Interview: United CEO Jeff Smisek

Addis Ababa - The Federal Aviation Administration on Nov. 30 issued a single operating certificate to Continental Airlines and United Airlines, now recognized as a single entity. Work remains before the carriers fully act as one. For example, United early next year expects to begin using a common passenger services system, a milestone that would enable the merged carriers to "really look and feel like one airline," according to senior vice president of worldwide sales Dave Hilfman.

Meanwhile, United continues to integrate corporate contracts with its A++ transatlantic joint venture partners Air Canada and Lufthansa, and awaits Canadian approvals to launch a transborder JV with Air Canada. United CEO Jeff Smisek last week discussed those efforts with BTN's Jay Boehmer here at an event welcoming Ethiopian Airlines into Star Alliance.

What's the status of the single passenger services system?

We expect to have that completed in the first quarter next year. We are in the fairly advanced testing stages now. We're training our United employees to use the system, and we're making very good progress and all systems are go right now.

Does this bring a new feature set or is this just about tying everything together?

It will over time. We recognize that we had two different systems, and we needed to pick one. We picked Shares [a legacy Continental system furnished by HP] for a couple of reasons. One, we have significant intellectual property rights in Shares. And secondly, we have spent a lot of time offloading the host on Shares—making it more web-based and less tied to the mainframe, which means we can be much faster to market with product innovations. That's the right platform for us to get to.

We're not moving simultaneously to a new front-end on the system, because that means training all of the employees. So, we're only training half on the native Shares, but I believe roughly by the end of next year we'll have the new slick front-end for everyone, and have everyone trained on that as well.

But the system is a powerful system and I think it will be very beneficial for us in terms of speed to market. We have a lot of product development just sitting and waiting for PSS to go. We have a long queue, and we a lot of people chomping at the bit, but what we've done is focused our technology folks on getting us to a single passenger services system on time. Once that's done, the floodgates are open on the products.

So, you're saying the transition has put some product development on hold?

A lot on hold and also there's a lot of product development in the queue. The bad news is it's on hold, the good news is it's coming and Shares is the right platform to facilitate that.

There appear to be some regulatory hiccups on the Air Canada transborder joint venture. Where does that stand and what's your outlook?

Well, let's take it one by one. A++ is up and running and the transpacific joint venture [with Star Alliance partner All Nippon Airways], we're putting some finishing touches on that.

Now, the transborder joint venture with Air Canada has just gotten scrambled inside of regulatory issues. But like all things, you work your way through them. I don't know how they'll come out, because when you're in regulator-land you never know.

You've coordinated on corporate deals and agency agreements with your transatlantic joint venture partners. What about GDS agreements? Is that in the works right now?

No comment.

Can you give me an update on where transitioning corporate client contracts to the joint venture stands?

Let's take the JV aside. For the merger itself, we've had tremendous success because we offer the best network in the world—just on United alone, with no mention of Star Alliance—so it's been very appealing to corporate customers, and we're winning corporate customers in droves, which was a large part of what we were expecting to get out of the merger.

We are working on corporate contracts in the joint venture. We've had a number of successes and there are more to come, but the joint venture really just got up and running so it's still in the early stages, but I think that will be successful as well.

Are you willing to put any timeframe on that?

It takes time.

What's the early read on 2012 in terms of corporate demand?

I would say corporate demand is sort of skating sideways. I don't see it declining, but I don't see it increasing. As we talk to our customers for next year, we're not getting any significant feedback on declining demand. We're also not getting any significant feedback that it's going to come back screaming either. We have concerns in Europe, as you would expect. I think everybody's worried about that, and they should be worried because Europe has a lot of problems on its hands and it's slowly solving its issues, but it's taking time.

If you take a look at Latin America, it's on fire right now. Asia is doing well. And the U.S. domestic is actually doing pretty well right now too, so we're being cautious about next year. And we've already announced at United that we're not going to grow next year. We didn't grow this year—we even shrank a little—and we didn’t grow the year before. We're just being really cautious because with the world situation and the high price of fuel, what we've learned is if we're disciplined in our capacity we will make money, and we're kind of tired of losing money.