United Airlines Hates Its Customers. For Short-Term Survival That’s a Good Thing.

Scott Kirby is the President of United Airlines, and soon he’ll become CEO. He was an America West executive under Bill Franke, President of US Airways and of American Airlines. No one is more spreadsheet minded and less customer-centric in the airline industry.

Kirby appointed Andrew Nocella, his long-time associate, as United’s Chief Commercial Officer. Together the duo have consistently cut the passenger experience, cut the loyalty program’s value, and eroded the goodwill the airline was building under CEO Oscar Munoz.

I’ve called Kirby a destroyer of airlines, but he’s also a savior of them. He’s more a destroyer of customer experience and during the worst of times there’s no one better at the helm in the short run because he’s clear-eyed and unsentimental.

His over-reliance on spreadsheets that lead him to make cuts and delay investment in good times are precisely the characteristic that positions him well to conserve cash and ensure a business’s survival in the worst times. He did this at US Airways and it’s no coincidence that United is openly preparing for the worst case scenarios in the current environment more than competitors.

United is planning for revenue to be down 70% in April; 70% in May; 60% in June; 40% in each of July and August; 30% in each of September and October; 20% in November and December.

That’s why United is:

  • Beginning reductions in capacity, capital expenses and operating expenses
  • Raising liquidity – they just added $2 billion (secured with older aircraft), bringing them to $8 billion total [like American, United has a covenant requiring a minimum of $2 billion cash]
  • Capital expenses for the year are now projected at $4.5 billion down from $7 billion. Since they’ve already spent $2 billion this year, that’s a 50% cut for the rest of the year.
  • Stopped stock buybacks (effective February 24) and eliminated discretionary operating expenses
  • Not going to take any new aircraft that are not fully financed


Empty Coach Cabin On A United Boeing 777-300ER

Live and Let’s Fly hopes that ‘Kirby Kutbacks’ don’t include delaying the launch of the Washington Dulles Polaris lounge.

Reframe all of your expectations. Construction costs money. Lounge staff and food cost money. Kirby will spend money that’s demonstrated to offer a good, immediate return on investment. But when revenue is down, and he can’t attract incremental business? Do not expect passenger experience enhancement, expect cuts.

United isn’t just looking for cuts from my perspective they are viewing customers as an enemy of its solvency and strictly as a wallet of its salvation. They implemented a rule saying even past ticket purchases will not be refunded in the event of a schedule change less than 25 hours. Since it contravenes published policy at the time of those purchases it may be illegal, but any DOT ruling on that will take time and in the meantime United has the extra liquidity. (Plus most customers will grit their teeth and accept it rather than fight.)

They’ve subsequently said they would review refund requests case-by-case which means still reneging on their published policy of refunds in the event of a schedule change of 2 hours or more, just requiring customers to wait on hold to ask and find out if they can get their money back when United changes their flights to the day before or the next day.

This is a deplorable approach. In the long run it could hurt them, when they need customers again, although their success post-David Dao suggests customers lump all the airlines together and forget which one they pledged not to fly.

Regardless right now United isn’t thinking about the long run, they’re preparing to survive the short run. Scott Kirby made clear everything else comes later.

Expect to see other airlines shift into that mode – hopefully seeing customers as partners rather than as potential marks for cash.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. @ Gary — THIS customer doesn’t lump all airlines together. I hate them all, but for their own unique reasons. United is the worst offender.

  2. I still love your line of “self-loading cargo” Gary. I flew HA in F last week and scanned my own boarding pass and poured my own drinks which the staff seemed accepting and happy I did it myself.

  3. 100% what Gene said. It used to be that I was loyal to a particular airline but would fly others when the route or price point made it a no-brainer. Nowadays, instead of having a list in order of airlines I prefer, I have no loyalty to any of them and a list of who I most want to avoid. United is at the top of that list and I’ll avoid them to the furthest extent possible.

  4. Hi Gary:

    (I intend to repeat this post on other aviation sites).

    I am a little tired of the general bashing of the airline industry, and of United Airlines in particular.

    Here is a summary of what happened last Friday February 28:

    1. Friday afternoon my wife and I flew to EWR from PIT.

    2. Because we had been upgraded, we spent the layover in the new Polaris lounge. Amazing. Fantastic product.

    3. Boarded the flight to Rome, UA40

    4. Technical delay announced. Possible problem with a fuel pump….. The captain spends some of the time chatting with Polaris passengers.

    5. We are asked to deplane 30 minutes later. I look at my wife and say “they are giving us a new plane. This will delay us a couple of hours”.

    6. As we are walking off the plane I overhear a flight attendant say that the threat level has been raised to 3. She shows me her screen

    7. Back in the boarding area I confirm the news. We decide to abort the trip concerned about possible quarantines on the way back. (Indeed, Sunday evening my employer mandated self quarantine, beating the government agencies).

    8. “No problem sir, we call this a carry over, carry back”, says the fantastic gate agent at C90, and we are booked on the 7:40 back to Pittsburgh

    9. During this very short time, the plane is re-boarded. We hear that about 4 other passengers elected to also stay back

    10. We go back to the Polaris lounge where my wife has a light dinner.

    11. Landed at PIT at 9:50pm

    12. So…. We had a nice Friday evening date at the EWR Polaris lounge

    13. Now, my eldest son is certain the technical delay was not real, and thinks that United was being warned of the upcoming news by the CDC. Even if that was not the case, why did they not make a public announcement on board, or in the gate area?

    Guess what Gary and friends: United did not give us a credit. United refunded all expenses! There is a reason they are the best airline in the galaxy, and you “experts” only perpetuate the ignorance of the infrequent flyer, a being I define “the tourist”

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