Turbulent Times for United Airlines
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Case Code: BSTR308 Case Length: 17 Pages Period: 1970-2008 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.300 Organization: United Airlines Industry: Aviation Countries: United States Themes: Business Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
"This environment demands that we and the industry act decisively and responsibly. At United, we continue to do the right work to reduce costs and increase revenue to respond to record fuel costs and the challenging economic environment."
- Glenn Tilton, Chairman, President and CEO, UAL Corporation and United Air Lines Inc., in June 2008.
"No matter how rough the ride for United's employees and passengers, it will continue to be smooth sailing in the executive suite."
- Joe Brancatelli, Business Travel Columnist, Seat 2B, in June 2008.
"I think it's the UAL labor-dynamic playbook. It's been that way for a long time. Just change 2008 to 2000 and it was roughly the same story."
- Robert Mann, Aviation Consultant, in August 2008.
Introduction
In April 2008, United Airlines (United), one of the oldest and largest airlines in the United States, reported a loss of US$ 537 million for the first quarter of 2008 compared to a loss of US$ 152 million in the corresponding quarter of 2007. The loss was reported to be the highest ever incurred by any airline in the first quarter. The company cited increasing fuel prices as the main reason for the loss, as its expenses had shot up by US$ 618 million.
It added that it was working on new cost cutting measures, in addition to those, such as job cuts and reducing employee wages, which it had already taken. United was the first commercial airline in the US and was created on April 6, 1926, as Varney's Airlines (VA), a transporter of air mail across the US. Later VA was acquired by United Aircraft Transport Corporation (UATC).8 United flourished in the 1950s and 1960s. In 1961, it became the world's largest airline after merging with Capital Airlines.
However, United started facing troubles in 1970, when for the first time, it made a loss of US$ 46 million. This was followed by several years of losses. In 1978, the Airline Deregulation Act10 brought in more trouble in the form of increased competition. In the late 1970s, United also started facing labor problems, something that was to plague the company for years to come. In the 1980s and 1990s, instability at the top level management and labor disputes saw the company incur losses, although some years in the mid-1990s were profitable. The company also started a low cost airline called Shuttle by United, developed its Information Technology (IT) system, and entered into mergers and alliances during this period...
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