Operations Management at United Airlines

Operations Management

Operations management is the part of a company that is concerned with designing, implementing, overseeing and control of its business operations. It is responsible for ensuring that operations are run efficiently and in a way that satisfies the customers’ needs. It is also the part of a business that ensures input in the form of labor, raw material, information and energy are converted to desirable output, which could be good or services. The tactical design of operations management lies in the docket of senior management, but its implementation happens through collaboration between senior and junior employees.

Case Study

United Airlines boasts of being the largest airline in the world. It employs over 88500 employees in more than seven operating airlines. It is also publicly traded at the NYSE. However, in a recent Airline’s Quality Report, United Airlines came in last, scoring a negative figure of 2.4. Some of the areas investigated by the report revolved around the core services delivered by airlines, and this is a cause for concern this paper looks into the dismal performance of the airline, by investigating the operations management at the company. It begins with a general overview of some of the facts and issues related to United Airlines. A raft of recommendations is outlined in the end, which would help the organization to improve its performance.

Operations Management at United Airlines

United Airlines is a subsidiary of united continental holdings. It has its headquarters in Chicago Illinois. It operates in ten airline hubs in the US, Japan and Guam, among them, four of the United States' largest cities (United Airlines, 2013). Some of these hub cities include Chicago, Cleveland, Denver and Los Angeles. It serves 62 countries with 373 destinations, 228 domestic ones and 145 international ones. Moreover, it has an annual employee turnover of 140 million passengers as of 2012. It employs a large number of people, in specific, over 88500. A breakdown of its employee base reveals the following quick facts about per department labor numbers. There are 26216 employees working in the Airport operations and Cargo, 21,355 working in in-flight operations and another 11,475 working in management and administration (United Airlines, 2013). It is publicly traded at the NYSE, where it began trading on October 1 of 2010. However, it trades through its parent company, Continental Holdings. As of October 2013, its market capitalization stood at $10.5 billion.

The slogan for United Airlines is “Fly the Friendly Skies”, a slogan that was readopted after it initially dropped. The readopted slogan was a replacement for “Let’s Fly Together”, which had been chosen in October 2010, to replace another slogan, “It’s time to fly”. United involves itself in many corporate consumer relations activities, by sponsoring Chicago’s major sports teams, namely Bears, Blackhawks, Chicago Bulls, White Sox and Cubs (United Airlines, 2013). Moreover, the Blackhawks and Bulls play at the United Center, which United Airlines has naming rights up to 2013.

United Airlines also boasted of stakes in many travel and leisure companies, but this was before its merger with Continental Airlines. Some of these hotels include Westin Hotels and Resorts and Hilton Hotels Corporation. In its efforts towards greening, United converted to paperless operations, by implementing paperless flight decks. To achieve this, it deployed iPads to all pilots, which were intended to replace operating manuals, reference handbooks, navigation charts and other manual, paper-based items required by pilots (United Airlines, 2013). As a result of this shift, United Airlines has enjoyed benefits such as reductions in paper use, printing and fuel consumption. United Airlines has also attempted to adopt green fuel in flying its planes. For example, United was the first airline to fly a commercial aviation flight using Solajet, an algae-derived jet fuel, which contains only 60% of petroleum-derived fuel. Moreover, United Airlines also ordered 100 new Boeing 737 MAX9s, which is a fuel-efficient version of the Boeing 737 family of airlines.

United Airlines presents a paradox in the ratings of its operations. This is because the airline claims to be the best in the world (United Airlines, 2013). However, airline quality ratings beg to differ. In fact, United Airlines was ranked last in the most recent Airline Quality ratings released for the year 2012, receiving a score of -2.18 (Bowen & Headley, 2013). Some of the areas which caused United Airlines to perform so dismally included a drop in its on-time arrival performance, an increase in the mishandled baggage rate and a rise in involuntarily denied boarding rates. Moreover, the customer complaint rate increased from 2.21 to 4.24 per 100,000 passengers (Bowen & Headley, 2013). The combination of these factors is what led to a drop in its performance. Two factors should be most worrying, and these are the negative performance as well as the fact that the Airline was ranked last.

The most shocking thing, however, is the company’s reaction to this dismal performance. According to Adam Hartung (2013), United Airlines responded to these findings by saying that they did not care. This should be a cause for worry, judging from the fact that many of these metrics relate to how the consumer is handled ad treated. This is even more emphasized by the fact that the airline industry is a service industry, and as such, the quality of services should be excellent. For example, a finding such as poor on-time flight performance indicates the consistency in the arrival or departure of the flight as indicated. A poor performance then means that there were delays in the flight, a fact that is not likely to go down well with the consumer.

The cause for alarm is amplified due to the nature of the research ratings. Adam Hartung (2013) indicates that what is more worrying about these rankings is that the authors used data collected from the statistical performance. Thus, the research was not inclusive of customer feedback and response. It is likely then that if customer input were to be taken into account, then the gravity of the results would be exacerbated. The survey by the researchers did not involve itself in establishing consumer satisfaction (Hartung, 2013). Thus, though United Airlines claims that it is not worried about the findings, they should be worried and they should be concerned. One of the reasons why United Airlines is less responsive to such findings is that it is generally more focused on operational excellence (Hartung, 2013). The implication here is that United is more concerned about its operations rather than its service delivery. It is therefore imperative to take a look at the performance of United on the front of its operations management.

Operations management concerns itself with the efficient delivery of goods and services to the consumer. Operations management refers to the practice of ensuring that the production and delivery of goods to the consumer is successful (Collier & Evans, 2009). From this definition, it is evident that the consumer is at the epicenter of the process. The production of goods or services must be geared towards ensuring that the needs of the consumer are met and that the consumer is satisfied. In the case of United Airlines, predominantly a service delivery enterprise, the process must be geared at ensuring that the services lead to customer satisfaction. There are many avenues through which the Airline interacts with the consumer such as at the point of payment and at the point of service delivery. Each of these can be developed in such a way that customer satisfaction is achieved.

United Airlines faces one of the constraints that many other organizations also have to cope with, which is homogeneity in customer demand. According to Young (2009), managers often have to contend with the fact that consumers usually want the same thing at the same time. The problem is perhaps more emphasized in service delivery organizations, where the resources required to cater to each individual consumer may be limited.

In the case of united airlines, it might only be able to offer a set number of planes to a particular destination at a particular time. The problem arises when consumer demand exceeds the organization's capability to meet that need. In order to tackle this problem, the organization must find a way to diffuse these demands by distributing it over a period of time during which the organization can comfortably manage to satisfy the need. This is referred to as yield management, which is a strategy whereby companies offer deals to the consumer, which encourage consumers to come at off-peak times. United Airlines commonly employs this strategy. This is by charging different prices for the same flight, based on the day of the week and the time of the day. The distributed pricing is meant to deter people from traveling at peak hours and encourage them to travel during less-desirable hours, thereby reducing the demand at those peak-hours.

One of the areas in which United Airlines has managed to leverage itself strategically is in its airline reservation system. United Airlines, is able to use the information content that it acquires from its strategic input form, to provide a detailed analysis of and to develop insightful pricing. It also uses this content to make promotional decisions (Bettley, Mayle, & Tantoush, 2005). The combination of these factors is what underpins United’s competitive advantage over its competitors. Nonetheless, the combination of these factors does not suffice to cater to the most essential part of the operations management process, which is to ensure that the consumer is satisfied.

It has been reported that United Airlines has not been so responsive to the Airline Quality ratings that ranked it last. It has also been indicated that these ratings focused on four key areas, which are arrival on time, mishandled baggage rates, involuntary denied boarding rates and customer complaint rates. In its defense, the company argued that it was performing well in many other areas that were not evaluated for the purpose of these rankings. These areas include the provision of larger overhead bins, in-flight satellite, Wi-Fi and better service delivery tools for co-workers (Cho, 2013). The validity of these assertions is hard to verify, as it may also be the case that they are simply a public relations gimmick.

However, even in the case that the company was actually engaging in the above activities, a problem still exists. This problem is underpinned by the fact that the dismal performance is based on metrics that assess the fundamental services provided by an airline. Moreover, the problem is exacerbated by the fact that they stem from a relatively more credible source since they are based on statistics obtained from the department of transport, which is generally impartial.

Evidently then, United Airlines is facing several problems. It is imperative for the company to address this problem since this problem derives from the core of its service delivery mandate. Some of the recommendations that would be beneficial in resolving the issues at continental airlines are outlined below.

The company should engage in systems that would reduce the mishandling of baggage

The company should develop strategies through which it can reduce the number of denied boarding rates. For example, it can choose to purchase more airlines or it can partner with another airline such that some of its excess flights are transferred to this partner company

The company should also work with its pilot in order to enhance arrival times. In particular, it should engage with that section of its pilots that may not be keeping time.

United Airlines should also focus more on improving the working standards for its employees. United Airlines employees have complained that the company is too focused on technology upgrades (Jordan, 2012). Seeing that the above complaint was coming from its pilots, it is possible that this was the cause of delayed flights. Moreover, employees are the service deliverers and it is likely that when they are unsatisfied, service delivery output will be dismal. Thus, United Airlines would improve standards for its employees and this will lead to better service delivery.

Once implemented, the above recommendations will then be evidenced in a reduction in the number of customer complaints. Another way in which the company can reduce consumer complaints is to engage more often with them and to respond promptly to these complaints.

Conclusion

This paper has discussed the need for United Airlines to change its approach towards its operations management. United Airlines is the leading Airline in the World, boasting of operations in ten airline hubs in the world and delivering to 373 destinations in 60 countries. However, the airline performed dismally in the 2012 Airline Quality Standards ratings. This was mainly due to late arrivals, mishandling of baggage and high customer complain rates. However, the company argues that it has availed Wi-Fi as well as an in-flight satellite. Nonetheless, this paper observes that the core functionalities of the company are what constitute its dismal performance and as such, there is a need for their ratification. Some of the recommendations for the airline include improving relations with its employees, as this will lead to better service delivery.

References

Hartung, A. (2013, April 11). United: This Is Not 'Any Way to Run an Airline'. Retrieved December 03, 2013, from Forbes: http://www.forbes.com/sites/adamhartung/2013/04/11/united-this-is-not-any-way-to-run-an-airline/

Bettley, A., Mayle, D., & Tantoush, T. (2005). Operations Management: A Strategic Approach. London: Sage.

Bowen, B. D., & Headley, D. E. (2013). Airline Quality Rating 2013. Advanced Aviation Analytics Institute for Research.

Cho, J. H. (2013, April 09). United Airlines says 2012 Airline Quality Rating doesn't tell the whole story. Retrieved December 03, 2013, from Cleveland.com: http://www.cleveland.com/business/index.ssf/2013/04/united_airlines_says_2012_airl.html

Collier, D. A., & Evans, J. R. (2009). Operations Management. Mason, OH: Cengage Learning.

Jordan, K. (2012, June 18). United Airlines opens operations center in Willis Tower. Retrieved December 03, 2013, from ABC: http://abclocal.go.com/wls/story?id=8705823

United Airlines. (2013). United Airlines. Retrieved December 03, 2013, from United Airlines: https://www.united.com

United Airlines. (2013, July). United Airlines Fact Sheet. Retrieved December 03, 2013, from United Airlines: https://www.united.com

Young, S. T. (2009). Essentials of Operations Management. London: Sage.