United Airlines Holdings Internal Environmental Analysis

Corporate-Level Strategies and Stability Focus

In basic terms, an enterprise's corporate-level strategies refer to the approaches embraced by top management in efforts to steer the entire organization toward success (Godfrey, 2015). They tend to have an impact on the entire organization. With this in mind, the corporate-level strategies of United Airlines Holdings could be conceptualized as all organizational undertakings meant to further promote the company's competitive advantage in the airline industry. Strategies of this nature also relate to the determination of the overall direction the company takes going forward.

With the worst effects of the COVID-19 pandemic now behind us, United Airlines Holdings appears to be focused on stability. In the words of Brondoni (2018), a stability strategy could come in handy "when a company finds that it should continue in the existing business and is doing reasonably well in that business but no scope for significant growth" (p. 107). Josephs (2022) indicates that over recent months, demand for travel appears to have increased. The author is also categorical that despite many households having been hit by inflation, most travelers — both business and leisure — have not "yet shied away from higher ticket prices" (Josephs, 2022). At present, United Airlines Holdings has its sights set on the incremental improvement of functional performance. Indeed, the CEO of the company has been quoted saying that the company's main attention this season is reliability (Josephs, 2022). This is especially the case given that within the last two pandemic years, before the present rebound, customers had to contend with numerous cancellations following the disruption of most airline routines. It is also important to note that the company has largely taken a cautious approach with regard to the addition of capacity (Josephs, 2022). According to the author, this contrasts with the approach embraced by some rivals in the market, including Spirit Airlines and American Airlines.

An evaluation of United Airlines Holdings' strengths and weaknesses is useful in examining some of the company's key internal factors. This would aid in the formulation of strategies meant to address the company's weaknesses while further reinforcing its strengths.

Strengths:

1. Brand image
2. Fleet size
3. Innovative culture
4. Little debt
5. Competent management

Strengths and Weaknesses: Partial SWOT Analysis

Weaknesses:

1. High employee turnover
2. Lack of diversity in the managerial team
3. Financial decline / decline in profitability
4. Price rigidity

With regard to brand image, United Airlines Holdings is perceived by customers as a trusted and stable enterprise owing to its long period of operation. The two companies that merged to form United Airlines Holdings — United Airlines and Continental Airlines — had each been operating in the industry for many decades. Next, the fleet size of United Airlines Holdings is impressive. At present, the number of mainline and regional aircraft operated by the company stands at 835 and 522 respectively (United Airlines Holdings, 2022). This means the company can better serve various routes as the market rebounds after a two-year hiatus. With regard to innovativeness, the company has in the past embraced various technological innovations that ease its ability to serve customer needs. As the company states, it is "committed to developing innovative technologies that will create value commercially, for the customer, or throughout United's expansive operations" (United Airlines Holdings, 2022). Lastly, the company has in place a team of highly capable managers and executives, led by CEO Scott Kirby, with extensive experience in airline operations, engineering, and business management — a team capable of steering the company toward even greater accomplishments in an increasingly competitive environment.

When it comes to weaknesses, the company has a notably high rate of employee turnover. Available data indicates that in 2020, United Airlines Holdings had a total of 74,400 employees (Macro Trends, 2022). According to Macro Trends, this represents a 22.5% decrease compared to 2019. Losing crucial talent is counterproductive, as it reduces the company's capacity to serve customer needs effectively. Furthermore, the company must constantly engage in recruitment, selection, and training, resulting in wastage of organizational resources that could have been deployed elsewhere.

The company's top management also appears to be largely male-dominated — both at the board and executive team levels — with only approximately 20% female representation in both instances. This could deny United Airlines Holdings crucial perspectives, as well as the confidence of key stakeholders who prioritize equal opportunity. Additionally, over the last two financial years, the company posted negative returns: a net loss of $7 billion in 2020 and a net loss of $1.9 billion in 2021. This decline in profitability could negatively affect the company's ability to meet its financial obligations.

Lastly, with regard to price rigidity, United Airlines Holdings does not have offerings that rival those of low-cost carriers such as Southwest Airlines, AirAsia, and EasyJet. At present, the airline appears incapable of minimizing operating costs or eliminating certain amenities in order to offer competitive prices to price-sensitive customers. This could hurt the company's ability to compete effectively in the event of a significant economic downturn that reduces consumers' disposable income.

There are various strategies United Airlines Holdings could deploy to capitalize on the strengths highlighted above while addressing its identified weaknesses. First, the company should embrace marketing strategies that connect with customers in more meaningful ways, which would further reinforce its brand image. Second, the company should consider exploring untapped markets — specifically in East Africa and Asia. The East African region is considered a fast-growing economic hub, and countries such as Kenya and Tanzania have traditionally been popular tourist destinations. The airline could take advantage of its large fleet to explore these markets. Third, United Airlines Holdings could enhance the competitiveness of its management by actively promoting diversity at both the board and managerial levels, particularly with respect to gender.

To address the high employee turnover rate, the company could employ a range of HR strategies optimized for enhancing employee satisfaction, including offering career development opportunities, reviewing the existing compensation structure, and introducing mentorship programs. Regarding financial decline, United Airlines Holdings is not alone — many airlines suffered losses during the pandemic, and there are signs of a return to profitability as the adverse effects of COVID-19 wear off. However, to better handle future economic downturns, the company should consider embracing a low-cost carrier model, particularly given ongoing geopolitical concerns and the possibility of a major economic depression.

Amason (2011) points out that an IFE Matrix is one of the most important tools for evaluating the internal environment of a business enterprise. It can therefore be used to audit the weaknesses and strengths of United Airlines Holdings identified above.

Strengths:

IFE Matrix Assessment

Brand image — Weight: 0.05, Rating: 3, Score: 0.15
Fleet size — Weight: 0.09, Rating: 4, Score: 0.36
Innovative culture — Weight: 0.14, Rating: 3, Score: 0.42
Competent management — Weight: 0.19, Rating: 4, Score: 0.76
Strengths subtotal: 1.69

Weaknesses:

High employee turnover — Weight: 0.16, Rating: 1, Score: 0.16
Lack of diversity in managerial team — Weight: 0.08, Rating: 1, Score: 0.08
Financial decline / decline in profitability — Weight: 0.10, Rating: 2, Score: 0.20
Price rigidity — Weight: 0.19, Rating: 2, Score: 0.38
Weaknesses subtotal: 0.82

Total Weight: 1.00 | Total Score: 2.51

Conclusion

Moyer, R. C., McGuigan, J. R., & Rao, R. P. (2012). Contemporary Financial Management (12th ed.). Cengage Learning.

United Airlines Holdings. (2022). Form 10-K.

United Airlines Holdings. (2022). Products.