Crain’s Chicago Business: Tilton’s Troubles

Crain’s has this piece about United’s current cash flow problems. In the piece, the author (John Pletz) states what is now common knowledge:

That’s far from the flight path Mr. Tilton, 61, envisioned when the longtime oil industry executive took charge of a struggling United in 2002. He expected to purge excess costs in Chapter 11 bankruptcy proceedings, then initiate a badly needed airline industry consolidation with a sale or merger that would send him into retirement with a handsome payday.

“That was Glenn’s plan — to consolidate,” says Mo Garfinkle, CEO of Virginia-based GCW Consulting LLC, who has advised Mr. Tilton and United. “The game plan now is to survive.”

So, this begs the question: How well is United now positioned to survive?

Glenn Tilton made sure that both the board and the executive suites were stacked with loyalists. He had three years in bankruptcy with which to remake United into a viable, customer-centered entity. He had almost all of the labor concessions that he could get, and had a green light from the Bush administration and the bankruptcy court to dump over $9 billion in pension obligations. He had Southwest as a business model to learn from, just as the auto industry has had Toyota for all of these years. He had decades of experience and contacts as an oil executive to apply to the problem of rising oil prices and the need for fuel hedges.

You’d think that with such a stacked deck, United would now be a lean, mean, flying machine — competing with other U.S. flag carriers that have also weathered the storm (e.g., Continental). What Tilton didn’t have was the intent or a viable plan for running a professional and profitable airline focused on happy employees and customers. The single egg in Tilton’s basket has been to sell the airline, or merge it. In order to do that, Tilton and his yes-men (and women) have been hellbent on shrinking UAL to the point where it is incapable of making anybody happy; i.e., employees, customers, stockholders, and now apparently the banks as well. Rather than competing with Continental, Tilton has had to beg it for a merger or the scraps of a code-share agreement.

I was just an employee, not an executive. Even so, I know that you cannot shrink a business to profitability. Controlling costs is important, but not at the expense of reasonable growth and increased revenues from world-class quality, service, and the satisfaction of customers and employees alike. Unfortunately, those have never been strategic imperatives for the current leadership at United.