Sorry we ruined your vacation

After a summer of chaos, will United's apologies and free miles be enough to appease customers?


Diane Seo
August 18, 2000 11:00PM (UTC)

With its tail already between its wings, United Airlines' summer fiasco only seems to grow more embarrassing by the day.

Contract disputes with pilots have caused the world's largest airline to cancel an estimated 6,000 flights since May -- and the disruptions are far from over. United already has chopped 2,000 flights from its September schedule, blaming the chaos on pilots who refuse to work overtime.

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The blame game is hardly placating throngs of fed-up passengers, whose anger toward the airline has become palpable. "Believe me, given a choice, I'll never fly United again," David McVey wrote in a letter to Salon. "The customer be damned. Friendly skies, indeed."

Amid such a public relations nightmare, the Chicago-based airline has gone into crisis mode. But how does it respond? So far, it's chosen a less-than-satisfying tactic: saying sorry.

United this week took out full-page ads in several newspapers, apologizing for letting down customers during the hectic summer vacation season. "This isn't getting us where we want to go," United CEO Jim Goodwin says in the ad, which depicts a departure board full of delayed or canceled flights.

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And on Thursday, the company threw its best customers a bone, announcing that its premiere frequent fliers -- mostly business travelers who log at least 25,000 miles a year -- would receive bonus miles to compensate for its embarrassing number of delays and cancellations. United also will waive schedule change fees.

But for frequent business travelers, do miles really matter, since their employers are picking up the tab anyway? What United seems to be forgetting is that most passengers aren't asking for miles; they just want the basics -- flights that leave on time (or leave at all) and land in the correct place. Apparently, that's been too much to ask this summer.

In his letter to Salon, Jack Mingo explained how he recently put his 14-year-old daughter on a United plane in Oakland, and instead of going straight to Detroit, it abruptly landed in Denver. She then was shuttled to Las Vegas and Minneapolis before arriving in Detroit the next day. Her compensation? A $6 phone card.

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Yes, it's going to take a lot more than miles and apologies in the local newspaper -- which analysts are calling "embarrassing" and "stupid" -- to quell customer complaints.

Now, one can only wonder what United will do to appease investors.

The company on Thursday warned that its third-quarter profits would miss expectations, because -- surprise -- customers are bolting to other airlines. United says it won't meet the already-lowered $2.60 to $3.20 a share earnings range it issued in July. The company expects to lose as much as $150 million this summer from all the turmoil. "Although booking patterns remained strong through early August despite poor operating performance, booking levels have since fallen on the adverse publicity surrounding the cancellations that occurred in early August," Goodwin said in a press release.

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Investors took the news as expected, sending the stock -- which traded at $79 in January -- down another dollar to close at $48.50.

"This is a total airline meltdown," says Joe Brancatelli, a columnist for biztravel.com, which covers the airline industry. "Things are continuing to spiral out of control, and if it doesn't get its act together quickly, it could have a long-term impact."

After all, Brancatelli says, a prepared written apology or a few extra miles won't win back passenger confidence, especially business travelers, who provide nearly half of the company's total revenue. "If United offers impossibly low fares, that may appease the general public, but not heavy business travelers. Corporations that are putting employees on the road aren't concerned about getting the cheapest fare. They need an airline to be reliable."

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Stephen Klein, an airline analyst with Standard and Poors, agrees that all-important business travelers could defect in mass, unless United resolves its labor conflicts soon. "Business travelers can't tolerate even the slightest delays, because there's no reason to travel if they miss their meetings. Because of this, they tend to shy away from airlines facing a potential strike or other problems."

Klein believes the P.R. crisis, which amounts to daily media accounts of problems at the nation's airports, is putting increasing pressure on the airline to settle its dispute with pilots. "They have to be thinking whether it's worth settling to buy peace. After all, look at how much they're losing in terms of market share, revenues and the value of their stock."

United has been in contract talks with the pilots union since December 1998, but scheduling troubles began after the pilots' contract came up for renewal in April. Seeking better pay and working conditions, the pilots began rejecting overtime work. But the pilots say the flight cancellations have more to do with the airline's failure to hire enough pilots to maintain its packed flight schedule.

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"The pilots individually per their contractual rights are not willing to fly extra time on their days off," says Capt. Ken Bradley, a spokesman for United's pilots union. "But even though this overtime issue is what the media has focused on, the reality is that United hasn't properly staffed itself."

Further souring relations is United's proposed $11.6 billion merger with US Airways. Union leaders oppose the deal, fearing that United's 10,500 pilots will lose seniority if the two companies become one.

United, which is in the process of hiring 1,300 new pilots, hopes to have a contract by Labor Day. Although a week ago, that seemed too optimistic, United is under the gun to resolve its woes.

"There's a great deal of media attention and increasing governmental pressure on the corporation," Bradley says. "And it appears that all the negative public attention they're receiving is causing them to move forward."

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Illinois Attorney General Jim Ryan last week followed the lead of five members of Congress in asking the U.S. Transportation Department to investigate United's services and business practices. Sen. Dick Durbin, D-Ill., met Thursday with United's Goodwin and the president of the pilots' union to share his concerns about the deadlock and disruptions.

"Our goal is to have a contract as soon as possible," United spokesperson Chris Brathwaite says. "We want an agreement as soon as we can get it to build confidence with customers and employers. And we will do whatever is necessary and possible to provide the service that our customers have come to expect." Which after this summer means what?


Diane Seo

Diane Seo is the senior business editor at Salon.

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