Presentation of Strategy Audit Findings of United Airlines
Continuing my project on United Airlines I plan on working on the environmental scan. This starts with identifying the mission, values, and vision of the company. With an airline that serves in over 73 countries it is important that have a company mission that puts emphasis on diversity. At United they define diversity as the range of differences that make individuals unique, including ability, age, ethnicity, gender identification, race, sexual orientation and veteran’s status. They talk about inclusion is how they leverage these differences to form a genuine community and expand business opportunities. This is the beginning of the airlines mission statement starting 2012 after the Continental United merger. Their current mission is to create an inclusive work environment, characterized by dignity and respect, which empowers every employee to serve the global marketplace and contribute to our success. Specifically, Diversity and Inclusion is managed purposefully and strategically to enable United Airlines to operate more productively and efficiently. (United Airlines, 2011)
The United airlines vision is also very similar to their mission stating “through our Diversity and Inclusion strategy, we find innovative and effective solutions to engage employees from diverse backgrounds and cultures in taking our flyer-friendly service around the globe. We are driving to become recognized as an airline where:”
Leaders embrace Diversity and Inclusion as a business advantage
Employees feel highly valued, are actively engaged and are treated with dignity and respect
Customers value our inclusive approach to delivering flyer-friendly service
This was all a part of their “fly the friendly skies” campaign used the try and turn the airline around since 2010. At that point they were rated one of the lowest in customer service from any U.S. carrier which in turn was 60th in the world. In 2011 the chairmen of the airline took an old slogan from the 60 and reinvented it saying "We had to reinvent it. Today's air travelers require more, so we redefined the tagline through the lens of what customers nowadays are expecting." (Morrison, 2013)
These missions and visions stem off the companies values becoming a valued global citizen. Every day United Airlines connects friends and family as well as colleges and coworkers from all over the world. The vision that is shared by everyone at United is that they strive to meet the responsibilities by taking an active role as global citizens. They do this by having programs in place that help protect the environment, celebrate diversity, protect our human rights and lead the industry safe, clean and reliable service. By doing so it shows they are dedicated moving forward. This also plays a big part in their strategies such as the “fly the friendly skies” campaign.
As mentioned in previous papers, United Airlines is trying to lead the industry in customer satisfaction, technology, and change the way people view an airline experience. The strategy is at its simplest is to take the stress out of air travel. Although that sounds easy, there are many moving parts that go into an airline. Through interviews I have began to understand that United Airlines is trying to attract the middle class, as revenue is generated by the first and business classes. The value in United is they provide the technology and comfort of a private jet at a significantly lower cost to the company of customer. With constraint innovation and continuous improvement, this has given United Airlines the competitive advantage.
The culture of an airline maybe very different then other organization others may have entered. This is because there are many services that your taxes pay for that most don’t even know about. For example, the recent plane disappearance or crashes from non U.S. carriers. This would never happen in the U.S. due to its aviation culture. The past as dictated many rules and regulation the govern every plane, every passenger and every crew member in the United States regardless of who you work for. These are enforced by the Federal Aviation Administration that has made the U.S. the safest place to fly on earth. Now when it comes to airlines the FAA require documentation on every part, person, and rule of an airline which can cause problems in efficiency. Luckily for United, their culture allows the airline to prevent these violations by having a whole team of FAA inspectors on staff which although costly, allows United to avoid roadblocks before they occur. (United Sates, 2016)
As for the value chain, this has been developed over the course of this class. It is obvious by now that United Airlines has to have a strong value chain in order to provide exceptional support for their customers. We have identified what makes a value chain as well as identifying the primary and supporting activities that make United’s service what it is today. Most of use know how air travel works, but some supporting roles that some don’t mention is the use of new aged technology. Starting and the top an aviation route is predicted to generate the most profit. For example, we can predict the most people don’t want to go to Alaska during their dark season or we can assume people want to go south for spring break. These routes are approved by the FAA then imputed in a program that generates a flight plan for the pilots and crew. This plan has to be created for every flight, which is regulated by the FAA. (Bagbee, 2016)This program allows the airline to choice thousands of options which will allow maximum efficiency. This adds direct value to the customer. Not this can be a disadvantage, because other airlines that have out dated technology or neglect to have the right systems in place can lose money on every flight.
So in this aspect of thing to find the advantages, disadvantages, opportunities and treats we will use a SWOT analysis. SWOT analysis allows a company like United examines which areas of the company need improvement, and which give them a competitive advantage over others. This analysis is similar to other airlines, but tailored to United. Starting with the strengths of United, there are a few to choose from. Probably one of the more obvious strengths is there size. They now have the largest fleet in the U.S. and which allows them to have access to more routes. This plays in to their other strength of asset leverage. This allows United Airlines to use their best operational assets to expand their business and improve their market share. By using assets they have they can compete with low cost carriers. Plus emphasis on their supply chain allows United to get the right product from their suppliers as well as deliver a timely product to their customers. Lastly, we can add loyalty. Customer loyalty is the corner stone of any airline. With United Airlines, they provide loyalty cards and the long standing reputation with business allow a steady flow of customers.
Loyalty has slipped a bit as the 2010 merger will act as a current weakness. Since the merger United has not been the same. When combining hundreds of people in to one larger company, they will have their problems and United as had their fair share. With the laps in customer service and efficient crew, and fleet scheduling United’s reputation suffered. Although it wasn’t enough the bankrupt the company, it was enough to land them 8th out of 8 in overall satisfaction in 2011. This is followed by the fact the United’s other weakness is having a high debt burden. Due to the low margins of profit airlines have to work with, if more bad business mistakes are made then it could lead to bankruptcy as it did in 2009. United Airlines also has a weak cost structure. This means United Airline’s cost are high in comparison to their competitors like Spirit and Frontier. This may have a long term negative effect on the business.
Although costly, this has provided great opportunity for United. For example, Spirit and Frontier can only operate in the American continent, where United has a larger and more sophisticated fleet allowing passengers to choose international destinations. With a large also comes the opportunity to exchange old technology for new. When a plane gets old, it don’t typically go to the junk yard, rather sold to another airline. This allows debt/equity on old aircraft to be exchanged for new technology like the 787’s previously discussed. This technology doesn’t just have to deal with aircrafts though. As tech continues to innovate, United has further captured an online market. This has allowed services to be reached by everyone around the world. This is costly compared to some, but you can argue that innovation is what gives United its reputation that it has today, being able to have every need met while comfortably flying 35,000 feel in the air.
Probably one of the biggest threats to an airline is the economy. As I stated before, the airlines are the first to show recession and the last to come out of it. This is why United and Continental merged in 2010. It was because the market crash in 2009. They weren’t the only ones as American merged with U.S. Airways, Delta with Northwest, Southwest with AirTran and Alaskan Airlines with Virgin America. This is happening because of a bad economy. Plus United has to think about volatile costs. This means if tomorrow a barrel of oil shoots up to $200 then United has to have a plan for this occurrence. Right now, United is having difficulty competing with international competitors. Due to other country regulations and infrastructure it has become unprofitable for United to fly certain routes due to airspace taxes. (Wiki Wealth Staff, 2014)
United has to focus on a balanced scorecard as well as the SWOT analysis. This will allow United to properly measure if there is progression towards a common vision. A balanced scorecard will represent organizational performance on four primary groups of measure; Financial, Customer, Learning and growth, and Internal Process. The main focus should be the internal process. Although the merger has caused problems from 2010 United has posted 4th quarter profits since then. Working for the company and information from interviews, the internal process is what United should focus on the most.
There is still drama at every base the United operates at because of the merger. When the two airlines, United and Continental, when bankrupt in 2009 all of the employees that have tirelessly worked for ether company for many years all lost their pensions. This was a huge hit to employee loyalty as people that have built up hundreds of thousands of dollars working for the company now have to figure out other plans for retirement. This is one of the main reasons moral was so low which reflected directly with low customer service. This was also a huge problem because the airlines are seniority based. This means employees that use to be very high on the list now are lowered due to the combination of employees due to the merger. This makes everything much worse.
Five years have passed since the merger and new United has provided a very bold strategy to bring in new employees. They have developed early out programs which allow older employees to retire early with a generous severance. This eased the tension a bit but more needs to be done. I suggest a seniority upgrade program which allows people that were most affected by the merger to be grated benefits not allowed to other new employees. These benefits can be anything from added buddy passes to increased discounts travel packages for flights and hotels for them and their families. This would cost the airline very little as buddy passes only allow standby or “buddies of employees” the opportunity to travel anywhere if the plane is not full. Also this strategy will allow employees that retire with United the highest seniority level to travel free with direct family if space allows. This would encourage more employees to be productive and not let poor moral get in the way of corporate goals. (Bennett, 2016)
Furthering the internal strategy, United needs to implement a better performance based incentive. Just last year, they had a great idea of giving away new cars. The program allowed 2 employees from each department from all the bases a chance to win a new car with perfect yearly attendance. The results have yet to be recorded to how new the program is but assumption is more employees are not skipping work and performing better. This will help cut the drama of employee bias from old Continental and United to work together for a new United Airlines. This can be supported by the financials in 2015. New employees meant a change in moral with leads to progression for the airline. This will bring a brighter future and a friendlier United.
Bagbee, C. (2016, March 23). United Operations as of 2016. (E. Speechley, Interviewer)
Bennett, D. (2016, Jauary 14). United's Quest to be less Aweful. Retrieved April 2016, from Bloomberg: http://www.bloomberg.com/features/2016-united-airlines-struggles/
Morrison, M. (2013, Swptember 20). Watch the Spot: United Resurrects 'Fly the Friendly Skies'. Retrieved April 2016, from Ad Age: http://adage.com/article/cmo-strategy/united-resurrects-fly-friendly-skies/244277/
United Airlines. (2011, May). Diversity and inclusion. Retrieved April 2016, from United.com: https://www.united.com/web/en-US/content/company/globalcitizenship/diversity.aspx
United Sates. (2016, April). Federal Aviation Administration. Retrieved April 2016, from Federal Aviation Administration: http://www.faa.gov/
Wiki Wealth Staff. (2014, March). United airlines SWOT Analysis. Retrieved April 2016, from Wiki Wealth: http://www.wikiwealth.com/swot-analysis:united-airlines
