Archived Speeches
Remarks by Gerald Greenwald, Chairman and CEO,
United Airlines to the Aero Club, May 27, 1999
"From Four Wheels to Two Wings - Taking on the United Challenge"
Good afternoon …
It's great to be with you today.
As most of you know … my days as the CEO of United Airlines are rapidly coming to close...which I guess makes my presentation today part of the Jerry Greenwald farewell tour. But I'm not here today just to say my goodbyes to an industry that I have always respected.
I want to take this opportunity to take a look at the state of our industry. I still remember the first day that I was actually a part of the industry. I remember standing in my new office and looking out the window... And I remember thinking... what have you gotten yourself into this time? I remember thinking about an industry loaded down with huge capital debt ... with four years of losses that had wiped out the profits of the past sixty years... with labor-management relations that had spiraled into open warfare ...And I remember thinking... well... this… is going to be interesting. "Interesting" turned out to be a bit of an understatement.
Because as I look back now, I would also add the words... exciting... energizing... fascinating... frustrating… exhausting… rewarding... and ultimately the best career decision that any guy coming out of the car industry could have made. Trading four wheels for two wings… was a very good move.
Of course, the look back is sweetened by the fact that United has enjoyed quite a run... record revenue and profit... a stock price that has tripled... employment up from 77, 000 to 95, 000... creation of the industry's leading alliance. It's been a very good five years. And I can say much the same for the industry as a whole.
In the rest of my time with you today, I'd like to take a quick three - stop look at some relationships… with Washington... with each other... and with our customers.
When we think about how Washington looks at this industry, it's useful to stop for a second and look at what you see when the view isn't clouded by political opportunity. Since deregulation in 1979… passenger miles flown has more than doubled… while, in real terms, airfares have dropped by one third. Let me say that again… twice as many miles… one third less cost. In 1979 we made 5.3 million trips to 788 cities. Last year we made 8.5 million flights to 2,003 destinations. And the efficiencies of the hub and spoke system, along with the growth of regional or feeder jets, is inviting smaller communities to the party.
Safety has steadily improved. As you know, 1998 was the safest year since the FAA started keeping records in 1969. Some of that might be good fortune… but as one observer put it… it's also a "triumph of brainpower over gravity."
When you look at all we've accomplished, you've got to wonder why it seems that everybody from Main Street to Pennsylvania Avenue is upset with us. Well, for one thing... we're making money. Actually, quite a lot of money. And that alone seems to make us a bit of target... forgetting those four years in the early '90s that wiped out every cent we had made in the previous six decades.
Unfortunately our newfound prosperity collides with the perception that our service is terrible... and even worse than that ... that we don't really care... that somehow an industry that makes its living by encouraging return business has adopted an anti-consumer attitude.
Well, again, if you take the time to really look at this industry, the problem becomes very clear, very quickly. The simple fact is… we have a lot of customers. The FAA tells us that the number of people flying increased 24 percent between 1992 and 1997. In that time air cargo volume was up 10 percent at the top 25 cargo airports.
And there's another fact... just as simple and just as obvious. All this traffic is trying to squeeze through an air traffic control system that is woefully behind the times... and an airport infrastructure that is simply not up to the job. Now the irony is that all of those people and all of that product are crowding airports because we've been so successful since deregulation.
Competition works. If you want to see a very good example of deregulation in action, just look around the DC Metro area. With our expansion at Dulles, United and other carriers are slugging it out here and up and down the East Coast to win customers. More service... aggressive competition... multiple carriers... and downward pressure on prices. Unless I'm mistaken, that's pretty much what deregulation had in mind. We seem to be hearing calls for re-regulation at the same time we're hearing calls for more competition. I don't believe you can have it both ways. Try as you might, you simply can't tell a free market what to do. You can let a free market pick its own winners... or you can arbitrarily assign winners through guaranteed routes and subsidies. But you can't do both.
Another curious development is the "bill of rights" proposals. I believe it applies standards to our industry that are applied to few… if any… other businesses. If I go to a supermarket where the parking lot is filled... where there are long lines at the checkout counter... and where I don't feel like I'm getting the attention I deserve… I simply don't go back.
I don't go to Washington to complain. And my representative does not propose a bill to discount my groceries 33 percent if I'm in line 10 minutes... and 50 percent if my time in line is more than 15 minutes. My representative does not propose a bill that would require the checkout clerk to advise me of every single discount coupon that might be available for the products in my shopping cart… or demand that the clerk advise me of all of the generic products that might be cheaper than the ones I bought.
Give or take a few liberties in my analogy, I believe there are, in fact, some parallels with the passenger rights proposals now on the table. Am I saying that our service is uniformly excellent? No. But neither is it uniformly bad. It is something we're working very hard to improve, and for the best of all reasons... it keeps our best customers coming back. And when you look at the fact that the number of complaints has risen with the increase in traffic… the latest tally of five thousand complaints out of 5 million passengers is actually very good for an industry this complex, this big, and this vulnerable to weather and other factors beyond our control. In the car business, those numbers would have made us pretty happy.
So… my view is that we should turn down the heat on the passenger bill of rights... which will not address the structural issues that will improve service. And start turning up the heat on the issues that will… such as improving the Air Traffic Control system… and encouraging the badly needed infrastructure improvements at the nation's airports. I'm very happy to say that, although the job is far, far from finished, there has been progress. The FAA has announced a $17 billion, six year overhaul of the ATC system.
It has the will, it has the plan and… now… it needs the money. I applaud Congressman Bud Shuster's efforts to make that funding available by taking FAA off the budget… meaning this vital national resource would no longer be hostage to the budget process… where it has come out very much on the short end of deliberations in years past.
Yes… you can complain that the work on bringing our Air Traffic Control System up to 21st century demands should have happened a long time ago. But thanks to efforts like Congressman Shuster's… it is happening. And it is going to be a very critical piece in the ability to improve service and safety in the years ahead.
Airports are also starting to catch up to demand… even though there is still a long way to go. Of the top 100 airports, eight are building or extending runways and 59 have plans on the table … although that expansion often must get past local opposition.
And if you want a model for municipal and regional planning, look to Chicago. This is a city that is getting it right. Mayor Daley has done an outstanding job of planning ahead for the future of O'Hare. Chicago has laid out a clear blueprint for new terminals, and an airport that can meet the challenge of the 21st century. And one of the critical ways Chicago is doing that, is by not focusing on the needs of individual airlines. It is by focusing on the needs of alliances, which are rapidly becoming the new model for airline competition.
I think another very positive move is proposals to lift restrictions on landings and takeoffs at O'Hare, JFK, and LaGuardia.
But my enthusiasm has a qualification. While the idea is right, I believe the timing is wrong. A three to five year waiting period is simply too long to wait. We need to lift the restrictions now, not years from now.
Another very positive development is the U.S. Open Skies policy. It has enabled the development of competitive global networks that can deliver rewards and recognition to customers, and new efficiencies for carriers.
Next stop ... the relations between management and labor.
When we look back, the view is not pretty. Let's just say that we were the dysfunctional family … more like the Bundys than the Cleavers.
Looking ahead, I hope and believe that the view is much improved... although the American disruption and the Northwest pilot strike might cause some to argue that point.
I think if there's one thing that United as shown over the past five years ... it's that there is another way. Our ESOP did not provide all the answers. It did not exempt us from the problems of the past. It did not mean we would high-five each other across the negotiating table. What it did do, is create a whole new framework. It gave us a platform on which to rebuild a relationship. It's based on a reasonable amount of trust and goodwill… and a shared understanding that we are bound together by the demand of customer service… which , in turn, points us toward a shared understanding that we cannot allow the customer to continue to be caught in the cross fire of union-management skirmishes.
However, like Darth Vader or should I say Darth Maul, analysts and other industry watchers seem to be seduced by the dark side of employee ownership... the idea that having employees own a large share of the company... and having union representation on our board… means that we have become a company run for the benefit of employees… to the exclusion of service to our customers and reward for our shareholders.
Ladies and gentlemen... I'm here to tell you... we ain't that dumb. We know who pays the bills... and we know who supplies the capital for growth. Having said that, I can't tell you whether or not there will be an ESOP2 when this one runs out. Some love it ... some don't. Whenever the outcome, it won't be management's decision. Our employees will make the call. That was the deal going in. and that is the deal now.
I also can't stand here and say that an ESOP is right for every company. But I can say that when you look at the ongoing tensions at our competitors… and when you look at the fact that we have not had a work stoppage for the five years of the Plan… logic says we might be on to something.
Last stop… the customer. I've heard it said that a fanatic is someone who can't change his mind and won't change the subject. On the subject of customer service, I qualify. I talked a minute ago about the need for regulatory and infrastructure improvement. But I'm not about to let the industry, itself, off the hook. We can do a whole lot better. We all know that. Fortunately, even though progress seems painfully slow at times, we're doing it.
For United, that started with listening. Over a two-year period, we talked to more than 2,000 customers and asked them exactly what they wanted from an airline. We built the results into our Customer Satisfaction Philosophy… which is a point by point strategy and measurements that define and guide how we want to treat passengers. Guided by that philosophy, we've invested $391 million in in-flight comfort, entertainment and technology. We’re spending another $93 million to improve airport communications and check in. We created Star Alliance… we changed our operations and put limits on carry-ons to improve on-time performance. And we're improving … but customers don't really care about improvement. They want perfection.
Money won't buy happiness… but it will get you right up close to it. Well, we're going to keep working to get as close to on-time perfection as we can… knowing full well that perfection is impossible. With that, I'll close what is likely my last presentation to the Aero Club.
I value the chance I've had to get to know this organization… and to work with you. You've done some great things for this industry. And I thank you.
Even as I turn my attention to completing the home my wife has started calling the Casa del Greenwald out in Colorado… I will never completely turn away from the airline business. It's been too much a part of me. It's been too much fun. I'm leaving this business with a major amount of satisfaction and a minor amount of regret… which is mainly in the area of unfinished business. But the business will be finished… I'm sure of that.
I'm leaving an industry that is much better, and much stronger than the one I joined. And that feels good.
Thank you very much.
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