Speaker 1: Bloomberg Audio Studios, Podcasts, Radio news.
Speaker 2: Scott.
Speaker 3: Great to see you after a quarter. We did beat expectations,
Speaker 3: but cut guidance. We'll get into all the numbers. I
Speaker 3: want to start with the big news over the past
Speaker 3: couple of weeks. Are you going to buy American Airlines?
Speaker 1: Well, thanks for being here in first liason and first
Speaker 1: I'm not gonna comment on that, but I will tell
Speaker 1: you a little bit about repeat some of the things
Speaker 1: that I that I've said in the past. And first,
Speaker 1: it was a great quarter, even though fuel prices doubled.
Speaker 1: You know, the team that you know I did an
Speaker 1: incredible job and really a look full guidance given guidance
Speaker 1: for the full year. Being able to be solidly profitable
Speaker 1: even in this escalating fuel price environment. I think is
Speaker 1: really the entrege of where we want to go for
Speaker 1: the future, which is we've built a brand loyal airline
Speaker 1: by a tracking customer by giving them quality, by giving
Speaker 1: them value, an airline that customers love and that you know,
Speaker 1: gives us resilience in tough times. But it also lets
Speaker 1: us think about what's the next phase for United Airlines.
Speaker 1: We've spent the last couple of years thinking about We've
Speaker 1: proving that this strategy to where brand loyal customers works,
Speaker 1: But how do we become.
Speaker 2: A truly globally competitive airline.
Speaker 1: Now I don't have the nentwery yet, I'm not saying
Speaker 1: anything specific about what they are. But today there's a
Speaker 1: big trade deficit in the United States with foreign flagged airlines,
Speaker 1: and they fly sixty five percent of the long haul
Speaker 1: seats into the US, even though only forty percent of
Speaker 1: the customers are foreigners. And that trade deficit is bad
Speaker 1: for United airlines. It is bad for US aviation. It's
Speaker 1: bad for US workers because we actually create some of
Speaker 1: the really best jobs with the best benefits in the country,
Speaker 1: not just jobs but careers. And it's bad for the
Speaker 1: United States of America. And so I would like to
Speaker 1: solve that and create a truly global, great airline that
Speaker 1: all US citizens can be proud of.
Speaker 3: So it's important, in other words, for the United States
Speaker 3: to fortify its airline industry with the competitor in mind,
Speaker 3: not necessarily of the big three in the US of American, United,
Speaker 3: and Delta, but internationally with some of the long haul
Speaker 3: carriers that you see as really the main competition for
Speaker 3: the United.
Speaker 2: States is acrea.
Speaker 1: You know, I feel like what we've at United have
Speaker 1: done here in the United States.
Speaker 2: By building a brand loyal airline, you know, we.
Speaker 1: Really have attracted all the brand is certainly in our hubs.
Speaker 1: We've attracted the brand loyal customers, and we've won huge
Speaker 1: market share kind of everywhere that we fly by being better,
Speaker 1: by being high quality, and that's what's caused us to win.
Speaker 1: And I think the next phase for us is can
Speaker 1: we take that around the globe? Can we do that
Speaker 1: everywhere that we fly? And look, there's some really good
Speaker 1: airlines in the Middle East or some really good airlines
Speaker 1: in Asia, and they do some things better than us,
Speaker 1: But can we create a US airline? And I don't
Speaker 1: have the answer, dot hundred percent sure we can do it,
Speaker 1: and not proposing any specifics today, of course, but it's
Speaker 1: an aspirational vision that I think United is in a
Speaker 1: unique position to go after because of the success we've had,
Speaker 1: because our people are great, because of the investments we've
Speaker 1: made in product and technology to get there. That we're
Speaker 1: in a end, because we have the willingness to try
Speaker 1: to do big things that we are in a unique
Speaker 1: position to try to achieve that and do something big
Speaker 1: for United but also for the country.
Speaker 3: You've been really vocal about how it's an opportunity when
Speaker 3: there is a crisis or when there's serious pressures in
Speaker 3: the industry right now as high oil prices to potentially
Speaker 3: pick up other assets that could be distressed, others that
Speaker 3: are weaker, that are falling out of favor. Are there
Speaker 3: characteristics of airlines that you would consider taking over, assets
Speaker 3: that you would potentially acquire in this type of period.
Speaker 2: Yeah, you know, with one.
Speaker 1: The best way to prepare for a crisis is to
Speaker 1: be prepared before it starts. We knew something would happen.
Speaker 1: I didn't know when we knew something would happen. So
Speaker 1: we're carrying triple the cash we had pre COVID. We've
Speaker 1: moved to the top of the industry profit margins, we
Speaker 1: have the best credit rating that we've had in over
Speaker 1: thirty years, and we're committed to getting to investment grade abalacy.
Speaker 1: That gives us the ability to look through the problems
Speaker 1: the spike and oil prices to the other side and
Speaker 1: not have to make short term, you know, strategic bad
Speaker 1: strategic decisions. And as I look at assets like maybe
Speaker 1: they will maybe they won't come available. We've actually even
Speaker 1: had some discussions with one airline about buying some. But
Speaker 1: the kinds of things were most focused on are again
Speaker 1: back to this, how do we create a great airline
Speaker 1: for a decommoditize great airline for customers that can really
Speaker 1: be stronger internationally. So things that support growing an international
Speaker 1: network are more interesting to us because that's where our
Speaker 1: focus and I think that's where our big future growth
Speaker 1: potential is.
Speaker 3: President Trump gave a nod to you in a conversation
Speaker 3: yesterday talking about how he likes what you're doing. He
Speaker 3: said that he didn't really want to see a tie
Speaker 3: up between America and United I know you're not saying anybody,
Speaker 3: do you think that this is a more amenable period
Speaker 3: for tie ups than it has been in the past.
Speaker 3: This is sort of a window that airlines can capitalize
Speaker 3: on to execute mergers that have been hard fought in
Speaker 3: the past.
Speaker 1: Well, I'm not sure, but that's certainly the market can
Speaker 1: sens us. That's what people think, and what I think
Speaker 1: it is, more than any think, is an opportunity to maybe,
Speaker 1: instead of looking at everything through the traditional lens, which
Speaker 1: is mostly a domestic lens, to maybe think about what
Speaker 1: does quality mean? What do customers want? What do customers
Speaker 1: really want? And I think we have proven it United.
Speaker 1: Customers want great technology. People love our app it's so
Speaker 1: much better than any other airline in the world.
Speaker 2: They like the information that we can give them.
Speaker 1: People want great service, people want high reliability. Customers want
Speaker 1: a great product. You know, customers want value, and value
Speaker 1: is much bigger than just the price.
Speaker 2: And customers want quality. They want value.
Speaker 1: And I think, you know, whether it's this administration or not,
Speaker 1: I think thinking about what do customers really want?
Speaker 2: It. Look, we have proof points like here in well
Speaker 2: three of our hubs where we had big competitors, three
Speaker 2: different hubs.
Speaker 1: We want about twenty points of market share with the
Speaker 1: local community over the last year. Those are massive moves
Speaker 1: at an airline with against three different competitors that are
Speaker 1: biking those markets.
Speaker 2: And it's all because we built a quality.
Speaker 1: Airline that takes care of customers and put the customers first.
Speaker 3: You've talked about how you are going to raise prices.
Speaker 3: All the airlines are raising prices, and we've seen this.
Speaker 3: Are you surprised by how little customers have stopped flying,
Speaker 3: how much demanded structure actually has been.
Speaker 2: So you know, airfares have gone as well, goes up.
Speaker 1: We need about fifteen to twenty percent increase in airfares
Speaker 1: to recover one hundred ultimately recover one hundred percent of
Speaker 1: fuel price, and so fares have gone up. But in
Speaker 1: real terms, you know, airfares in twenty twenty five or
Speaker 1: twenty seven percent below where they were twenty nineteen pre COVID,
Speaker 1: So we're just like starting to catch up. We haven't
Speaker 1: been caught up to inflation. Even with the increase in
Speaker 1: fuel prices. I did expect a bigger price less tessity
Speaker 1: effect from customers. We've seen actually remarkably strong demand continuing
Speaker 1: even in the face of what are necessarily higher prices.
Speaker 1: What we are anticipating somewhere down the road that elastic blastasey.
Speaker 2: Is real become one on one.
Speaker 1: We all took it, and that that's going to happen
Speaker 1: and that there will be less demand. That's partly why
Speaker 1: are you know we're going to trim some flying out
Speaker 1: of the third Nothing not get to be rid of
Speaker 1: airplanes or changing anything strategically, but we're just going to
Speaker 1: trim some of the marginals. The Tuesday, Wednesday, Saturday is
Speaker 1: the reradie flying out of the second half of the year,
Speaker 1: because I think both well as possibility of being higher
Speaker 1: for longer, but also in the face of higher fuel prices,
Speaker 1: there will be less.
Speaker 2: Demanded, so we need to supply less to the market.
Speaker 3: Is there any scenario where you could see cutting capacity
Speaker 3: more than that? I mean there's been discussion around fight
Speaker 3: flights to Europe getting canceled as a result of just
Speaker 3: simply a lack of physical jet fuel available to fly back.
Speaker 2: Yeah.
Speaker 1: Well, first, on the physical jet fuel, we have not
Speaker 1: seen problems yet. Prices are higher, but we haven't actually
Speaker 1: seen shortages.
Speaker 2: But we're closely.
Speaker 1: Watching everywhere on the globe, and in particular Asia and
Speaker 1: Europe are the two sort of hot spots that were
Speaker 1: most focused on, and it's not impossible that something like
Speaker 1: that would happen. I think we'll manage through with It'll
Speaker 1: be higher priced, but that we'll manage through without getting
Speaker 1: to shortages.
Speaker 2: I hope.
Speaker 1: So, even though it could happen, but even if there
Speaker 1: starts to be shortaged, I think what you'll see you've
Speaker 1: already seen it in Asia. You've seen a little bit
Speaker 1: already starting to happen in Europe. Is it's more likely
Speaker 1: to take short haul services out of the system than
Speaker 1: the long haul global flights. You know, there's options for
Speaker 1: shortthul you can drive, you can take a train, and
Speaker 1: the global long haul to keep the world connected. I
Speaker 1: think will probably be the last in the tail of
Speaker 1: where flying would have to stop.
Speaker 2: So probably going to be able to manage through it.
Speaker 3: In the meantime, we've seen other airlines really struggling internationally,
Speaker 3: left fans of for example, cutting flights. We've seen the
Speaker 3: Asian carriers really struggle as a results of just a
Speaker 3: physical lack of jecule. Does this give you an opening
Speaker 3: in some ways on the international scale, given the fact
Speaker 3: that they're facing some real constraints.
Speaker 1: You know, we talked earlier about there may be opportunity
Speaker 1: in this. I doubt that it's anything because of what's
Speaker 1: happening on international carriers. That'll be a temporary phenomena. They're
Speaker 1: not going to give up slots. You know, I'd like
Speaker 1: to get more slots in other places, but people aren't
Speaker 1: going to give up slots. I don't think over something
Speaker 1: like this, So I think the opportunity is more, how
Speaker 1: do we really create a great US airline that's folks
Speaker 1: on US citizens primarily and getting them around the globe.
Speaker 1: How do we eliminate that, you know, sixty five forty
Speaker 1: trade deficit.
Speaker 3: Do you think it's appropriate for the government to give
Speaker 3: to get a stake in Spirit Airlines as we struggle
Speaker 3: to fortify the US airlines.
Speaker 1: You know, on that point, Like, first, I think you
Speaker 1: can see this, even in this fuel crisis fuel spike,
Speaker 1: that well run airlines like United Airlines can say made
Speaker 1: solidly profitable. And I don't think that this is anywhere
Speaker 1: close to the US airline industry needing a bailout.
Speaker 2: The kinds of things that have happened in the past.
Speaker 1: And the problems that Spirit predate the run up in fuel.
Speaker 1: It was a fundamentally flawed business model, and I feel
Speaker 1: bad that, you know, like as much as we're competitive
Speaker 1: with them, Like, I don't want to see people lose
Speaker 1: their jobs.
Speaker 2: By the way, a lot of them are coming to United.
Speaker 1: I talked to all of our new hard pilot class,
Speaker 1: and every time there's a whole bunch of hands.
Speaker 2: That game Spirit.
Speaker 1: So but I don't want to see anyone lose their jobs.
Speaker 1: But this was a fundamentally flawed business model that I've
Speaker 1: been on the going back into the last administration saying
Speaker 1: it's going to fail because the business model doesn't work.
Speaker 1: And so I think the spiking fuel price is just
Speaker 1: moving forward by a couple of months.
Speaker 3: I just want to finish up. You are the economist
Speaker 3: who has the most front row view to the American economy,
Speaker 3: more so than anyone else. Do you think now the
Speaker 3: economy is better or worse than people think it is?
Speaker 1: You know, I certainly if I read the headlines, is
Speaker 1: better than what the people in the headlines said.
Speaker 2: Although the stock market, you know, is acting like it's
Speaker 2: pretty good.
Speaker 1: So people that are vote with their money, that aren't
Speaker 1: just experts on TV are seen to be voting that
Speaker 1: the economy is pretty good, and that's what we see.
Speaker 1: I think the risks are higher in the economy right now,
Speaker 1: you know, like.
Speaker 2: What's happening with oil.
Speaker 1: It's such an inelastic demand for oil, and if you
Speaker 1: get to the point where we have to have demand
Speaker 1: destruction to overcome oil shortages, I think that could impact
Speaker 1: the economy, but we just don't.
Speaker 2: See it yet.
Speaker 3: Scott Kirby, always wonderful to speak with you. Thank you
Speaker 3: so much. That was Scott Kirby, the CEO of United Airlines,