Lavinia-United Airline

Consulting Report for

United Airlines

Liyan Wang

Analytical Tools for Marketers

Dr. Zafar Iqbal, DePaul University

1

Contents

Introduction …………………………………………………………………2

Overview ………………………………………………………………….2

Findings/Recommendations ………………………………………………2

Perceptual Mapping ………………………………………………2

Conjoint Analysis ………………………………………………4

Value Curve Study ………………………………………………5

Conclusion ………………………………………………………………......6

Appendix ……………………………………………………………………7

2

Introduction

United Airlines has been facing a steady erosion of profitability and market share to

Southwest Airlines after its emergence from Chapter 11.

Different analytical techniques were applied in order to solve this problem, including

multidimensional scaling (perceptual mapping), exploratory factor analysis (EFA),

conjoint analysis and value curve study. The data gathering process was both quantitative

in examining records, reports and surveys as well as qualitative through focus group

discussions and authority interviews.

The key objectives of the consultation were to:

Understand the perception of brand and the driving factors that affect performance;

Understand customer value structure in terms of airline choice and create the optimal

product;

Draw a new value curve for United Airlines, summarize with a simple tagline and

show economies of scale for sustainability.

This report is a summary of findings and recommendations.

Overview

United Airlines (commonly referred to as “United”) is the world's largest airline when

measured by number of destinations served. United operates a comprehensive domestic

and international route network, and has significant presence in the Asia-Pacific region.

The main competitors are American Airlines, Delta Air Lines, and Southwest Airlines.

United resurrected the popular “Fly the Friendly Skies” slogan in September 2013. Such

customer-focused campaign is based on feedback from customers that “user-friendly”

means the combination of service, technology and product enhancements. Thus United

designed investments in global route network, new aircraft, onboard features, customer

service and digital channels to be “flyer-friendly.”

Finding/Recommendations

1. Perceptual Mapping

Findings:

United is generally reckoned as expensive and offering somewhat pleasant flight

experience. It is ranked first in the overall preference in light of its outstanding

performance in the following aspects: variety of class seating options, direct flight

availability, convenient gate location, level of available legroom, level of safety, desired

3

destination availability, frequency of

desired flights, standby options and

sufficient on- flight storage(see in appendix

1, 2 & 3).

However, when it comes to two factors that

drives the Y-axis, United is no longer

successful. Even though it is ranked

second in the aspect of friendliness of flight

crew and on-time arrival, there is still huge

gap between its competitive rival,

Southwest and little gap between American

Airlines and Delta.

Recommendations:

Enhance the quality of flight crew.

Flight attendants are the representatives

of brand image and their service

directly impact customers’

impression and flight choice. It’s

fundamental for flight crew to be professional, optimistic and polite to passengers so

as to show “fly-friendliness”. What’s more, having bilingual or trilingual crew during

the flight is crucial since the fact that certain percentage of Hispanic passengers can’t

speak English and communication is the base for attendants’ showing kindness.

Increase the percentage of on-time

arrival. Find out the ratio of delay out

of the five possible causes, i.e. carrier,

weather, NAS, security, and late arrival.

If the majority of delay occurrence is

caused by controllable factors like

carrier, for example, awaiting the

arrival of connecting passengers or

crew, a more effective supervision

system should be built up.

After repositioning, United is supposed to

be perceived in the position shown in

Figure 2.

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

-1.5 -1 -0.5 0 0.5 1 1.5

High-end Low-cost

Pleasant Flight Experience

Unpleasant Flight Experience

Friendliness of Flight Crew

Figure 1 Brand Perception with Attributes: Friendliness of

Flight Crew & Excellent On-time Arrival

Figure 2 New Brand Perception

Excellent On Time Arrival

High-end

Pleasant Flight Experience

Unpleasant Flight Experience

Low-cost

4

2. Conjoint Analysis

Findings:

There is no doubt that price is the

priority among the 7 features in a

mature market, which accounts

for nearly 50%. Number of

layovers and on-time arrival

percentage are the second and

third significant features.

The least important features

according to the result are class

seating, percent of time desired

destination offered and food

Service. The sum percentage of

these three features is no bigger

than that of frequency of desired

flight.

Based on OFI, optimal total product utilities (TPU) is calculated and shown in the

following table.

Optimal Product Profile Utilities

$300 1.00

0 layover 0.54

80% on-time arrivals 0.33

Frequency flight is hourly 0.20

Having 1 class seating 0.05

90% of the time desired destination offered 0.09

Food Service snack 0.05

Total 2.26

Recommendations:

Customers are sensitive about price. So it’s high time to strengthen cost control. As it

is mentioned above, in order to improve the performance of flight crew, it’s necessary

to lay off those who rank at the bottom of performance evaluation for a long time

quarterly, which is based on online survey designed for passengers to rate their flight

experience after the flight.

Increase the ratio of non-stop flight. There is an obvious linearity in number of

layovers (See in appendix 4). Passengers travel for either business or leisure reason

want to arrive at the destination as soon as possible. For one New York – Los

47.43%

24.60%

14.15%

7.72%

2.09%

1.61%

2.41%

Overall Feature ImportancePrice

Number of layovers

Percent of on-time arrivals

Frequency of desired flight

Percent of time desireddestination offeredFood Service

Class seating

Figure 3 Conjoint Analysis OFI

Table 1 TPU of Optimal Product

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Angeles flight, 23% (total=65) of the lights provided are non-stop. If United make it

30%, the brand performance will be better.

Reconsider class seating. From the result, customers prefer 1 class to 2-3 class. In the

current United class system, United provides 3 classes: Economy (lowest), Economy

(flexible) and First. Combine Economy (flexible) and First with a new name Valued

which offer the benefit both classes share.

3. Value Curve Study

Findings:

Food is considered “So-what” factor because as it was ranked the least important factor in

the conjoint analysis.

Recommendations:

Eliminate food service from the current service or replace with snacks. There is no

need to cooperate with companies to provide meals as customers usually buy food in

the restaurants within the airport after security check.

Provide fres wifi access. With the development of technologies, now it’s possible and

safe to use digital appliances during the flight and most customers leverage their own

digital appliances for entertainment.

0

1

2

3

4

5

United Value Curve

High-end Airlines

Low-cost Airlines

United

L

L

L

L

L

S

M

D D

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Offer better membership rewards to valuable loyal members.United now has 5

different classes existing, namely United Economy®, United Business®, United

BusinessFirst®, United First®, United Global FirstSM. By supplying free check-in

baggage service to business plus classes, those who already are members are willing

to enjoy the benefits and recommend to their family members or friends. It’s a free

brand promotion.

Conclusion

There is no need for United to launch a new brand TED. As it is shown in the perceptual

mapping, United is rated first among the popular airlines. The decrease of profit is not

because of competing with fierce competitors like Southwest but spending much

cost/investment on the services which customers don’t care to leverage, such as food

service. In addition, not much differences exist between hourly flight and every 3 hours

flight.

Go only with TED is bold as it will confront Southwest which has aggregated large

number of loyal customers and undoubtedly such movement will impair current United

loyal members, some of whom travel for business and are of great value to the company’s

long-term development and profitability.

As a result, what United needs to change is its investment structure, improve employee

performance and reduce cost. After its change, the market share will increase from

28.97% to 40.63 %( See appendix 5).

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Appendix 1 Brand Perception

Appendix 2 Brand Perception with Preference Line

High-end

Pleasant Flight

Experience

Unpleasant Flight

Experience

Low-cost

High-end

Pleasant Flight

Experience

Unpleasant Flight

Experience

Low-cost

I prefer this brand

4

5

6

3

1

2

8

Appendix 3 Brand Perception with All Measured Attributes

Low-cost High-end

Pleasant Flight

Experience

Small No. of

Loyal Customers

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Appendix 4 Conjoint Analysis Output

0.58

1.00

0.55

0.05

0.54

0.27

0.05

0.33

0.17

0.05

0.20

0.19

0.05

0.05

0.01

0.00

0.09

0.06

0.05

0.05

0.03

0.02

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Intercept

$300

$600

$900

0 layover

1 layover

2 layovers

on-time 80% of the time



Hourly

Every 3 hours

Every 6 hours

having 1 class

having 2 classes

having 3 classes

90% of the time desired destination offered



snack

cold meal

hot meal

Conjoint Utility Bar Graph

SUMMARY OUTPUT

Regression Statistics

Multiple R 0.723518593

R Square 0.523479154

Adjusted R Square 0.504142076

Standard Error 1.156612996

Observations 360

ANOVA

df SS MS F Significance F

Regression 14 507.0055556 36.21468254 27.07126478 2.58202E-47

Residual 345 461.525 1.337753623

Total 359 968.5305556

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%

Intercept 1.383333333 0.236092639 5.859281924 1.08566E-08 0.918971242 1.847695425 0.918971242 1.847695425

$300 x1 2.458333333 0.149318096 16.46373349 2.36542E-45 2.16464496 2.752021707 2.16464496 2.752021707

$600 x2 1.3 0.149318096 8.706245505 1.31935E-16 1.006311627 1.593688373 1.006311627 1.593688373

on-time 80% of the time x3 0.733333333 0.149318096 4.911215413 1.40001E-06 0.43964496 1.027021707 0.43964496 1.027021707

on-time 70% of the time x4 0.325 0.149318096 2.176561376 0.030191036 0.031311627 0.618688373 0.031311627 0.618688373

cold meal x5 -0.058333333 0.149318096 -0.390664862 0.696286094 -0.352021707 0.23535504 -0.352021707 0.23535504

hot meal x6 -0.083333333 0.149318096 -0.558092661 0.577143092 -0.377021707 0.21035504 -0.377021707 0.21035504

having 2 classes x7 -0.091666667 0.149318096 -0.613901927 0.539684712 -0.38535504 0.202021707 -0.38535504 0.202021707

having 3 classes x8 -0.125 0.149318096 -0.837138991 0.403093955 -0.418688373 0.168688373 -0.418688373 0.168688373

being offered desired destination 90% of the time x9 0.108333333 0.149318096 0.725520459 0.468624641 -0.18535504 0.402021707 -0.18535504 0.402021707

being offered desired destination 80% of the time x10 0.025 0.149318096 0.167427798 0.867131549 -0.268688373 0.318688373 -0.268688373 0.318688373

frequency flight is hourly x11 0.4 0.149318096 2.678844771 0.007741474 0.106311627 0.693688373 0.106311627 0.693688373

frequency flight is every 3hours x12 0.358333333 0.149318096 2.399798441 0.016933689 0.06464496 0.652021707 0.06464496 0.652021707

zero layovers x13 1.275 0.149318096 8.538817707 4.39432E-16 0.981311627 1.568688373 0.981311627 1.568688373

one layover x14 0.583333333 0.149318096 3.906648624 0.000112619 0.28964496 0.877021707 0.28964496 0.877021707

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Appendix 5 Market Share Simulation

Product Profile Old United Product Profile New United

$600 0.55 $300 1.00

1 layover 0.27 0 layover 0.54

on-time 70% of the time 0.17 on-time 80% of the time 0.33

Frequency flight is hourly 0.20 Frequency flight is hourly 0.19

having 3 classes 0.00 having 2 classes 0.01


0.09 90% of the time desired destination offered

0.09

cold meal 0.03 snack 0.05

Total 1.32 Total 2.21

Product Profile Southwest Product Profile American

$300 1 $600 0.55

1 layover 0.27 1 layover 0.27

on-time 70% of the time 0.33 on-time 70% of the time 0.17

Frequency flight is hourly 0.2 Frequency flight is hourly 0.20

having 1 classes 0.05 having 3 classes 0.00



snack 0.05 cold meal 0.03

Total 1.95 Total 1.28

MKT Share MKT Share

Old United 28.97% New United 40.63%

Southwest 42.88% Southwest 35.85%

American 28.15% American 23.53%

28.97%

42.88%

28.15%

Market Share - Old United

Old United Southwest American

40.63%

35.85%

23.53%

Market Share - New United

New United Southwest American

Documents

Lavinia-United Airline