00:00[sound] You know, you can tell George is an old friend of
00:04mine, when he can sort of pimp me about on time.
00:08Look, I, when I heard about this, when George asked me to
00:12come, someone had described this as a lecture and, you know,
00:15I think of lectures as something that smart people do and
00:19they impart learning, right?
00:22So this can't possibly be a lecture.
00:25The reason for that is I'm in the airline business.
00:27I'm an airline executive so by definition I'm not smart
00:32>> And secondly I'm in a business that hasn't earned an
00:35adequate return on its invested capital since the Wright
00:40So I'm a slow learner as well, alright?
00:44>> So what I'll talk to you about is, I'll talk to you a
00:46little about the airline business, and then I'll do a small,
00:48while I'm doing this, I'll do a small commercial for the new
00:51United Airlines because I want all of you to fly us.
00:54And I want you to pay, always book at the last minute and
00:57pay the highest fare, that's the key.
01:00>> And then I'll talk a little bit, a little bit about,
01:02about, leadership as well.
01:03Let me start by talking about the airline business.
01:05It is an extraordinary business.
01:06And I like to say and you're and most of you are, are, are,
01:10are, getting your MBAs or your PhDs.
01:12You know if you like the business of business, there is no
01:16business like the airline business.
01:18If you like making money, forget it.
01:21It's a tough, tough, business, and it's a tough business
01:24because there are a lot of structural problems with the
01:27It has very low barriers to entry.
01:29I like to say any idiot can get an operating certificate.
01:35It has very high barriers to exit.
01:38Because everybody who touches us, makes money off of us.
01:43Whether it's the air frame manufacturers, or the engine
01:45manufacturers, the aircraft lessors, the cities where we
01:50operate, whether it's the avionics manufacturers, the folks
01:55who service the lavatories, you name it, they make money on
01:58And as a result, nobody wants us to die.
02:01And that's why you see so many airlines that go into
02:04bankruptcy, and yet they get reconstituted and they come
02:06They don't liquidate.
02:07They come out the other end.
02:08And so you have, you have basically, an open opportunity for
02:12new entrance, and a cap on exit.
02:14And therefore, you tend to have an overcapacity, which tends
02:17to drive down fares, which tends to make us unprofitable.
02:20We're also a brutally regulated business, recognizing that
02:23the airlines were deregulated in 1978, only nominally.
02:28We are the most heavily regulated deregulated business that
02:33there is, and some of the regulations make a lot of sense.
02:36I mean, certainly the safety regulations make enormous
02:38But sometimes industrial organization is mixed in with
02:41safety and, consumer protection is mixed in, in regulations
02:47in ways that, that are fairly oppressive, for example, you
02:50probably know that the air traffic control system in the
02:53United States is quite antiquate.
02:56It's safe, don't get me wrong, it's safe.
02:58But, it's just very, very slow, and it uses the very finest
03:021950's ground based radar technology that money could buy.
03:06And we need to invest in that system, but, but we haven't as
03:09a nation, and as a result, it's, it's, it, it, the system
03:13has, has very limited throughput in, in, particularly in
03:16times of bad weather.
03:17That's why you have all of these, all, many, many delays in
03:21But if, as a result of our antiquated air traffic control
03:23system, our airplanes are stuck on a taxiway for more than
03:26three hours, we get fined $27,500 per passenger.
03:33Now I'm gonna give you a
03:35We don't charge that much per passenger, right.
03:37And, and, and so as a result we have lots of regulations
03:40that are very oppressive.
03:42On, on, on the air care someone actually recently said why
03:45don't you charge for air tickets because fuel's so important
03:48Why don't you sell an air ticket, and then, at the last
03:51minute, whatever the fuel price is that you're gonna be
03:53using, that'll be the cost, and the customer's credit card
03:56will be charged that.
03:57I mean, it'd be a logical thing to do.
03:59Well, the federal government, about a week ago, outlawed
04:01that practice before we could even start that practice, even
04:05So we're very heavily regulated in the ways that we
04:08advertise, the way that we operate.
04:09The ways we price our tickets, even though, nominally, we're
04:11a deregulated business.
04:12And we're also subject to external events that most
04:16I mean, last year, last April, there was a volcanic
04:20eruption, the name of which I've never been able to name
04:24Maybe one of you can do it.
04:25But it really shut down air travel in Europe and had some
04:29fairly material adverse effect on air travel.
04:32And who could have thought when you were planning for the
04:34year that you would be subject to a volcano or subject to
04:37SARS, or subject to any of the number of the external events
04:40that affect our industry.
04:42And certainly, the price of fuel is, you know, remarkably
04:46difficult for us to handle.
04:47Because not only is it an important input for us, in fact it
04:51is our single highest cost.
04:53We spend more on fuel than we do on our people worldwide,
04:57our aircraft worldwide or our facilities worldwide, or
05:02And when we, when, when fuel is such an important input
05:06price, it's quite high and quite volatile.
05:08To give you a concept of how much, I mean George mentioned
05:11$25,000 a minute which is a lot of money.
05:14Which is why I try to talk really, really fast, right?
05:15But if you think about what it is, at, at United Airlines,
05:19the new United combined Continental and United Airlines, we,
05:24for what we spend on fuel, we could buy a brand new Airbus
05:29You know what that is, that really big aircraft that spins
05:31little regional jets around like tops.
05:33You've probably seen that.
05:35>>We could buy a brand new Airbus A380 a week and throw it
05:40away, for the price of what when spend on fuel.
05:43And so when you've got that size of an input price, over
05:47which you have no control.
05:48Now you can do hedging and we do hedge, we do typical hedge,
05:52we're using typical financial products to hedge.
05:55But the reality is ultimately those hedges burn off and you
05:58have to pay the higher price of fuel and you've got to
06:01figure out a way to recover that higher cost.
06:03And this time around, this bump in fuel in 2011, we're as an
06:08industry doing a better job than we were in 2008.
06:11In 2008 you know, a lot of your clients got into a lot of
06:16trouble with high, very high fuel prices and fuel prices
06:18peaked at $172 a barrel for jet fuel.
06:20We're paying today about $136 a barrel so it's pretty close
06:24to what it, what it had been at its peak.
06:26But we've done a much better job of pricing to it.
06:29We've had a number of fare increases this year and we're
06:31also doing a better job.
06:33Obviously as you price your product higher you're going to
06:35less demand and we've done a good job reducing our capacity
06:38so we don't have too many seats chasing too few butts.
06:42But in terms of capital costs, huge capital costs very
06:46sophisticated financing which we do for all the capital we
06:49Technology we have, we're essentially a technology company
06:53It's a very data rich business.
06:56A very data rich business and as a result we have a lot of
06:59information in which to make a decision but we also have a
07:02lot of data and you gotta figure out how to part your way
07:06And I'm sure many of you have been faced with a whole lot of
07:10data and trying to figure out what, seeing through this,
07:12this, this, this fog of data what actually is very important
07:15So it?s, it's without question a difficult business and as
07:18George mentioned, it's also heavily unionized business.
07:20And that imparts its own set of difficulties.
07:22And certainly in a, in a merger like we're doing, we, we did
07:25the merger because we were, this is the network business and
07:28having the, the largest single network in the world is very
07:31And also there are lots of other assets you get in a merger
07:34of the size that we've done for example our loyalty program,
07:37our frequent flier program, has more members than there are
07:39citizens of France worldwide.
07:41And that imparts a lot of value, not only in the loyalty of
07:45But also in our ability to sell miles to third parties, like
07:49Chase, the credit card, things like that, is really
07:52But bringing together, bringing together carriers has its
07:57And certainly, the work groups are a very difficult issue.
08:01We have work groups that are represented by the same union.
08:04We have work groups that are represented by different
08:07We have work groups, some of whom who are not unionized
08:10that's on the Continental side or unionized on the United
08:13And you have to bring those together and, and, that's a,
08:16that's a, that's a, a long process, but an important
08:19And you've got to, you?ve got to earn the people's trust
08:23I think the most difficult thing in, in bringing two
08:26carriers together the size of Continental and United, it
08:30Because we are very two different carriers with two
08:33And, and Professor Parker is, is well, you know, well versed
08:36in, in, in the old Continental culture.
08:39But that's really important in a service business and, and I
08:41want to talk a little bit, a little bit about that as I talk
08:45more on the sort of the leadership aspect of this, you know,
08:48if you're, if you're trying to get together 87,000 diverse
08:52people, as we are in this merged enterprise.
08:56You've got to have a vision for them.
08:59And that's what I'm paid to do as CEO.
09:01But importantly, you've got to have a plan that they
09:06And if you'd, if you know, if you don't know where you're
09:10going, any road will take you there, right?
09:12So you've got to have a plan.
09:13And, and, and at the, at the new, combined carrier we're
09:18using a plan, that we have used on the Continental side for
09:23It's a simple one page plan.
09:25That is everything that we want to do is on a single piece
09:29of paper, or a single iPad page as the case may be.
09:32And it's important that people understand that plan, it's
09:37important that you, that everybody understands it.
09:39And it's most important that you tell people if what they're
09:44working on, if they can't trace it back to that plan then
09:48they should stop what they're doing and do something else.
09:51Because you can, you can distill everything you want in a
09:53business, into a marketing plan, and into a financial plan,
10:00and into an operating plan, and into a people plan.
10:03And what we do at the combined carrier is, we just take the
10:06most important things that we're going to be doing for the
10:08year, and we put them under each column, for the marketing
10:12plan, and for the financial plan, and for the operating
10:14plan, and for the people plan, list it out and we make sure
10:18people understand what they're working on and why they're
10:21And it's really important to show that and get that out and
10:24around the system so that people know where you're going.
10:28Because people want to believe in a future but you've got to
10:31show them what the future is going to be but them you have
10:34to show them how to get to that place.
10:37And so having a key a simple clear plan is incredibly
10:41valuable for leading change, bringing businesses together
10:46leading your troops and going over it over and over and it
10:49can get repetitive I understand that but, it's important
10:52that everybody understand how they fit in.
10:54Because you know, you, you, from, from the perspective of,
10:58of, of, of, of, of, you know person on the ramp throwing
11:01bags they wonder what, what, part are they, how are they
11:03participating in the carrier.
11:04How, what are they doing, how are they contributing to the
11:07And they can do that by understanding what we're doing in
11:11The other, the second thing I'd wanna make, make sure you
11:13understand for your own leadership positions going forward
11:15from, from what I've learned is the incredible importance is
11:18getting really talented people to work with you and work for
11:21you as you become leaders yourself.
11:23There are people who are insecure and they won?t hire really
11:27good people cuz they want to be better than the people
11:29reporting to them, they want to know more.
11:31My theory has always been, you go out and you find the very
11:34best people that you can find and you hire them and you
11:37actually try to hire people who are better at your own job
11:40than you'll ever be and then leave them alone.
11:43I mean a lot of people micromanage and there's nothing more
11:47dispiriting to people who work for you, than to micromanage.
11:50And, if you, if you've hired the right people and you've
11:53given them the tools that they need to do their job
11:56effectively then you ought to trust them, and you ought to
12:00let them make some mistakes.
12:01Now I don't mean mistakes like I mistakenly took some of the
12:04company's cash and put it in my bank account.
12:06Not that kind of mistake.
12:08But, let them, let, let them run with it.
12:10And don't micromanage them, and you know, what you'll find
12:12is 99 times out of a 100 they'll do the right thing.
12:15They'll be really good.
12:16And the one time out of a 100 you may have to sit down and
12:20give 'em a little counseling.
12:21But it's really important to hire the very, very best people
12:24and then make sure they've got the tools for the job and
12:27then let them run with it.
12:29Because if you're constantly, you know, if you're constantly
12:31in their underwear, I'll tell you, it makes their lives
12:33miserable, and you'll drive good people off.
12:35Whereas if you give them lots of response, and let them run
12:39Now, it's important that you not get sandbagged.
12:41I mean, what I tell my own direct reports is, you go run
12:44with the business, and you go do what's right, but keep me
12:47I don't ever want to discover something material, you know,
12:51It'd be nice for you to tell me in advance.
12:53So make sure you don't sandbag me.
12:55But it's important to get those people, and let'em run.
12:57Now, that's not to say, as leaders, you can't get intimately
13:00involved in portions of the business.
13:02And I would encourage you to do that as well.
13:04I mean I reserve the right as CEO to go do, kind of, you
13:08know, poke my nose in whatever I want to, from a business
13:11But it's, and it's important to know that, cuz there are
13:14leaders who are at, you know, 40,000 feet all the time.
13:17They're sort of the, what I would call the business round
13:20You know, the talking heads on TV, the people who make
13:23broad, generic statements, but don't actually know what's
13:25going on in their business.
13:26And you can get isolated really quickly as you rise up
13:29Now I've got, for example, I've got 8 SIDA cards - Security
13:32Ident, Identification Display of Area cards.
13:34Those are the things you use to go airside.
13:36And I had to go, by the way, watch 8 separate Spot the
13:39Terrorist videos to get this thing, which was really an
13:42unpleasant experience to have to go through to get these
13:44But I will tell you, it's really valid, because I can go
13:48I can go and just walk in any break room, and I do that
13:51alone, without an entourage.
13:52And it's really valuable, because you get to know people
13:55And, and make sure you're also mixing with the folks you're
13:58I mean, on every airplane I go up on the flight deck before
14:02the airplane takes off I talk to the pilots.
14:04The reason I do that before the airplane takes off is if I
14:07do it in flight they lock the door and they won?t let me
14:11And they have lots and lots of questions.
14:13I like to answer their questions but there's a limit to, to,
14:16to, to what I can do right?
14:19>>And, and again, and then, I work all the galleys.
14:20And I talk to all the flight attendants, and I go in the
14:24So over the years at Continental, I know thousands, and
14:26thousands, and thousands of people.
14:28And that's really valuable as a manager because that way the
14:30people who report to you can't bull shit you.
14:33I mean, they can tell you things but you can go 1 or 2 or 3
14:37levels deep and get the real information.
14:38And the fact is, the people who now, who now work for me
14:43So they don't bullshit be cuz they know I can, I can dig in
14:47And that's, that's, that's really valuable.
14:48But I think the most important thing that you can, that you
14:51can bring as leaders in the future to your own enterprises,
14:54whether they're for profit or non profit, is, is the culture
14:58I'm a huge believer that culture matters in a business, now
15:00I'm in a service business where, where it's sort of obvious
15:03that cultures important.
15:04And we have different cultures at these two airlines that I'
15:07m trying to bring together, a culture, and it's even more
15:09difficult because, because this particular transaction that
15:11we did, United Continental, was a merger of equals.
15:13Where we didn't acquire, we at Continental didn't acquire
15:16United and United didn't acquire Continental.
15:17We're trying to bring together the best of both but we're
15:20trying to bring together the best of both cultures.
15:22And, and, and you know, I sort of, I've always lived my life
15:25by two rules that my sort of mommy taught me.
15:29Which, which is, treat other people, like you'd like to be
15:32And, never tell a lie.
15:33That's really simple and you can be successful doing that.
15:37And at the airline treating each other like you'd like to be
15:42treated is what we call dignity and respect, treating each
15:44other and treating our customers with dignity and respect.
15:47That means being honest with people that means, that means
15:50And I'll tell you many people, again, as you progress in
15:53your career you have folks working for you, you, you thank
15:56people with financial incentives and you structure them
15:59appropriately and that's why we're all in business because,
16:01you know, you do want to get paid in business.
16:04But, even more importantly, often than the financial
16:06incentives, even more important than that are the personal
16:11I mean, and I don't mean the, I don't mean superficial.
16:13I mean having people who've done a really good job and go,
16:16taken the trouble to go to their office or go to their cube
16:20and thank them personally.
16:21[cough] I mean it makes a huge difference to them.
16:23And I would encourage you as well to always remember that's
16:26there's so many people who work really hard and work all
16:28through the night to make you look good.
16:31And you need to make sure you're thanking those folks as you
16:34go through your career.
16:35And build up those relationships, because it's incredibly
16:38But treating your coworkers with respect, treating your
16:41customers with respect is incredibly important.
16:43And also being open, direct and open and honest.
16:46It?s always better to tell the truth.
16:49If you make a mistake, get up to it quickly and it can be
16:53There's some mistakes that can be fixed, most mistakes can
16:56But being open and honest in my business that means not only
16:59being direct and open with my co-workers, but also with
17:02So if there's a problem, there's a delay, say what the delay
17:05is, tell people why there's a delay, and if you don't know
17:08why the aircraft's delayed, then say, I don't know, but I'll
17:11And explain what's going on to people.
17:13People much prefer that, than, than silence or the
17:16And it also means when I go out and talk to co-workers.
17:19I do, I do CEO exchanges, something similar to this
17:22actually, where I speak for a few minutes.
17:24And then, I open up for a half-hour of questions of, of my
17:27And they've learned over the years, on the Continental side,
17:30and the United folks are learning.
17:31They can get up on the microphone and they can ask me any
17:35And I'll give them a direct, and open, and honest answer.
17:38Now, sometimes that means telling them something they don't
17:41I don't always agree with them, but it's not, when someone
17:44comes to you with an idea that you know you'll never do, it'
17:47s not patting them on the shoulder and saying you know,
17:50great idea, I'll consider it.
17:52We won?t do that and here's the reason why, or when someone
17:55stands up and, and makes a, a, a, you know, a group of, of
17:59folks from the union step, and make a demand for a contract
18:02that you know will not be, in knowing the long run interest
18:06of, of interest of, of the company but harmful to the rest
18:08of the co workers, you'll explain that you'll never do that.
18:11And use the word never.
18:12It's a tough word but it's a true word.
18:15That is you would never do a contract that would jeopardize
18:17the future of the company or jeopardize the future of the
18:20And people sometimes don't want to hear the tough message.
18:23But it's important to give that tough message.
18:25You can give it politefully, politely.
18:26And you can do it respectfully.
18:29Because when you do that, when you've got, when you've got a
18:32culture that's built around, people treating each other with
18:34dignity and respect in direct and open honest communication.
18:36What you build is, is a company where people enjoy coming to
18:42They trust each other, and they, they learn, and, and
18:45management needs to do this, earn their trust, but they also
18:48learn to trust management.
18:49And even in a unionized workforce, you can build a
18:52relationship with a unionized workforce where the workforce
18:55thinks of themselves as employees of the enterprise first
19:00and union members second.
19:03If you have it flipped where its union first and enterprise
19:06second, that's the path to ruin.
19:09And you can build that culture where people enjoy coming to
19:12work, they trust each other, they trust management, they're
19:15proud of what they do, and they deliver tremendous service
19:19I'm sure many of you have worked over the years for various
19:23And if you think of places you've worked where you're really
19:26proud to work there, or you were proud of the product, proud
19:29of the brand, you'll do a better job.
19:31There's an old saying in the airline business, you know how
19:33much faster you can fix an airplane if you want to, right?
19:38And you can, you can get so much more out of people if they,
19:41if they're proud of where they're working, and they see the
19:43future, and they're rewarded for it.
19:45And it can be any of number of things.
19:47At, at, at, at United, we have perfect attendance programs,
19:50by working, if people have six months of perfect attendance,
19:53we put their name in a, in a, in a revolving drum, and we,
19:57and we pull out every six months, we pull out a name from
20:01And the winner gets a brand-new car with all the taxes paid,
20:04and the gross up on the taxes, and everything else.
20:06So they actually get a new car
20:08We have an on time bonus program, where if our, if our
20:11aircraft are 80% or more on time despite what Mr. Parker
20:14said, we are an on time airline.
20:17Domestically or internationally, we, or both we pay a bonus
20:21We, you know, we have for profit sharing program, so when we
20:26make a profit, when our co-workers work together and deliver
20:29the profit, we share the profit.
20:30That's what makes a great workplace, and that's what
20:32ultimately makes a great company.
20:34So I would encourage all of you in your future, in your
20:37leadership positions as well.
20:39Really, I've had, a lot of people ask me this all the time,
20:42you know, cuz I've had a really checkered career.
20:45I mean, I've done a lot of different things in my life.
20:48And, I never thought I would be in the airline business, and
20:51I sure as heck didn't think I would be running the world's
20:54But, what I've told people is, follow your passion.
20:56Don't go into investment banking because that's cool and
20:58everybody's doing it.
20:59And don't go into consulting because it's cool and
21:01everybody's doing it.
21:02Go follow what you want to do.
21:04If you've got a passion for investment banking, go for it.
21:07If you've got a passion for consulting, go for it.
21:09If you've got a passion for, for working in the high tech
21:13But go for your passion, because money is important, there's
21:16no question about it, but beyond a certain amount, what
21:18matters is really enjoying coming to work.
21:20And being proud of what you do.
21:22And, and believing in the company and believing in the
21:24future of the company.
21:25And I'll tell you, I've had jobs where I was unhappy and it'
21:29s a lot more fun being in a, in a job where you really enjoy
21:32what you're doing and you enjoy the people you work with,
21:35and you're proud of what you're doing, and you want to
21:38continue to improve the business.
21:39It's more, it's more personally successful.
21:41So follow your passion, ignore the herd.
21:43And be yourself, you know, a lot of people think of, you
21:47know, business people being sort of stuffed suits, but the
21:53reality is, the best thing you could do, and the way you can
21:57advance your own career, and the way you can be most
21:59satisfied is simply be yourself.
22:01I like to joke if you're an obnoxious liar you're probably
22:03not going to make it in business.
22:05Not that kind of be yourself but, but, follow your passion
22:08and be yourself and, and I think, certainly with he
22:10background of Stanford business school, you'll be incredibly
22:13So, I'm going to stop right there and start, and, and, and
22:16start taking questions, but I, I wanna end by thank you very
22:19I'm honored to come here, I'm certainly honored to a to be
22:22in this spectacular, look at that, people way in the back,
22:25hi there in this, in this spectacular auditorium, in the
22:27beginning of, of, of this, a brand new night business
22:30school, and I want to thank Professor Parker for, for
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