WEBVTT - United Airlines CEO Scott Kirby Talks Potential American Airlines Merger 0:00:02.480 --> 0:00:07.000 Bloomberg Audio Studios, Podcasts, Radio news. 0:00:07.760 --> 0:00:08.160 Scott. 0:00:08.360 --> 0:00:11.200 Great to see you after a quarter. We did beat expectations, 0:00:11.200 --> 0:00:13.720 but cut guidance. We'll get into all the numbers. I 0:00:13.720 --> 0:00:16.079 want to start with the big news over the past 0:00:16.120 --> 0:00:18.680 couple of weeks. Are you going to buy American Airlines? 0:00:18.720 --> 0:00:23.439 Well, thanks for being here in first liason and first 0:00:23.480 --> 0:00:25.160 I'm not gonna comment on that, but I will tell 0:00:25.200 --> 0:00:28.000 you a little bit about repeat some of the things 0:00:28.000 --> 0:00:29.880 that I that I've said in the past. And first, 0:00:29.880 --> 0:00:32.559 it was a great quarter, even though fuel prices doubled. 0:00:32.760 --> 0:00:34.239 You know, the team that you know I did an 0:00:34.280 --> 0:00:38.040 incredible job and really a look full guidance given guidance 0:00:38.040 --> 0:00:40.040 for the full year. Being able to be solidly profitable 0:00:40.080 --> 0:00:42.640 even in this escalating fuel price environment. I think is 0:00:42.640 --> 0:00:44.440 really the entrege of where we want to go for 0:00:44.479 --> 0:00:47.919 the future, which is we've built a brand loyal airline 0:00:48.080 --> 0:00:50.360 by a tracking customer by giving them quality, by giving 0:00:50.360 --> 0:00:53.680 them value, an airline that customers love and that you know, 0:00:53.760 --> 0:00:57.040 gives us resilience in tough times. But it also lets 0:00:57.120 --> 0:00:59.960 us think about what's the next phase for United Airlines. 0:01:00.080 --> 0:01:02.440 We've spent the last couple of years thinking about We've 0:01:03.120 --> 0:01:05.800 proving that this strategy to where brand loyal customers works, 0:01:06.040 --> 0:01:07.160 But how do we become. 0:01:06.959 --> 0:01:09.240 A truly globally competitive airline. 0:01:09.240 --> 0:01:10.759 Now I don't have the nentwery yet, I'm not saying 0:01:10.760 --> 0:01:13.640 anything specific about what they are. But today there's a 0:01:13.680 --> 0:01:16.800 big trade deficit in the United States with foreign flagged airlines, 0:01:16.800 --> 0:01:18.560 and they fly sixty five percent of the long haul 0:01:18.600 --> 0:01:20.880 seats into the US, even though only forty percent of 0:01:20.920 --> 0:01:23.640 the customers are foreigners. And that trade deficit is bad 0:01:23.680 --> 0:01:26.840 for United airlines. It is bad for US aviation. It's 0:01:26.920 --> 0:01:29.600 bad for US workers because we actually create some of 0:01:29.600 --> 0:01:32.639 the really best jobs with the best benefits in the country, 0:01:32.680 --> 0:01:34.800 not just jobs but careers. And it's bad for the 0:01:34.920 --> 0:01:37.600 United States of America. And so I would like to 0:01:37.640 --> 0:01:40.679 solve that and create a truly global, great airline that 0:01:40.760 --> 0:01:42.280 all US citizens can be proud of. 0:01:42.400 --> 0:01:44.959 So it's important, in other words, for the United States 0:01:45.000 --> 0:01:48.200 to fortify its airline industry with the competitor in mind, 0:01:48.280 --> 0:01:51.560 not necessarily of the big three in the US of American, United, 0:01:51.600 --> 0:01:54.120 and Delta, but internationally with some of the long haul 0:01:54.160 --> 0:01:56.920 carriers that you see as really the main competition for 0:01:56.920 --> 0:01:57.440 the United. 0:01:57.240 --> 0:01:57.840 States is acrea. 0:01:57.920 --> 0:01:59.760 You know, I feel like what we've at United have 0:01:59.800 --> 0:02:01.200 done here in the United States. 0:02:00.960 --> 0:02:03.840 By building a brand loyal airline, you know, we. 0:02:03.920 --> 0:02:07.200 Really have attracted all the brand is certainly in our hubs. 0:02:07.200 --> 0:02:09.680 We've attracted the brand loyal customers, and we've won huge 0:02:09.720 --> 0:02:13.440 market share kind of everywhere that we fly by being better, 0:02:13.480 --> 0:02:16.720 by being high quality, and that's what's caused us to win. 0:02:16.960 --> 0:02:18.959 And I think the next phase for us is can 0:02:19.080 --> 0:02:21.160 we take that around the globe? Can we do that 0:02:21.560 --> 0:02:24.240 everywhere that we fly? And look, there's some really good 0:02:24.240 --> 0:02:26.280 airlines in the Middle East or some really good airlines 0:02:26.320 --> 0:02:27.880 in Asia, and they do some things better than us, 0:02:28.400 --> 0:02:31.160 But can we create a US airline? And I don't 0:02:31.200 --> 0:02:32.880 have the answer, dot hundred percent sure we can do it, 0:02:32.960 --> 0:02:35.839 and not proposing any specifics today, of course, but it's 0:02:35.840 --> 0:02:38.320 an aspirational vision that I think United is in a 0:02:38.440 --> 0:02:41.560 unique position to go after because of the success we've had, 0:02:41.560 --> 0:02:43.680 because our people are great, because of the investments we've 0:02:43.680 --> 0:02:46.960 made in product and technology to get there. That we're 0:02:46.960 --> 0:02:49.080 in a end, because we have the willingness to try 0:02:49.360 --> 0:02:52.080 to do big things that we are in a unique 0:02:52.120 --> 0:02:55.200 position to try to achieve that and do something big 0:02:55.240 --> 0:02:56.639 for United but also for the country. 0:02:56.680 --> 0:02:59.440 You've been really vocal about how it's an opportunity when 0:02:59.480 --> 0:03:01.800 there is a crisis or when there's serious pressures in 0:03:01.800 --> 0:03:04.440 the industry right now as high oil prices to potentially 0:03:04.480 --> 0:03:07.359 pick up other assets that could be distressed, others that 0:03:07.400 --> 0:03:09.800 are weaker, that are falling out of favor. Are there 0:03:09.919 --> 0:03:14.600 characteristics of airlines that you would consider taking over, assets 0:03:14.639 --> 0:03:17.520 that you would potentially acquire in this type of period. 0:03:17.680 --> 0:03:19.280 Yeah, you know, with one. 0:03:19.919 --> 0:03:21.640 The best way to prepare for a crisis is to 0:03:21.639 --> 0:03:23.840 be prepared before it starts. We knew something would happen. 0:03:23.880 --> 0:03:25.760 I didn't know when we knew something would happen. So 0:03:25.800 --> 0:03:28.000 we're carrying triple the cash we had pre COVID. We've 0:03:28.000 --> 0:03:30.000 moved to the top of the industry profit margins, we 0:03:30.040 --> 0:03:33.239 have the best credit rating that we've had in over 0:03:33.280 --> 0:03:38.080 thirty years, and we're committed to getting to investment grade abalacy. 0:03:38.320 --> 0:03:41.480 That gives us the ability to look through the problems 0:03:41.560 --> 0:03:44.520 the spike and oil prices to the other side and 0:03:44.880 --> 0:03:47.480 not have to make short term, you know, strategic bad 0:03:47.480 --> 0:03:50.680 strategic decisions. And as I look at assets like maybe 0:03:50.680 --> 0:03:53.640 they will maybe they won't come available. We've actually even 0:03:53.680 --> 0:03:56.760 had some discussions with one airline about buying some. But 0:03:57.880 --> 0:04:01.000 the kinds of things were most focused on are again 0:04:01.120 --> 0:04:03.240 back to this, how do we create a great airline 0:04:03.320 --> 0:04:07.040 for a decommoditize great airline for customers that can really 0:04:07.080 --> 0:04:11.160 be stronger internationally. So things that support growing an international 0:04:11.200 --> 0:04:15.120 network are more interesting to us because that's where our 0:04:15.160 --> 0:04:17.400 focus and I think that's where our big future growth 0:04:17.760 --> 0:04:18.480 potential is. 0:04:18.640 --> 0:04:21.320 President Trump gave a nod to you in a conversation 0:04:21.480 --> 0:04:24.440 yesterday talking about how he likes what you're doing. He 0:04:24.760 --> 0:04:26.320 said that he didn't really want to see a tie 0:04:26.360 --> 0:04:28.600 up between America and United I know you're not saying anybody, 0:04:28.920 --> 0:04:31.239 do you think that this is a more amenable period 0:04:31.560 --> 0:04:33.400 for tie ups than it has been in the past. 0:04:33.440 --> 0:04:36.200 This is sort of a window that airlines can capitalize 0:04:36.200 --> 0:04:39.720 on to execute mergers that have been hard fought in 0:04:39.800 --> 0:04:40.240 the past. 0:04:40.520 --> 0:04:42.720 Well, I'm not sure, but that's certainly the market can 0:04:42.760 --> 0:04:46.520 sens us. That's what people think, and what I think 0:04:46.560 --> 0:04:49.039 it is, more than any think, is an opportunity to maybe, 0:04:49.080 --> 0:04:53.039 instead of looking at everything through the traditional lens, which 0:04:53.040 --> 0:04:56.039 is mostly a domestic lens, to maybe think about what 0:04:56.160 --> 0:04:59.280 does quality mean? What do customers want? What do customers 0:04:59.320 --> 0:05:02.520 really want? And I think we have proven it United. 0:05:02.680 --> 0:05:05.680 Customers want great technology. People love our app it's so 0:05:05.800 --> 0:05:07.520 much better than any other airline in the world. 0:05:07.520 --> 0:05:09.200 They like the information that we can give them. 0:05:09.240 --> 0:05:12.599 People want great service, people want high reliability. Customers want 0:05:13.040 --> 0:05:17.720 a great product. You know, customers want value, and value 0:05:17.800 --> 0:05:19.719 is much bigger than just the price. 0:05:20.279 --> 0:05:23.320 And customers want quality. They want value. 0:05:23.640 --> 0:05:26.800 And I think, you know, whether it's this administration or not, 0:05:26.960 --> 0:05:29.240 I think thinking about what do customers really want? 0:05:29.279 --> 0:05:32.360 It. Look, we have proof points like here in well 0:05:32.560 --> 0:05:34.360 three of our hubs where we had big competitors, three 0:05:34.360 --> 0:05:35.000 different hubs. 0:05:35.160 --> 0:05:37.800 We want about twenty points of market share with the 0:05:37.920 --> 0:05:40.800 local community over the last year. Those are massive moves 0:05:40.960 --> 0:05:43.200 at an airline with against three different competitors that are 0:05:43.200 --> 0:05:44.120 biking those markets. 0:05:44.200 --> 0:05:46.520 And it's all because we built a quality. 0:05:46.080 --> 0:05:48.599 Airline that takes care of customers and put the customers first. 0:05:48.720 --> 0:05:51.159 You've talked about how you are going to raise prices. 0:05:51.200 --> 0:05:53.080 All the airlines are raising prices, and we've seen this. 0:05:53.800 --> 0:05:57.560 Are you surprised by how little customers have stopped flying, 0:05:57.560 --> 0:05:59.320 how much demanded structure actually has been. 0:05:59.440 --> 0:06:02.120 So you know, airfares have gone as well, goes up. 0:06:02.160 --> 0:06:05.120 We need about fifteen to twenty percent increase in airfares 0:06:05.720 --> 0:06:08.080 to recover one hundred ultimately recover one hundred percent of 0:06:08.080 --> 0:06:11.240 fuel price, and so fares have gone up. But in 0:06:11.279 --> 0:06:13.839 real terms, you know, airfares in twenty twenty five or 0:06:13.839 --> 0:06:16.680 twenty seven percent below where they were twenty nineteen pre COVID, 0:06:16.720 --> 0:06:19.240 So we're just like starting to catch up. We haven't 0:06:19.240 --> 0:06:21.640 been caught up to inflation. Even with the increase in 0:06:22.040 --> 0:06:25.560 fuel prices. I did expect a bigger price less tessity 0:06:25.560 --> 0:06:30.240 effect from customers. We've seen actually remarkably strong demand continuing 0:06:30.279 --> 0:06:33.839 even in the face of what are necessarily higher prices. 0:06:34.640 --> 0:06:39.160 What we are anticipating somewhere down the road that elastic blastasey. 0:06:38.680 --> 0:06:39.800 Is real become one on one. 0:06:39.880 --> 0:06:42.839 We all took it, and that that's going to happen 0:06:43.240 --> 0:06:45.400 and that there will be less demand. That's partly why 0:06:45.800 --> 0:06:48.080 are you know we're going to trim some flying out 0:06:48.160 --> 0:06:49.920 of the third Nothing not get to be rid of 0:06:49.960 --> 0:06:52.520 airplanes or changing anything strategically, but we're just going to 0:06:52.800 --> 0:06:55.159 trim some of the marginals. The Tuesday, Wednesday, Saturday is 0:06:55.160 --> 0:06:58.000 the reradie flying out of the second half of the year, 0:06:58.040 --> 0:07:01.200 because I think both well as possibility of being higher 0:07:01.240 --> 0:07:04.320 for longer, but also in the face of higher fuel prices, 0:07:04.360 --> 0:07:05.080 there will be less. 0:07:04.960 --> 0:07:06.839 Demanded, so we need to supply less to the market. 0:07:07.000 --> 0:07:09.480 Is there any scenario where you could see cutting capacity 0:07:09.560 --> 0:07:12.280 more than that? I mean there's been discussion around fight 0:07:12.320 --> 0:07:15.000 flights to Europe getting canceled as a result of just 0:07:15.000 --> 0:07:17.840 simply a lack of physical jet fuel available to fly back. 0:07:17.920 --> 0:07:18.120 Yeah. 0:07:18.160 --> 0:07:21.280 Well, first, on the physical jet fuel, we have not 0:07:21.360 --> 0:07:25.239 seen problems yet. Prices are higher, but we haven't actually 0:07:25.280 --> 0:07:26.160 seen shortages. 0:07:26.200 --> 0:07:27.760 But we're closely. 0:07:27.400 --> 0:07:30.040 Watching everywhere on the globe, and in particular Asia and 0:07:30.520 --> 0:07:32.840 Europe are the two sort of hot spots that were 0:07:33.160 --> 0:07:36.840 most focused on, and it's not impossible that something like 0:07:36.840 --> 0:07:39.520 that would happen. I think we'll manage through with It'll 0:07:39.560 --> 0:07:42.360 be higher priced, but that we'll manage through without getting 0:07:42.360 --> 0:07:42.880 to shortages. 0:07:42.960 --> 0:07:43.200 I hope. 0:07:43.280 --> 0:07:45.760 So, even though it could happen, but even if there 0:07:45.800 --> 0:07:47.360 starts to be shortaged, I think what you'll see you've 0:07:47.360 --> 0:07:48.800 already seen it in Asia. You've seen a little bit 0:07:48.800 --> 0:07:51.559 already starting to happen in Europe. Is it's more likely 0:07:51.920 --> 0:07:55.000 to take short haul services out of the system than 0:07:55.080 --> 0:07:57.400 the long haul global flights. You know, there's options for 0:07:57.560 --> 0:08:00.240 shortthul you can drive, you can take a train, and 0:08:00.280 --> 0:08:03.160 the global long haul to keep the world connected. I 0:08:03.160 --> 0:08:05.760 think will probably be the last in the tail of 0:08:06.640 --> 0:08:07.840 where flying would have to stop. 0:08:07.880 --> 0:08:09.840 So probably going to be able to manage through it. 0:08:09.880 --> 0:08:12.800 In the meantime, we've seen other airlines really struggling internationally, 0:08:12.880 --> 0:08:15.760 left fans of for example, cutting flights. We've seen the 0:08:15.840 --> 0:08:18.400 Asian carriers really struggle as a results of just a 0:08:18.400 --> 0:08:21.440 physical lack of jecule. Does this give you an opening 0:08:21.680 --> 0:08:24.280 in some ways on the international scale, given the fact 0:08:24.280 --> 0:08:26.320 that they're facing some real constraints. 0:08:25.880 --> 0:08:29.160 You know, we talked earlier about there may be opportunity 0:08:29.440 --> 0:08:32.240 in this. I doubt that it's anything because of what's 0:08:32.240 --> 0:08:35.360 happening on international carriers. That'll be a temporary phenomena. They're 0:08:35.400 --> 0:08:37.520 not going to give up slots. You know, I'd like 0:08:37.520 --> 0:08:39.720 to get more slots in other places, but people aren't 0:08:39.720 --> 0:08:42.280 going to give up slots. I don't think over something 0:08:42.360 --> 0:08:44.520 like this, So I think the opportunity is more, how 0:08:44.520 --> 0:08:47.640 do we really create a great US airline that's folks 0:08:47.720 --> 0:08:50.880 on US citizens primarily and getting them around the globe. 0:08:50.880 --> 0:08:53.000 How do we eliminate that, you know, sixty five forty 0:08:53.040 --> 0:08:53.640 trade deficit. 0:08:53.760 --> 0:08:55.480 Do you think it's appropriate for the government to give 0:08:55.679 --> 0:08:58.360 to get a stake in Spirit Airlines as we struggle 0:08:58.400 --> 0:09:01.319 to fortify the US airlines. 0:09:01.200 --> 0:09:04.599 You know, on that point, Like, first, I think you 0:09:04.600 --> 0:09:07.720 can see this, even in this fuel crisis fuel spike, 0:09:08.200 --> 0:09:10.880 that well run airlines like United Airlines can say made 0:09:10.960 --> 0:09:14.520 solidly profitable. And I don't think that this is anywhere 0:09:14.520 --> 0:09:16.840 close to the US airline industry needing a bailout. 0:09:16.960 --> 0:09:19.119 The kinds of things that have happened in the past. 0:09:18.840 --> 0:09:23.160 And the problems that Spirit predate the run up in fuel. 0:09:23.800 --> 0:09:26.400 It was a fundamentally flawed business model, and I feel 0:09:26.400 --> 0:09:29.200 bad that, you know, like as much as we're competitive 0:09:29.200 --> 0:09:30.720 with them, Like, I don't want to see people lose 0:09:30.720 --> 0:09:31.199 their jobs. 0:09:31.320 --> 0:09:33.560 By the way, a lot of them are coming to United. 0:09:33.640 --> 0:09:35.240 I talked to all of our new hard pilot class, 0:09:35.280 --> 0:09:36.920 and every time there's a whole bunch of hands. 0:09:36.679 --> 0:09:37.440 That game Spirit. 0:09:37.720 --> 0:09:40.400 So but I don't want to see anyone lose their jobs. 0:09:40.520 --> 0:09:43.079 But this was a fundamentally flawed business model that I've 0:09:43.120 --> 0:09:45.360 been on the going back into the last administration saying 0:09:45.679 --> 0:09:48.120 it's going to fail because the business model doesn't work. 0:09:48.679 --> 0:09:50.760 And so I think the spiking fuel price is just 0:09:50.840 --> 0:09:52.120 moving forward by a couple of months. 0:09:52.200 --> 0:09:54.600 I just want to finish up. You are the economist 0:09:54.640 --> 0:09:57.880 who has the most front row view to the American economy, 0:09:58.120 --> 0:10:00.240 more so than anyone else. Do you think now the 0:10:00.280 --> 0:10:02.880 economy is better or worse than people think it is? 0:10:03.040 --> 0:10:05.080 You know, I certainly if I read the headlines, is 0:10:05.080 --> 0:10:07.320 better than what the people in the headlines said. 0:10:07.320 --> 0:10:09.280 Although the stock market, you know, is acting like it's 0:10:09.280 --> 0:10:09.679 pretty good. 0:10:09.679 --> 0:10:11.160 So people that are vote with their money, that aren't 0:10:11.160 --> 0:10:14.319 just experts on TV are seen to be voting that 0:10:14.360 --> 0:10:16.240 the economy is pretty good, and that's what we see. 0:10:16.559 --> 0:10:19.760 I think the risks are higher in the economy right now, 0:10:19.800 --> 0:10:20.199 you know, like. 0:10:20.160 --> 0:10:21.040 What's happening with oil. 0:10:21.080 --> 0:10:24.960 It's such an inelastic demand for oil, and if you 0:10:25.040 --> 0:10:26.600 get to the point where we have to have demand 0:10:26.600 --> 0:10:31.720 destruction to overcome oil shortages, I think that could impact 0:10:31.760 --> 0:10:33.199 the economy, but we just don't. 0:10:33.000 --> 0:10:33.520 See it yet. 0:10:33.760 --> 0:10:36.120 Scott Kirby, always wonderful to speak with you. Thank you 0:10:36.200 --> 0:10:39.200 so much. That was Scott Kirby, the CEO of United Airlines,