John Rainey, United Airlines’ infamous CFO who claimed that elites are over-entitled, has put his foot in his mouth again…this time by trashing his company’s three-cabin international first class product, dubbed “Global First”. But it was not just a curious denigration…it was a fairly accurate statement and a sign that United does not see a three-cabin first class in its future.
Watch the video on bloomberg.com.
Rainey appeared on Bloomberg to bemoan high airline taxes in the USA but the issue of three-cabin first class came up. Citing American Airlines’ decision to eliminate international first class on many routes, he was asked whether United is considering a similar cutback. Rainey responded–
We’re moving more toward a two-cabin plane, with Economy Plus.
He then added–
It’s effectively the same service: you’ve got a very similar product, very similar seat, even the food service is very similar.
The direction that United is moving toward a two-cabin model is apparent enough: the new 787-9s, ordered post merger, will only offer two cabins of service, and the fact that United Global First is known by United employees and frequent flyers as “employee class” is just an illustration that few are willing to pay for first class.
While I admire Rainey’s brutal honesty, I question his decision to just rip any justification a customer on the fence might have for booking or upgrading to Global First. And his statement was not all totally accurate: while amenities and food are similar, the seat is not “very similar” – it is actually a tremendous improvement over both the legacy Continental and legacy United business class (“BusinessFirst”) seat.
While pre-merger United 777s and 747s have 2-4-2 seating in business class, first class is 1-2-1, with much more spacious seats that are wider, longer, and include all kinds of personal storage space (space that is glaringly lacking in business class). First Class, though not enclosed, is much more private, offers better bedding, and even a turn-down service with mattress pad.
Food is similar – the only difference between first and business class is hot appetizers, a soup course, and a better wine list ($20 bottles instead of $5 bottles). A very nice amenity kit is offered in Global First, a big upgrade to what passengers in business receive.
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I’ve flown Global First twice this year – both last minute op-ups – once to Washington Dulles and once to San Francisco. I will note that on the SFO flight at least, service was significantly better than what I usually experience in business class.
So while the two cabins are accurately similar in the big scheme of things, I would think that a CFO would at least point out the benefits of Global First (with no plans to retire the 747 or legacy UA 777 fleet, Global First will be around for awhile) or at the very least make the case that United’s “BusinessFirst” already offers first class service.
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Here is what bothered me – I really think CFO Rainey did not know any better. I have been critical of the Continental team, led by CEO Jeff Smisek, for being openly hostile to pre-merger United and that was display in the interview. Listen to the CFO–
What we had when we merged Continetnal and United…uh…United had a three-cabin plane and we had a two-cabin plane…
He uses “we” throughout the interview, but clearly that we means Continental Airlines – not legacy United. Flyers and insiders still argue over whether the new United is “Continental doing business as [DBA] United” or “United DBA Continental” and this remark makes it even clearer that the Continental management team that took over United was not looking to innovate, but rather to obliterate what it deemed as an inferior, poorly-run airline.
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Rainey also discusses taxes and fails to realize, or at least admit, why airline taxes are high.
In our industry, 16 or 17 taxes. I’m not talking income taxes. This is off the top line. There is a tax on fuel…a crushing tax burden…
He moans that taxes are higher than alcohol, tobacco, and firearms but what he fails to concede is the public infrastructure that airlines rely on – airports, security, and the FAA — all public entities necessary for the functioning of the airline. Of course taxes are going to be higher! That doesn’t mean I think the recent increase in the “9/11 Security Fee” is justified, but running an airline is not like running a brewery.
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Rainey is worried about Gulf carriers like Emirates getting preferential tax treatment, and that is a fair concern, but a host of other problems come with state-owned and backed national airlines. That is not the U.S. model and everything comes at a cost. Perhaps if we had to start over again things would be done differently, but dropping taxes to Dubai levels is a non-starter in a country with competing privately-owned airlines and a crumbling national infastructure.
An interesting interview, but not one that gives me a great deal of confidence about the management leadership of United Airlines. UA could have a competitive first class product if it wanted to – I just wish it would try it and see what happens when it really tries to compete with Emirates, Singapore, and Lufthansa.
wow. The leadership void could not be more apparent.
Brad – what do you mean by “leadership void?” Their CFO is pretty spot on. Their F product is garbage and few pay for it (though many pax on foreign carriers do pay for it) and indeed domestic elites are over-entitled (albeit they were trained by the carriers).
Nevertheless, you statement about a leadership void is inaccurate. It would appear that management has a very clear vision of what UA/CO should be. That their vision doesn’t appeal to you isn’t a void.
The Continental Airlines, DBA United business plan , is to run a large, small airplane airline. Why doesn’t the CFO talk about all the fuel stops from Europe because of 757’s on routes that 767’s wide bodies should be on, not to mention the single isle for 9 hours. The bathroom lines are pathetic. Shame on this airline!!!!!
Well the CFO was correct. Anyone who wants a first class product shouldn’t be flying United to begin with. The best item lately was when they added Tito’s vodka, and thats pretty sad.
Shall it be beef or pasta today ?
A leader should be informed and well versed on the offerings that their company provides at all times, especially on national television. A leader uses the proper pronouns referring to the entire company, not perpetuating us vs. them that shouldn’t exist this far past day one.
I stand by my statement. I also stand by my decision to stick with United. In spite of poor leadership, the airline is the lesser of many evils for much of my travel needs.
Taxes (and other government imposed fees) are indeed an issue to be confronted, but most of those are levied directly on us when we buy tickets, so affect every airline operating in or from or to the US. (And there is the airline-imposed fuel surcharge, a true mystery as to how it is calculated.) And while I tend to agree that airlines like EK get special treatment from their home countries, let’s not forget that for decades US airlines were indirectly subsidized by the US government through mail contracts and military charters. And the US was the only nation that compensated its airlines for the 9.11 grounding to off-set losses. Not to mention, just about every US airline has now jettisoned their pension liabilities to a government agency after going through bankruptcy, thus reducing costs in that realm that most foreign legacy airlines still maintain. So Mr. Rainey should consider all the facts before he complains about unfair competition.
As for his comments about UA’s F and C…others have well addressed that one. Suffice to say as DL and AA, plus most of those foreign carriers, move to 1-2-1 international business cabins, UA’s 2-4-2 sardine cans will become a truly sub-stantard product. And costly for UA to upgrade!
The boys from Houston screwed up. 5 years into the merger and the airlines are still being run separately. They’re laying off the United FA’s and hiring new Continental FA’s. Delta and Northwest were done in one year with their merger because they spent money on IT etc. The new United is penny wise and pound foolish!!!!!!
Brad, I have to respectfully disagree with the last part of your comment. The reason why CEOs like Smisek, Doug Parker, etc. can continuously degrade their product with impunity is because they know that 1) leisure travelers will continue to choose based solely on price, and 2) business travelers will justify staying with the airline in spite of the cutbacks because of company travel policy limitations, convenience of schedules, being close to million miler status, not wanting to give up elite benefits, some combo of the above, etc. It’s one thing to complain about the cutbacks, but if we’re not willing inconvenience ourselves a little and switch carriers, what good does it do? I doubt John Rainey really cares about your criticism of UA’s leadership, because as you state, you will continue to fly United anyway.
I’m hoping that Parker’s attempts to turn AA into US Airways will prove to be a bridge too far, especially with soon-to-be robust, convenient options on VX and WN out of Dallas, but unless AA elites actually start voting with their wallets, I seriously doubt he or any other CEO is going to reverse course anytime soon.
You are welcome to stand by your statement.
United First Class is not a very good product when compared to non-U.S. airlines. United can’t compete with better airlines, so it’s easier to drop first class and compete with other low quality U.S. airlines instead of offering a competitive first class product.
@Kelvin: It is certainly easier, but is it the right course or does UA have a chance to distinguish itself from DL and AA by offering a truly global-quality first class product?
@ MeanMeosh Fair point. Of course I don’t think my actions or complaints are enough to effect a change in the continual dilution of benefits at United. Unfortunately consolidation of the industry has removed many of the options for all travelers. Even if I haven’t moved on, I think it is clear that others have. In United’s case, they continue to perform below their peers by many metrics. Leadership is not solely to blame for that, but they own a big part of it and someone at some point will have to answer for it. I hope anyway. There has been a slight turn around of late, at least in terms of financials, but I still think United is lagging its competitors.
I wish I had reasonable alternatives for my travel needs, but I’m really not seeing it. Maybe Southwest is a possibility, but of course only for my domestic flights. I am really not a fan on the few times I have flown with them, but in some cases I would have non-stops rather than connections to a few destinations I frequent.
@Matthew: I agree with you about not considering this the right course. I just don’t have any confidence that United is capable of competing with AA and DL, and I’m sure they can’t compete with non-U.S. airlines.
I don’t see how they are able to sell their business class cabin. Why would anyone pay for sitting in a business class cabin that has eight seats in one row? I used to put up with United’s bad service when they had a good frequent flyer program, but after the devaluation I’ve not purchased another United ticket, and have no plans to in the future. You can get away with bad service if you are the leader in other areas, but once you are behind in almost all categories, it’s hard to expect people will keep coming back unless they are in a captive market.
It’s funny because you don’t know anything about the airline industry thats my dad and you can continue to say stuff about him but he is doing the best thing for this company.
Luke, I am sure your father is a very nice man and I would love to meet him one day. I think on the issue of United First Class, he really missed the point and spoke quite foolishly. No one is perfect: even the best of us make mistakes.