance is not nearly as easy to identify.
It's one of those squishy touchy-feely things that bean counters either despise or ignore, because it can't be quantified. While customer surveys can be trotted out and results tallied, just as we saw play out over the last 15 or so years at American Airlines, the real damage done by a management team that overpromises and underdelivers can take much longer to surface.
It's a slow rot. Not a loud explosive upheaval.

United Airlines

Thursday, United Airlines is scheduled to report its 2Q13 results.
Almost three years out, and how has the airline done in terms of managing expectations of what we could and should expect from the merger?
I'd give United a C-.
That is an improvement over what it would have received this time last year. But it's not good enough.
Based on its own latest internal customer satisfaction numbers, the airline is coming in under plan. Operationally, it is holding its own with its peers, although daily checks of the A+14 performance show that its regional operations are dragging the airline down. And yes, I've considered the effect the Asiana crash had on SFO operations earlier this month.
All in all -- the airline has improved operationally over last year. We assumed that would be the case. But in order to catch up to, and then keep up with, its peers, it's got more work to do.
However, I've come to the conclusion that until the airline announces an RFP for a new PSS, I'm going to remain rather skeptical that we're going to see the level of revenue performance that we need to see. I'm talking true revenue improvement -- not just revenue improvement as a result of decreased capacity.
Why do I say this? Several reasons.
One, I don't believe the airline currently has the flight firming add-ons that maximized revenues which the old cobbled-together Apollo system provided. The functionality still has not returned. There are also other processes the current system simply can't do.
I'm not an IT geek. But I know a number of people whom I respect tremendously who have worked on either the SHARES platform or Sabre or Open Skies. So again, when I hear United CEO Jeff Smisek talk about the "strength" of the SHARES platform, I wonder if he has reached out beyond his own IT department and discussed these issues with knowledgeable IT people -- people who have worked as developers on different systems. Including the now much-maligned Apollo.
My sense is no.
If he had, I think the airline would be actively moving towards an RFP.
Second, the airline's interfaces with its travel agent and TMC customers are still way too difficult. I'd like to say everyone I reached out to in the last two weeks sent me back glowing reports of vastly improved experiences. But that did not happen. One of the worst pieces of feedback came from one travel agent who told me that the reason his client's Mileage Plus miles had not been redeposited into the client's account for more than two weeks was because -- all of the MP adjustments were being done by hand. That information came directly from someone at United. This same person did tell the travel agent that his request to redeposit was "in the queue" though.
Nice.
These are the kinds of things that cost an airline money -- and three years out, they shouldn't still be hanging around.
Third, I found it most telling that early last year, before United began to endure the most serious after-effects of its migration to the SHARES platform, I asked three different execs at US Airways which platform the airline would use, if a merger with American came to pass. Without missing a beat, the answer was ...Sabre.
They had good reasons for why this was the choice. I won't go into them here. But we all have heard at least one public reason given by no less than US Airways CEO Doug Parker, who has said that the airline reached out and asked Delta Air Lines CEO Richard Anderson for advice on the potential merger. One of his bits of wisdom -- go with the systems of the bigger airline. Then take a second look.
I don't think that the current management team at United looked much past Houston when it was making its decisions on what IT platform it was going to go with.
Because, after all, the Continental Airlines management team was going to take over the situation in Chicago and transform the airline into the ....greatest, largest, most spectacular airline in the world.
While management has reined in the ego, along with the expectations, over the last year, I think there was damage done before the reins were pulled. Corporate customers were lost, employees were disillusioned and ****ed off. Schedules didn't work, planes were broken, and yet it was a long time before the company, and particulary CEO Jeff Smisek, showed any indication publicly of having concluded that perhaps an overabundance of hubris was not a good thing.
Instead of acknowledging problems, and reassuring both customers and employees, the company seemed to be rather obsessed with a "Gamechanger" aircraft, pegging its public persona to an aircraft that was unproven and untested. And we all know the rest of this story.
We assume Boeing will eventually work the bugs out of the 787. But we're not there yet.
As I said in an email to someone at United this week, "Don't hitch your company's expectations wagon to a star that has not yet proven itself to be bright and shiny."
Notice I did not say "fiery."
And no, a network does not an airline make. That's just one part. Unfortunately, the airline over the last two years has tended to hold out the "network" as one of the main reasons it was going to be fabulous, great, wonderful, whatever.
I would kindly suggest that the "power of the network" be put on the back burner. It will always be there. It's always been there. But it means little if the operation supporting that network is not operating anywhere near its best. Or if the employee culture is bifurcated and disillusioned. Or if the IT system is inadequate.
On a positive note, I do see signs that the company realizes it set expectations too high. On several fronts.
What I'd like to see more of are signs that the airline understands and is addressing its cultural problems (and no, I'm not talking about labor issues). I'm talking about the continued "split" between the two airline employee groups. The ex-Cons seem to be more disillusioned than ever. Again -- a matter of mis-managed expectations.
I'd like to see technological integration with United's corporate travel partners improved. The airline needs to continue upgrading its products, and it needs to continue improving its operations.
The upshot? United is an enigma now. I'm not sure what the expectations are, or should be, at this point. I don't feel particularly bullish about the airline, nor am I overly pessimistic. It seems to be stuck in neutral while it tries to figure out how to get to where it wants to be.
But you know -- that's okay. This is probably where the airline should have been all along. Instead of promising the earth, the moon, and the stars, the airline should have ditched the ego, and taken the time to do the work that needed to be done. Quietly. Diligently. It should have managed the expectations of its various constituencies much more carefully.
We watched Delta Air Lines do this for several years.They were quiet. Very quiet. Didn't promise anything until they knew they could deliver.
Over the last few months, I've heard the executives at US Airways repeat over and over and over to both their own employees and to those at American something that goes essentially like this: This is going to take time. It's going to be maddening. It's going to be frustrating. It's going to be difficult. We've got a ton of work to do. But if we work together with a single purpose in mind, we'll be successful. But we are going to need all of you to be patient.
They are continually trying to manage expectations -- but in a realistic fashion. They understand that managing expectations effectively is crucial to keeping employees engaged in the process.
When I look at United today, I am reminded of the line from "The Way We Were" in which Barbra Streisand says of Robert Redford's character, Hubbell Gardner, "Everything came too easily to him."
I think that was the problem here. The sheer difficulty and complexity that accompanies a merger in this industry was underestimated. Life in Houston had come...too easily.
Or to put it another way, United went straight to Broadway thinking it didn't need those rehearsals in Des Moines.
I await to see if we get further tweaks in the script.