United CEO Glenn Tilton told investors in a conference call to expect the airline to double corporate revenues in four years.
Mark Greenberg, the president of United Airlines, announced a goal to double the airline’s earnings by 2017. As part of this effort, he said he would double the amount of miles per mile flown on the carrier’s frequent flier program, MileagePlus. United Airlines currently has a 2-1 ratio of miles flown to miles earned, which means customers fly twice as many miles for every mile earned. Greenberg, who was named CEO of the airline in February, said he has set a target of doubling the ratio.
United CEO announces goal to double MileagePlus revenue in four years
Gary Leff 6. June 2021 Scott Kirby, CEO of United Airlines, spoke Thursday at the 37th annual Alliance Bernstein Strategic Solutions Conference and explained that his vision for cost reduction is to reduce the burden of redundant management and processes without sacrificing investment in products. He said they will cut $2 billion in costs, won’t make a dime on customer products, in fact we will spend more on these things, and noted that new products will be announced soon.
Reap the full benefits of the pandemic
In a sense, cutting billions of dollars in costs without any effect on the product is a gratuitous notion, assuming that the airline accumulates many costs over time that are difficult to eliminate. On the other hand, it takes a pandemic to solve it. My humble experience is that a sclerosis develops in organizations and a passivity towards projects that may have started as experiments, but are continued because there are groups who like them, not because they create value. As Kirby noted later in the discussion, in the past it would have been hard to get rid of many unprofitable lines because people loved them and employees were emotionally attached to them, but today they just aren’t renewed. That’s fine, and crises can be good for an organization if they force you to shift your focus and start over. You wouldn’t wish them on yourself, but you might find that you’d be better off on the other side if you’d experienced them.
doubling MileagePlus savings could be bad forcustomers
One area where I think Kirby needs to move away from his vision of cutting costs without penalizing customers is the MileagePlus program. During the discussion, he said that airline spending on credit cards [in general] is now increasing … and that credit card spending is back to 2019 levels. Credit card spending is driving the financial performance of MileagePlus, which lagged behind American and Delta through 2020. Just before the pandemic, United struck a deal with Chase that will make the airline even more money. However, this growth in turnover is not enough. On the contrary, Kirby says, the goal I have set for the team is to double the EBITDA of this company…. in four years. And to double the revenue, you’ll need to roughly double the number of co-branded card members or lower the cost of MileagePlus. And it’s not easy to double – we’re talking 19% annual growth over the base case, which already includes the new economic benefits of the co-branding agreement with Chase.