tumbleweed
Member
- Sep 5, 2002
- 22
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This is a reprint from another site that might be worth the read...
Here is the text of Tilton's speech to the Wings Club of New York
Text of Tilton's Speech:
Good afternoon.
It is a pleasure to be here, and I very much appreciate the kind introduction
I have to acknowledge that my introduction to this industry, some twenty months ago, was not as encouraging. Leaving that aside, I believed then, and I know today, that there is tremendous potential to be unlocked at United.
United has superb assets, superb assets that were not being managed effectively;
United is a great brand, a great brand that had been neglected;
United has loyal customers, customers who were not being offered a compelling or consistent value proposition;
And, just as importantly, United has dedicated employees, employees who were struggling without clear direction.
But United had been directly and greatly harmed by the attacks of September 11, and had significant business issues to address before we could begin to realize our potential.
Our issues included:
A cost structure that was highly uncompetitive;
A balance sheet that was severely over-leveraged;
Lack of alignment between management, supervisors and frontline employees;
Limited scope, productivity and portfolio authority;
Excess capacity;
An impossible corporate governance structure; and
Leadership that lacked credibility… 4 CEOs in 3 years; 7 CEOs in 15 years.
All of this combined to make United a hugely challenged company.
Today, I want to share with you what the people of United have done to restructure our company to meet these challenges.
United’s Restructuring
We knew, twenty months ago, that United was peering into the abyss. We had to immediately bring a new discipline to our thinking and to our work... good, fact based, analytical work would be required if we were to pull back from the specter of failure and the risk of liquidation.
We segmented the work on two distinct tracks:
The first track….all the work associated with restructuring in bankruptcy; and,
The second track, running our operations and our business at a higher level of employee engagement and performance.
The cardinal rules in our restructuring are straightforward:
Do it well. Take the time. Take full advantage of every tool of bankruptcy – that is what Chapter 11 is designed for.
We want to do this once. We want to do it right – and never come back.
As everyone in this rooms knows, and as Bob Crandall recently said, the challenge of this industry is costs, costs, costs. We have brought our costs down from among the highest in our peer group to among the most competitive.
Labor costs will continue to dominate concerns about viability across the industry… Our new, consensual six-year labor agreements deliver $2.5 billion in annual savings, with wage growth average just over one percent with no snap-back or wage re-openers.
At United, on another front, through work rule and scope changes in our employee agreements, we now have the flexibility we need to be responsive to market challenges or opportunities.
To be responsive in this rapidly changing marketplace, we now have unlimited code share authority. And we can deploy regional jets wherever it makes sense for our business and our customers.
It is the full participation of our employees and our union leadership that is driving the pace and scale of these changes.
Because we preserved the options made possible by our unparalleled network, we have been able to make smart decisions about which markets to exit – and which ones to add, such as recently announced expanded service to China, Vietnam and other fast-growing destinations.
Our unit revenue performance has improved. We have used a combination of route and capacity changes; aggressive marketing and sales initiatives; restructured business fares; and better inventory management. The result: our year-over-year unit revenue improvement leads the industry.
The significance of this challenge is often overlooked. United has now been rechartered and has a conventional and transparent governance structure. Board committees have gone from ten to four and they are independent. Oversight is focused on financial return and the interests of all the company’s stakeholders.
As we work through our restructuring, as I said earlier, the second track - running a good airline for our customers - is critical.
Our customers do not want, nor should they be, part of our restructuring. They expect that in today’s competitive environment we should be doing more to earn and retain their loyalty… not less.
We will continue to work on providing consistent, high-quality customer service. We have more to do, but we are seeing good solid results.
Last month, United's load factors were the highest for any April in the company's history. High load factors often lead to delays and frustrated customers. But, in fact, we achieved our best-ever customer satisfaction ratings.
Last year was the best on-time performance in United’s history, and last month was our best ever. In 2002-2003, we led network carriers in on-time arrival :14. Productivity at United is the best ever.
We launched Ted, our new low-fare carrier, in February and customer response has been excellent. Our research shows that 82 percent of Ted customers would choose Ted for a future trip, and 76 percent would recommend Ted to a friend. Load factors for Ted were a remarkable 89% in March.
We do not want to be all things to all people – but we will invest in what our customers say they value most and where we see the business potential for the future.
Employee Commitment/Culture Change
We are aligned in moving this company forward, but it did not happen over night. We have gone through wrenching change, and we know change is continuous. We know that we are going to have to compete in a much different way in a difficult and dynamic marketplace.
What I know is that we are a vastly different company than we were two years ago. A year ago, we were burning through millions of dollars of cash every day.
Today, we are executing against a solid business plan that is delivering results, and we’ve created a strong foundation to build upon.
Our unit revenue was up 14% in the first quarter, while our unit cost, excluding fuel, was down 14%... both improvements far outpacing the industry. We dramatically reduced our loss in the first quarter and expect to record an operating profit in one of the next two quarters.
Were it not for record high fuel prices, I would be able to stand here and say with some certainty that we would be profitable this quarter.
Validation of the Work
Moving forward on these two tracks as I have described them has been challenging. We know first hand why companies try at almost any cost to avoid Chapter 11. It is complex, it drains resources, and people from outside the company get intimately involved in your business.
All of our constituent groups, including our banks, JP Morgan and Citigroup, know every aspect of our plan and performance. It subjects the work to an intense level of scrutiny that only comes in bankruptcy – and has not been entirely a bad thing for United.
Industry issues and competitive environment
In the face of our industry’s complexities, there is a predisposition to oversimplify. Such as, the widely held assumption that low-cost carriers will inherit the skies, and that the network model is obsolete.
Point-to-point carriers have a different cost structure. And they do deliver a specific service and value to their customers.
But they can’t fly you from Charlottesville to Beijing. They do not have the connectivity or serve the range of communities United reaches, through our mainline, United Express, Ted, and our Star Alliance partners.
It is clear to me that the future will include both network carriers and low cost operators. But we think the network model is the right model for United.
We also believe it is all about execution against that model. And that’s what we have been about at United – restructuring our business to tap into the inherent strengths of our global network.
Although some are better positioned than others, no single network carrier or LCC is guaranteed survival. The company that does the best work wins.
Conclusion – United’s Future
We will be a company with a relentless focus on costs, critical in this continuing environment of uncertainty when we are confronted with challenges such as “a terror premium in the price of fuelâ€
Through this work, we are unlocking the potential of United.
We are beginning to rebuild our brand.
We are managing our assets and reengaging with our loyal customers in a way that will differentiate us in the market place.
And our motivated employees are fully aligned with the direction in which we are headed.
But United is stronger for this experience.
It’s time for United to fly.
Thank you very much.
Here is the text of Tilton's speech to the Wings Club of New York
Text of Tilton's Speech:
Good afternoon.
It is a pleasure to be here, and I very much appreciate the kind introduction
I have to acknowledge that my introduction to this industry, some twenty months ago, was not as encouraging. Leaving that aside, I believed then, and I know today, that there is tremendous potential to be unlocked at United.
United has superb assets, superb assets that were not being managed effectively;
United is a great brand, a great brand that had been neglected;
United has loyal customers, customers who were not being offered a compelling or consistent value proposition;
And, just as importantly, United has dedicated employees, employees who were struggling without clear direction.
But United had been directly and greatly harmed by the attacks of September 11, and had significant business issues to address before we could begin to realize our potential.
Our issues included:
A cost structure that was highly uncompetitive;
A balance sheet that was severely over-leveraged;
Lack of alignment between management, supervisors and frontline employees;
Limited scope, productivity and portfolio authority;
Excess capacity;
An impossible corporate governance structure; and
Leadership that lacked credibility… 4 CEOs in 3 years; 7 CEOs in 15 years.
All of this combined to make United a hugely challenged company.
Today, I want to share with you what the people of United have done to restructure our company to meet these challenges.
United’s Restructuring
We knew, twenty months ago, that United was peering into the abyss. We had to immediately bring a new discipline to our thinking and to our work... good, fact based, analytical work would be required if we were to pull back from the specter of failure and the risk of liquidation.
We segmented the work on two distinct tracks:
The first track….all the work associated with restructuring in bankruptcy; and,
The second track, running our operations and our business at a higher level of employee engagement and performance.
The cardinal rules in our restructuring are straightforward:
Do it well. Take the time. Take full advantage of every tool of bankruptcy – that is what Chapter 11 is designed for.
We want to do this once. We want to do it right – and never come back.
As everyone in this rooms knows, and as Bob Crandall recently said, the challenge of this industry is costs, costs, costs. We have brought our costs down from among the highest in our peer group to among the most competitive.
Labor costs will continue to dominate concerns about viability across the industry… Our new, consensual six-year labor agreements deliver $2.5 billion in annual savings, with wage growth average just over one percent with no snap-back or wage re-openers.
At United, on another front, through work rule and scope changes in our employee agreements, we now have the flexibility we need to be responsive to market challenges or opportunities.
To be responsive in this rapidly changing marketplace, we now have unlimited code share authority. And we can deploy regional jets wherever it makes sense for our business and our customers.
It is the full participation of our employees and our union leadership that is driving the pace and scale of these changes.
Because we preserved the options made possible by our unparalleled network, we have been able to make smart decisions about which markets to exit – and which ones to add, such as recently announced expanded service to China, Vietnam and other fast-growing destinations.
Our unit revenue performance has improved. We have used a combination of route and capacity changes; aggressive marketing and sales initiatives; restructured business fares; and better inventory management. The result: our year-over-year unit revenue improvement leads the industry.
The significance of this challenge is often overlooked. United has now been rechartered and has a conventional and transparent governance structure. Board committees have gone from ten to four and they are independent. Oversight is focused on financial return and the interests of all the company’s stakeholders.
As we work through our restructuring, as I said earlier, the second track - running a good airline for our customers - is critical.
Our customers do not want, nor should they be, part of our restructuring. They expect that in today’s competitive environment we should be doing more to earn and retain their loyalty… not less.
We will continue to work on providing consistent, high-quality customer service. We have more to do, but we are seeing good solid results.
Last month, United's load factors were the highest for any April in the company's history. High load factors often lead to delays and frustrated customers. But, in fact, we achieved our best-ever customer satisfaction ratings.
Last year was the best on-time performance in United’s history, and last month was our best ever. In 2002-2003, we led network carriers in on-time arrival :14. Productivity at United is the best ever.
We launched Ted, our new low-fare carrier, in February and customer response has been excellent. Our research shows that 82 percent of Ted customers would choose Ted for a future trip, and 76 percent would recommend Ted to a friend. Load factors for Ted were a remarkable 89% in March.
We do not want to be all things to all people – but we will invest in what our customers say they value most and where we see the business potential for the future.
Employee Commitment/Culture Change
We are aligned in moving this company forward, but it did not happen over night. We have gone through wrenching change, and we know change is continuous. We know that we are going to have to compete in a much different way in a difficult and dynamic marketplace.
What I know is that we are a vastly different company than we were two years ago. A year ago, we were burning through millions of dollars of cash every day.
Today, we are executing against a solid business plan that is delivering results, and we’ve created a strong foundation to build upon.
Our unit revenue was up 14% in the first quarter, while our unit cost, excluding fuel, was down 14%... both improvements far outpacing the industry. We dramatically reduced our loss in the first quarter and expect to record an operating profit in one of the next two quarters.
Were it not for record high fuel prices, I would be able to stand here and say with some certainty that we would be profitable this quarter.
Validation of the Work
Moving forward on these two tracks as I have described them has been challenging. We know first hand why companies try at almost any cost to avoid Chapter 11. It is complex, it drains resources, and people from outside the company get intimately involved in your business.
All of our constituent groups, including our banks, JP Morgan and Citigroup, know every aspect of our plan and performance. It subjects the work to an intense level of scrutiny that only comes in bankruptcy – and has not been entirely a bad thing for United.
Industry issues and competitive environment
In the face of our industry’s complexities, there is a predisposition to oversimplify. Such as, the widely held assumption that low-cost carriers will inherit the skies, and that the network model is obsolete.
Point-to-point carriers have a different cost structure. And they do deliver a specific service and value to their customers.
But they can’t fly you from Charlottesville to Beijing. They do not have the connectivity or serve the range of communities United reaches, through our mainline, United Express, Ted, and our Star Alliance partners.
It is clear to me that the future will include both network carriers and low cost operators. But we think the network model is the right model for United.
We also believe it is all about execution against that model. And that’s what we have been about at United – restructuring our business to tap into the inherent strengths of our global network.
Although some are better positioned than others, no single network carrier or LCC is guaranteed survival. The company that does the best work wins.
Conclusion – United’s Future
We will be a company with a relentless focus on costs, critical in this continuing environment of uncertainty when we are confronted with challenges such as “a terror premium in the price of fuelâ€
Through this work, we are unlocking the potential of United.
We are beginning to rebuild our brand.
We are managing our assets and reengaging with our loyal customers in a way that will differentiate us in the market place.
And our motivated employees are fully aligned with the direction in which we are headed.
But United is stronger for this experience.
It’s time for United to fly.
Thank you very much.
