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United to outsource 650 jobs

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Source: Media Article

Date: Oct 26, 2004

From: Rocky Mountain News

Carrier says plan for reservationists will reduce costs

Financially troubled United Airlines, seeking to slash costs, plans to outsource about 650 telephone-reservations jobs to India, and will cut jobs in the United States.

The carrier said in a letter to reservations employees that the move will "help make United more responsive to customers seeking competitive fares in an industry being pressured by record fuel prices, increased competition and lower yields" on average fares.

United will close a small reservations center in Bloomington, Ind., that employs 83 people. The carrier also said it might need fewer workers at its other U.S. call centers, including a 325-employee center in Denver, but "it is too early to speculate on exactly how many positions might be affected." United also indicated it will reduce its U.S. staff by not filling jobs vacated by reservationists. The airline, which is flying under bankruptcy-law protection, plans to reach deals with two suppliers to have representatives in India conduct reservations sales calls. It will become the second major U.S. carrier after Delta Air Lines to outsource customer-service jobs to India.

Earlier this year, United, which has 4,000 U.S. reservations employees, signed a contract with Electronic Data Systems to open a 200-employee call center in Canada, its first outsourcing of reservations jobs.

The carrier said one reason it is outsourcing work to India is that an average of about 600 reservations employees have been leaving United annually, requiring it to hire and train many replacements. "A more cost-effective approach" is necessary, it said.

"Having this work performed by strategic suppliers is one way we can reduce costs and provide quality customer service," said United spokeswoman Jean Medina.

Some industry analysts criticized the decision, saying UAL Corp.'s United is risking a decline in service quality. The carrier has recently improved its phone-call response rates, after leaving callers with lengthy wait times in 2003 when it pared staffing.

"It is a bad idea," said Mike Boyd, an Evergreen-based industry consultant.

"The challenge you have with this is you are turning your sales function to people who have no vested interest in whether you fly on United or get on a duck and take off," he said.

He added: "If someone calls up and says, 'I need to get to Flint, Mich.,' a trained United employee will say, 'Well, I can get you to Detroit or Lansing.' What the person in New Delhi or Mumbai is going to say is, 'We don't fly there.' "

Delta's move to outsource three call centers to India has prompted complaints from some Delta fliers, who have questioned reservationists' knowledge about U.S. geography and other information needed to handle certain ticket purchases.

"I feel pretty strongly that, unless you're outsourcing back-office quality control work, it is a recipe for customer-service failure over and again," said Kevin Mitchell, head of the Business Travel Coalition, an advocacy group for business travelers. "You can end up with tickets to Arkadelphia, Ark., instead of Philadelphia, Pa."

He said United risks "taking another step backwards" after rebounding in service.

Said Boyd: "This takes a hacksaw to one area where United is head and shoulders above the competition."

David Stempler, president of the Air Travelers Association, an advocacy group for airline passengers, said United has little choice but to look at outsourcing as it grapples with depressed airfares.

"What we've been telling the airlines is the primary thing we want is low fares, and the other stuff is secondary," he said. Outsourcing customer service is among "the consequences of what we've been doing through our purchasing patterns."

United told workers in its letter that representatives in India "will receive extensive training and be closely monitored in order to be held to the same call-quality standards as all United call centers."

The Chicago-based airline declined to say how much savings it expects from the move.

Medina said the action is part of United's effort to achieve more than $1 billion in additional annual cost savings, which reportedly could include as many as 6,000 job cuts. The 62,000-employee company is struggling to emerge from the industry's biggest bankruptcy.

All of the employees laid off at the Indiana reservations center will be offered the chance to relocate to United's Chicago call center.

United, Denver's dominant carrier, has about 325 employees at a call center near the former Stapleton Airport.

Joe Tiberi, a spokesman for the International Association of Machinists, the union representing customer-service workers, said the outsourcing is allowed under contract concessions made by the union last year.

He said "there are people training for reservations jobs in this country right now." He added that the union "will ensure that all protections in our (contract) are afforded to our members."

Atlanta-based Delta has saved about $25 million a year by outsourcing about 1,000 reservations jobs to India.

The rest of the nation's five big old-line carriers have not been outsourcing customer-service jobs overseas.

Representatives for American and Northwest said all their reservations centers are in the U.S.

A Continental spokesman said the carrier has had contracted reservations employees in Latin America for many years to handle calls related to its flights there. The overwhelming majority of its reservationists are in the U.S.

The online travel agency Travelocity said this year it would outsource about 300 jobs to India, a move expected to save $10 million annually. It said it was at a competitive disadvantage against rivals that farm out such work.

Airline sending call-center jobs to India

United Airlines will outsource about 650 phone- reservations jobs to India.

The carrier will close a small reservations center in Bloomington, Ind., that employs 83. Those workers can relocate to a Chicago call center.

United says it might need to slash more jobs at call centers in the U.S., but some reductions will be achieved through attrition.

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