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Navigating Through Economic Turbulence: A Case Analysis of United Airlines
On December 4, 2002, United Airlines entered a very dark period of their history when the company announced Chapter 11 bankruptcy. The case begins with CEO Glenn Tilton on his way to Chicago to announce the specifics of the bankruptcy and meeting with the key stakeholders of the company. These stakeholders have the power to completely re-order the United Airlines business model in the days following the bankruptcy filing. They are comprised of stockholders (both individual investors and institutions), suppliers, Wall Street analytics and the creditors the company owes payments to, and United's partners in the Star Alliance of code-sharing programs. While the case study is downbeat and shows just how far out of touch the airline is with its value chain, one of the most redeeming aspects of United's situation is their strength at partnerships an alliances (Sjogren, Soderberg, 2011). The en masse adoption of low-cost airlines and a completely different business model focused on standardization over customization is pervading the airline industry and was in full motion in 2002 as well (Pereira, dos Reis, 2011).
Statement of the Problem
Of the myriad of issues in the case study, at the center of all the chaos United is dealing with is the lack of connection with their value chain. Whenever a...
Strip away the many related and chaotic problems with their financials, the lack of consistency in their pay structures, and the unwillingness to change their route structuring all are paradoxically pushing United into being more anachronistic and out of touch with the rapidly changing value chain of this industry. The case study shows how United Airlines continue to follow the growth progression of the airline industry without ever considering how they could transform it to be more competitive at the process level. In essence, United was lock-step with the industry and failed to realize that time was running out to break out and disintermediate supply chains, logistics, and more sacred to United, their hub-and-spoke business model. In the meantime, Southwest Airlines and other low-cost carriers on a regional basis were disintermediating the supply chain with strong success (Berghel, 2000). United is completely out of step with the cost structures, evolving changes to airline business models that are re-defining the industry, and blames the massive financial losses for these inefficiencies instead on the September 11, 2011 terrorist attacks. Careful analysis of the case financials shows that United was actually…
References
Hal Berghel. (2000). Predatory disintermediation. Association for Computing Machinery. Communications of the ACM, 43(5), 23-29.
Markides, C., & Oyon, D. (2010). What to Do Against Disruptive Business Models (When and How to Play Two Games at Once). MIT Sloan Management Review, 51(4), 25-32.
Pereira, C., & dos Reis, F.. (2011). Regular Airlines Flying towards A Low Cost Strategy. International Business Research, 4(1), 93-99.
Porter, Michael E.. (1986). Changing Patterns of International Competition. California Management Review, 28(2), 9.
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