United CEO sees more passenger choice -- for a fee

[November 10, 2011]  NEW YORK (AP) -- Jeff Smisek says he was drawn to the airline business for a simple reason: the complexity.

"People who love challenges get into this business," says Smisek, a former corporate lawyer turned airline CEO.

He faces many as he tries to combine United and Continental into the world's largest airline.

Most of his day is spent integrating the airlines' different cultures, fleets and unions. Managing sky-high fuel costs is also high on his to-do list. And before he leaves the office, Smisek reads as many emails as he can, including those from passengers upset they got stuck with the middle seat.

Smisek, 57, graduated with honors at both Princeton University and Harvard Law School. He was CEO of Houston-based Continental when it merged with United a year ago, leapfrogging Delta Air Lines Inc. as the biggest. The combined airline took United's name and its Chicago headquarters, but the top executives who run the operation came mostly from Continental.

In 1995, Smisek left a job as a partner at Vinson & Elkins LLP, specializing in mergers and acquisitions, to join a turnaround team at Continental. Now, he oversees more than 86,000 employees and 5,700 daily flights. United Continental Holdings Inc. carries more than 142 million passengers a year to 376 destinations around the globe.

Smisek jokes that if United and its partners don't fly someplace, then "you don't want to go there."

The combined airline isn't worrying so much about attracting vacationers. Instead, it is targeting business travelers who tend to pay more for last-minute tickets and focusing on lucrative international routes. The airline is also looking at new ways to get more money from passengers.

Smisek says airlines probably won't add more baggage fees. However, there will be plenty of other extra services that his airline will offer, for a fee.

Smisek sat down with The Associated Press in New York and discussed the economy, airfares, and why air travel was never glamorous. Below are excerpts, edited for length and clarity.

Q: What's your take on the economy and how that might affect air travel?

A: We have a lot of different geographies we operate in. Latin American markets are doing extremely well. The Pacific market is doing well. The European market is actually holding up far better than I would anticipate given all the turmoil. And the U.S. market is just sort of chugging along, sort of sideways. We're not seeing any decrease in business travel. We're not seeing any increase.

Q: Are there two or three big changes that air travelers will see in the next five years?

A: We have an enormous amount of data about our consumers that we do not adequately use today. You're going to see more targeted marketing, on an individual basis. We know how frequently they travel, where they travel, when they travel. Often we know whether they're renting a car, or a hotel. We know their propensity to upgrade or buy an upgrade.

Q: Is there anything that will make airfare pricing less complicated?

A: No. I think what you're going to see is more choice. And choice can become complex.

Q: What's your verdict on the status of the merger?

A: We're exactly where we expected to be, in terms of things that we've accomplished. The only thing where we haven't gotten where we wanted to be by this point is in getting the labor agreements done. With the pilots, there has been some degree of intra-union politicking going on and that has delayed it. But that, you can't lay at the feet of management.

Q: A lot of people love to hate the airlines. Do they expect too much from you?

A: We're in the business of getting people safely from point A to point B, on time, with their underwear. That's what we do for a living and we are really good at it. The mental image people have of the glamour of flying was when flying was unaffordable. When I was a child, I didn't fly -- we couldn't afford to fly. Flying was for rich people. Today, flying is for everybody.

Q: Are there any foreign airlines doing things you think are especially innovative?

A: I like to fly competitors, because I learn. I like to go spy on them. We're not proud. We'll copy anything that makes sense. I can't think of any particular item where we've gone, "Wow, we should do that," but we're always looking for it.

Q: Is consolidation good for consumers?

A: Ultimately, yes. It's bad for consumers to have airlines that are always on the brink of insolvency, that are subject to potential strikes by labor, who cannot be depended on to be there the next day.

Q: Do you have three tips for parents traveling with kids over the holidays?

A: Pack light; arrive early; bring snacks.

Q: Where is the use of cellphones on planes heading and where do you think it should go?

A: To the extent that there's going to be air-to-ground communication onboard airplanes by customers, I don't think it will be cellphones. We'll have a completely Wi Fi-enabled fleet over the next few years. There's (voice over Internet). It can be very beneficial if you need to make a phone call. However, if you're on a 14-hour flight and the guy sitting next to you is arguing with his girlfriend for three of those hours, it's going to be a pretty unpleasant flight. We've got to sort that out as a carrier and as an industry.

Q: Do you ever fly in coach?

A: I do. I prefer first class.

Q: Window or aisle?

A: Aisle. I'm working. I get up on the flight deck of every airplane before the flight and I visit with the pilots. I talk to them and answer their questions. Then I work the galleys and talk to flight attendants and answer their questions. Often customers will come up and start talking as well. I kind of hold a little session back there and listen to them.

Q: Are you ever able to be on a flight and just be a guy in a seat?

A: I can't do that on United because I'm too visible. And I don't want to -- that's my job. I expect my officers to do the same thing. But on competitors, I'm a passenger, I sit and watch. I just sort of watch things probably more closely than others, and I will occasionally visit with flight decks and ask them how things are going, and just listen.

Q: Do they usually know who you are when you're talking to them?

A: Generally not, no. And I don't tell them, either.

Q: Tell us about the first time you started managing somebody. What did you learn?

A: My first experience managing people was really as a lawyer. What I learned was the value of communication: why something was needed, how it fit in the puzzle, what the deadline was, and then, feedback.

Q: Your father was a bomber pilot during World War II. Did he push you toward an aviation career?

A: No. If I were lying on a bench in a psychiatrist's office, he could tease out from the recesses of my mind why I did this. But no, I never really gave a thought to a career in aviation. I just sort of stumbled into the business as part of a turnaround group. I was interested in it for sort of the business challenge.

Q: What's the last thing you do before heading home?

A: I try to make it through my emails. We fly (millions of) people a year and my email address is in the public domain, and customers write me all the time. I always try to personally answer co-workers, even if it's: "I don't know but we'll figure it out." I can't keep up with the volume of customer emails. Those I tend to send to our customer care folks. I get interesting emails, like a customer that was just outraged that she was in 23B and she wanted to be in 23C and it was marked "Urgent -- Fix This Tonight!"

Q: At the end of the day, what are you doing to unwind and relax?

A: If I'm in Chicago, I go back to my lonely-guy apartment, I work out and then I take my microwave dish and eat it. I get my iPad out and I read the newspapers or I read a book. When I'm in Houston, I work out, then I walk my dog and I visit with my wife and I cook -- because I can't cook for one but I can cook for two.

[Associated Press; By JOSHUA FREED and SCOTT MAYEROWITZ]

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