United Airlines begins to show signs of improvement and stability: customer service and operational
One of the most significant challenges United Airlines has faced in its unsettling merger integration is operational improvement. The company suffered a high profile operational meltdown in the summer of 2012 that sent some lucrative business passengers searching for a more reliable airline. In 2014 and 2015 the company also endured technological challenges that disrupted its operations.
During the past two years United has worked to shore up its operational performance as Delta Air Lines, on a mainline level, continues to outshine its peers in the large global network airline category. Part of United’s strategy to improve its operational integrity entails investment in updated technology and changes in flight patterns to maximise efficiency.
Those efforts are starting to show positive results, but obviously it will take some time for United to reach the operational performance of its rival Delta, whose supremacy will be temporarily affected by an Aug-2016 technological outage. United’s renewed focus on operations had started prior to the late 2015 management shake-up at the airline; but its performance under the direction of a new CEO should continue to improve steadily.
United's focus on operations shows encouraging trends after years of weak performances
United has suffered numerous merger integration challenges, including a less than ideal operational performance. After its operational meltdown in the summer 2012 US high season the airline’s on-time performance in Jul-2012 sank 10ppt year-on-year to 64%.
United has fought operational challenges since the 2012 meltdown; but there are emerging signs of improvement. According to data from the US DoT, its mainline on-time performance for the 12 months ending Jun-2016 was 82%, slightly better than those of American and Southwest but 5ppt below its rival Delta, which recorded an on-time performance of 87%. United’s on-time performance for the 12 months ending Dec-2015 was 78%. Airlines vary block times in their respective schedules and add padding of their times, which in turn affects on-time performance.
Overall percentage of reported flight operations arriving on time for selected US airlines: Jan-2016 to Jun-2016
|Alaska Air Group||87%|
One of United’s priorities for 2016 to maximise operational efficiency is to increase levels of “out and back” flying in its operations, which entails enlarging the percentage of flights that originate at a hub, travel to another station, and return to the originating hub. The company calculated that 35% of its flights in 2015 adhered to that operational pattern, and the percentage reached 70% by YE2016.
The logic behind United’s decision is that altering its flight patterns is one of the changes that will reduce the complexity of the airline’s operations, and it also allows the company to isolate weather impacts on its operations.
See related report: Operational excellence becomes a competitive force for American Airlines, Delta and United
United improves: posts reductions in customer complaints and mishandled bags in 1H2016
Throughout 2015 United ticked off year-on-year improvements in its operations. During 1H2015 the company estimated that it had cancelled 24,000 fewer flights versus the previous year, despite an operational performance in Jun-2015 that fell below company expectations.
One reason for United’s improved performance was a wise decision to make technological investments; during the difficult Jun-2015 period this allowed the airline to notify customers proactively about disruptions, and resolve the ensuing passenger issues much more quickly than in the past. United also equipped its airport employees with handheld devices and mobile printers to assist thousands of customers, with average transaction times lasting a minute. Neither practice is either novel or innovative, but is a welcome change that should start a slow process of changing negative customer sentiment about United.
Data from the DoT show that United’s customer complaints per 100,000 enplanements dropped from 2.78 for 1H2015 to 2.47 for 1H2016. Among the three large US global network airlines, American had the worst performance of 2.71 and Delta eclipsed its rivals with 0.60 complaints per passenger enplanements.
United’s mishandled bag performance also improved year-on-year in 1H2016 to 2.52 per 100,000 enplanements from 3.59 for the year-ago period. American posted 3.47 mishandled bags per 100,000 enplanements in 1H2016, and Delta’s performance was 1.75. Southwest, which is the only US airline that does not charge for checked bags, recorded 2.93 mishandled bags per 100,000 enplanements.
Delta’s mainline operational performance has become the benchmark for its large US global network rivals. Arguably Delta had a first mover advantage from the completion of its merger integration with Northwest, years before the United-Continental merger and the combination of American and US Airways.
An examination of DoT data for United and Delta from 2012 to 2015 shows the challenges that United has had in its operational performance compared with its large rival. American’s data was not included due to the fact that American and US Airways only closed their merger in late 2013.
During that four-year time period Delta’s percentage of mainline flights arriving late was 15% or less, while United’s reached 20% or above. The percentage of mainline flight cancellations for Delta was also markedly lower than United's.
United percentage of late flights and percentage of flights cancelled: 2012 to 2015
|Year||% of late flights||% of flights cancelled|
Delta percentage of late flights and percentage of flights cancelled: 2012 to 2015
|Year||% of late flights||% of flights cancelled|
United is showing improving signs in its proportions of late and cancelled flights for 1H2016. Its percentage of late flights fell from 23% to 16% year-on-year and the percentage of cancelled flights fell from 1.79 to 1.32.
United’s performance in those metrics in 1H2016 was better than that of its rival American, but still inferior to Delta's. However, Delta’s performance for the summer season could be skewed due to a power outage the airline suffered in early Aug-2016 that caused numerous flights delays and cancellations.
Southwest – which also battled a technological breakdown in Jul-2016 that resulted in more than 2,000 flight cancellations – will also find that its overall cancellation performance has suffered for the busy summer high season in the US.
|Airline||% of late flights||% of flights cancelled|
See related report: Southwest Airlines: Where is the LUV? Rivals have advantages as labour relations crumble?
A valid argument could be made that United’s operational performance gap versus American's should be wider, given that United completed its merger with Continental in 2010. American completed its reservation system cutover in Oct-2015, and is now turning its attention to other integration projects that include a USD100 million investment in operational performance – particularly irregular operations.
American’s management will not be sitting idly by and allowing the operational performance gap with its competitors to grow much wider.
United still has much runway left to reach its potential, but is trending in the right direction
As previously concluded by CAPA, with a new CEO at the helm United is starting its integration process over again, in some ways, and its management seems to understand the stakes in this second chance to prove the company’s potential.
The airline has taken the right steps to invest in technology for operational improvement and equipping its employees with the tools necessary to reaccommodate passengers during irregular operations. United still has much runway ahead in terms of operational performance and regaining customer trust. But for now the airline is posting some encouraging trends.