United Air Lines Talks New Technology

It's a grim time to be an airline. People aren't flying. Almost every major U.S. carrier is parking part of its fleet, cutting routes and losing money. Collectively, the industry lost $7.7 billion last year and is expected to lose another $4 billion this year. It probably won't break even until 2004.

A nasty economy did in TWA early last year. It filed for bankruptcy protection in January 2001, then was bought by American Airlines. The attacks of Sept. 11 devastated an already weak industry. And two days after US Airways announced a Chapter 11 filing last month, United Air Lines, which lost $2 billion in 2001, warned that it, too, may have to file for bankruptcy protection.

What could help?

Like its rivals, United says it is doing everything it can to generate new revenue and slash costs. United most urgently wants to reduce labor expenses—a task now falling to its newly appointed chief executive, Glenn Tilton. During the same week that this issue of Baseline was going to press, Tilton was said to be meeting with union leaders to discuss concessions.

In the cost-cutting that United has done to date, technology has often played a role. Rono Dutta, United's former president, made that clear in July when he told analysts that the company's reduction of its staff of reservations agents—from 7,500 to 2,500—had been achieved "primarily through the use of technology." (Dutta left United after Tilton was hired.)

United's Web site now accounts for 8% of the company's overall customer-service traffic. But taking on even more of the load—60,000 calls per day—is a voice-recognition system that helps callers get routine departure, arrival or gate information. American, Continental, Delta and other airlines also run voice-response systems. But United's application is one of the oldest in the industry. It has saved United $25 million since it went live in the fall of 1999. That's equivalent to the average salaries of about 140 customer-service people over three years, United says.

The voice-enabled flight information system, or "flifo" in airline parlance, works like this: A customer dials United's toll-free number and is told to press "1" for flight arrival, departure or gate information. The call is automatically shunted to the voice system. A voice asks the caller to respond to simple questions such as, "Would you like arrival or departure information?" The interactive voice-response software, which is from SpeechWorks International in Boston, recognizes the verbal answers from preprogrammed vocabulary lists.

When it has gathered enough variables to find what the caller wants, the system populates a database field with a query carried by BEA Systems' Tuxedo transaction processing software to United's Apollo reservation system, a 30-year-old mainframe program. Apollo returns information, via Tuxedo, to the SpeechWorks software, which then turns the data pieces into a spoken sentence. "United flight four-oh-five is scheduled to arrive on time at 8:20 a.m. in Denver, Colorado... " The process can take as few as two minutes.

Voice technology is a mix of trade-offs. For example, at United, the software is slightly slower, typically, than a human agent working in ideal conditions to answer the same queries. That means average phone fees—the cost of the 800 number, mainly—are higher for the computer than for a service agent.

On the other hand, automating such routine stuff frees more service people to handle more money-making calls—customers who want to book flights. Also, the computer system doesn't "busy out" during an unexpected flood of calls, such as when there's a surprise storm. "Before we had this, we would choke out some revenue because the lines were busy, and those customers may go right across the street and call American," says Bob Bongiorno, managing director of customer service applications at United.

Trying to staff a call center in case of emergency would mean paying lots of people to do nothing most of the time. United also would have to build or rent more space, buy new computer gear and do extra training, he says. And software, of course, is more predictable than people. As Bongiorno puts it: "It works 24/7 and doesn't get sick, need a vacation or have any other personal problems."

The system handles about 60,000 calls daily, at a cost of about 15 cents each. Human agents answering the same queries would cost United 65 cents per call, Bongiorno says. That puts the potential savings from the application at $30,000 per day, or $11 million a year.

Saving money is why most companies install voice response, says Jackie Fenn, an analyst at Gartner Inc. Voice technology works best in simple, high-volume applications. Where live agents will always outmaneuver voice software is in situations that invite more free-form responses, as in: "Hello. This is United Air Lines. How may I help you?" Callers could say anything. Has the hurricane off Florida's east coast delayed flights to Miami? Are toenail clippers banned in carry-on bags? In a situation like that, "the thing will blow," Fenn says.

Voice Recognition Technology Use

Heavy accents, background noise or an unusual tone of voice also can trip the technology. The systems must sort and interpret a huge vocabulary. Think how many ways there are to express a day: Wednesday, next Saturday, the day before yesterday, the 24th and so on. But United's computerized male persona sounds calm and eager to please, especially when the exchange isn't going well. A mumbler gets these cheerful responses:

"Please enter or say the United flight number. Or say, 'I don't know it,' and we'll get the number a different way."

"Sorry, I didn't understand you... OK, I'm going to ask you a few questions so we can find the right flight."

"I think you said, 'Boston, Massachusetts.' Is that correct? Please say 'yes' or 'no.'"

"Say the departure city one more time. You may want to say the city and state."

Though other airlines have tweaked the persona of their voice systems—American changed from serious to peppy in its five applications—United has kept the same one since inception.

United worked with SpeechWorks consultants to build guard rails into the system, to keep callers from leading the software astray. It will frequently prompt callers to say "yes" or "no," for example, to avoid having to understand responses such as "that's right" or "nope." It also can react to common errors. For example, people often say "Chicago" when they mean "Illinois." Another boundary: The application only handles requests about flights within a two-day window. Customers can't check on their flight next week or month, which limits what the system needs to know.

Bongiorno wouldn't say exactly how well or badly United responds to incoming calls on the whole. But the number of calls answered within 20 seconds of the first ring is "in the 80%s," he says, up from about 60% a few years ago. A good part of that overall improvement is because the voice system never leaves people on hold.

United doesn't actually run the system itself. InterVoice-Brite, a customer-service technology company in Dallas, hosts the application. InterVoice-Brite is a close partner of SpeechWorks, accounting for 19% of SpeechWorks' $44 million in sales last year. However, United intends to end the hosting deal and bring the system in-house by the end of next year, a move it believes will eventually save it money. United plans to put the application on Intel-based servers equipped with telephony cards and Microsoft's NT or XP operating system. The airline wanted to take control of the application sooner, but the stagnant economy stalled that project, and others. "After 9/11, everything was stopped. Now we're selectively starting things up," Bongiorno says.

Any big company close to bankruptcy should be tracking expense items monthly and stop all technology work, save for two or three critical projects, says Dave McNally, a principal at AlixPartners, a business turnaround firm in Southfield, Mich. McNally recently finished stints as a turnaround chief information officer at Kmart and Burlington Industries, and specializes in fixing bad information-technology processes.

United discovered last year that the airline business doesn't track the gains and dips of gross domestic product in the U.S., as had historically been believed, but instead rises and falls with the profits of corporations. That means, McNally says, United should launch targeted data mining projects to quickly create marketing programs aimed at business travelers—which account for the largest part of United's revenues. Data-mining projects are generally a good bet for companies in poor financial shape, looking to technology for quick payback, he says.

This year, United wants to start building two much more complicated voice applications—a Japanese flight information system and, in the U.S., a fare-finder and booking system.

Paperwork has been resubmitted to get the booking system project restarted. If it's approved, the application could be done by the second half of next year, Bongiorno says.

It's ambitious. Shopping for airline tickets is more open-ended than asking what time a flight lands in Cincinnati. Programming voice software to manage booking requires anticipating and responding to more variables.

"It's harder to do," Bongiorno acknowledges. But he adds, "You can always start it with voice and if it gets into trouble, send it to a live person." The payback in that situation would not be as great as that from having a computer complete the whole transaction, but it would still be enough, he says.

But Chris Fletcher, an analyst at Aberdeen Group in Boston, says United is perhaps too optimistic. Voice-recognition systems generally can't handle complicated transactions well, Fletcher says. "They're still kind of bumbling their way along."

Continental Airlines, which also uses SpeechWorks software, has no plans for anything similar. "With speech applications, you have to be careful not to have too many prompts that will slow everything down and turn the customer off," says Continental e-commerce director Chris Frawley.

SpeechWorks says its software can do it, though. United plans to hire consultants from the vendor if the airline's senior executives OK the project.

Voice-response booking may be risky, but the $25 million saved using the technology already makes it too tempting not to try. "As flying traffic comes back, you don't want to grow head count with it," Bongiorno says. "It's an opportunity to avoid hiring." That is, if United's financial problems don't first force it to utter a response of its own, in bankruptcy court: "Uncle."

United Air Lines Base Case

Headquarters: 1200 E. Algonquin Rd., Elk Grove Township, IL 60007

Phone: (847) 700-4000

Business: Airline

Chief Information Officer: Eric Dean

Financials in 2001: $16.1 billion in sales; $3.7 billion operating loss; $2.1 billion net loss

Challenge: To improve its financial situation by cutting costs and building revenue

Baseline Goals:

Cut cash-burn rate to $1 million per day, from $10 million per day last year Reduce capital spending 50% to $1.2 billion in 2002 Increase revenue per available seat-mile to pre-9/11 levels of at least 11 cents, from 9.76 cents in Q4 2001

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in Baseline.