United Continental Holdings (US)

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United Airlines is one of what are now only three major global air carriers based in the US. The business was created in 2010 from the merger of the old United with Continental Airlines. It was until recently the leader by international passengers, having carved out a strong global profile during the 1980s and 1990s through the acquisition of worldwide routes from failing giant PanAm and the creation of the Star Alliance with Lufthansa and other carriers. (It was overtaken in international passengers in 2015 by American). The path has never been easy. The global airline industry has been in turmoil since 2001 as a result of the economic fallout from terrorist attacks, cumbersome internal security measures and (for a while) soaring fuel prices. Until the beginning of 2006, United spent more than two years in bankruptcy protection, struggling to find a way to restructure its finances. All the US carriers agreed that the disappearance of one of the majors would relieve the general pressure across the industry as a whole, but United had to fight hard to ensure it didn't become the fall-guy for its rivals. After several years of on-off negotiations, it finally secured an agreement to merge with rival Continental.

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Adbrands Weekly Update 13th Apr 2017: In an extraordinary act of careless self-harm, United Airlines inflicted untold damage on its brand image last weekend by calling airport security to forcibly remove a passenger from an internal flight out of Chicago's O'Hare airport. Videos of this unfortunate man being literally dragged bloody-faced and screaming from the plane have lit up social media and mainstream news coverage all week. And all through no fault of his own. United had overbooked the flight. When no passengers were prepared to surrender their tickets voluntarily in exchange for a voucher, four were picked at random. Three of these went quietly but the fourth - 69-year-old Asian-American doctor David Dao - refused, leading to absurdly heavy-handed treatment. (We are reminded of the memorable airplane scene in the original movie of Anger Management). Adding insult to injury, the airline merely needed the seats for four of its employees on free passes. As several commentators pointed out, for a comparatively modest increase in the voucher offer, United could almost certainly have persuaded this or another passenger to depart of their own freewill. Instead, the airline has been overwhelmed by millions of dollars of negative media coverage around the globe, just a few weeks after another PR disaster in which it refused to board a 10-year-old girl for wearing "inappropriate" leggings.

United exacerbated an already difficult situation by taking a wholly defensive stance. In his first media statement on Monday, United CEO Oscar Munoz blamed Mr Dao for being "disruptive and belligerent", and said the incident was "an upsetting event to all of us here at United". Not, we imagine, as upsetting as it was for Dao or any other passengers forced to watch his eviction. Missing the point entirely, Munoz apologised for the over-booking and to the three other customers who had to be "re-accommodated", but emphatically not to Mr Dao. He also jumped to the defence of United employees, who had been "left with no choice", he said, but to act the way they did. That stance merely added fuel to the flames. But it's amazing what a $1bn plunge in your market cap can do, combined with the threat of regulatory investigation. On Tuesday, United's share price tumbled by 4% in response to the increased vehemence towards the airline within traditional and social media channels and news that the Department of Transportation was reviewing the case. Even White House press secretary Sean Spicer - pleased no doubt to let someone else take some heat from the media if only for a brief while - said he was "disturbed" to see "another human being treated that way". In a new statement on Tuesday afternoon, Munoz offered a complete turnaround. "It's never too late to do the right thing," he suggested hopefully. "I deeply apologise to the customer forcibly removed and to all the customers aboard." In an odd echo of Spicer's comments, he added, "No one should ever be mistreated this way." Yet another attempt to appease the outrage followed on Wednesday when United said it would compensate all passengers on the affected flight for the cost of their trip.

Adbrands Weekly Update 22nd Oct 2015: Under-performing US airline group United Continental was thrown into turmoil by the hospitalisation of new CEO Oscar Munoz after only a month in the job following a heart attack. It is hoped that he will return to the group but for the time being Munoz is on indefinite medical leave. He has been replaced as acting CEO by the group's legal counsel Brett Hart.

Adbrands Weekly Update 10th Sep 2015: Jeff Smisek stepped down unexpectedly as CEO of US #3 carrier United Airlines, along with the group's two most senior government affairs executives. The resignations were prompted by an ongoing federal investigation into the activities of David Samson, former chairman of the Port Authority of New York and New Jersey, who has been accused of abusing his position for personal and political ends. Among other duties, this body oversees New York's airports, including Newark, where United is the biggest carrier by passenger volumes. Prosecutors allege that United buckled to pressure from Samson to reinstate loss-making weekly flights to an airport in South Carolina near his weekend home in exchange for improved conditions at Newark. The service was cancelled three days after Samson resigned from the Port Authority last year. The airline named former AT&T and Coca-Cola executive Oscar Munoz as its new CEO.


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Background

Free for all users | see full profile for current activities: United Air Lines was formed in the late 1920s from the acquisition of three regional mail delivery services by Boeing Air Transport, an offshoot of William Boeing's aircraft manufacturing business. Boeing was among the first companies to sell tickets to commercial passengers and the first to introduce stewardess service in 1930. After accusations of favouritism in the allocation of mail contracts, the US government regulated the industry in 1934, separating aircraft manufacturers and commercial services. United was spun off from Boeing as a standalone business, and its fortunes were greatly enhanced by the increasing popularity of air transport after World War II. The acquisition of cargo carrier Capital Airlines in 1961 made United the world's largest commercial airline. It adopted its long running Fly The Friendly Skies slogan in 1965, and formed holding company UAL Corporation in 1969. 

Diversification as a conglomerate caused numerous problems in the ensuing years. In 1970 the group acquired Westin Hotels, and a series of additional purchases followed including Hilton Hotels and the Hertz car rental service in the 1980s. These and other developments angered employees within the core airline business, leading to several labour disputes, capped by a six week strike by pilots and flight attendants in 1985. United's pilots also launched two unsuccessful attempts to buy out the airline. The group's diversified holdings were gradually sold off towards the end of the 1980s. 

In the meantime United had also expanded its operations beyond the US, launching its first commercial intercontinental flight to Tokyo in 1983. It profited from the sad decline of PanAm, acquiring the latter's routes to the Pacific in 1986, to London in 1990, and to Latin America in 1991. Yet expansion also led to huge losses. In an attempt to reduce costs the group negotiated a landmark agreement with employees, swapping almost $5bn of wage concessions for the creation of the world's largest employee share ownership scheme controlling a 55% majority shareholding in the company as well as several seats on the board. The group cemented its global service by establishing the Star Alliance network in partnership with co-founders Air Canada, Lufthansa, SAS and Thai Airways in 1996, as a response to a similar strategic alliance between rival American and British Airways.

The middle and late 1990s marked United's most profitable and successful period until cut short by economic turmoil from 2000 onwards. The wage freeze agreed with the unions expired that year, causing renewed friction over pay increases. Plans to merge with rival US Airways also complicated labour negotiations. (They were later vetoed by regulators). United cut 7,000 flights from its schedule in 2000 and many others were delayed or temporarily cancelled, forcing the company to run ads apologizing for the problems. A year later, two United flights were hijacked and destroyed in the terrorist atrocities of September 2001. These events caused a steep downturn in worldwide air travel. United laid off a further 20,000 jobs, generating a record loss for the year. 

Faced with substantial debt repayments in 2002, the company negotiated further job cuts with the unions and applied to the US government for an emergency loan of $1.8bn. After deliberation, this was declined and the group sought Chapter 11 protection at the end of the year. A renewed application for a loan to speed up reorganization of the business in 2004 was also denied, although United has been granted an extension to the timing of the process and was subsequently granted permission to transfer $6.6bn of unfunded pension liabilities to third party pensions manager PBGC. This deal, a significant lifeline for United, was accepted by the company's pilots, despite the fact that it would halve their expected pension benefits, because of the promise of enhanced future benefits and equity in the company if and when it could escape bankruptcy. The airline's machinists and flight attendants were less satisfied and threatened further action. See full profile for current activities


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