Turbulence Subsides At United A Year After Passenger Services System Cutover

A year ago this month, United Airlines in the wake of the merger with Continental Airlines was reeling from a buggy transition to a single passenger services system, aggravating customers with unsynced passenger name records, missing itineraries, check-in troubles, mileage accrual issues, upgrade challenges and drawn-out hold times to speak with customer service agents.

The subsequent months didn't get much easier for United or its customers. There was a period of woeful operational performance last summer, followed by evidence of deteriorating corporate buyer sentiment and business travelers jumping to competitors.

That turbulence since has subsided: System glitches largely have been addressed, operations have stabilized and, according to United, corporate business that fled to other airlines is returning.

"Obviously 2012 was a big year for United, and frankly it's a year we're glad to have behind us," said executive vice president of marketing, technology and strategy Jeff Foland during a recent interview. "Integrating an airline of this size is not an easy task. We know we made our fair share of mistakes, but we also accomplished a lot last year. Most of the integration work is behind us—not all of it, but most of it—and we're full-speed ahead at advancing the business again. That's a very refreshing place for us to be."

Righting What Went Wrong 

Since the post-transition period of glitchy systems and service disruptions, Foland said "high-priority service IT interruptions" have declined significantly, and "the time it takes us to resolve these issues has been reduced by more than 70 percent since the second half of last year."

Serving as anecdotal evidence of stable operations, gripes from frequent flyers on message boards like FlyerTalk about United systems have waned from the post-cutover uproar.

While the passenger services system was among the most profound and widely discussed system hiccups, Foland said Continental and United's "very complex environment" included more than 1,400 IT applications that had to be addressed in a single-carrier configuration. Additionally, "hundreds, if not thousands, of business processes also had to be changed during that same time period."

"We had loyalty programs to integrate," Foland said. "There were all sorts of process and policy elements that had to change. There was boarding process integration, a plethora of operational process integrations, credit card program integrations. When you talk about system integration, the systems support a lot of these processes."

United acknowledged that it attempted to change too much too quickly. Last year it was "stitching together these 1,400 applications" and "simultaneously retiring hundreds of applications in the process," Foland explained, and the seams showed. "When you have that much change and that many applications and you're stitching it all together, you have data that is flowing across systems in ways they weren't designed to flow in the ways the systems were originally architected years back."

While United continues to tie together systems and business processes, the largest hurdles appear to have been cleared, and "by the end of this year, we will be very, very close to being completely done with that, with only a few loose ends to tie," said Foland.

Meanwhile, as most critical systems now are largely linked, "system stability has dramatically improved," Foland claimed, and "our call center performance has dramatically improved since last year."

Though glitches sometimes still arise, United has built what Foland called "self-healing and self-identification mechanisms in all of our critical systems so that they recognize issues before a human being would even realize there's an issue."

Operational Stability Improves 

If system glitches weren't enough to turn passengers off, United last summer also posted lackluster operational performance. The low point came in July 2012, when only 64 percent of the carrier's flights arrived on time, according to data from the U.S. Department of Transportation.

United CEO Jeff Smisek at the time acknowledged the carrier "added new stress to the system by simultaneously converting to a single passenger system, implementing hundreds of new processes and procedures, rerouting aircraft across our network and harmonizing our maintenance programs. Those changes were in large part responsible for the degradation of our operational performance."

Since September 2012, however, the airline has righted itself by averaging "over 80 percent on-time" performance, according to a United statement issued this month.

It's no surprise that corporate travelers sought solace with other airlines, and the carrier on multiple occasions last year referenced that loss of business. Amid United's troubles, corporate travel buyer opinions of the carrier fell dramatically, according to Business Travel News' Annual Airline Survey, released in November.

Citing customer surveys and interactions, Foland claimed a reversal. "Sentiment across the board from customers and certainly within the corporate community has risen significantly over the past few months," he said.

Smisek during an investment conference this month said the carrier "lost some of the customer experience, some of the customer service, in the integration. We're getting that back." He pointed to the improved operational performance as well as investments in products as keys to winning business back.

"We're recovering the temporarily lost corporate share that we had through the torn-up road last summer," Smisek said. While both managed and unmanaged corporate travelers "fell off last summer, as you would expect them to, the unmanaged travel fell off even more than the managed travel. We're working hard to get both back, and the way you get them both back is just proving yourself."

Smisek highlighted ongoing training initiatives and employee incentive programs as ways United is improving customer service. Additionally, the airline is investing in facilities and bringing to 300 airplanes by the end of the year satellite-based Wi-Fi systems, which are operable for transoceanic travel.

While United declined to share corporate-specific revenue data—some of its competitors release that information—to prove the returning business, Foland said the airline is "encouraged by what we're seeing. Work is not done. I don't want anyone to misinterpret that we think we're done. Every day, we're improving and gaining momentum. We're pleased but not satisfied."

Smisek, meanwhile, noted that United's unit revenue growth is a good indicator that higher-yielding business is returning. "The trends we're seeing is the business is coming back," he said. "You're seeing our [passenger unit revenue] results. You'll see it in our yields. And that's how you'll judge how well we'll get it back."

Indeed, the carrier's passenger revenue per available seat mile lately has outpaced the industry average, according to analysts. Cowen Securities airline analyst Helane Becker in a March 25 research note wrote that "United became the PRASM growth leader among the airlines last month when it reported a 7 percent increase." Yet, Deutsche Bank analyst Michael Linenberg noted that United's recent PRASM growth is coming "after more than year of underperforming industry PRASM."

System Upgrades Ahead 

While last year's service disruptions certainly were felt by travelers, some complications struck closer to home for travel buyers and managed travel processes. As part of its transition to a single passenger services system, United suspended sales of Economy Plus seating through global distribution system channels and halted its prepaid PassPlus program. While the latter has been restored, Economy Plus still is not available through GDS channels. "We expect to be rolling out Economy Plus on a more broad basis in the second half of this year," said Foland. "We're making progress there."

United senior vice president of sales Dave Hilfman last year told The Beat that combining United and Continental on a single system would enable the merged airline to provide additional details in corporate client reports, including company-specific data on ancillary spending, on-time performance and baggage handling.

Those enhanced reports, "which reflect certain operational and value metrics by company," according to Foland, were relaunched late last year. "That's back up and operational for the new company, and our sales managers across North America started taking these reports to their accounts in the fourth quarter of last year, and we'll do more of that this year."

With baseline functionality largely restored to United's systems, the carrier is eyeing enhancements. Among projects underway are new interfaces for airport employees and contact center agents, which Foland called a "much more efficient system—an intuitive point-and-click system" that should speed customer service interactions.

Additionally, the carrier now is "rolling out new e-commerce improvements" around its website, mobile applications and kiosks, Foland said. "We're rolling out in phases new features, look and functionality this year, but in the second half of this year—really in the fourth quarter—is when we're targeting a truly major overhaul in our e-commerce channels. This is going to be a step change from where we have been pre-merger and certainly in the past 18 months. We feel good about that."