This article from NYTimes.com has been sent to you by psa188@juno.com. If management needs consultants to tell them how to do their job, maybe it's time to fire the high-paid executive staff. Hopefully, the CONsultants won't come up with any more fake names like "Allegis" or "Avolar". psa188@juno.com McKinsey Works on a Vision for Airline December 10, 2002 By JONATHAN D. GLATER Now that United Airlines has filed for bankruptcy protection, the critical challenge facing the airline - and many of its rivals - is to find a business strategy that works. To that end, United has hired McKinsey & Company, the consulting firm, in addition to the usual army of accountants, lawyers and investment bankers who will advise the company in Chapter 11 proceedings. The task of McKinsey, whose high-priced consultants are not nearly as well known for their bankruptcy experience as they are for their business strategy advice, will be to help come up with a vision for the airline. McKinsey is already studying whether certain discounts to corporate customers should be scaled back or even eliminated in some cases, according to court documents. The consulting firm, which recently advised Delta Air Lines on setting up a low-cost carrier, is also likely to push United toward adopting at least some of the techniques of low-fare airlines that have managed to be profitable while United has been losing billions. In several articles in McKinsey's quarterly newsletter, the firm's partners have sung the praises of low-cost airlines like JetBlue and Southwest in the United States and Ryanair and EasyJet in Europe. The firm has noted the advantages of having a fleet of very similar or identical aircraft that require the same maintenance procedures, for example, and the benefits of using less popular and therefore cheaper airports, like Oakland International Airport in California and Dallas Love Field. Hiring McKinsey to advise on strategies to cope with changes in the airline industry makes sense, said Tom Rodenhauser, president of Consulting Information Services in Keene, N.H., but hiring it while in bankruptcy proceedings is unusual. "Hiring McKinsey is a signal that they're hiring the big thinkers," Mr. Rodenhauser said. For a company trying to survive, he said, "it's not the most logical choice." United's own stab at a viable business plan was rejected last week by the board created to provide loan guarantees to airlines struggling after last year's terrorist attacks. The industry's problems are well documented, and United has higher operating costs than do most of its rivals. These are topics that McKinsey's partners have evaluated in the past as well, pointing out the risks from many large airlines' overreliance on business travelers paying high fares as corporate travel has declined. Under the terms of its retention by United, McKinsey will advise the airline on ways to increase revenue. The consulting firm will focus on improving the airline's corporate sales and will also assist United in developing a "comprehensive, integrated turnaround program." The consulting firm will be paid close to $1.5 million a month for its work, according to court documents. Some of McKinsey's recommendations so far seem relatively minor, like eliminating discounts for some corporate customers. "Nearly half of all accounts may be too deeply discounted," a McKinsey partner, Gerhard Bette, wrote to United. In the letter, Mr. Bette went on to say that United could lift revenue by $50 million by addressing the problem. The airline could also save about $10 million a year by improving training of its sales staff and increasing the number of corporate accounts handled by each staff member. A United account executive "has 10 corporate accounts compared to a Delta A.E. that has 60," according to Mr. Bette's letter. Sales team members should also receive incentives to encourage better performance, McKinsey advises. McKinsey estimates that United could increase revenue by $25 million a year if it improved its customer relationship management so that the airline is better able to market certain services and discounts to certain kinds of customers, and gathers more information on competitors' offerings. http://www.nytimes.com/2002/12/10/business/10CONS.html?ex=1040528900&ei=1&en=3d4736b173f9302a HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company