Businessmodel of United Airlines

Customer Segments

United has a mass market business model, with no significant differentiation between customer segments. The company targets its offering at all consumers who want to take plane flights.

Value Proposition

United offers four primary value propositions: innovation, accessibility, cost reduction, and brand/status.

The company has embraced innovation from the start. Its groundbreaking firsts include:

• Introducing air-to-ground radio, improving flight safety and communication
• Introducing stewardesses, who originated as in-flight registered nurses, to airlines
• Introducing the Boeing 247, which enabled non-stop flight across the U.S. for the first time
• Introducing flight simulators with visual, motion, and sound cues for training pilots
• Becoming the first U.S airline to complete WiFi installations on its international fleet
• Becoming the first airline to offer Personal Device Entertainment (PDF) as an alternative The company creates accessibility by providing a wide variety of options. All of its domestic hubs are located in large population and business centers. This hub-and-spoke format enables it to transport customers between a high number of desinations with more frequent service than if each route were handled directly. It also enables United to add service to a new destination from a large number of cities using a limited number of aircraft. The company also creates accessibility by catering to special travel needs among passengers. It provides tailored services for customers with disabilities, children traveling alone, pregnant travelers, customers requiring extra seating, passengers with animals,  senior travelers, customers with peanut allergies, and customers with various specific dietary needs.

The company reduces costs in a variety of ways, which include the following

• United Specials – last-minute getaway deals
• Offers through MileagePlus, the company’s frequent flyer program
• Promotional certificates toward air travel purchase that can be redeemed online
• Car rental offers offering discounts as high as 40% through United’s partner Hertz
• Discounts for U.S. veterans and their family members The company has established a powerful brand due to its success. It maintains the world’s most comprehensive route network, with gateways to Asia and Australia, Europe, Latin America, Africa, and the Middle East and non-stop or one-stop service from almost anywhere in the U.S. It serves 340 destinations, including 212 domestic and 127 international (with 54 countries in its reach). It experiences 5,000 daily departures on average, and transported 140 million passengers in 2015 through over 1.5 million flights. It operates the most fuel-efficient fleet among U.S. network carriers. Lastly, it has won a number of honors, including recognition by Global Traveler for having the Best Frequent Flyer Bonus Program and Best Overall Frequent Flyer Program for 12 years in a row.

Channels

United’s main channels are its website, mobile app, online travel agencies, and traditional travel agencies. The company promotes its offering through its social media pages, advertising, and participation in trade shows and conferences.

Customer Relationships

United’s customer relationship is primarily of a personal assistance nature. The company transports passengers to their destinations via plane and provides various services on each flight.

That said, there is a self-service component. The company’s various distribution channels enable consumers to purchase tickets on their own. Also, its website features a “Travel Resources” section that includes airport terminal maps, fleet specifications, how-to-guides, a currency converter, and answers to frequently asked questions.

The site also features a newsletter with updates, promotions, and tips, and an “Operational Status” section that includes information on current flight status and travel advisories. Lastly, it operates United University, which provides a continuing education program that features online courses for travel agency employees in operations and account management.

Key Activities

United’s business model entails designing and developing its services for its customers.

Key Partners

United maintains the following types of partnerships:

• United Express Partners – Airlines that support the company’s route network through the U.S. and Canada, operating a wide range of aircraft. Specific partners include Cape Air, ExpressJet, GoJet Airlines, Mesa Airlines, Republic Airlines, Shuttle America, SkyWest Airlines, and Trans States Airlines.
• Star Alliance Partners – Members of Star Alliance, the world’s largest airline alliance of which United is a founding member. It provides service to more than 190 countries through 28 member firms. Specific partners are Adria Airways, Aegean Airlines, Air Canada, Air China, Air India, Air New Zealand, All Nippon Airways (ANA), Asiana Airlines, Austrian Airlines, Avianca, Avianca Brasil, Brussels Airlines, Copa Airlines, Croatia Airlines, EGYPTAIR, Ethiopian Airlines, EVA Air, LOT Polish Airlines, Lufthansa, SAS Scandinavian Airlines, Shenzhen Airlines, Singapore Airlines, South African Airways, SWISS, TAP Portugal, THAI Airways International, and Turkish Airlines. ### Key Resources

United’s main resources are its physical resources. As of December 2015 it operated 720 mainline planes, with plans to add 21 new Boeing aircraft and six Airbus aircraft in the coming year. The company also depends on human resources in the form of travel agents, pilots, flight attendants, and other flight personnel.

Cost Structure

United has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is likely cost of services, a variable expense. Other major drivers are in the areas of sales/marketing and transaction expenses, both fixed costs.

Revenue Streams

United has three revenue streams:

• Ticket Revenues – Revenues generated from sales of tickets to passengers for flight
• Cargo Revenues – Revenues generated from sales of flights for cargo transport
• Other Operating Revenues – Revenues generated from miscellaneous sources, including advertising solutions offered to brands and third-party businesses