The following letter was recently sent to Jeff Smisek, CEO of United Airlines. It describes a spreading practice where highly profitable airlines (with the notable exception of Southwest) put their loyal employees jobs up for auction to the lowest bidding outside vendors. This results in less experienced workers handling these jobs. Airline passengers see many of these workers on the tarmac.
Dear Mr. Smisek,
Two stories have come to public attention about your airline, which invites some serious introspection by you and your fellow executives who make millions of dollars a year.
The first appeared in the January 23, 2015 edition of the Wall Street Journal titled, "Suddenly Flush Airlines Debate How to Use Cash." The article posed the choices: for increased services for consumers and reduced fares; for investors to cut debt and buy back stock. There was no indication of a cash dividend increase. Then this paragraph: "United returned $320 million to shareholders last year through share repurchases, and it said Thursday it could accelerate its buybacks with extra cash flow." Stock buybacks -- really a poor use of productive capital -- are favored by executive suites as a way to elevate executive compensation compared to cash dividends.
Now comes the second story that was not so widely publicized. Your subordinates have been instructed to outsource 2,000 union jobs under a vendor bidding process that you will throw against your loyal skilled workers to match, or else. Twenty-eight stations at airports are affected in this round. You hope to save $2.7 million out of the pay of long-time United Airlines workers (many who make $15 per hour and benefits) on the tarmac at dawn or dusk, and rain, snow or shine.
Do these two stories prod you to wonder what's going on in your monetized mind that excludes common decency and elemental labor management relations? Do you think that vendors' lower paid, inexperienced labor pool is not going to cause you problems down the road?
And does a merged airline (with Continental) planning more unproductive stock buybacks to pile on the $320 million in 2014 have any qualms squeezing 2,000 already hard-pressed workers with families out of $2.7 million (not to mention other similar plans, past and future), astonishingly at a time of record profits? Squeezing appears to be your corporate policy tool for your passengers as well -- for example, squeezing their leg room, squeezing them by innumerable fees and penalties, and squeezing their time by delays on the phone in responding to their questions.
Why is it that a far tighter oligopoly of domestic airlines than before deregulation mimics each other's race to the bottom in labor and consumer relations, instead of mimicking better practices by Southwest Airlines with a far more consistent record of profits and no layoffs? Does this perverse behavior also make you wonder?
Mr. Smisek, you're pushing the envelopes in ways that reflect a power trip -- that is if you can get away with it, you will. At this point I am reminded of the courteous UAL of the Sixties, Seventies and early Eighties with services and attentiveness, with a fine record of domestic maintenance standards. That history should provide you with some contemplation about the role of top management over the years.
Consider this advice: drop the risky outsourcing; treat your employees as Southwest does; and stop ratcheting up the fees for baggage, changes of reservations, etc. Unless, that is, you believe that customer backlash, investigations by media and lawmakers and lower job gratification are not anywhere on your horizon.
Your response is welcomed.