United: Can it Soar Back After a Forgettable 2012?

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2012 wasn’t a good year for United Continental Holdings (NYSE:UAL), but the airline is committed to crawling its way back.

When United and Continental Airlines merged in 2010, the two companies did so under the shared belief that the merger would help generate savings of more than $1 billion a year. What they didn’t expect was the trauma that followed.

The Wall Street Journal reports that the transition of the two airlines’ reservation system in 2012 is what marked the beginning of the chaos. United Chief Executive Jeff Smisek attributes the trouble to the company’s mistake of changing too quickly. When customers went to book tickets after the transition, they met with dreaded wait times, they couldn’t access their frequent-flier accounts, and they didn’t understand the new rules — leading the company to lose many of its customers to competitors. Since then, the airline has fixed the reservation problem and communication errors, and has also boosted the stability of its IT system. However, unfortunately for United, the airline has learned that despite these changes, travelers don’t forgive and forget all that easily.

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Two reservations outages last August and November especially stick out in costumers’ minds. The surge of canceled and delayed flights, only worsened by the airline’s inability to effectively handle changes to passenger reservation systems, hit the company hard. It lost money as its customers lost faith, pointing fingers at United’s poor management as a key factor that would lead to its downfall.

And the company may have fallen, but new efforts show that it is not ready to be down for long. It is now reworking its strategies, cutting costs, and making the necessary changes to bolster the good reputation the two separate airlines used to pride themselves on. In order to increase reliability and ensure that such wide-spread cancellation debacles never arise again, the airlines has put its older aircraft through “preventative maintenance” and has increased the number of spare planes that can replace and fill in as needed.

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United’s boarding system has also been revised, with five boarding lines replacing the previous two — an addition that has only proved to increase the airline’s efficiency and alleviate boarding stress.

And though customers have reported friendlier customer service and more positive flying experiences, United is still working through labor issues that have resulted from the merge. The airlines is continuing to mitigate drama as it consolidates the two company’s fleet of pilots, flight attendants, mechanics, ramp workers, and customer service agents. Pilots from United and Continental have reached a joint contract, but the other factions have yet to do so.

But now, 2 1/2 years after the major merger, United is finally witnessing its efforts paying off. Fielding less customers complaints and reporting increasing satisfaction, The Wall Street Journal reports that it posted its best on-time performance in 10 years, with 81 percent of its domestic flights arriving on time. Though the airline still has a long way to go before it can compete with its major rivals’ success rates, any sign of improvement is welcomed from the company. And while its customer complaints decreased more than a third in April, its customer-satisfaction scores also prove to be on the rise.

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Thus far, United has posted losses that account for underwhelming revenue gains coupled with the $1.2 billion  required for the integration effort. However, these losses, too, are decreasing, and the airline’s stock price is inching upward, up 87 percent from last summer. Shareholders are witnessing improvement and expressing more trust in the company — likely hoping that it follows in the footsteps of Delta Air Lines (NYSE:DAL) now that the company has demonstrated growing success as it continues to heal from similar acquisition issues.

Smisek admits that United still has a far way to go, explaining, “It’s measuring off a low base to say it’s materially improved,” but he understands that improvement is improvement, and it will only continue in the future. After all, he probably hopes that someday soon he’ll be able to take a page from Drake’s book and say, “Started from the bottom now we’re here.”

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