A few interesting comments from United’s CEO


United Airlines CEO Jeff Smisek has been doing a pretty good job of keeping his name in the news lately, with many interviews running over the past few months. Most of them are basically fluff pieces where he talks about how challenging merging the airlines is and how great all his co-workers are (both true facts but hardly "news"). This week’s version is not much different but there are three particular bits in the published Q&A that caught my attention.

Pricing

Q: Is there anything that will make airfare pricing less complicated?

A: No. I think what you’re going to see is more choice. And choice can become complex.

That’s not really a good thing, though it also is not particularly surprising. The company is on record as looking for more different ways to incrementally increase revenue and this sort of comment suggests it isn’t going to stop any time soon. This also plays in to the recent battles between the airlines and the GDS companies versus their "direct" sales models where different customers can see different pricing depending on a variety of factors. Pretending that’s "choice" for the customer is a disingenuous move but one that all the airlines are parroting.

Consolidation

Q: Is consolidation good for consumers?

A: Ultimately, yes. It’s bad for consumers to have airlines that are always on the brink of insolvency, that are subject to potential strikes by labor, who cannot be depended on to be there the next day.

Indeed, companies that cannot function on a day to day basis is bad for consumers. But history suggests that mergers are a crap shoot in terms of labor relations (just look at US Airways today or the current challenges Continental and United are facing in getting their seniority lists and union contracts aligned). And consolidation means less competition so generally higher prices. Stable companies are a good thing for consumers, but at what cost?

Customer Service

Q: What’s the last thing you do before heading home?

A: I try to make it through my e-mails. … I get interesting e-mails, like a customer that was just outraged that she was in 23B and she wanted to be in 23C and it was marked "Urgent — Fix This Tonight!"

Sorry about that, Jeff.

So, just another puff piece of sorts, but it also gives a lot of insight into the thought processes at work behind the guy running the largest airline. Always fun to read.

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, LinkedIn and .

5 Comments

  1. Thanks as always Seth.

    I don’t feel complex pricing is necessarily a bad thing, as long as there are guys like you, Lucky, and Gary (and the FT community) helping us to navigate the system!

    If complex pricing (‘unbudling’) means I have more choice in selecting the benefits I want, then it could be OK.

    What is Jeff’s e-mail address? I’ve got an SWU that is not clearing that I would like him to take care of for me…

    1. I’m of two minds on the “complex pricing” thing.

      Yes, I’ll still likely be one of the folks who wins from that effort. I’m willing to invest the time and effort to figure it out and that works in my favor. And the unbundling is annoying but, again, I’m generally pretty good at seeing the total cost picture so that doesn’t bother me too much.

      At the same time, however, it also means that the airlines can tweak pricing to the specific customer doing the shopping rather than just publishing fares and letting folks figure out which they prefer. Smisek alludes to that in the interview, suggesting that they have a decent idea of which customers are likely to buy upgrades or otherwise pay for for certain things. If they know that your price threshold is $100 higher than mine then they don’t have as compelling a reason to sell you the cheaper fare, even if they’d sell it to me on the same flight at the same time of purchase. It can be a bit ugly.

  2. “At the same time, however, it also means that the airlines can tweak pricing to the specific customer doing the shopping rather than just publishing fares and letting folks figure out which they prefer. Smisek alludes to that in the interview, suggesting that they have a decent idea of which customers are likely to buy upgrades or otherwise pay for for certain things. If they know that your price threshold is $100 higher than mine then they don’t have as compelling a reason to sell you the cheaper fare, even if they’d sell it to me on the same flight at the same time of purchase. It can be a bit ugly.”

    I had not thought about it that way… You are right though, with effective data mining and customer tracking ability they surely have, then they could manipulate (abuse) the information they derive to the detriment of the customer. (but to the benefit of UA’s bottom line.)

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