PESTEL Analysis United Airline Holdings Inc

UNITED AIRLINE HOLDINGS, INC.

External Environmental Analysis of United Airline Holdings, Inc.

Company Overview

Founded in the year 1968 following the merger between Continental Airlines and United Airlines, United Airline Holdings operates in the Airlines industry and concerns itself with the provision of air transportation services. It is important to note that at present, the company operates in multiple locations across the world. More specifically, the company deploys regional as well as local fleets in the transportation of cargo and people across the following regions; North America, Latin America, the Middle East, the Pacific, Africa, Europe, and Asia (United Airline Holdings, Inc., 2021, p. 3). At present, the company has its headquarters in Chicago, IL. It would be prudent to note that prior to the year 2019, the company was referred to as United Continental Holdings. At present, the company happens to be one of the world’s largest airline operators.

As the company points out in its latest annual report, it was founded with the need to connect persons and unite the globe as its core purpose (United Airline Holdings, Inc., 2021, p. 3). Over time, it has grown and consistently expanded its route network. It currently has in its employ more than 84,000 full-time employees (United Airline Holdings, Inc., 2021, p. 10). An assessment of the company’s annual report for the year ended 31st Dec 2021 indicates that the company has suffered losses over the last two financial years. In the year 2020, the company made a loss of 7 billion; whereas in the year 2021, it posted a loss of 1.9 billion (United Airline Holdings, Inc., 2021, p. 61). The company attributes this to the effects of the COVID-19 pandemic. Although it indicates that it remains optimistic about the future, the company is categorical that its future performance will largely be determined by a wide range of factors such as how long the world takes to return to normalcy (United Airline Holdings, Inc., p. 48).

At the helm of the company is a skilled and experienced team of executives led by its Chief Executive Officer Scott Kirby. Other key officers of the firm are inclusive of, but they are not limited to; Brett J. Hart (who serves as President), Josh Earnest (who serves as Senior Vice President and Chief Communications Officer), Torbjorn (Toby) J. Enqvist (who serves as Executive Vice President and Chief Customer Officer), Theresa Fariello (who serves as Senior Vice President, Government Affairs and Global Public Policy), Kate Gebo (who serves as Executive Vice President, Human Resources and Labor Relations), Linda Jojo (who serves as Executive Vice President Technology and Chief Digital Officer), Gerald Laderman (who serves as Executive Vice President and Chief Financial Officer), Andrew Nocella (who serves as Executive Vice President and Chief Commercial Officer), and Jonathan Roitman (who serves as Executive Vice President and Chief Operations Officer) (United Airline Holdings, Inc., 2022). Its Board of Directors comprises of a total of 14 individuals – all of whom have served in diverse commercial settings. The company is listed in the New York Stock Exchange under the symbol, UAL.

The General Environment

United Airline Holdings, Inc. operates in the Airlines industry (Mergent Online, 2022). From the onset, it would be prudent to note that when it comes to the assessment of the general environment of an enterprise, the relevance of coming up with a PESTEL analysis cannot be overstated. PESTEL analysis, according to Bruin (2016, para. 1), could be conceptualized as technique that comes in handy in the monitoring as well as analysis of the various factors in the macro-environment that could have an effect on the performance of an enterprise. In basic terms, the five letters of the said technique or tool, as Bruin (2006, para 1) further points out, are representative of the terms Political, Economic, Social, Technological, as well as Environmental and Legal components or elements. It therefore follows that PESTEL analysis will be instrumental in the assessment of the general environment of United Airline Holdings, Inc.

a) Political Factors

The aviation industry in which United Airline Holdings operates, is impacted upon by a wide range of political factors. One such political factor is political instability. The said instability has the potential to disrupt the airline’s route networks. For instance, further escalation of the Ukrainian-Russia conflict could have a negative impact on United Airline Holdings’ route planning efforts. It could also significantly limit the company’s market access. Further, it would also be prudent to note that aviation could also be negatively affected by trade wars. For instance, in the recent past, China and the US have implementing a number of tariff measures in what could be seen as protectionism measures. The International Air Transport Association - IATA (n.d. p. 2) makes an observation to the effect that trade wars have the capability to stifle the demand for air cargo owing to the fact that they often have a direct effect on the price of goods and effectively discourage trade between nations. The other equally important political factor of relevance to United Airline Holdings is government policies. To a large extent, the government of the day seeks to pursue its own agenda on the basis of the promises made to the electorate. The said agenda could have a huge impact on the operations of commercial enterprises. For instance, an increase in aviation taxes could have a negative impact on United Airline Holdings’ bottom-line. Various government policies could also affect how the company conducts its operations.

b) Economic Factors

Bruin (2016, para. 3) indicates that certain economic factors play a significant role in the determination of how the economy performs. The various economic factors that could impact the performance of United Airline Holdings are inclusive of, but they are not limited to exchange rates and interest rates. Exchange rates are especially relevant on this front. This is especially the case given that passenger flow is, to some extent, affected by exchange rates. For instance, inbound visitors are likely to be fewer if there is rise in the exchange rate of a certain country. United Airline Holdings’ operations in such a country could, thus, be impacted. It would also be prudent to note that given that United Airline Holdings has international operations, it is uniquely exposed to FX risk as its cash flows need to be translated into various currencies. Downturns in economic activity could also have an effect on the profitability of United Airline Holdings. For instance, the COVID-19 pandemic has triggered a downturn in economic activities in multiple countries across the world (Wang, Wang, Abbas, Duan, and Mubeen, 2021, p. 37). This negatively affects travelling in the sense that prospective passengers are forced to cut back on their travel plans as a consequence of slashed disposable incomes. Yet another economic factor that also ought to be factored in on this front is fuel prices – which is in some instances more of a demand and supply issue.

c) Social Factors

Some of the social factors of relevance to business enterprises, as Bruin (2016, para. 4) indicates are lifestyle attitudes, health consciousness, career attitudes, age distribution, as well as population growth rate. The needs of consumers continue to change every other day – specifically as the world transitions from one generation to another. For instance the needs of the millennial generation and the so called Generation Z largely differ from those of baby boomers. More specifically, millennial are likely to demand more and be more inclined towards instant gratification. If it is to continue being relevant into the future, United Airline Holdings must factor in this phenomenon and adapt its services and offerings accordingly. One other social factor of relevance at present is the emergence of a passenger that is more economically minded. This means that entities like United Airline Holdings have to find a way of providing superior services at low cost. However, it should also be noted that with increased connectivity and enhances access to the internet, people’s perspectives about traveling are being adapted – with more persons embracing the need for travel and exploration. This could benefit companies like United Airline Holdings going forward.

d) Technological Factors

This could be inclusive of the diverse services as well as products made possible by scientific advances (Chapter 3, p. 82). Technology continues to change on a daily basis, as many industries increase their utilization of technology to either enhance efficiency or cut costs. For players in the airline industry, such as United Airline Holdings, technology is of great relevance in efforts to promote safety and advance convenience. Convenience could be thought of in terms of improved customer experiences (with reference to access to ticketing access, inflight experiences, amongst other things). There are also various technologies that have in recent times been introduced in the realm of airplane safety. This is particularly the case in those settings where there is need to improve the situational awareness of pilots (Kounis, 2020, p. 184). Future projections indicate that the industry could progress to fully autonomous flights. Players that are quick enough to embrace meaningful technologies are likely to outcompete those that lag behind. There are, however, other technology-related factors that could impact the profitability of the industry as a whole. One such factor is decreased need for business travel as a consequence of better telecommunication and conferencing technologies such as Skype, Team Viewer and Zoom. Decreased need for physical travel could in this case affect the bottom-line of companies like United Airline Holdings.

e) Environmental Factors

According to Bruin (2006, para. 6), environmental factors have grown in prominence as a consequence of various developments in recent times. The said developments, according to the author, relate to raw materials scarcity, the need to reign in pollution, and efforts to adhere to government mandates in relation to carbon footprints. As a consequence, companies like United Airline Holdings are called upon to be conscious of their impact on their environment. This is especially important given that airplanes are powered by fossil-fuels. Available scientific evidence indicates that fossil fuels have a negative impact on the environment interims of the amount of greenhouse gasses they release into the atmosphere when burned (Kounis, 2020, p. 113). Towards this end, there have been calls for those responsible for CO2 emissions to play a more prominent role in reining in climate change. Thus, United Airline Holdings and its peers are under pressure to, for instance, acquire aircrafts that are more fuel-efficient. A move of this nature, which could be dubbed ‘green flying’ could be rather cost intensive. However, failure by airlines to play a meaningful role to minimize environmental damage could negatively impact their reputation. It is important to note that this will continue to be a crucial factors owing to enhanced environmental consciousness of consumers and the increasingly more pronounced efforts of activists and environmentalists.

f) Legal Factors

Airlines like United Airline Holdings operate in an environment that happens to be hugely regulated. The relevant regulatory agencies keep a close eye on the operations of players in this industry as a consequence of a wide range of factors – especially passenger safety and other security considerations (most specifically following the September 11 Terror attacks in the country). Towards this end, United Airline Holdings has to operate within set regulatory boundaries. Deviation from the various laws and regulations governing its operations could result in lawsuits, cancelation of operating licenses, and hefty fines. This is an especially important concern given that United Airline Holdings is a multinational corporation operating in multiple jurisdictions. For this reason, it has to be aware of the various regulations in place in the said jurisdictions, especially in relation to what it can or cannot do. Considerations on this front could be inclusive of the labor laws in place, passenger wellbeing and safety considerations, as well as region/country-specific industry regulations. There are also various standardized protocols that United Airline Holdings is bound to comply with. Such protocols are established by the relevant air transport organizations, such as the International Civil Association Organization and the International Air Transport Association, and are meant to minimize chances of adverse incidents and further enhance the safety of all stakeholders.