Computer switch will test merger
CHICAGO – Top executives at United Continental Holdings Inc. usually don’t field questions about 1980s Matthew Broderick films during conference calls to discuss the airline’s quarterly profits.
But they did during a recent earnings call.
“I can’t help but think of that scene from ‘War Games,’ where they couldn’t shut the computer off,” said Jamie Baker, a stock analyst from JPMorgan Chase, referencing the 1983 movie about a military supercomputer that takes over and nearly starts a nuclear war. “My question is, what happens if the cutover doesn’t go as planned?”
United Continental’s cutover to a new computer system is just weeks away, slated for the first week of March, although the airline won’t give an exact date. The system will be the digital backbone of the airline’s worldwide network, handling everything from passenger information and reservations to airfares and flight schedules. The move to a combined system will help customers finally see United and Continental, which merged in 2010, as a single airline.
But the switch is a risky undertaking and a monumental one for the Chicago-based airline, which spent more than a half-billion dollars on integration last year. The cutover alone has involved thousands of United employees.
On the conference call, United executives chuckled at the movie reference in the analyst’s question. But they are dead serious about the cutover.
“We’ve had four full-scale dress rehearsals, all the data transfers, and everything is appropriate,” United CEO Jeff Smisek said. “We are exceedingly well-prepared for it.”
But other airlines, despite their preparations, have had embarrassing episodes with similar computer conversions that created major hassles for air travelers.
“That’s always a risky endeavor,” Seth Kaplan, managing partner of Airline Weekly, said of airline computer system changes. “We’ve seen over the past several years as airlines have migrated their reservation systems, some have done it rather smoothly and some have not and had real operational messes and a lot of bad headlines.”
Surely mindful of those problems, United’s preparation hasn’t stopped with dry runs.
“I’m confident this will go as planned, but … being prudent, we also have scenarios in case we have some unforeseen issues,” Smisek said. If something goes wrong, the airline can roll back the cutover or postpone it, he said. “We’ve been pretty thoughtful, careful and conservative in this.”
The airline is reducing flights for the cutover. “Around the date of the cutover, we are taking some of the load off the airports, but that’s for a very short period of time,” Smisek said. “We are also, obviously, staffing up for that period of time. We’ve got a large number of people around the system who are experts in (the new computer system).”
He said the cutback in flights, which United would not elaborate on, will have a “fairly modest” effect on the airline’s revenue.
Helping the transition is that the company is moving to the reservation system used by Continental, so many employees of the combined airline know how to use it. Still, the company had to train some 10,000 workers from the United side. Part of that training has included localized exercises at some United hubs. For example, United customer service agents at Los Angeles International Airport completed an exercise where they worked Continental flights for a day, giving them a chance to use the computer system in a real situation, a spokeswoman said.
Although the computer switch is largely behind the scenes, a somewhat related change for customers will be the demise of Continental.com. All its functions, including new and existing bookings, will migrate to the United.com Web address.
At the airport, passengers will be able to more easily use ticket counters for United or Continental, which, unlike now, will be on the same computer system. At airport gates, customer service agents will be able to make accommodations, such as seat changes, regardless of which airline the passenger booked with.
“From a customer standpoint, it will really start to feel like one airline,” Kaplan said.
That is, if the cutover goes as planned.
Even if it doesn’t, problems are usually short-lived, Kaplan said.
“It can be ugly, but a month later it’s mostly forgotten about,” he said. “In the long term, it will be good for them to have one system.”