Glenn F. Tilton

Chairman, President and CEO, United Airlines

“Delivering Global Connectivity”

Good afternoon, and thank you, Governor Thompson. 

I want to start today by thanking the members of the Midwest U.S.-Japan Association for giving me the opportunity to address this prestigious, important, and very timely gathering.

Special thanks to Steve Plunket, Executive Director of the Association and to Yuzaburo Mogi, the Conference Chairman.

• Obviously I'd like to acknowledge the governors who are present here today and
• Taizo Nishimuro, Chairman of Toshiba, with whom it is my honor to share this podium.

And, of course, I'd be remiss if I did not acknowledge my colleague and Star Alliance partner, Kichisaburo Nomura, Chairman of All Nippon Airways Co.

As I am sure the gathering has heard, this year marks several important anniversaries for the United States and Japan, and for relations between our two countries. 

A little context:

• 150 years since Commodore Matthew Perry arrived in Japan…
• Chicago and Osaka's 30-year anniversary as sister cities…
• the 35th year of this conference…
• And, closer to my new home, 20 years since United launched a flight connecting Chicago with Tokyo.

An entire month of activities across the ten Midwest states will commemorate those 150 years, a testament to the strength of this region’s partnership with Japan.

My company, United Airlines, is proud to be a participant and a supporter of these events, because Japan and Asia are very important to United.

In fact, I returned from Asia last week. And, I was personally extremely encouraged by the recovery that is apparent there.

Throughout my trip, I saw full flights – my own for example –, booked hotels, crowded restaurants and shops, and a renewed sense of personal and commercial energy.

One of the reasons I went to Asia was to announce an agreement between United and Air China that adds significantly to United’s ability to serve Asia.

I also made it a point to stop briefly in Tokyo – at Narita – on the way to Hong Kong and China then on the way back to meet and strategize with Mr. Ohashi, the Chief Executive Officer of All Nippon Airways.

The economy here in the Midwest has turned a corner as well.  Today, this region is home to more Japanese-owned manufacturing facilities than any other area throughout North America.  We have emerged as a center for technology and biotech research and development. 

As an airline, United plays a pivotal role as a connector between our countries – a facilitator of the flow of people, ideas and products.

And this is one of the things that I'd like to talk about today.

• First, the role of airlines and ours in particular, as vital contributors to global connectivity and commerce; and
• Second, technology in our business, the aviation industry – primarily as it relates to customer convenience, and the flow of commerce and ideas;

But, before I do, I’d like to briefly address what is undoubtedly the primary thing on many people’s minds with respect to my company – and that's our financial restructuring.  It's understandable especially when you consider the magnitude of what we have accomplished since we filed for Chapter 11 protection in December of 2003.

Our efforts have been focused on a three key areas:

• One, getting our financial house in order.  We are now on track to reduce our costs annually on a recurring basis by some $5 billion….  To give you an idea of context and scale, this is almost one third of our previous operating budget. 

That has been coupled with substantial improvements in our revenue performance. The company was cash flow positive on an operating basis in the second quarter of this year, and experienced steady improvement throughout July and August. 

• Two, as we work hard to get our financial house in order, running a great airline.  Indeed, running an even better airline than ever before.  For the last 12 months, our company has led the industry in on-time performance.  And our employees have consistently outperformed both competitors and United’s own previous records on every customer service metric, across the board.
• And, three, preserve and enhance our most valuable assets in a way that opens options for us and enables us to make smart, strategic choices about our future, upon our emergence from Chapter 11. 

If we had made convenient, expedient and often recommended choices six months ago, we would have far less strategic options than we do now.

Our accomplishments since December have given us the opportunity to focus not only on our survival, but also on United’s ability to compete effectively and globally. 

They enable us to look at the investments that we can make to enhance our customers’ experience… and this includes continuing United's legacy of technological innovation.

They equip us to serve in our role as a vital connector in the global marketplace, which is not only my first subject today, but I know one that you will be discussing in breakout sessions through the afternoon.

The economy of the 21st century places a premium on global connectivity. When talk turns to this concept, people immediately think of electronic means by which we do so – teleconferencing, email, the Internet, wireless communications.

Clearly, advances in communications technology have transformed the way business is transacted and profoundly impacted the way we interact. Information and ideas are exchanged at lightning speed, enabling unprecedented efficiency in research and development, manufacturing, service delivery, and marketing.

At the same time, I'd like to suggest, electronic communication and other technologies have not replaced the need to move people and products from one place to another.  That is where we, the airlines, play a huge role in global connectivity. 

We get people and commodities moving across borders.  We help bring your products to global markets. 

We enable the face-to-face meetings upon which enduring business relationships are often built, such as those that will be formed during this conference.

For United, in particular, linking Asia and the U.S. has become a critical part of our company’s revenues. 

• Pacific routes account for 17% of our total global business and roughly 50% of our international business.
• United operates more non-stop flights to Asia from the fifty United States than any other carrier in the world.
• We were extremely pleased to be able to fully restore all of our non-stop flights from the U.S. to Tokyo to pre-SARS levels at the beginning of this month.  By the 26^th of October, we will have restored all of our trans-Pacific flights.

What allows us to provide this global connectivity is our seamless global route network.  Either directly or through Star Alliance partners such as All Nippon Airways and Lufthansa, we are able to make 771 destinations available to customers in 133 countries.  And we do so with ease, efficiency and comfort. 

It is not so different, in a way, from the Internet where everything is interconnected and has a flow and logic.  And, as I’ll mention in a moment, the Internet is a part of the technology revolution in our industry.

What makes United’s network function in the way that you expect is an incredible array of technologies, some of which you may see as a passenger and much of which you may not.

They all work together to make air travel safe and make it reliable; more enjoyable and convenient on board; and as easy and hassle-free as possible all the way through the experience.

I'd ask you to take just a moment to think about the sophistication of all the electronics, and avionics and computer systems that keep a 747 running safe and on time.  As passengers, we may take a lot for granted. 

• Real-time, PC-based weather tablet displays and tracking systems ensure that the captain has up-to-the-moment information and can work with air traffic control to alter course and to avoid bad weather. 
• Flight path systems help recalculate cruising speeds and altitude to ensure an on-time arrival and a more efficient use of very valuable fuel. 
• Air traffic control systems at each airport help map runway approaches for hundreds of planes each day with precision. And the list goes on and on. 

In fact, just two weeks ago in Denver, we ran an FAA certification test of a new, high-tech runway and an airplane specially equipped with an electronic auto-land system. This technology literally enables the plane to land itself when a pilot cannot see the ground because of bad weather. 

United is the only major airline in the world whose entire fleet is equipped with this technology. 

And then, with respect to the customer expectations – they've have grown. The proliferation of technology has vastly simplified business processes and eased everyday life.  Wireless Internet access… email-enabled pagers… electronic toll collection systems… and personal GPS. 

We've all come to expect simplicity of process, immediate access to information and instantaneous communications.  And, we all want this same ease-of-use and efficiency on board and throughout our travel experience.

The challenge we face as an airline is duplicating this experience seven miles up in the air traveling at 450 miles an hour without compromising safety.

Nonetheless, we have to differentiate the experience we have to offer the marketplace – from booking and checking in to the flight itself. And, we have to do so sufficiently, so that you and your colleagues, when given a choice, will continue to choose United.

Our responsibility is to make this all happen smoothly, safely, efficiently and comfortably.  Every time.  This is what the marketplace has come to expect.

Increasingly, technology – the subject of your conference – greatly enhances our ability to do that. 

For example, as I suggested, the Internet, itself, has brought and will continue to bring countless benefits to customers and to airlines:

• Passengers are able not only to comparison shop, but also to book tickets online.
• With United, they also can check in for flights through our website, United.com, and print boarding passes on their printers. 
• Frequent flyers can apply upgrades to purchased tickets… online. 
• And through a feature called EasyUpdate, United passengers can receive important flight notifications automatically via email, instant message, phone or fax.

All of this reduces wait time at the airports, making travel during these difficult times more convenient and more effective and more efficient for the airlines themselves.

Another example. Security and immigration procedures in the wake of September 11th increased wait time and raised inconvenience levels for passengers at the airports.

United responded two years ago by introducing EasyCheck-in – self-service kiosks that issue boarding passes to passengers with electronic tickets.

The concept caught on quickly with passengers.  And as a result, the entire process of checking in has become faster and simpler.

EasyCheck-in also is a good example of an innovative product that doesn’t just meet a need, but also creates new opportunities to engage our customers and to offer valuable information and services. 

Based upon customer and employee feedback, we use powerful software to add features to EasyCheck-in that can differentiate United further.  Today, passengers can:

• Choose seat assignments;
• Check in for cancelled or delayed flights that have been automatically rebooked by our Customer Advocate Center;
• Check in for international outbound flights from the U.S.; and
• In the near future, EasyCheck-in will offer services for purchase: membership in our Red Carpet Club, cabin upgrades and perhaps even Duty Free products.  This will be another example of technology enabling us to establish a closer one-to-one relationship with our customers.

But also, suddenly, EasyCheck-in becomes a valuable sales and marketing tool.

Similarly, the Internet enables us to create marketing opportunities that elicit from you, the customer, instantaneous response. Customers can respond to promotional fares and travel packages with just a few clicks. 

• This summer, we launched an international offer called “Ticket to the World,” where customers who bought a first or business class ticket on United could receive a free ticket on United or any of its 16 Star Alliance partners. 
• Today, nearly 115,000 people have registered – 97% of them online.

Again, benefit for customers… and increased bookings for the company.

Airlines have come a long way to making passengers feel more connected on board.

United introduced the ability to email easily from the air in North America earlier this year through a revenue-sharing partnership with Verizon Airfone®.  What would have been a cost center is now a source of revenue for the company.

As we look into the future, we will be employing technology in many ways to make the whole airport terminal experience more efficient, faster, and more predictable for the passenger.

A very relevant example for this particular audience: parallel modernization projects under way at both Chicago O’Hare and Narita International Airport. 

When United's terminal redesign at O’Hare is fully implemented – within the next year-and-a-half – the terminal will be perhaps the most advanced in the United States. 

At the same time, Narita expects to be most advanced in the world by 2006. 

What were both striving for here is the airport of the future – ultimately, the "no-wait airport." 

Advancements in technology will enable customers – and, importantly, their luggage – to move through the check-in process with minimal wait time: 

• Our Star Alliance partner, Lufthansa has developed technology that will enable them to email check-in bar codes to travelers' cell phones that can be used in lieu of a boarding pass at the gate.
• Your luggage tag could soon have a radio frequency ID chip in it. This will make it possible to self-check luggage, reducing both waiting time and our costs; it also will make your bags "trackable" throughout its travel. It's being studied for O'Hare and Narita.
• United is working with government agencies in the U.S., Japan and Europe on the practical implementation of eye-, face- and fingerprint-scanning systems.  They would enable passengers who use them to move through immigration and security far more quickly.

And those are just a few examples.

All of these innovations, present and future, are making airlines – and specifically United Airlines – better at meeting the needs and expectations of customers…  They are spurring the kind of global movement and interaction so vital to today's dynamic marketplace.

As corporate citizens of Illinois, we have a vested interest in fostering the continued development of our state and the Midwest as a business, technology research & development and tourism center…

…as a home for Japanese companies in North America… as a transportation hub regionally, nationally and globally. 

Our biggest contribution that we see today in this difficult corporate environment, as an airline, is removing the disincentives to fly, making it easier for people and goods to flow between our countries.  Easier for everyone to take advantage of us as physical global connectors.

All of the technological innovation I’ve described today is enhancing our ability to do that.

As I said earlier, airlines enable face-to-face meetings to take place in the global business community. United is committed to bringing people together for important conferences such as this one.  We don't underestimate the significance of this personal interaction and the relationships that you will create in the days ahead.

On behalf of all my colleagues at United, we want to thank you for inviting us to present here; we wish you all a successful and productive conference; and we ask only that you fly United.

Thank you very much.

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