United Airlines Again Working Hard To Lower Service Levels

When United and Continental announced their merger a few years ago, they trumpeted something like $2 billion in savings that could be realized from combining the two companies.  Fast forward to the 1st quarter of 2014 and the airline lost a half billion dollars in the quarter.  That’s obviously not the direction they want to be going, so they’ve set out to find other cost savings.

One of the ways that they’re working on saving money is by outsourcing operations at 12 additional airports in the US.  Quoting from the WSJ article:

United Continental Holdings Inc. UAL +2.38% said Monday it will outsource jobs at 12 U.S. airports in cities including Buffalo, N.Y., Charlotte, N.C., and Detroit on Oct. 1 to vendors who will perform the duties at lower cost. The jobs currently employ about 635 workers in areas including check-in, baggage-handling, and customer service.

Given, these aren’t major stations for United, but there aren’t many instances where outsourcing provides an increase in the service levels (though, given how sullen some United employees are post-merger, you never know).  One of my least favorite outsourced stations is Los Angeles.  Typically, they’ll have one or two United employees who can resolve conflicts with your reservation serving somewhere in the neighborhood of 20 kiosks.  The rest of the employees are contract folks who really can’t do much more than tag your bag.

To be clear, outsourcing alone isn’t a recipe for poorer service.  As the article notes, American Airlines has a lot of outsourced employees who do a good job.  I frequent some outsourced stations for both American and United and it’s generally a better experience from the Envoy employees that serve American Airlines counters.

A recent experience for me at an outsourced United station had me worried about 1 of our family’s 5 checked bags, a stroller.  Due to some kinks being worked out in a new baggage system, the stroller had to be handled by a United employee.  I alerted someone from the ticket counter to my bag and they said they’d take care of it.  I was pretty worried that bag wouldn’t make the plane.  In the end, United didn’t mis-deliver our stroller, they actually left all 5 of our bags off one of our flights, despite the red priority tags attached to them.

That’s an isolated instance and certainly not the norm.  The larger point here is that United hasn’t done a great job training their existing employees to maintain service standards.  Outside contractors can be harder to manage, in that you’re generally a bit further removed from the day-to-day management of those employees when you outsource.

It doesn’t have to be that way.  United used to have a regional carrier named Atlantic Coast Airlines that operated a sizable regional jet network for United out of IAD.  Alas, when United cut their compensation too far, they branched out on their own to form Independence Air, ultimately failing on their own.

A recent comment from my wife is illustrative of the average person’s response to United’s service levels.  She doesn’t fly United anywhere near as often as me, but hasn’t seen much to be impressed by.  When discussing an upcoming trip we had booked on Lufthansa, I told her that United had opened up 4 seats to Rome on a nonstop flight for us to snag as opposed to flying Lufthansa and connecting in Frankfurt, arriving 4 hours later.  Her response?

“Lufthansa treats the kids so much better.  They’re less likely to lose or ruin our suitcases.  And, the United employees just aren’t friendly.  But, I guess we should take the direct flight.  Hopefully, it won’t be too bad.”

Not a condemnation, but you can’t just sell network.  Customers want a product that gets them there happy and on-time.  They might not be able to get that all the time, but when the competition is offering a better experience, they can’t blame folks for having a wandering eye.

United strikes me more as a plane without a pilot right now as opposed to a company realizing synergies from a massive merger.  They’re focusing on bulk ketchup and garlic bread while service levels continue to fall, losing them key corporate clients.  There’s no doubt in my mind that drastic changes are needed when you lose half a billion dollars in 3 months.  And, all of these moves may be the right financial decisions for United to make, just like they’re de-hubbing of Cleveland.  But, shrinking an airline to profitability isn’t something that has a great history of success.  Scrambling for these maneuvers also takes United away from the task of making a better airline.

In the words of their CEO, Jeff Smisek, these don’t strike me as changes we’re going to like.



  1. What is your basis for making the following claim: “losing them key corporate clients”

    Can you point to specific key corporate clients that UA has lost as a result of these changes?

    1. Billy, not publicly, I can’t. However, if you look at where their losses are coming from in their public filings you can see they’re losing customers.

  2. Looking at their overall network, one would think they would be doing the best of the vaunted “Big 3” financially. Obviously, they aren’t. It’s kind of sad to watch, as I really had high hopes for them. The issues you describe here are a big part of the problem. They can’t even manage to get the basics done, much less anything truly innovative. Until they fix the core airline, nothing else they do will matter.

    1. Marshall, when I made the switch to give some of my business to UA about 3 years ago, I didn’t know at the time I was picking the worst time possible to switch. Living near IAD, I should be happy to take advantage of the network. Instead, I find myself coming up with contingency plans when I fly them. You hit at the core. Until they can execute on the basics, the rest is immaterial.

  3. United flight attendants yell at you in first class so how the hell would they get key corporate clients?

    1. Shay, the service levels from some of the tenured employees are pretty poor, no doubt. If the traveling customer made the decision, UA would likely not have any corporate clients. Fortunately for United, some of those contracts for corporate clients are negotiated and signed in offices, not planes.

  4. Lots of people on the blogs have promoted how great UA is for their FF program (well, maybe not as much now since they’ve gutted their partner award chart), which I have always thought mysterious. For me at least, I couldn’t wrap my head around why is was worth it to spend all of my time flying a miserable and unreliable airline all year long, just to be able to redeem one or two aspirational awards. The value proposition isn’t there. For the business traveler, it matters more to know that I will probably get there on time and have a reasonably pleasant service experience, and generally positive interactions with FAs/ground staff. I don’t choose UA if I’m expecting any of those things.

    1. Hi George,

      As a business traveler based out of IAD, I am forced to choose UA most of the time. Their FF program is good enough that I can bring the wife along a few times a year. I don’t expect “generally positive interactions” because even though I’d sure like that, the bottom line for me is the route network. I won’t connect if I can fly direct, and on UA, I can. That’s all that really matters, sadly.


      1. David, that’s all that matters for you. But, others of us may have different priorities. On a recent UA TATL flight, it took us almost 2 hours from takeoff to get a kid’s meal for our children in business class. Not sure what we would have done had we not brought some food on for them.

  5. Quick PS:

    As a business traveler, UA’s FF program is rigged in our favor.

    I just bought a ticket for a flight tomorrow. Paid $1700. Sometimes I spend high 4 and low 5 figures for same day/next day flights internationally.

    That’s huge for us in UA’s FF program. It garners us better status and more points (especially after next year’s changes take effect).

    1. Which is exactly why they’ve made those changes for next year. They’re trying to keep high-value customers like you happy. It’s the low-end customers and credit card churners who are complaining.

      To me it seems UA actually has a good strategy here.

      1. Arcanum, if they were trying to keep high-value customers happy, why artificially cap earnings on expensive tickets?

    2. When you buy 4-figure tickets last minute, does the mile earning influence whether you travel? Or is it simply an additional perk?

      Does the award earning influence which airline you fly, or is it based on schedule, service quality, or elite benefits/loyalty?

      While I can see that accountants think it’s great to reward highest spend travelers, it’s not clear to me whether it really increases profits or whether you are increasing rewards to people who would have flowing you anyway without the increased reward…

  6. You mischaracterize LAX as an outsourced station.

    As UA (and pretty much all airlines) have moved toward self-service check-in, they have added contractors who can accept and tag bags. UA uses Airserve, I believe. They have contractors to tag bags at pretty much all their larger cities. LAX is still also staffed by UA employees. It can at times be hard to get their attention, however, and there isn’t any obvious queuing system or signaling system.

    DL, AA, AS … they all outsource smaller stations. But it can be harder to get exceptions and IRROPs taken care of at an outsourced station. Back when AS had paper upgrade certificates it was pretty common for them not to be collected at outsourced stations.

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