Still under intense financial pressure four months after exiting bankruptcy protection, United Airlines late last month enacted a set of organizational changes to its sales and distribution divisions. As a result, the carrier disbanded certain groups, created new ones and reduced overall head-count.
United in 2004 began a sales transformation that ultimately included revised corporate pricing programs, reshuffled account management, new leadership and a larger dedicated staff. According to The Beat, United senior vice president of worldwide sales and alliances Graham Atkinson wrote in an internal memo that the latest "structure change" to United worldwide sales is "consistent with the progressive strategic sales transformation goal of making this sales team the best it can be."
It also is part of parent UAL Corp.'s new plan to save $400 million in 2007--"over and above what is in the business plan," according to a company statement--and an opportunity to become more efficient. "United never had the best management, and they were top heavy," said one travel manager. "We will see if the infusion of new blood will get them to a better place."
"It's time now for us to set a new agenda for United Airlines," said UAL chairman, president and CEO Glenn Tilton, today during a Merrill Lynch conference in New York.
The revised sales leadership team includes David Anderson, appointed managing director of the new B2B Products & Channels group designed to analyze and manage corporate and travel management company accounts. Like Jeff Foland, who joined United last year as vice president of North America sales, Anderson previously worked with the airline as a consultant at ZS Associates. Inside the B2B group, United named new North America directors for the corporate and TMC channels, as well as for international sales channels.
Another new group, Distribution and Worldwide Headquarters Analysis, "will focus on advancing our distribution initiatives and cross-functional projects," Atkinson explained to employees, noting that the Worldwide Sales Strategy and Sales Operations groups "no longer exist in their current form."
The Worldwide Sales Strategy group previously devised some of United's distribution strategies and early last year floated alternatives to corporate and TMC accounts. Since conveying plans to promote the likes of G2 SwitchWorks, ITA Software and Farelogix--purportedly as cheaper surrogates for traditional global distribution systems--United signed long-term agreements with all four primary GDS operators.
Among other changes, the North America Sales Operations team now reports to North America Sales, "providing a more direct alignment with the field organization," according to Atkinson's memo. Also, "given its immediate, critical importance to the success of our organization, Sean Burke has been asked to lead our North America incentive compensation, goal setting and alignment management programs."
Though the latest reshuffling was not aimed at the field salesforce, changes are occurring there, as well, similar to other carriers that gradually are centralizing account management. Doug Baldy, Eastman Kodak corporate travel services manager, said that while Kodak's United account manager in the Rochester, N.Y. area had not been impacted, "two or three others in the district were let go, in Connecticut and New York City. We made it clear, as did Xerox, that we expect to have someone in Rochester. We expect to see sales people frequently, and not have to do business on the phone; if not, out of sight, out of mind. We understand the airlines need to change their business models to save money, but they shouldn't do it to cut revenues."
During a conference call last month with analysts, United chief revenue officer John Tague said "the selling organization continues to drive more discipline and fiscal responsibility into our relationships with corporate customers and travel agencies. While providing value to them, we are increasing the return to United. The team is better aligning discount practices with the strong market environment and we have taken the steps of removing non-performing accounts from our corporate portfolio."
Including the first two months of operations after a lengthy Chapter 11 case, UAL's first-quarter results fell short of expectations and disappointed Wall Street. Excluding reorganization items, a net loss of $306 million was slightly larger than a year earlier. Rising unit costs--up 3 percent when excluding fuel--were seen as one culprit.
"We are making certain that we improve on that number," Tilton said today. "The second quarter already shows progress." He detailed elements of the newest cost savings plan: cutting $60 million from marketing and advertising expenses and $100 million from general and administrative overhead expenses, "escalating our cost of sale reduction program," and eliminating "1,000 salaried and management positions out of approximately 9,400 by year-end."
Moreover, the airline will look to "reduce demand-creation spending to a more moderate level and instead focus on keeping customer demand high by delivering excellent products," according to a spokesperson.
For example, United will continue to follow a path of product differentiation, including premium offerings on transcontinental routes and aboard regional jets, and planned enhancements in premium classes on overseas flights. "I'll meet tomorrow morning with 50 corporate accounts. They have expectations of a productivity experience," Tilton told attendees at the Merrill Lynch conference.
The airline this year also has been aggressively raising fares. "We have introduced multiple fare initiatives to lift arbitrary caps ... and to restore important fares rules, such as minimum stays," Tague said. "Though only partially matched by our competitors, we continue to believe that these initiatives are revenue-positive for United and the industry." He acknowledged that stronger revenue trends, while encouraging, "do not meet [the company's] expectations or reflect the full potential of this airline."