Flight Risk

Af­ter a trou­bled merger, United fi­nally turns a profit—but fails to grow

Bloomberg Businessweek (Asia) - - CONTENTS - BY DRAKE BEN­NETT

Early last sum­mer, a team at United Air­lines set out to dis­cover what both­ered its pas­sen­gers most. The air­line col­lects 8,000 cus­tomer sur­veys a day, and there was a lot to choose from: Was it ex­tra fees for lug­gage? The lack of legroom? The sour, thin cof­fee? Was it be­ing forced to spend 20 hours in a frigid mil­i­tary bar­racks in New­found­land (as pas­sen­gers on a United flight to Lon­don did last June)? How about the car­rier’s ten­dency to lose the one bag you re­ally need? (On June 17, 2014, Rory McIl­roy tweeted: “Hey @united landed in Dublin yes­ter­day morn­ing from Ne­wark and still no golf clubs... Sort of need them this week.”) Could it be the prob­lems with the reser­va­tion sys­tem that caused wide­spread de­lays in 2012, and again in 2014, or the com­puter glitch on July 8, 2015, that led the air­line to sus­pend all its flights, all over the world, for two hours? In Oc­to­ber, United failed to pro­vide a wheel­chair to a pas­sen­ger with cere­bral palsy; he had to crawl off the plane.

Ev­ery air­line has its hor­ror sto­ries, of course— air travel is full of op­por­tu­ni­ties for cus­tomer dis­en­chant­ment. But United has proved an in­dus­try leader: On all ma­jor per­for­mance met­rics—de­lays, can­cel­la­tions, mis­han­dled bags, and bumped pas­sen­gers—United has, since 2012, been re­li­ably the worst or near worst among its com­peti­tors. In 2012, ac­cord­ing to the U.S. De­part­ment of Trans­porta­tion, United was re­spon­si­ble for 43 per­cent of all consumer com­plaints filed against U.S. air­lines. It fin­ished last among North Amer­i­can nondis­count air­lines in the 2015 J.D. Power & As­so­ciates cus­tomer sat­is­fac­tion sur­vey. Re­cently the car­rier agreed to pay $2.8 mil­lion in fines for tar­mac de­lays and the poor treat­ment of dis­abled pas­sen­gers. “United is off-the-charts worse than any­thing I’ve ever seen,” says Lenny Mendonca, a re­tired senior part­ner at McKin­sey. De­spite hav­ing flown more than 3 mil­lion miles with the air­line, he says, “If I have any other al­ter­na­tive, I will fly some­one else.”

It’s been five years since United Air­lines and Con­ti­nen­tal Air­lines com­bined to form what was at the time the world’s largest car­rier, and the merger hasn’t gone well. In 2012 and early 2014, when Amer­i­can Air­lines Group, Delta Air Lines, and South­west Air­lines re­ported large, and in some cases, record prof­its, “the new United” lost money. Earn­ings calls be­came an op­por­tu­nity for then-Chief Executive Of­fi­cer Jef­fery Smisek to apol­o­gize. “I know we cre­ated some cus­tomer dis­ser­vice be­cause of all the changes we made so quickly, and I apol­o­gize for that,” Smisek said in July 2012. “We know we can do bet­ter and are tak­ing actions to do just that,” he promised in April 2014.

For the CEO, how­ever, things got worse. Last Septem­ber, Smisek re­signed along with two other top ex­ec­u­tives as the De­part­ment of Jus­tice in­ves­ti­gated whether the air­line had tried to im­prop­erly in­flu­ence the Port Au­thor­ity of New York & New Jersey, which op­er­ates the re­gion’s ma­jor air­ports. One month later, Smisek’s suc­ces­sor, Os­car Munoz, suf­fered a heart at­tack and went on med­i­cal leave. On Jan. 6 he had a heart trans­plant. Although United prom­ises he’ll re­turn “at the end of the first quar­ter or the be­gin­ning of the se­cond quar­ter of 2016,” no one can deny that a com­pany that had long en­dured calls for a shake-up has been well and thor­oughly shaken in a way that has both com­pli­cated and cat­alyzed its ef­forts to rein­tro­duce it­self to the world.

“We’ve been out front ac­knowl­edg­ing that, ‘Hey, it would have been great to get it to­gether be­fore year five,’ ” says Brett Hart, United’s gen­eral coun­sel and in­terim CEO. But the air­line, he in­sists, is get­ting it to­gether now: United’s num­bers for on-time ar­rivals, can­cel­la­tions, and bag­gage han­dling in re­cent months have been the best since the merger. “Peo­ple see the planes com­ing in and go­ing out on time,” he says. “Em­ploy­ees’ in­ter­ac­tions with cus­tomers are dif­fer­ent. Our cus­tomers’ re­sponse to the ser­vice is im­prov­ing. Peo­ple are say­ing, ‘You know, this feels like a new day.’ ” The se­cond quar­ter of 2015 was the air­line’s most prof­itable ever, with $1.3 bil­lion in net in­come, ex­clud­ing spe­cial items. In the third quar­ter, it climbed to $1.7 bil­lion.

There have been false dawns be­fore in the long saga of the United and Con­ti­nen­tal merger—it’s the Zeno’s para­dox of merg­ers, never quite reach­ing the des­ti­na­tion. De­spite its record prof­its, the air­line has still strug­gled to grow—year-over-year, rev­enue was down 4 per­cent in the se­cond quar­ter of 2015 and 2.4 per­cent in the third. The im­prove­ments the air­line has made have, in many ways, sim­ply brought it back to where it be­gan. Af­ter its “cus­tomer ex­pe­ri­ence” team went through the com­plaints from last sum­mer, it set­tled on a straight­for­ward prob­lem: the com­pli­cated board­ing process United put in place in 2013, which it says it has fixed and will up­date soon. “It’s primed for im­prove­ment,” says Vicki Bryan, a trans­porta­tion an­a­lyst at Gimme Credit who’s been par­tic­u­larly crit­i­cal of United. “But I still see this com­pany very much in limbo.”

Con­nie Gar­cia works in cus­tomer ser­vice for United at Ne­wark Lib­erty In­ter­na­tional Air­port. Her sis­ter also works there, as does her hus­band, in fa­cil­i­ties man­age­ment. “It’s sort of a fam­ily busi­ness for me,” she says. She re­mem­bers hear­ing cus­tomers cheer­ing in the ter­mi­nals on Sept. 8. Cu­ri­ous, she asked around and learned that Smisek was step­ping down. Glo­ria Reid, a flight at­ten­dant su­per­vi­sor, was down­stairs in the Ne­wark crew lounge, where she says an im­promptu party broke out. “Ev­ery­body was very happy,” she says, “ex­tremely happy.”

The events that led to Smisek’s res­ig­na­tion took place a year af­ter he be­came CEO of the merged air­line. In Septem­ber 2011, he and two of his senior gov­ern­ment af­fairs ex­ec­u­tives had din­ner with David Sam­son, the Port Au­thor­ity chairman, at a Man­hat­tan trat­to­ria called Novita. Smisek was push­ing Sam­son to make hun­dreds of mil­lions of dol­lars’ worth of im­prove­ments at United’s Port Au­thor­ity-op­er­ated

Ne­wark hub. As re­ported last spring by Bloomberg, Sam­son asked for a fa­vor in re­turn: He wanted the new United to re­store a dis­con­tin­ued Con­ti­nen­tal flight from Ne­wark to Columbia, S.C., a short drive from a va­ca­tion house Sam­son and his wife owned.

Over the fol­low­ing months, Sam­son re­it­er­ated his re­quest sev­eral times and said he was block­ing the air­port im­prove­ments. United added back the un­prof­itable flight. The “chairman’s flight,” as Sam­son liked to call it, was sched­uled per­fectly for his week­end trips and might have re­mained an­other ob­scure bit of New Jersey horse-trad­ing if not for the Bridge­gate scan­dal, which fol­lowed the in­ten­tional snarling of traf­fic in Fort Lee, N.J., by Port Au­thor­ity of­fi­cials and aides to New Jersey Gov­er­nor Chris Christie to pun­ish a lo­cal politi­cian. Four days af­ter Sam­son re­signed, in March 2014, for his role in the traf­fic prob­lems, the chairman’s flight was dis­con­tin­ued.

The U.S. at­tor­ney for New Jersey hasn’t brought charges against any­one at the car­rier, but the com­pany’s an­nounce­ment made it clear that Smisek and the two other United ex­ec­u­tives at the din­ner, Nene Fox­hall and Mark An­der­son, were step­ping down be­cause of United’s own in­ter­nal in­ves­ti­ga­tion. Smisek left with a sev­er­ance pack­age worth $28.6 mil­lion. Smisek, Fox­hall, and An­der­son didn’t re­spond to re­peated re­quests for com­ment.

Smisek, an at­tor­ney, had been part of the team that turned around the strug­gling Con­ti­nen­tal in the 1990s. Three months af­ter be­ing named that air­line’s CEO, in Jan­uary of 2010, he in­ter­rupted merger talks be­tween United and US Air­ways to pro­pose Con­ti­nen­tal as a bet­ter part­ner. “I didn’t want him to marry the ugly girl,” Smisek said of Glenn Til­ton, then United’s CEO, a com­ment for which Smisek apol­o­gized to US Air­ways CEO Doug Parker, who now runs Amer­i­can.

Peo­ple who worked closely with Smisek de­scribe him as funny and ex­tremely smart but also re­served and, on oc­ca­sion, tone-deaf. One for­mer Con­ti­nen­tal col­league re­mem­bers Smisek get­ting up from the ta­ble af­ter a meet­ing with pi­lots union rep­re­sen­ta­tives and im­me­di­ately pulling on the leather gloves he used to drive his Porsche. Bryan, the Gimme Credit an­a­lyst, ar­gues that Smisek’s aloof­ness par­a­lyzed his man­age­ment team and made them slow to see prob­lems de­vel­op­ing. “You have an elit­ist cul­ture prob­lem,” she says. “And who is con­tent to work for this kind of cul­ture? Not the kind of per­son who’s go­ing to step up and say, ‘We need to do it like this.’ No, they’re go­ing to do what Jeff says.”

Many of the merged air­line’s front-line em­ploy­ees com­plained that man­age­ment, hav­ing promised sig­nif­i­cant sav­ings to Wall Street, fo­cused on cut­ting costs above all else. There were lay­offs, fur­loughs, and bag­gage han­dling and gate agent jobs were out­sourced. For­mer Con­ti­nen­tal em­ploy­ees say they’d been dis­cour­aged from giv­ing out vouch­ers to pla­cate un­happy cus­tomers who had been bumped from their flights, though United says they hadn’t been. Even the new air­line’s uni­forms seemed the re­sult of cost-cut­ting. “There were a lot of com­plaints about the qual­ity of the uni­form,” Gar­cia re­calls.

The depth of em­ployee dis­con­tent helps ex­plain the merged air­line’s poor per­for­mance. “Un­happy me­chan­ics do not tend to go the ex­tra mile—or the ex­tra foot—to get the air­plane ready to go,” says Ge­orge Fer­gu­son, a Bloomberg In­tel­li­gence air­line an­a­lyst. Long­time fliers no­ticed the de­lays, can­cel­la­tions, and lost bags—and the short-tem­pered gate agents and flight at­ten­dants. “As in­di­vid­u­als, they are re­ally nice peo­ple,” says Jared Spool, a Web design con­sul­tant who flies 150,000 miles a year on the air­line. “But they are in such a hor­ri­ble sit­u­a­tion, con­stantly try­ing to deal with cus­tomers that are not happy, and they’re com­pletely pow­er­less.”

Some of the prob­lems that have be­dev­iled the merged air­line were in­her­ited. Dur­ing a bru­tal three-year bank­ruptcy that ended in 2006, United slashed salaries, de­faulted on its cor­po­rate-pen­sion plan, and stopped up­grad­ing fa­cil­i­ties and re­plac­ing planes, leav­ing a deeply em­bit­tered work­force and one of the old­est fleets in the busi­ness. Ev­ery­thing from bag­gage han­dling to air­craft reli­a­bil­ity suf­fered. And even to­day, some la­bor is­sues re­main beyond the com­pany’s con­trol. The for­mer Con­ti­nen­tal and United flight at­ten­dants, the only work group cur­rently with­out a pre­lim­i­nary joint con­tract, are sharply di­vided over whose work rules to adopt. Un­til they de­cide, there’s lit­tle United can do.

One thing Smisek and his executive team clearly ne­glected was en­sur­ing that flights left and landed on time, and build­ing in al­lowances for the storms and me­chan­i­cal fail­ures that in­evitably oc­cur. Delta, by con­trast, set out af­ter its 2008 merger with North­west Air­lines to elim­i­nate flight can­cel­la­tions un­re­lated to storms and largely suc­ceeded. The ex­ten­sive tech prob­lems of the United-Con­ti­nen­tal merger were also avoid­able. Rather than com­bin­ing the car­ri­ers’ reser­va­tions sys­tems, web­sites, and fre­quent-flier pro­grams over time, the com­pany merged all three on the same day, max­i­miz­ing dis­rup­tion and con­fu­sion. And in adopt­ing the pas­sen­ger ser­vice sys­tem from Con­ti­nen­tal, the smaller of the two air­lines, United had to train a much larger num­ber of peo­ple to use dif­fer­ent soft­ware. In the end, that train­ing proved in­ad­e­quate. Con­ti­nen­tal’s sched­ul­ing pro­gram, when adopted by the merged air­line, lost track of pi­lots, lead­ing to flight can­cel­la­tions, and as­signed flights to pi­lots who were re­tired or dead.

An in­ci­dent on July 14, 2014, crys­tal­lized the lack of trust be­tween United em­ploy­ees and man­age­ment. A flight was about to de­part San Fran­cisco for Hong Kong when men­ac­ing graf­fiti—the words “bye bye” and two crude faces—were found

scrawled in oil on the fuse­lage. The flight at­ten­dants on board re­fused to fly un­less the plane was given a full ad­di­tional se­cu­rity sweep—Malaysia Air­lines’ Flight 370 had gone missing four months ear­lier. United’s flight op­er­a­tions, safety, and main­te­nance teams, along with the plane’s pi­lots, re­sponded that it had al­ready been thor­oughly checked. The stand­off ended with the can­cel­la­tion of the flight, and the flight at­ten­dants were fired for in­sub­or­di­na­tion.

At 3:30 p.m. Cen­tral time on Sept. 8, United alerted an­a­lysts of a con­fer­ence call that would be­gin an hour later. When the an­a­lysts di­aled in, they heard Henry Meyer III, the com­pany’s brand-new nonex­ec­u­tive board chairman, an­nounce Smisek’s im­me­di­ate res­ig­na­tion. His re­place­ment, Munoz, was a board mem­ber at United and, be­fore that, Con­ti­nen­tal, but was oth­er­wise an out­sider to the air­line in­dus­try. He came from CSX, where he was the chief op­er­at­ing of­fi­cer and pres­i­dent. He’d been seen as a likely pick to run the rail gi­ant—early in his ca­reer he’d worked both sides of the cola wars, first at Pep­siCo and then at Coca-Cola. When an an­a­lyst on the call asked Munoz whether, in light of the sud­den change at the top of United, any ma­jor de­ci­sions would be pushed into the fu­ture, he said that putting things off “is not en­tirely in my vo­cab­u­lary, cer­tainly.” When an­other asked when the com­pany would choose a new chief fi­nan­cial of­fi­cer (a post that re­mains un­filled), Munoz replied, “It’s my first half-hour.”

Munoz threw him­self into the task of rein­tro­duc­ing the air­line to its cus­tomers. He called Gor­don Bethune, the beloved Con­ti­nen­tal CEO who had turned the air­line around in the 1990s, and in­vited him to Chicago, where the two talked about how to re­pair the air­line’s dis­mal rep­u­ta­tion. United took out ads in news­pa­pers across the coun­try ad­mit­ting that “we haven’t lived up to your ex­pec­ta­tions or to the prom­ise and po­ten­tial” of the 2010 merger. Munoz wrote an open let­ter to em­ploy­ees promis­ing to “give you the right tools to de­liver the ser­vice and reli­a­bil­ity I know we are ca­pa­ble of.” He de­scribed a con­ver­sa­tion with a long­time United flight at­ten­dant “near tears” who told him, “I’m just so tired of hav­ing to tell peo­ple I’m sorry.” Dur­ing the hec­tic days be­fore Thanks­giv­ing and Christ­mas, United man­agers handed out free bottles of wa­ter to cus­tomers at the air­line’s hubs—an up­dated ver­sion of a Bethune tac­tic.

Munoz talked to em­ploy­ees wher­ever he flew, of­ten sur­pris­ing them in their break­rooms. “He lis­tens ex­cep­tion­ally well,” Bethune says, “and he un­der­stands the value of an en­gaged work­force.” On his se­cond day on the job, Munoz walked the floor of the air­line’s net­work op­er­a­tions cen­ter in Wil­lis Tower, some­thing peo­ple there re­called see­ing Smisek do only a hand­ful of times (usu­ally with a cam­era crew in tow). In a story that quickly made the rounds, Munoz crashed an af­ter-work em­ployee party at a down­town Chicago bar. The ap­proach seemed to be work­ing. “I think the way to talk about it,” says Sara Nel­son, a United flight at­ten­dant and the in­ter­na­tional pres­i­dent of the As­so­ci­a­tion of Flight At­ten­dants-CWA, “is the air­line was just in­cred­i­bly sick and Os­car Munoz is like a shot of peni­cillin. It’s go­ing to get bet­ter, but it has to have some time to ac­tu­ally set­tle in and work.”

In late Septem­ber, Mendonca, the for­mer McKin­sey part­ner, posted an open let­ter on the web­site Medium de­tail­ing his frus­tra­tion with United. Munoz e-mailed him, and the two set up a time to talk on Oct. 15. That day, Mendonca got an e-mail from Munoz’s as­sis­tant say­ing the CEO wasn’t feel­ing well. As United con­firmed the next day, Munoz had been hos­pi­tal­ized with a heart at­tack. The fol­low­ing Mon­day, the com­pany an­nounced Hart was the in­terim CEO.

Soft-spo­ken and cour­te­ously cir­cum­spect, Hart sat for an in­ter­view just be­fore Thanks­giv­ing in his Wil­lis Tower of­fice, down the hall from the one kept va­cant for Munoz. Asked what it was like to be the in­terim head of a mas­sive com­pany, he smiled: “There’s no real book on it. I looked around.” But, he added, “Os­car was with us long enough for us to have a very good un­der­stand­ing of how he wanted us to think about ex­e­cut­ing the plan and the var­i­ous fac­tors that we should take into con­sid­er­a­tion: how some­thing is go­ing to im­pact the over­all cus­tomer ex­pe­ri­ence, how it’s go­ing to im­pact our em­ploy­ees’ abil­ity to pro­vide great cus­tomer ser­vice, whether it’s in­no­va­tive.”

Un­der Hart, the air­line has kept up a steady stream of changes, some big, many small. On Oct. 23 it an­nounced an agree­ment with the lead­er­ship of its me­chan­ics union, then a month later a con­tract ex­ten­sion with its pi­lots. Both are con­tin­gent on votes by the unions’ mem­bers. The com­pany de­clared a mora­to­rium on out­sourc­ing air­port cus­tomer ser­vice and ramp jobs un­til 2017. Rep­re­sen­ta­tives from the com­pany’s uni­form ven­dors were brought in to hear em­ploy­ees’ com­plaints. Per­haps more sig­nif­i­cantly, the car­rier brought back free snacks in econ­omy class.

Then there was the cof­fee, an is­sue that, while hardly cen­tral to its busi­ness, sym­bol­ized United’s in­abil­ity to get things right. On Nov. 19 the air­line an­nounced it was chang­ing the cof­fee it serves on its planes and in its lounges from a brand called Fresh Brew to the Italian premium roaster Illy. It was wel­come news to cus­tomers and to the flight crews used to field­ing com­plaints. It was also a tacit ad­mis­sion that the choice of cof­fee af­ter the merger, a de­ci­sion that con­sumed thou­sands of man-hours, took nearly a year, and in­volved ev­ery­one from Smisek to the air­line’s head chef to the flight at­ten­dants, hadn’t worked out.

More fun­da­men­tally, United is re­ex­am­in­ing the way it boards planes. “There’s a lot of anx­i­ety around the board­ing process,” says Man­deep Gre­wal, the man­ag­ing director who led last sum­mer’s cus­tomer-sat­is­fac­tion task force. “You re­peat­edly see lower sat­is­fac­tion scores.” United’s board­ing process—five cor­doned­off lines cor­re­spond­ing to their own board­ing groups—was in­sti­tuted in 2013 to bring or­ga­ni­za­tion to the ex­pec­tant throng at the gate. But what Gre­wal’s team found was that the lines were self­per­pet­u­at­ing. As soon as some­one got in the queue, others felt com­pelled to do the same. Well be­fore board­ing time, the lines would trail out across the con­course. Re­gard­less of how long the process took, it felt longer to those go­ing through it.

Work­ing with plan­ners in United’s air­port op­er­a­tions de­part­ment, Gre­wal ran ex­per­i­ments with flights out of Phoenix and Ne­wark and came up with a sys­tem with only two main lanes: one for the group cur­rently board­ing and one for the group that was next. To pre­serve the pre­rog­a­tive of latear­riv­ing pri­or­ity pas­sen­gers, a “by­pass” lane was added. In late Oc­to­ber the board­ing process work­ing group took over a gate at Chicago’s O’Hare In­ter­na­tional Air­port for four weeks. They boarded sin­gle-aisle and twin-aisle planes, flights full of busi­ness trav­el­ers, and flights to leisure des­ti­na­tions such as Hawaii. Ac­cord­ing to Michelle Brown, Gre­wal’s coun­ter­part at air­port op­er­a­tions, “We’re clear­ing the gate area faster now and get­ting a bet­ter flow.” United is re­fin­ing its board­ing al­go­rithm and plans to roll it out later this year.

The routes planes fly are also evolv­ing. Pre­vi­ously, the air­line re­lied heav­ily on what’s known as lin­ear rout­ing: a plane start­ing in New York would land, say, in Chicago, then travel to Den­ver and San Fran­cisco and end its day in Seat­tle. The method max­i­mizes the hours each air­craft is in the air full of rev­enue­gen­er­at­ing cus­tomers, but bad weather at one air­port can cause de­lays and can­cel­la­tions along nu­mer­ous routes. In Novem­ber, United started in­creas­ing its use of “out-and-back” rout­ing. It also in­creased the amount of time bud­geted for turn­ing planes around, some­thing it hadn’t done even though, with newer, thin­ner seats, its planes were car­ry­ing more pas­sen­gers.

“We’re try­ing to find more of a bal­ance be­tween sched­ul­ing an air­line for max­i­mum ef­fi­ciency from an as­set per­spec­tive as op­posed to op­er­a­tions,” says Andy Buchanan, man­ag­ing director of in­ter­na­tional net­work plan­ning. “We’re find­ing, I think, a bet­ter mid­dle ground.”

Re­cent months have seen marked im­prove­ments in United’s per­for­mance. Its on-time and missed-con­nec­tions met­rics have been the best since the merger. Its rates for mis­han­dled bag­gage are also sharply down, ac­cord­ing to the lat­est De­part­ment of Trans­porta­tion sta­tis­tics. While the air­line hasn’t closed the gap with in­dus­try leader Delta on those mea­sure­ments, it’s at least pulled it­self solidly into the mid­dle of the pack. New planes have steadily been re­plac­ing older ones. And fliers are hap­pier: In­ter­nal cus­tomer sat­is­fac­tion scores were bet­ter in 2015 than in 2014, bet­ter in the fourth quar­ter of 2015 than in the third, and in De­cem­ber were the high­est in two years.

On Jan. 7, United re­leased an up­beat an­nounce­ment, quot­ing the chief of car­diac surgery at Munoz’s hos­pi­tal. “Given Mr. Munoz’s ex­cel­lent phys­i­cal con­di­tion and the rapid pace of his re­cov­ery prior to the trans­plant, we ex­pect a quick re­cov­ery and a re­turn to his du­ties as CEO,” he said. If Munoz has no com­pli­ca­tions from his heart trans­plant, he should be in the hos­pi­tal for 10 days. He’ll be able to drive a car in six weeks. A full re­cov­ery can take six months or more, but pa­tients can re­turn to work in two or three months if all goes well. Of course, as re­cent years should have taught ev­ery­one at United Air­lines, it’s best to plan for com­pli­ca­tions. Whether the com­pany’s board has done so re­mains to be seen; it has not pub­licly ad­dressed the del­i­cate but po­ten­tially nec­es­sary is­sue of a suc­ces­sor.

The air­line’s re­cent progress has oc­curred at a time of ex­ceed­ingly friendly mar­ket con­di­tions. Pas­sen­gers have proved will­ing for the past few years to pay higher fares, and to sub­mit, if grudg­ingly, to pay­ing on top of that for checked bags, legroom, and food. Most of United’s profit of late is due to his­tor­i­cally cheap fuel—a huge cost for air­lines—an ad­van­tage that may not last. Af­ter five cost-con­scious years, it will be hard for United to find any more sav­ings to squeeze out. And its ri­vals con­tinue to make gains. Delta re­cently passed United to be­come the se­cond-largest U.S. air­line by traf­fic. United’s com­peti­tor Amer­i­can, now the world’s largest air­line, has brought in record prof­its as it works through the chal­lenges of its own 2013 merger with US Air­ways.

The true test will be find­ing a way to grow in less for­giv­ing times. On Jan. 11, United re­ported that pas­sen­ger rev­enue has de­clined more than ex­pected, partly due to the Paris ter­ror­ist at­tacks. “Look, this is the air­line in­dus­try. We are ac­cus­tomed to win­dows open­ing and clos­ing and open­ing again,” says Hart. “So we are not hit­ting the pause but­ton in any re­spect.” <BW>

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