It is now three years later, and I am delighted to be back and to have the opportunity to do so and to talk to you about a number of things but most importantly to talk to you about a bright future for our company, as a company that aptly today even more so than before, refers to itself as your hometown airline.  We are delighted to have our headquarters now identified by the architectural tour as it cruises by 77 West Wacker as the new United building. 

Let me talk to you a little bit about lessons learned during the course of our experience, which I think to this audience, and especially to the new young leaders and to the students, may be of some interest. 

The first order of business for United was to establish the resolve of the management team and the constituents that the work that we needed to do was worth doing. As I start this conversation, I am reminded that there are many constituents that have to be of like mind and in many ways this is where Chicago comes into the discussion.  Chicago reminded us again and again that this was important to you.  I am here today to tell you that that was immensely motivating to the management team of United as we worked our way through a very rigorous restructuring.

Again and again we were reminded of how our futures are intertwined.  As a matter of fact, in the course of our journey, we were actually reminded that the world isn’t as flat as it’s suggested to be today by authors and journalists and pundits.  The world actually can be quite small.  A community of people that contemplate the loss of something significant really do come together as a local community with huge global implications. 

We were fortunate when we began our journey through this challenge to have Board members such as Jim [O’Connor].  Jim has been a Director of United for some 22 years.  So it’s fair to say for all of you that have witnessed the challenges of our company, the journey of our company over those 22 years, Jim O’Connor has just about seen it all when it comes to United Airlines.
 

Jim knew and reminded me on a regular basis as a lead director of the company that the work that we were doing was important to the city of Chicago.  I was reminded by the Mayor very frequently that the work that we were doing was important to the city of Chicago.  I was reminded by Kaarina, I was reminded by the Commercial Club and the Civic Committee and all of those who look forward to the modernization of O’Hare that the work that we were doing was not just our work; it was the work of our community. 

That’s a really significant thing for a company such as ours to know.  It led to a decision that we made in the course of the restructuring, which I mentioned three years ago, which was that this restructuring was not going to be on the backs of our customers.  It was not our customers’ fault, nor our customers’ responsibility that we face these challenges. These challenges were our responsibility and we were going to work as hard as we possibly could in the course of our restructuring to be attentive to our customers and our community while we were also attentive to our creditors and the representatives of our creditors.  We did that by changing some behaviors at the company that I would like to share with you just in the context of lessons learned.

First of all, we put together two separate tracks, which I have talked to many audiences in Chicago about.  One track and one book of work was focused on the restructuring and only the restructuring and that team was led by our Chief Restructuring Officer, Mr. Brace, who is right over here, the guest of J. P. Morgan Chase who of course were our bankers during the experience. They focused on the restructuring of the company, positioning the company such that I would be in this place today to talk to you about the future of United.  It is in round numbers today regarded as a $23 billion restructuring of this company; a dramatic financial transformation. 

The separate track was run by a group of executives who were focused on you and I mean you in the large sense.  Certainly you as our customers.  During the course of the restructuring we improved the quality of our operation certainly not to where we want it to be today but we improved the quality of the operation because it was the very unreliability of the operation that in part contributed to the fact that we were in the crisis that we were in.

We also improved the quality of our internal conversations, and we focused our conversations on the facts.  I can’t stand here today and overemphasize to you how important that was because within our company over time we had grown fond of focusing on things as we wish they were.  Said very simply we fictionalized our circumstances and if you were an optimist you had an optimistic view.  If you were a pessimist you had a somewhat pessimist view.  We needed to bring to that your view -- honest feedback from our constituents; all of our constituents and certainly our customers.  We did that. It was a very sobering experience for this company to understand how much better we needed to be to realize your expectations of us, but we set about doing that.  Everybody in business recognizes the symptoms of a company that tells itself stories rather than relies on the facts as they are presented to the company by its important constituents. 

We had rationale for why the low-cost carriers were taking as much share across the domestic market as they were and it had to do with the fact that they were different than we. Somehow or other you made the difference or the marketplace made the difference and would always prefer us given our suite of products even if we didn’t earn the difference between us and your decision making.

Now they stand at some 30-odd percent of the overall domestic market and there is no further opportunity for denial; the new entrants into this market actually create a value proposition that gives the consumer legitimate choice, and we have to face up to that -- a year ago the creation of Ted, a lower cost operation of our own.

We had to confront the issue within the company of the inevitable commoditization of a seat in a passenger aircraft, which we were told was inevitable and there isn’t any opportunity to differentiate the offering.  That proved also to be untrue.  Said very simply, the nature of our world and the presence of security as it exists today differentiate your experience in almost every single imaginable point from the beginning of your journey including the booking to the conclusion of your journey. 

So at every one of those opportunities we now understand we have the opportunity to decommoditize our business and we have the opportunity to differentiate your experience throughout that entire journey whether you are physically moving or not.  Even if you are simply beginning the process of going online to make your booking or even to secure your boarding pass online. 

All of this has been a transformation of the experience during the course of restructuring.  So if you imagine these two parallel tracks the business is changing dramatically, competition within the business is changing dramatically, the global environment is changing dramatically.  At that speech with Wolfgang Mayrhuber three years ago we talked about the nascent combination of KLM and Air France.  The transporter combination of airlines creating one enterprise.  Today that combination is fact.  Today they seek to expand; today they’ve realized their synergies. Now they are looking for another opportunity to add capacity to the combination, acquiring new aircraft, flying new routes. 

In Asia the prospect that we discussed at that time has become reality and DragonAir and Cathay Pacific have become one company and Cathay Pacific has taken an equity in Air China.  So we are seeing consolidation take place in the Pacific as well. 

While we here in the United States, which I couldn’t have predicted at that time, have two of our colleague airlines, Delta and Northwest, in bankruptcy restructuring and going through the same process that we took our company through.  

At that time while we do all of this and we focus on the complex situations that were presented to us during the restructuring we made the tough decisions that we needed to make.  We base our decisions on the facts; we don’t look back; we tell ourselves the truth, and we don’t fictionalize our circumstances.  I also said when we’ve done this work we want to evolve into an environment in which we are given the opportunity then to grow. 

That brings me back to my topic of community.  It’s my view after three-plus years in this industry that the entire country is somewhat analogous to Chicago.  There is a huge collateral economy around this industry, which is in many ways more important to all of us in this room than the industry itself.  This industry drives growth, this industry creates peripheral, collateral associated prosperity.  Cities that are hub cities have the opportunity to mine that prosperity.  Cities that are not hub cities either wish they were or they wish they could be again.  I think that is inarguable and powerful. 

Today Beijing wants to be a hub city.  Shanghai wants to be a hub city.  Denver, with its new and beautiful facility that we wish we had here in Chicago, would dearly love to be a hub city.  This is I think an advantage to communities such as Chicago that you don’t want to lose.  So said simply, we’re in this together.  The world isn’t as flat as we thought.  We have a special relationship with Chicago.  We have a special relationship with all of you in this room and it’s different from the relationship that we have with cities to which we simply fly and fly back.  That’s an important thing for us to remember. 

Chicago is really at the core of what this airline is about.  In many ways Chicago values are going to be the values that we want to build our company on now that we have done this work.  This is a company that wants to be representative of Midwest values; solid values.  We want to identify with our customer base here.  We want you to think of us as your airline.  We mean that sincerely.  We’re not a transient enterprise.  We’re not a global enterprise with respect to our anchor residencies.  We don’t live just anywhere. 

All of our senior directors, all of our senior executives are now taking up positions of responsibility in the community on cultural boards, on philanthropic boards and establishing a link with this city, which is important for us to do.  It’s important for our employees to know where we live.  Simply because we travel to all of the places that Jim spoke to doesn’t mean that we are from all of those places.  We’re only from, at our core, one place.  We have other homes in San Francisco and Los Angeles and Denver and Washington-Dulles, of which we are very proud.  We have an offshore home in Narita, Japan, of which we are equally proud.  But this is at the core of the company.
 

And when you rebuild a company you rebuild a company around that certain knowledge; that there is a place that you call home.  Knowing that in the course of the restructuring has been very powerful for everybody at United.  I mean that sincerely.  When I say thank you I’m not really standing here today at this juncture in the company’s history only thanking you for your business as every Chief Executive Officer does that has the opportunity to speak to this group.  I’m thanking you for being a part of our community.  I’m thanking you for having us as one of your own and that’s an important thing for this company.  When you go through crisis you want to know that that’s there for you. 

In the course of this journey, we were blessed with an excellent Board and in many ways it was a solid Chicago Board.  Having directors of our company such as Jim O’Connor and Jim Farrell is very important to anchoring the company around the governance structure in a practice of telling ourselves the truth in the Boardroom.  Relative to the challenges that we faced it was very enabling for the process.  Because we have done the work that so many thought we could not do and because we only paid attention to our internal compass and our values and our understanding that we were going to have to do things that were very difficult, unpopular, unpleasant and often misrepresented, we never lost our way. 

We have the opportunity here today to chart a course for our future that has a foundation of credibility beneath it.  I want you to know it’s very powerful, it’s very liberating to do work that so many suggest publicly you won’t be able to do.  It’s something that I hope each one of you especially you new leaders and you students some day get the opportunity to do.  There is nothing more satisfying than proving Holman Jenkins of The Wall Street Journal wrong when he suggested in his headline that the solution to the problem of this industry was to kill United.  I hope everybody in Chicago took offense at that as I did.  But that wasn’t a solution.  To reinvent United is the solution and we’ve done that.  It’s hugely, hugely enabling.  All of my colleagues here today from United -- all of our partners, all of our vendors, all of our suppliers know that’s true.  We love being contrarian about it. 

In the course of this experience Graham Atkinson, Jeff Foland and his team, our sales team, they transformed the selling team in United and they used exactly the same principle that we used in the restructuring of the company and that is to establish a dialogue with our customers that is a dialogue based on fact, based on shared values, based on transparency, based on community and based on the truth. It’s exactly what they’ve done and I’m very proud of what they’ve done.  Today we’re much better for it and we’re a much stronger competitor for it.  It all really does tie together. 

So today our company, your company, your hometown airline, has the opportunity to be as excited as you are about the prospect of bringing the Olympics to this city.  We’re excited about the prospect of the Olympics being in Beijing in 2008.  We’re excited about the prospect of the Olympics being in London thereafter and being here thereafter.  It’s a wonderful opportunity for us with respect to those three cities of significance for our company. 

We’ve earned the right now to think about such exciting and pleasant things.  Had we not done the work that I talked to you about three years ago we wouldn’t have earned the right to do that and we’re not foolish about the fact that we are now focused on discussions around the proper growth of the company, the opportunity to take our place as one of the world’s best most significant airlines.  There were times when we talked about it, but we hadn’t yet earned it.  Now we have.  We want to do that on your behalf. 

On behalf of Chicago and on behalf of everybody that supported this company it its darkest times we want to focus on the opportunity as we go forward and be a big part of making certain that Chicago is always that center of transportation, of connectivity, of mobility and of cultural exchange in the country.  It’s very exciting for us to think about this rather than some of the things we were thinking about in the rear view mirror.  But we knew then and we know now that without having done that work, we wouldn’t be here today to talk to you about it. 

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