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UNITED AIRLINES RESEARCH PAPER

Research Paper Part 1 – United Airlines

Justin Beecher, Isabelle Niehoff, and Julian Hawlitzky

September 27, 2020

MKT4601

Professor White

Webber International University

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Literature Review

History

United Airlines is the fourth largest airline worldwide. The global player operates both

domestic and international flights. The airline operates cargo airplanes and passenger airplanes.

United Airlines was founded in 1926 by Walter T. Varney, originally under the name of Varney

Airlines. On April 6th, 1926, the newly founded corporation departed its first flight, which

makes it one of Americas oldest commercial airlines. Ever since, the company introduced

innovative practices which revolutionized the aviation industry. In the 1930’s United added

female flight attendants to their flights, creating new job opportunities for women. United also

became the first Airline to implement flight-path simulators and the first to hire an African

American pilot. As the airline continued to grow, it became the first to fly to all 50 states. Even

in recent years, United has not stopped to innovate. In 2016 United became the first U.S. airline

to depart commercial flight, powered with biofuel. In 2020 the airline is pioneering the industry

by adding interactive maps to their flights which are showing travel restrictions due to COVID-

19.

Competition

Despite being the fourth largest airline worldwide, United has been confronted with

numerous issues over the past years. One obvious issue is that United is being outperformed by

Southwest Airlines, Delta Airlines and American Airlines, which are considered its closest

competitors. American Airlines is leading the domestic market share within the U.S. with 17.8.

Just slightly lower is Delta with 17.3%, followed by Southwest with 16.8%. Behind its

competitors, United secures a 14.3% market share. (Zhang, March 2019). Due to the COVID-19

pandemic, the aviation industry has seen a national average decrease of 50% within the U.S for
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passenger flights. This pandemic should affect United and competitors in a similar manner. To

reduce operating costs, thousands of employees have already been laid off, and around 7400

accepted voluntary leave packages.

Brand Culture

In recent years, United has had many internal and external issues which resulted from bad

customer service and scandals, leading to poor customer satisfaction. Many employees have publicly

referred to the working environment as abysmal. This is a reflection of their top-down culture which is

being practiced. The airline is being sued by two of their own employees, who both have been with

United for over 25 years. According to employee reports brand culture is overrun with discrimination,

harassment and retaliation. (Singh, September 2020). Discrimination is most common within the cabin

crew, where employees are hired based upon their looks. This is especially true, when flights are

transporting sports teams. On those flights, United carefully picks young, good looking, and blond cabin

crew members. This poor working environment is one of the leading causes for the underdeveloped brand

culture.

Public Image

Externally the company is not reflecting a professional brand image as various scandals

in connection with United surface continuously. The one which caught the most attention

occurred in 2017, when United violently dragged a customer from one of their oversold flights.

Other passengers filmed this action initiated by United and the video went viral. When the

situation got more heated, United paid the customer serval millions as a settlement to reduce the

negative press it had been receiving. Additionally, it also attracted much tension after the airline

accidentally killed a passenger’s dog. In this incident a crew member, advised a passenger

multiple times to place her dog into the overhead storage. The crew member was unaware that
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there was no oxygen flow present in the storage, which unlimitedly cause the dog’s death.

Additionally, the airline is known for frequently misplacing pets. Even Schoolboy Q, a highly

successful rapper, had lost his dog because United placed it on the wrong flight. He tweeted

about the incident, and many fans replied with their distrust of the airline. In 2015 one of the

United employees purposely pushed an employee to the ground. (Matousek, March 2018).

Customer Satisfaction

Due to its bad public image, United is not known for great customer satisfaction. When

looking up online reviews, it becomes obvious that the customer service is a big issue.

Employees were often described as incompetent, rude and showcasing lack of interest. In efforts

to increase customer satisfaction, the airline has dropped its change fee in September 2020. The

idea to differentiate itself from its competitors backfired, as Delta and Southwest implement the

same change to their operations use days after. In recent months United implemented another

change which received criticism across the Internet. The airline will leave it up to the customer

to decide whether their carry-on will be acceptable for the flight, or is too big and needs to be

checked in.

Capital

Having limited resources for times of crisis has been an issue for United. With the drastic

decrease in sales, it started making such big losses, it could not come up with the needed capital.

This why United received 5 billion dollars in the spring of 2020, as governmental funding aid.

The funding plan expires on October 1st, and as of now, it is not expected to be extended or

renewed (Rappeport & Chokshi, April 2020).

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To compensate for the decrease in revenue the airline has announced it will lay off another

16370 employees, which will reduce its operating capacity by roughly 50% compared to 2019.

CEO Scott Strict said on September 22nd, 2020, he is predicting United to operate at 50%

capacity for the next 15 months.

Stock UAL

The flight regulations due to the virus have had a huge impact on sales, especially

international flights. The lack of sales and decreased revenue has been reflected on the stock

price. UAL was once sold for $96,70 a share on 30th November 2018, and on May 15th, 2020

the corporation reached a 5-year low of $19,92 per share. Such rapid decrease in value causes

shareholders, to sell their shares, driving the stock price down even further. With an ongoing

insufficient development, the company experiences difficulties, trying to find new investors.

Profitability

Solely in the second quarter of 2020, the airline reported a loss of $2,6 billion, which is

roughly a 75% decrease in revenue from its prior year quarter. The income statement of the third

quarter has yet to be published, but specialists at Bloomberg and similar institutions predict even

bigger losses than in the previous quarter. Fox business predicts that revenue will be down by as

much as 85% from the previous year quarter (Manfredi, September 2020). In efforts to minimize

losses, United operated around 5000 flights for just cargo since the 19th of March. On September

30th the national compensation aid for airlines expires, which will most likely result in the layoff

of 16000 more employees. United has requested an extension of the aid, but it has not been
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approved yet. A state published by the IATA (International Air Transportation Association) in

July suggested that global air travel won’t recover till 2024.

Procedures
Problem Identification 1

The problem that the research group has identified for United Airlines is the public
image. Because of the lawsuits and the stories that have come about from United Airlines, it has
damaged the public image of the company.

Research Objective RO1

To determine if the poor public image affects the sales of United Airlines.

Research Question RQ1

Does the poor public image affect the sales of United Airlines?

Null Hypothesis H01

There is no relationship between the poor public image of United Airlines and the decline
in sales.

Alternative Hypothesis HA1

There is a relationship between the poor public image of United Airlines and the decline
in sales.
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Problem Identification 2

The problem that the research group has identified for United airlines is the customer
satisfaction. The reviews online and the news stories online show that customer satisfaction is
not the greatest as of now.

Research Objective RO2

To determine if the poor customer satisfaction affects the sales of United Airlines.

Research Question RQ2

Does the lack of customer service affect the sales of United Airlines?

Null Hypothesis H02

There is no relationship between the lack of customer satisfaction and the decline in
sales.

Alternative Hypothesis HA2

There is a relationship between the lack of customer satisfaction and the decline in sales.

Problem Identification 3
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The problem that the research group has identified for United Airlines is competition. All
of the backlash and poor choices have given the competition the lead in running the aviation
business.

Research Objective RO3

To determine if the competition affects the decline in sales.

Research Question RQ3

Does the competition affect the decline in sales?

Null Hypothesis H03

There is no relationship between the competition and the decline in sales of United
Airlines.

Alternative Hypothesis HA3

There is a relationship between the competition and the decline in sales of United
Airlines.

Research Method

The research method that we will be using to collect primary data for our project is the

quantitative research method. Quantitative research is the collection and analysis of numerical

data (Bhandari, 2020). We will be using the quantitative research method in form of a survey.

The survey will be a good addition to our secondary data that we have collected already, and it

will help us find out if our hypothesis is true or, if it is not true, how else we might be able to
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solve the problem. We will conduct a well-structured survey with a limited number of precise

close-ended questions so that the data will be easy to be measured. We are using the quantitative

research method rather than the qualitative research method because our survey will be used to

support our problem statement that the problems of United Airlines are the public image and

customer satisfaction and the best way to do that is using numbers recorded in a survey.

Qualitative research is used to understand concepts or experiences through interviews with open-

ended questions and observations described in words (Streefkerk, 2019). We are not able to do

that kind of research in this class.

Research Design

The type of research that we will be conducting is exploratory research. We are limited in

our resources for this project since we don´t have any insight information from United Airlines

and we are not conducting any interviews. Our research includes a literature review with

secondary data that we have collected and a survey which will give us primary data. Our

research project is exploratory because we are doing initial research to clarify and define the

nature of the problem and to develop potential business opportunities for United Airlines. We

will not be able to provide conclusive evidence which would be causal research.
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References

Bhandari, P. (2020, June 12). An introduction to quantitative research. Scribbr. Retrieved September 25,

2020, from https://www.scribbr.com/methodology/quantitative-research/

Contributor Zacks Equity Research Zacks. (n.d.). United Airlines (UAL) Stock Sinks As Market Gains.

Nasdaq. Retrieved September 13, 2020, from https://www.nasdaq.com/articles/united-airlines-

ual-stock-sinks-as-market-gains:-what-you-should-know-2020-09-11

Egan, M. (2020, September 01). The airline industry could shrink by half to survive, United Airlines

chairman says. CNN. Retrieved September 27, 2020, from

https://www.cnn.com/2020/09/01/business/airline-jobs-united-munoz/index.html

Josephs, L. (2020, September 09). United Airlines bets on Africa, India and Hawaii in 2021 expansion.

CNBC. Retrieved September 27, 2020, from https://www.cnbc.com/2020/09/09/united-airlines-

bets-on-africa-india-and-hawaii-in-2021-expansion.html

Manfredi, L. (2020, September 20). United Airlines, unions call for 6-month extension of federal aid,

restart of stimulus negotiations. Fox Business. Retrieved September 26, 2020, from

https://www.foxbusiness.com/economy/united-airlines-unions-call-for-six-month-extension-of-

federal-aid-restart-of-stimulus-negotiations

Matousek, M. (2018, March 16). United Airlines has a long history of infuriating customers. Business

Insider. Retrieved September 13, 2020, from https://www.businessinsider.com/united-airlines-

worst-customer-service-incidents-2018-3
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New Airline Industry Analysis Shows States with Air Service and Travel Hardest Hit by COVID-19

Pandemic. (2020, August 13). Airlines for America. Retrieved September 26, 2020, from

https://www.airlines.org/news/new-airline-industry-analysis-shows-states-with-air-service-and-

travel-hardest-hit-by-covid-19-pandemic/

Singh, B. (2020, September 12). United Sued Over Discrimination of Staffing on Sports Charters.

Simple Flying. Retrieved September 13, 2020, from https://simpleflying.com/united-sports-

charter-lawsuit/

Rappeport, A. & Chokshi, N. (2020, April 14). Crippled Airline Industry to Get $25 Billion Bailout, Part

of It as Loans. NY Times. Retrieved September 26, 2020, from

https://www.nytimes.com/2020/04/14/business/coronavirus-airlines-bailout-treasury-

department.html

Streefkerk, R. (2019, April 12). Qualitative vs quantitative research. Scribbr.

https://www.scribbr.com/methodology/qualitative-quantitative-research/

Unnikrishnan, M. (2020, September 22). United Airlines Will Remain Half Its Size Until Vaccine Is

Widely Distributed: CEO. Skift. Retrieved September 26, 2020, from

https://skift.com/2020/09/22/united-airlines-will-remain-half-its-size-until-vaccine-is-widely-

distributed-ceo/

Zhang, B. (2019, March 06). The 20 biggest airlines in the world. The United Airlines Historical

Foundation. Retrieved September 26, 2020, from https://www.businessinsider.com/biggest-

airlines-world-oag-2019-3
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