>>
[sound] You know, you can tell George is an old friend of
mine, when he can sort of pimp me about on time.
Look, I, when I heard about this, when George asked me to
come, someone had described this as a lecture and, you know,
I think of lectures as something that smart people do and
they impart learning, right?
So this can't possibly be a lecture.
It'll be a talk.
The reason for that is I'm in the airline business.
I'm an airline executive so by definition I'm not smart
alright?
>>
[laugh]
>> And secondly I'm in a business that hasn't earned an
adequate return on its invested capital since the Wright
Brothers.
So I'm a slow learner as well, alright?
>>
[laugh]
>> So what I'll talk to you about is, I'll talk to you a
little about the airline business, and then I'll do a small,
while I'm doing this, I'll do a small commercial for the new
United Airlines because I want all of you to fly us.
And I want you to pay, always book at the last minute and
pay the highest fare, that's the key.
>>
[laugh]
>> And then I'll talk a little bit, a little bit about,
about, leadership as well.
Let me start by talking about the airline business.
It is an extraordinary business.
And I like to say and you're and most of you are, are, are,
are, getting your MBAs or your PhDs.
You know if you like the business of business, there is no
business like the airline business.
If you like making money, forget it.
It's a tough, tough, business, and it's a tough business
because there are a lot of structural problems with the
business.
It has very low barriers to entry.
I like to say any idiot can get an operating certificate.
And many do.
It has very high barriers to exit.
Because everybody who touches us, makes money off of us.
Whether it's the air frame manufacturers, or the engine
manufacturers, the aircraft lessors, the cities where we
operate, whether it's the avionics manufacturers, the folks
who service the lavatories, you name it, they make money on
us.
And as a result, nobody wants us to die.
And that's why you see so many airlines that go into
bankruptcy, and yet they get reconstituted and they come
out.
They don't liquidate.
They come out the other end.
And so you have, you have basically, an open opportunity for
new entrance, and a cap on exit.
And therefore, you tend to have an overcapacity, which tends
to drive down fares, which tends to make us unprofitable.
We're also a brutally regulated business, recognizing that
the airlines were deregulated in 1978, only nominally.
We are the most heavily regulated deregulated business that
there is, and some of the regulations make a lot of sense.
I mean, certainly the safety regulations make enormous
sense.
But sometimes industrial organization is mixed in with
safety and, consumer protection is mixed in, in regulations
in ways that, that are fairly oppressive, for example, you
probably know that the air traffic control system in the
United States is quite antiquate.
It's safe, don't get me wrong, it's safe.
But, it's just very, very slow, and it uses the very finest
1950's ground based radar technology that money could buy.
And we need to invest in that system, but, but we haven't as
a nation, and as a result, it's, it's, it, it, the system
has, has very limited throughput in, in, particularly in
times of bad weather.
That's why you have all of these, all, many, many delays in
bad weather days.
But if, as a result of our antiquated air traffic control
system, our airplanes are stuck on a taxiway for more than
three hours, we get fined $27,500 per passenger.
Per passenger.
Now I'm gonna give you a
[???].
We don't charge that much per passenger, right.
And, and, and so as a result we have lots of regulations
that are very oppressive.
On, on, on the air care someone actually recently said why
don't you charge for air tickets because fuel's so important
to you.
Why don't you sell an air ticket, and then, at the last
minute, whatever the fuel price is that you're gonna be
using, that'll be the cost, and the customer's credit card
will be charged that.
I mean, it'd be a logical thing to do.
Well, the federal government, about a week ago, outlawed
that practice before we could even start that practice, even
if any of us were.
So we're very heavily regulated in the ways that we
advertise, the way that we operate.
The ways we price our tickets, even though, nominally, we're
a deregulated business.
And we're also subject to external events that most
businesses are not.
I mean, last year, last April, there was a volcanic
eruption, the name of which I've never been able to name
that volcano.
Maybe one of you can do it.
But it really shut down air travel in Europe and had some
fairly material adverse effect on air travel.
And who could have thought when you were planning for the
year that you would be subject to a volcano or subject to
SARS, or subject to any of the number of the external events
that affect our industry.
And certainly, the price of fuel is, you know, remarkably
difficult for us to handle.
Because not only is it an important input for us, in fact it
is our single highest cost.
We spend more on fuel than we do on our people worldwide,
our aircraft worldwide or our facilities worldwide, or
anything worldwide.
And when we, when, when fuel is such an important input
price, it's quite high and quite volatile.
To give you a concept of how much, I mean George mentioned
$25,000 a minute which is a lot of money.
Which is why I try to talk really, really fast, right?
But if you think about what it is, at, at United Airlines,
the new United combined Continental and United Airlines, we,
for what we spend on fuel, we could buy a brand new Airbus
A380 aircraft.
You know what that is, that really big aircraft that spins
little regional jets around like tops.
You've probably seen that.
>>
[laugh].
>>We could buy a brand new Airbus A380 a week and throw it
away, for the price of what when spend on fuel.
And so when you've got that size of an input price, over
which you have no control.
Now you can do hedging and we do hedge, we do typical hedge,
we're using typical financial products to hedge.
But the reality is ultimately those hedges burn off and you
have to pay the higher price of fuel and you've got to
figure out a way to recover that higher cost.
And this time around, this bump in fuel in 2011, we're as an
industry doing a better job than we were in 2008.
In 2008 you know, a lot of your clients got into a lot of
trouble with high, very high fuel prices and fuel prices
peaked at $172 a barrel for jet fuel.
We're paying today about $136 a barrel so it's pretty close
to what it, what it had been at its peak.
But we've done a much better job of pricing to it.
We've had a number of fare increases this year and we're
also doing a better job.
Obviously as you price your product higher you're going to
less demand and we've done a good job reducing our capacity
so we don't have too many seats chasing too few butts.
But in terms of capital costs, huge capital costs very
sophisticated financing which we do for all the capital we
do.
Technology we have, we're essentially a technology company
with wings.
It's a very data rich business.
A very data rich business and as a result we have a lot of
information in which to make a decision but we also have a
lot of data and you gotta figure out how to part your way
through that data.
And I'm sure many of you have been faced with a whole lot of
data and trying to figure out what, seeing through this,
this, this, this fog of data what actually is very important
to you.
So it?s, it's without question a difficult business and as
George mentioned, it's also heavily unionized business.
And that imparts its own set of difficulties.
And certainly in a, in a merger like we're doing, we, we did
the merger because we were, this is the network business and
having the, the largest single network in the world is very
valuable.
And also there are lots of other assets you get in a merger
of the size that we've done for example our loyalty program,
our frequent flier program, has more members than there are
citizens of France worldwide.
And that imparts a lot of value, not only in the loyalty of
the customers.
But also in our ability to sell miles to third parties, like
Chase, the credit card, things like that, is really
valuable.
But bringing together, bringing together carriers has its
own issues.
And certainly, the work groups are a very difficult issue.
We have work groups that are represented by the same union.
We have work groups that are represented by different
unions.
We have work groups, some of whom who are not unionized
that's on the Continental side or unionized on the United
side.
And you have to bring those together and, and, that's a,
that's a, that's a, a long process, but an important
process.
And you've got to, you?ve got to earn the people's trust
over time.
I think the most difficult thing in, in bringing two
carriers together the size of Continental and United, it
really is cultural.
Because we are very two different carriers with two
different cultures.
And, and Professor Parker is, is well, you know, well versed
in, in, in the old Continental culture.
But that's really important in a service business and, and I
want to talk a little bit, a little bit about that as I talk
more on the sort of the leadership aspect of this, you know,
if you're, if you're trying to get together 87,000 diverse
people, as we are in this merged enterprise.
You've got to have a vision for them.
And that's what I'm paid to do as CEO.
But importantly, you've got to have a plan that they
understand.
And if you'd, if you know, if you don't know where you're
going, any road will take you there, right?
So you've got to have a plan.
And, and, and at the, at the new, combined carrier we're
using a plan, that we have used on the Continental side for
16 years.
It's a simple one page plan.
That is everything that we want to do is on a single piece
of paper, or a single iPad page as the case may be.
And it's important that people understand that plan, it's
important that you, that everybody understands it.
And it's most important that you tell people if what they're
working on, if they can't trace it back to that plan then
they should stop what they're doing and do something else.
Because you can, you can distill everything you want in a
business, into a marketing plan, and into a financial plan,
and into an operating plan, and into a people plan.
And what we do at the combined carrier is, we just take the
most important things that we're going to be doing for the
year, and we put them under each column, for the marketing
plan, and for the financial plan, and for the operating
plan, and for the people plan, list it out and we make sure
people understand what they're working on and why they're
working on it.
And it's really important to show that and get that out and
around the system so that people know where you're going.
Because people want to believe in a future but you've got to
show them what the future is going to be but them you have
to show them how to get to that place.
And so having a key a simple clear plan is incredibly
valuable for leading change, bringing businesses together
leading your troops and going over it over and over and it
can get repetitive I understand that but, it's important
that everybody understand how they fit in.
Because you know, you, you, from, from the perspective of,
of, of, of, of, of, you know person on the ramp throwing
bags they wonder what, what, part are they, how are they
participating in the carrier.
How, what are they doing, how are they contributing to the
future.
And they can do that by understanding what we're doing in
the plan.
The other, the second thing I'd wanna make, make sure you
understand for your own leadership positions going forward
from, from what I've learned is the incredible importance is
getting really talented people to work with you and work for
you as you become leaders yourself.
There are people who are insecure and they won?t hire really
good people cuz they want to be better than the people
reporting to them, they want to know more.
My theory has always been, you go out and you find the very
best people that you can find and you hire them and you
actually try to hire people who are better at your own job
than you'll ever be and then leave them alone.
I mean a lot of people micromanage and there's nothing more
dispiriting to people who work for you, than to micromanage.
And, if you, if you've hired the right people and you've
given them the tools that they need to do their job
effectively then you ought to trust them, and you ought to
let them make some mistakes.
Now I don't mean mistakes like I mistakenly took some of the
company's cash and put it in my bank account.
Not that kind of mistake.
But, let them, let, let them run with it.
And don't micromanage them, and you know, what you'll find
is 99 times out of a 100 they'll do the right thing.
They'll be really good.
And the one time out of a 100 you may have to sit down and
give 'em a little counseling.
But it's really important to hire the very, very best people
and then make sure they've got the tools for the job and
then let them run with it.
Because if you're constantly, you know, if you're constantly
in their underwear, I'll tell you, it makes their lives
miserable, and you'll drive good people off.
Whereas if you give them lots of response, and let them run
with it.
Now, it's important that you not get sandbagged.
I mean, what I tell my own direct reports is, you go run
with the business, and you go do what's right, but keep me
informed.
I don't ever want to discover something material, you know,
at a board meeting.
It'd be nice for you to tell me in advance.
So make sure you don't sandbag me.
But it's important to get those people, and let'em run.
Now, that's not to say, as leaders, you can't get intimately
involved in portions of the business.
And I would encourage you to do that as well.
I mean I reserve the right as CEO to go do, kind of, you
know, poke my nose in whatever I want to, from a business
perspective.
But it's, and it's important to know that, cuz there are
leaders who are at, you know, 40,000 feet all the time.
They're sort of the, what I would call the business round
table leaders.
You know, the talking heads on TV, the people who make
broad, generic statements, but don't actually know what's
going on in their business.
And you can get isolated really quickly as you rise up
through the ranks.
Now I've got, for example, I've got 8 SIDA cards - Security
Ident, Identification Display of Area cards.
Those are the things you use to go airside.
And I had to go, by the way, watch 8 separate Spot the
Terrorist videos to get this thing, which was really an
unpleasant experience to have to go through to get these
badges.
But I will tell you, it's really valid, because I can go
airside.
I can go and just walk in any break room, and I do that
alone, without an entourage.
And it's really valuable, because you get to know people
over time.
And, and make sure you're also mixing with the folks you're
working with.
I mean, on every airplane I go up on the flight deck before
the airplane takes off I talk to the pilots.
The reason I do that before the airplane takes off is if I
do it in flight they lock the door and they won?t let me
out.
And they have lots and lots of questions.
I like to answer their questions but there's a limit to, to,
to, to what I can do right?
>>
[laugh]
>>And, and again, and then, I work all the galleys.
And I talk to all the flight attendants, and I go in the
break room.
So over the years at Continental, I know thousands, and
thousands, and thousands of people.
And that's really valuable as a manager because that way the
people who report to you can't bull shit you.
I mean, they can tell you things but you can go 1 or 2 or 3
levels deep and get the real information.
And the fact is, the people who now, who now work for me
know I can do that.
So they don't bullshit be cuz they know I can, I can dig in
the organization.
And that's, that's, that's really valuable.
But I think the most important thing that you can, that you
can bring as leaders in the future to your own enterprises,
whether they're for profit or non profit, is, is the culture
of the business.
I'm a huge believer that culture matters in a business, now
I'm in a service business where, where it's sort of obvious
that cultures important.
And we have different cultures at these two airlines that I'
m trying to bring together, a culture, and it's even more
difficult because, because this particular transaction that
we did, United Continental, was a merger of equals.
Where we didn't acquire, we at Continental didn't acquire
United and United didn't acquire Continental.
We're trying to bring together the best of both but we're
trying to bring together the best of both cultures.
And, and, and you know, I sort of, I've always lived my life
by two rules that my sort of mommy taught me.
Which, which is, treat other people, like you'd like to be
treated.
And, never tell a lie.
That's really simple and you can be successful doing that.
And at the airline treating each other like you'd like to be
treated is what we call dignity and respect, treating each
other and treating our customers with dignity and respect.
That means being honest with people that means, that means
thanking people.
And I'll tell you many people, again, as you progress in
your career you have folks working for you, you, you thank
people with financial incentives and you structure them
appropriately and that's why we're all in business because,
you know, you do want to get paid in business.
But, even more importantly, often than the financial
incentives, even more important than that are the personal
thank yous.
I mean, and I don't mean the, I don't mean superficial.
I mean having people who've done a really good job and go,
taken the trouble to go to their office or go to their cube
and thank them personally.
[cough] I mean it makes a huge difference to them.
And I would encourage you as well to always remember that's
there's so many people who work really hard and work all
through the night to make you look good.
And you need to make sure you're thanking those folks as you
go through your career.
And build up those relationships, because it's incredibly
important.
But treating your coworkers with respect, treating your
customers with respect is incredibly important.
And also being open, direct and open and honest.
It?s always better to tell the truth.
If you make a mistake, get up to it quickly and it can be
fixed.
There's some mistakes that can be fixed, most mistakes can
be fixed.
But being open and honest in my business that means not only
being direct and open with my co-workers, but also with
customers.
So if there's a problem, there's a delay, say what the delay
is, tell people why there's a delay, and if you don't know
why the aircraft's delayed, then say, I don't know, but I'll
figure it out.
And explain what's going on to people.
People much prefer that, than, than silence or the
runaround.
And it also means when I go out and talk to co-workers.
I do, I do CEO exchanges, something similar to this
actually, where I speak for a few minutes.
And then, I open up for a half-hour of questions of, of my
co-workers.
And they've learned over the years, on the Continental side,
and the United folks are learning.
They can get up on the microphone and they can ask me any
question they want.
And I'll give them a direct, and open, and honest answer.
Now, sometimes that means telling them something they don't
wanna hear.
I don't always agree with them, but it's not, when someone
comes to you with an idea that you know you'll never do, it'
s not patting them on the shoulder and saying you know,
great idea, I'll consider it.
It's saying no.
We won?t do that and here's the reason why, or when someone
stands up and, and makes a, a, a, you know, a group of, of
folks from the union step, and make a demand for a contract
that you know will not be, in knowing the long run interest
of, of interest of, of the company but harmful to the rest
of the co workers, you'll explain that you'll never do that.
And use the word never.
It's a tough word but it's a true word.
That is you would never do a contract that would jeopardize
the future of the company or jeopardize the future of the
coworkers.
And people sometimes don't want to hear the tough message.
But it's important to give that tough message.
You can give it politefully, politely.
And you can do it respectfully.
But it's important.
Because when you do that, when you've got, when you've got a
culture that's built around, people treating each other with
dignity and respect in direct and open honest communication.
What you build is, is a company where people enjoy coming to
work every day.
They trust each other, and they, they learn, and, and
management needs to do this, earn their trust, but they also
learn to trust management.
And even in a unionized workforce, you can build a
relationship with a unionized workforce where the workforce
thinks of themselves as employees of the enterprise first
and union members second.
If you have it flipped where its union first and enterprise
second, that's the path to ruin.
And you can build that culture where people enjoy coming to
work, they trust each other, they trust management, they're
proud of what they do, and they deliver tremendous service
as a result.
I'm sure many of you have worked over the years for various
enterprises.
And if you think of places you've worked where you're really
proud to work there, or you were proud of the product, proud
of the brand, you'll do a better job.
There's an old saying in the airline business, you know how
much faster you can fix an airplane if you want to, right?
I mean it's true.
And you can, you can get so much more out of people if they,
if they're proud of where they're working, and they see the
future, and they're rewarded for it.
And it can be any of number of things.
At, at, at, at United, we have perfect attendance programs,
by working, if people have six months of perfect attendance,
we put their name in a, in a, in a revolving drum, and we,
and we pull out every six months, we pull out a name from
that work group.
And the winner gets a brand-new car with all the taxes paid,
and the gross up on the taxes, and everything else.
So they actually get a new car
We have an on time bonus program, where if our, if our
aircraft are 80% or more on time despite what Mr. Parker
said, we are an on time airline.
Domestically or internationally, we, or both we pay a bonus
for that.
We, you know, we have for profit sharing program, so when we
make a profit, when our co-workers work together and deliver
the profit, we share the profit.
That's what makes a great workplace, and that's what
ultimately makes a great company.
So I would encourage all of you in your future, in your
leadership positions as well.
Really, I've had, a lot of people ask me this all the time,
you know, cuz I've had a really checkered career.
I mean, I've done a lot of different things in my life.
And, I never thought I would be in the airline business, and
I sure as heck didn't think I would be running the world's
largest airline.
But, what I've told people is, follow your passion.
Don't go into investment banking because that's cool and
everybody's doing it.
And don't go into consulting because it's cool and
everybody's doing it.
Go follow what you want to do.
If you've got a passion for investment banking, go for it.
If you've got a passion for consulting, go for it.
If you've got a passion for, for working in the high tech
sector, go for it.
But go for your passion, because money is important, there's
no question about it, but beyond a certain amount, what
matters is really enjoying coming to work.
And being proud of what you do.
And, and believing in the company and believing in the
future of the company.
And I'll tell you, I've had jobs where I was unhappy and it'
s a lot more fun being in a, in a job where you really enjoy
what you're doing and you enjoy the people you work with,
and you're proud of what you're doing, and you want to
continue to improve the business.
It's more, it's more personally successful.
So follow your passion, ignore the herd.
And be yourself, you know, a lot of people think of, you
know, business people being sort of stuffed suits, but the
reality is, the best thing you could do, and the way you can
advance your own career, and the way you can be most
satisfied is simply be yourself.
I like to joke if you're an obnoxious liar you're probably
not going to make it in business.
Not that kind of be yourself but, but, follow your passion
and be yourself and, and I think, certainly with he
background of Stanford business school, you'll be incredibly
successful.
So, I'm going to stop right there and start, and, and, and
start taking questions, but I, I wanna end by thank you very
much.
I'm honored to come here, I'm certainly honored to a to be
in this spectacular, look at that, people way in the back,
hi there in this, in this spectacular auditorium, in the
beginning of, of, of this, a brand new night business
school, and I want to thank Professor Parker for, for
inviting me.
Thanks a lot.
[sound]
