Skift Take

These operational guarantee programs are not as generous as airlines would like people to believe, but they're better than nothing. It's a good thing United and Delta are focusing on on-time arrivals and mishandled baggage rates.

As it seeks to retain its most lucrative customers — and win over new ones — United Airlines is adding to the the commitments it makes to provide reliable service to passengers flying on many corporate accounts.

United created its program in December 2015, following Delta, which started a similar one earlier that year. The premise is simple: Both airlines want to assure corporate customers that business travelers will get where they’re going, on-time, as often as possible. If the airlines fail to meet their promises, they could owe compensation, ranging from a couple hundred dollars to $250,000. United promises credits companies can use to defray fees and ancillary charges, while Delta would give credit off of airfare.

The programs are valuable for marketing and sales purposes, but they’re designed to make the airlines look as generous as possible, even though it’s unlikely the carriers would pay for poor performance.

United’s 2017 guarantee, released recently, includes two holdovers from 2016, when United did not pay out any penalties. United has again told corporate customers it will have better on-time arrival performance than either Delta or American, measured by flights that arrive exactly on-time or early. It has also said it will cancel fewer flights than either American or Delta.

This year, United has added two new elements to its program. First, it promises it will mishandle fewer checked bags than either American or Delta. And second, it says it will have a lower gross carbon footprint than both American and Delta. United claims its carbon footprint guarantee is “unmatched in the industry.”

On-Time Performance Is Key

Even with its 2017 tweaks, United almost certainly designed its program to ensure it will owe little to nothing to its corporate customers this year. In many metrics it has chosen, United trails Delta but performs better than American.

But its biggest issue could be on-time performance.

In 2016, United improved its reliability by padding its schedules. Often, United added more time to many flights to make them seem like they were arriving on-time more often than before. United also added time between many flights, so planes sat on the ground for longer than before, ensuring they were more likely to depart as scheduled. But that’s a costly strategy, and in 2017, United has signaled it will schedule its airplanes more aggressively. That can lead to more delays.

But United should still be OK. Since Delta is the clear U.S. airline leader in on-time performance and operational reliability, United essentially seems to be guaranteeing it will perform better than American. That’s not as difficult as it sounds, for a key reason: United still tends to schedule more time for the same flights than American, which makes it more likely United’s flights will arrive exactly on time than American’s.

American does not have similar guarantees for corporate customers, but an airline spokesman said the airline is nonetheless committed to improving in key operational metrics.

In a recent blog post, Brett Snyder, an airline industry analyst, said he was not surprised United met its 2016 guarantee, even though the airline still has some work to do to improve reliability and efficiency.

“United knew it could likely control the numbers enough to avoid paying out on its operational guarantee,” Snyder wrote. “Sure enough, it did. And really, that’s a good thing. While agencies and corporates might have appreciated the payouts, there’s nothing they want more than an airline that gets their people where they need to be when they need to be there. United has stepped it up, so kudos to United for that. But there’s still plenty more work to be done in that operation.”

Low Payouts

Even if the airlines must pay, dollars amounts should be low.

For example, United would only owe $250,000 to a company if the airline misses its operational goals and delays or cancels more than 35,000 flights taken by that company’s employees. If United misses its on-time performance goals, but a company’s employees experience only 500 delays or cancelations, United would owe that company $1,000 in credits.

United’s credits for its new baggage-related guarantee will be lower. If United’s misses its goals and performs worse than Delta and American on baggage, it will owe corporate customers between $200 and $20,000 in credits.

Payouts will depend on how many bags a company’s employees check. If a company’s employees check 500 or fewer bags, United will owe that firm just $200. A company’s employees would have to check 50,000 bags before the $20,000 credit would kick in.


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Tags: delta air lines, On-time performance, united airlines

Photo credit: United Airlines is adding a mishandled bag guarantee for key corporate customers. Pictured are United and American Airlines planes at Los Angeles International Airport. 206488 / Flickr

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