On May 20, 2020 United President Scott Kirby will officially become the new Chief Executive Officer. How will consumers, employees, and shareholders react?
Kirby: Hope Is Not A Strategy
In several pieces over the last two months I have highlighted Kirby’s contrarian approach to COVID-19. While every major airline has acknowledged that it will emerge smaller and that demand will be slow to recover, Kirby has been an outlier in predicting doom and gloom. He has repeatedly said that he hopes for the best but plans for the worst.
That planning has included warnings of mass layoffs, mandatory hour reductions for non-union employees, and cutbacks onboard.
The perspicacious Brian Sumers of Skift defends this strategy:
“But Kirby’s not cutting hours or warning of layoffs or furloughs because he hates workers or wants to crush unions or screw the taxpayer. Instead, he claims to see what competitors do not — there are no quick fixes. To survive, he said, United needs to take action, even it means annoying workers, lawmakers or customers…
“I have been shocked at how many airline executives don’t mimic Kirby’s approach. I can’t understand if they don’t agree with him, or if they understand as well as he does, but would rather not scare the shit out of their customers or employees. Maybe they don’t want to hurt anyone’s feelings, or think the faux happy talk is good business…
His candidness is refreshing.”
I would agree, in part. Kirby is a no-nonsense guy. He’s shrewd, smart, and yet doesn’t come across as the clueless and out-of-touch imbecile the way Glenn Tilton and Jeff Smisek did. Practically, I also see mass layoffs as inevitable this autumn and think that preparing employees for it now is much wiser and fairer than hoping for a summer miracle and then dropping the news in late summer.
Where Kirby Might Rethink
I’ve long stopped worrying about “Kirby Kutbacks” like cutting appetizers in Polaris class or suspending lounge construction projects. Indeed, United is in a fight for its survival and it does not appear demand will return anytime soon. Furthermore, demand for United’s strong international network will return even more slowly. That’s not necessarily a zero sum game, since widebody aircraft can also be used on more domestic flights, but let’s all appreciate the uniquely difficult situation United is in.
While customers have short memories and the value of loyalty programs is not just an absolute valuation, but a relative one, I do think Kirby should be more nimble in slashing value from MileagePlus.
With so many U.S. businesses continuing to ban company travel, United’s bread and butter consultant class premium travelers will not be flying anytime soon. But discretionary passengers on the margins will likely fly much sooner. These are the travelers who have a choice in airlines and will patronize airlines in which they feel valued as customers. That means offering a loyalty program that does not suddenly change policies without notice, always in a negative direction. Kirby loves to emphasize how honest he is about keeping it real. Why not be honest with members about the need to cut back amenities, but also provide some advance notice?
I’ve long questioned the wisdom of rewarding those who would fly United anyways (by corporate contract or due to being hub captive) while punishing those who may indeed extract more value from MileagePlus than others, but nevertheless fill seats and provide long-term, often decades-long loyalty. Many are not lucrative tech worker in the Bay Area who spend thousands of dollars per ticket on United. But, they spend thousands of dollars on United each year…United should think twice before alienating these passengers.
Secondly, the whole refund debacle has been a huge embarrassment to United. While American and Delta have mostly played nice with consumers, United has made a fool of itself by flip-flopping repeatedly on refunds and re-defining what a flight cancellation or major schedule change is. Most customers won’t remember that, but those who matter most will…
Kirby enters United’s top role at a unique and difficult time. He is shewed and has greatly helped United to re-capture market share and improve operations during his tenure as President. But he must continue to grow beyond his “bean counter” mentality and recognize that unannounced, negative changes to the ticketing polices, the onboard product, or MileagePlus become counterproductive when they drive away discretionary revenue and destroy decades of loyalty.