Smisek was not the problem
 

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September 12, 2015
JOE CAHILL ON BUSINESS
This is not the change United Airlines needs
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JOE CAHILL ON BUSINESS

United Airlines Transportation Airlines Jeff Smisek Joe Cahill on Business Opinion & Columnists Oscar Munoz
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What United Continental Holdings needs is a high-level housecleaning that brings fresh perspective and superior talent to its executive suite. What it's getting is a new CEO with no airline operating experience but long ties to incumbent managers who bungled a merger that should have created the world's greatest airline.

Railroad executive Oscar Munoz was a director of Continental Airlines for six years before it merged with United in 2010. He was part of the board that handed control to a group of former Continental managers led by Jeffery Smisek, who resigned Sept. 8 under a cloud of suspicion stemming from investigations into the company's dealings with New Jersey airport officials.

Smisek's sudden ejection was only the latest in a string of fiascoes overseen by his management team. IT snafus, woeful on-time performance, labor acrimony and dismal customer service scores have plagued Chicago-based United Continental since the merger.

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Financial results have been equally unimpressive. Although plunging oil prices have inflated United's profits, its profit margins are subpar and its revenue is falling while competitors' rise.

All in all, United has fallen far short of the promise of its merger. With an enviable route system and deep base of lucrative business customers, the carrier was expected to dominate rivals like Delta and American. Instead, it's playing catch-up, and observers blame management. “This was a merger made in heaven that was basically destroyed,” says Vicki Bryan, a debt analyst who follows airlines at bond research firm Gimme Credit. “And that comes from the top.”

United declines to comment.

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Ironically, many believed Continental's management talent all but ensured the merger would come together smoothly. At the time, Continental was a Wall Street darling. United, meanwhile, had a long history of operational and financial underperformance.

Who better to run the combined carrier than the self-assured Texans who turned around Continental? Acting on that premise, directors gave the reins to Smisek, who quickly installed top lieutenants from Continental in senior posts. United veterans disappeared from upper management.

Apparently nobody gave much thought to the fact that Continental was smaller and less complex than United, let alone the combined carrier. Smisek's team soon proved unequal to the task of merging and running an airline so large.

A 2012 computer integration failed miserably, causing flight cancellations and stranding customers. Using Continental's revenue management system, the company cut prices unnecessarily, leaving millions of dollars on the table. Union negotiations dragged on, engendering worker resentment that spoils customer relations. Chronically late flights alienated the business travelers the new United was built to serve.

Operational and technical glitches persist. United's website crashed on the day Smisek resigned, and a malfunctioning computer router grounded flights in July.

Through it all, Smisek stuck with his Continental crew. Today, four of the six top executives listed with Munoz on the company website hail from Continental.

Given their repeated failures, you might have expected United to look outside the company for Smisek's replacement. But a board dominated by former Continental directors—including newly named Chairman Henry Meyer—chose one of its own.

Some suggest that Munoz's experience in a transportation industry—he had been president and chief operating officer of Jacksonville, Fla.-based CSX—prepares him for the job. I don't buy it. The differences between airlines and freight railroads vastly outweigh the similarities.

To fix United, Munoz must surround himself with top-notch airline executives capable of running the world's second-largest carrier. He won't find them down the hall from his new office.

Doesn't paint a rosy picture going forward. Hope management takes a good hard look at what needs to change

This is what I thought when I read who took over...another serial CEO.

Maybe not THE problem, but certainly the MAIN problem.

Cahill ignores or maybe didn't know that most of the former Continental management ( wall street darlings) left when the merger was agreed to ( some to Delta), with the leftovers running the show- which also included UAL's Pete McDonald and his toadies. Some of those remain today.

The assertion that Continental was "less complex" ( read less top heavy) was by design and part of the success story there.

The colossal IT failures began shortly after the CAL IT dept was displaced to Chicago. It was not a matter of IT scaling up, but new ( UAL IT management)

No one knows what was being said in the boardroom prior to the merger, and it may well be that Munoz was a dissenter from the start who is now saying, "I told ya so",, along with the CAL management that left when they learned of the merger proposal and Larry Kellner's refusal to participate.

Less complex in Planes, Employees, Route structure etc etc. UAL pre 9/11 was larger than the now combined company. The IT network at sUAL had already proven capable whereas the sCAL system was stretched beyond it's limits. Not meant as a slam to sCAL employees, but I have to agree that much of the senior management had bitten off more than they could chew. It's a moot point now. We're all UCH. I'm ready for less excuses from management and more doing.

Lets not forget how much LUAL had shrunk. Massive losses of Capitol, furloughed thousands. No thanks to that!!

captain Sleeves the unity man! Nice. Class act all the way. Can't you guys drop the crap?

Yes we had shrunk post 9/11. Went through a nasty BK and emerged more financially sound. Just like CAL did twice. What's your point? The author is making some true statements that the management team was in over their heads in dealing with a combined company more than twice the size that they'd ever operated and were not prepared to handle it.

This place as we all know needs a senior management team who possess the capability and desire to operate a major airline as a customer service entity. Secondly, the management team, middle and upper need a paradigm shift in how they interact with and motivate employees. Third, the silos need to come down.

A perfect example, why are the flight attendants afraid to tell the gate "not" to board when the aircraft is 85+° and the pilot's aren't onboard?