WEBVTT - United Airlines CEO Scott Kirby Talks Business and Geopolitics 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, podcasts, radio news. 0:00:07.880 --> 0:00:11.480 Yesterday after the bell, United Airlines reported earnings, as follows 0:00:11.480 --> 0:00:15.440 Delta reporting earnings and United beat expectations across the board. 0:00:15.640 --> 0:00:18.360 Joining us now to discuss is the chief executive officer 0:00:18.600 --> 0:00:22.280 Scott Kirby. Right before that earnings call with investors. Scott, 0:00:22.280 --> 0:00:24.080 thank you so much for being with us. I want 0:00:24.120 --> 0:00:26.720 to start on the transformation in the airline industry. It 0:00:26.840 --> 0:00:30.520 just seems incredible focus on revenues coming from premium and loyalty. 0:00:31.320 --> 0:00:34.240 Really they doubled relative to the pace that you're seeing 0:00:34.240 --> 0:00:36.280 in the main cabin. Can you give us some more 0:00:36.320 --> 0:00:37.559 color about why that is. 0:00:38.600 --> 0:00:41.520 Well, you know, we've spent a decade at United trying 0:00:41.520 --> 0:00:43.479 to build what we call a brand loyal airline to 0:00:43.479 --> 0:00:46.880 get customers but really all customers to choose to fly 0:00:47.040 --> 0:00:49.200 United to get out of the commodity cycle of the business. 0:00:49.200 --> 0:00:50.680 And twenty twenty five is a great year for that. 0:00:50.720 --> 0:00:54.080 Despite all the headwinds, United Airlines was the only airline. 0:00:53.800 --> 0:00:55.600 To grow EPs last year. 0:00:55.640 --> 0:00:58.120 We started with a really strong booking environment in twenty 0:00:58.120 --> 0:01:00.720 twenty five. It really is the culmination of this brand 0:01:00.760 --> 0:01:04.280 loyal strategy. And yes, that's over indexes to the premium. 0:01:04.360 --> 0:01:06.880 Those are the customers that fly the most and have 0:01:07.000 --> 0:01:09.319 the most loyalty, and that part of the business has 0:01:09.360 --> 0:01:12.280 done the best. But you know, we've seen pretty significant 0:01:12.280 --> 0:01:14.880 strength in the back of the airplane as well. We 0:01:14.920 --> 0:01:17.679 had seven percent growth and based economy last year, and 0:01:17.720 --> 0:01:19.360 we've been investing there. You know, I think one of 0:01:19.400 --> 0:01:21.840 the cool things we recently announced is we're the only 0:01:21.840 --> 0:01:24.880 airline in the country that has ovens in coach, and 0:01:24.920 --> 0:01:26.959 so we're going to be serving hot meals in coach 0:01:27.040 --> 0:01:29.200 for customers that pre order, give the customers the ability 0:01:29.240 --> 0:01:31.880 to pre order hot meals, and that applies obviously to 0:01:31.920 --> 0:01:34.760 the entire cabin and is not just focused on premium. 0:01:34.760 --> 0:01:38.840 Premium has over index, but really we're seeing strength across 0:01:38.880 --> 0:01:39.240 the board. 0:01:40.440 --> 0:01:42.080 That strength across the board, And this is what I 0:01:42.120 --> 0:01:43.959 was trying to get into it. I'd love your color 0:01:44.040 --> 0:01:48.160 on this. How much are the main cabin customers increasingly 0:01:48.240 --> 0:01:53.920 cost conscious even as the more premium and loyalty customers 0:01:54.280 --> 0:01:57.640 seem willing to pay for quality for the perks that 0:01:57.720 --> 0:01:59.640 come along with some of your new offerings. 0:02:00.360 --> 0:02:03.000 Well, while we index higher end kind of across the board, 0:02:03.040 --> 0:02:05.920 even in main cabin so we're not a perfect indicator 0:02:05.960 --> 0:02:07.080 of the economy. 0:02:07.600 --> 0:02:09.160 You know, one of the things I would say. 0:02:09.000 --> 0:02:11.640 Is customers are across the board willing to pay for 0:02:11.680 --> 0:02:15.920 better product, service, better technology, better experience across the board. 0:02:16.000 --> 0:02:19.160 But also i'd add, like airline traffic. You know, in 0:02:19.200 --> 0:02:22.560 twenty twenty five, airfares were two percent lower than they 0:02:22.600 --> 0:02:26.200 were in twenty nineteen, so we've been deflation Inflation is 0:02:26.200 --> 0:02:27.600 about about twenty three percent. 0:02:27.400 --> 0:02:28.040 Over that period. 0:02:28.639 --> 0:02:31.440 We've been deflationary, and our cost in many cases have 0:02:31.520 --> 0:02:34.520 grown even more. Fifty percent increase in air cross is 0:02:34.560 --> 0:02:37.799 sort of the norm across the industry. So airfare remains 0:02:37.800 --> 0:02:40.920 a pretty good value, pretty good good travel for customers. 0:02:41.520 --> 0:02:43.120 There's a lot of that's put a lot of pressure 0:02:43.360 --> 0:02:46.080 on the low end of the airline industry, as you 0:02:46.080 --> 0:02:49.440 can see, but air traveler mains a good value, and 0:02:49.720 --> 0:02:53.080 we are increasingly finding that really across the board, customers 0:02:53.120 --> 0:02:54.919 are willing to pay for a little at least a 0:02:54.960 --> 0:02:56.519 little bit for a better experience. 0:02:57.320 --> 0:02:59.799 You know, that deflation that you're talking about, how much 0:02:59.840 --> 0:03:02.440 do you need to see consolidation at the lower end 0:03:02.480 --> 0:03:06.320 of the offerings in order to actually bring supply into balance. 0:03:07.160 --> 0:03:08.800 Well, I think the low end, whether it havings through 0:03:08.840 --> 0:03:12.200 consolidation or airline shrinking or airlines just going out of business. 0:03:12.800 --> 0:03:15.640 I think the low end of the market is it's 0:03:15.680 --> 0:03:18.919 a painful process, but in the process of shrinking back 0:03:18.960 --> 0:03:20.840 to the niche that works for the low end, and 0:03:20.880 --> 0:03:24.080 that really is flying in big leisure markets, mostly flying 0:03:24.080 --> 0:03:28.160 to Orlando in Vegas and really shrinking back to that niche. 0:03:28.200 --> 0:03:29.560 And they're going through that process. 0:03:29.600 --> 0:03:32.560 I don't know if it'll be consolidation or liquidation or 0:03:32.600 --> 0:03:36.280 just shrinking dramatically, but they really outgrew the niche and 0:03:36.320 --> 0:03:38.840 they're in the painful process of shrinking back to that niche. 0:03:39.560 --> 0:03:42.680 Do I expect And you're talking about a particular niche, 0:03:42.800 --> 0:03:44.880 it makes me think you're talking about jet Blue as 0:03:44.920 --> 0:03:47.400 position for that. Are you expanding the partnership that United 0:03:47.440 --> 0:03:48.360 has with jet Blue. 0:03:49.040 --> 0:03:52.640 Well, I wasn't talking about them, but jet Blue is 0:03:52.640 --> 0:03:55.600 a great partner for us. We love their focus on customers. Really, 0:03:55.640 --> 0:03:57.720 it's more cultural than anything. Is the reason we wanted 0:03:57.720 --> 0:04:00.600 to partner with jet Blue, because we both believe in 0:04:00.720 --> 0:04:02.640 doing the right thing for customers, that the industry is 0:04:02.680 --> 0:04:05.160 not a commodity, and the. 0:04:05.160 --> 0:04:06.840 Partnership is great so far. 0:04:06.880 --> 0:04:09.000 If their opportunities to expand in the future, we'd certainly 0:04:09.360 --> 0:04:12.200 look at that. You know, Jet Blue I is, you know, 0:04:12.240 --> 0:04:14.280 trying to turn the corner they've had. They, like much 0:04:14.320 --> 0:04:17.719 of the industries, you know, had challenges, but they have 0:04:17.800 --> 0:04:21.240 the right strategy, the right vision, and we have a 0:04:21.279 --> 0:04:23.159 lot of hope for them in the future and we 0:04:23.200 --> 0:04:24.840 appreciate the partnership with them. 0:04:25.440 --> 0:04:28.000 The first two weeks of January have been tremendous. They 0:04:28.000 --> 0:04:30.559 broke records when it comes to revenues and ticketing, both 0:04:30.680 --> 0:04:34.960 in consumers and also business travel. What does that say 0:04:35.279 --> 0:04:37.640 for the setup for the remainder of twenty twenty six? 0:04:37.680 --> 0:04:40.159 Do you expect this to be an incredibly active year? 0:04:41.120 --> 0:04:44.919 You know, we have come in pretty hot to start 0:04:44.920 --> 0:04:48.840 the year. I think that's indicative of an underlying economy 0:04:49.480 --> 0:04:51.000 that has more underlying strength. 0:04:51.040 --> 0:04:52.479 I think than most appreciate. 0:04:52.920 --> 0:04:55.080 Saw that all through the last year, see it continuing 0:04:55.640 --> 0:04:58.480 into this year and people getting back to travel. I'm 0:04:58.520 --> 0:05:02.520 sure that applies in other industries as well. We're not 0:05:02.560 --> 0:05:04.240 sure if it'll last for the whole year. You know, 0:05:04.279 --> 0:05:06.279 I think our base case probably is that we'll we 0:05:06.279 --> 0:05:09.040 haven't built that into our guidance. We've been more conservative 0:05:09.080 --> 0:05:11.640 that in our guidance. But if it continues like this, 0:05:11.680 --> 0:05:13.960 it's going to be a really good year for United Airlines. 0:05:14.880 --> 0:05:17.479 Where specifically is it good, is it done? Domestic? Is 0:05:17.480 --> 0:05:21.960 it international? We saw international really strong, although inbound traffic 0:05:22.040 --> 0:05:24.479 to the United States fell off from a couple of 0:05:24.480 --> 0:05:26.280 different countries. We saw that with Canada, we saw that 0:05:26.360 --> 0:05:28.680 with China. I mean, where do you see the growth 0:05:28.680 --> 0:05:29.560 really coming from? 0:05:30.120 --> 0:05:33.800 You know, though the rising tide is lifting all of 0:05:33.839 --> 0:05:36.880 those boats. So it's everything is better across the world. 0:05:36.920 --> 0:05:42.040 But the best remains international, remains, premium, remains business travel, 0:05:42.600 --> 0:05:46.240 and you know, speaking to international, about eighty percent of 0:05:46.279 --> 0:05:49.880 the customers on United Airlines international flights are US citizens. 0:05:50.360 --> 0:05:53.440 And we really never saw much slow down there, even 0:05:53.560 --> 0:05:56.880 we did see some you know, some slow down from 0:05:56.920 --> 0:06:00.840 some parts of geography. Those mostly bottomed out started to recover. 0:06:01.680 --> 0:06:05.240 But really we see the most strength and international and premium. 0:06:05.279 --> 0:06:08.320 But everything is getting better across the board, at least 0:06:08.320 --> 0:06:09.679 in the first few weeks of January. 0:06:09.680 --> 0:06:12.599 As we come into the new year, we're. 0:06:12.880 --> 0:06:15.240 Here in Davos and there's a lot of discussion about 0:06:15.279 --> 0:06:18.960 geopolitical tensions. There's a lot of discussion about the dispute 0:06:19.000 --> 0:06:23.440 over Greenland and tariffs and treaties, and it feels as 0:06:23.520 --> 0:06:26.239 though some people are saying that the world order is changing. 0:06:26.279 --> 0:06:28.240 We've heard that from Mark Harney of Canada. I just 0:06:28.320 --> 0:06:31.599 wonder how you plan for the year ahead with some 0:06:31.680 --> 0:06:34.240 of these geopolitical tensions. Do you feel it when you 0:06:34.440 --> 0:06:37.960 are transporting people between polices and seeing some of the 0:06:38.000 --> 0:06:41.080 barriers maybe get a little bit higher. 0:06:42.080 --> 0:06:45.599 So we've spent a decade with a strategy to build 0:06:45.640 --> 0:06:48.359 a brand loyal airline that would have resilience in the 0:06:48.400 --> 0:06:51.400 face of all the kind of issues that affect aviation 0:06:51.440 --> 0:06:53.320 that happened all the time, and last year had more 0:06:53.360 --> 0:06:58.000 than its fair share of surprises that impacted demand and 0:06:58.160 --> 0:07:01.120 impacted travel. And yet you know, we had of a 0:07:01.120 --> 0:07:03.120 no excuses culture here, you know, and then we just 0:07:03.200 --> 0:07:05.360 overcame obstacles and with the only airline in the country 0:07:05.360 --> 0:07:09.119 that grew EPs last year. And it's really that brand 0:07:09.160 --> 0:07:11.960 loyal strategy gives us a resilience in the face of 0:07:12.080 --> 0:07:14.600 what there are going to always be gealpolitical issues. We're 0:07:14.600 --> 0:07:17.680 the largest global airline from the US. We're exposed to 0:07:17.720 --> 0:07:19.880 all levels of the all around the globe, and so 0:07:20.240 --> 0:07:23.320 we deal with stuff all the time, and you know 0:07:23.520 --> 0:07:26.520 what has short term impact. Staying focused on the long 0:07:26.600 --> 0:07:30.040 term and that brand strategy has been really successful for us. 0:07:30.400 --> 0:07:31.520 I think it will be this year. 0:07:31.560 --> 0:07:33.640 You know, we enter this year with a strong booking environment, 0:07:33.720 --> 0:07:37.120 feeling like a pretty good economy, really more us focused 0:07:37.160 --> 0:07:39.680 on our customer base, and you know, as we've said 0:07:39.720 --> 0:07:42.560 on this in this interview, like our bookings are just 0:07:42.680 --> 0:07:44.680 we're setting one record after another as we come into 0:07:44.680 --> 0:07:47.440 the year. So we feel pretty good that our guidance 0:07:47.480 --> 0:07:50.400 as solid and as long as things stay like they are, 0:07:50.440 --> 0:07:52.240 were going to wind up being conservative as we get 0:07:52.240 --> 0:07:52.920 through the full year.