Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Yesterday after the bell, United Airlines reported earnings, as follows
Speaker 2: Delta reporting earnings and United beat expectations across the board.
Speaker 2: Joining us now to discuss is the chief executive officer
Speaker 2: Scott Kirby. Right before that earnings call with investors. Scott,
Speaker 2: thank you so much for being with us. I want
Speaker 2: to start on the transformation in the airline industry. It
Speaker 2: just seems incredible focus on revenues coming from premium and loyalty.
Speaker 2: Really they doubled relative to the pace that you're seeing
Speaker 2: in the main cabin. Can you give us some more
Speaker 2: color about why that is.
Speaker 3: Well, you know, we've spent a decade at United trying
Speaker 3: to build what we call a brand loyal airline to
Speaker 3: get customers but really all customers to choose to fly
Speaker 3: United to get out of the commodity cycle of the business.
Speaker 1: And twenty twenty five is a great year for that.
Speaker 3: Despite all the headwinds, United Airlines was the only airline.
Speaker 1: To grow EPs last year.
Speaker 3: We started with a really strong booking environment in twenty
Speaker 3: twenty five. It really is the culmination of this brand
Speaker 3: loyal strategy. And yes, that's over indexes to the premium.
Speaker 3: Those are the customers that fly the most and have
Speaker 3: the most loyalty, and that part of the business has
Speaker 3: done the best. But you know, we've seen pretty significant
Speaker 3: strength in the back of the airplane as well. We
Speaker 3: had seven percent growth and based economy last year, and
Speaker 3: we've been investing there. You know, I think one of
Speaker 3: the cool things we recently announced is we're the only
Speaker 3: airline in the country that has ovens in coach, and
Speaker 3: so we're going to be serving hot meals in coach
Speaker 3: for customers that pre order, give the customers the ability
Speaker 3: to pre order hot meals, and that applies obviously to
Speaker 3: the entire cabin and is not just focused on premium.
Speaker 3: Premium has over index, but really we're seeing strength across
Speaker 3: the board.
Speaker 2: That strength across the board, And this is what I
Speaker 2: was trying to get into it. I'd love your color
Speaker 2: on this. How much are the main cabin customers increasingly
Speaker 2: cost conscious even as the more premium and loyalty customers
Speaker 2: seem willing to pay for quality for the perks that
Speaker 2: come along with some of your new offerings.
Speaker 3: Well, while we index higher end kind of across the board,
Speaker 3: even in main cabin so we're not a perfect indicator
Speaker 3: of the economy.
Speaker 1: You know, one of the things I would say.
Speaker 3: Is customers are across the board willing to pay for
Speaker 3: better product, service, better technology, better experience across the board.
Speaker 3: But also i'd add, like airline traffic. You know, in
Speaker 3: twenty twenty five, airfares were two percent lower than they
Speaker 3: were in twenty nineteen, so we've been deflation Inflation is
Speaker 3: about about twenty three percent.
Speaker 1: Over that period.
Speaker 3: We've been deflationary, and our cost in many cases have
Speaker 3: grown even more. Fifty percent increase in air cross is
Speaker 3: sort of the norm across the industry. So airfare remains
Speaker 3: a pretty good value, pretty good good travel for customers.
Speaker 3: There's a lot of that's put a lot of pressure
Speaker 3: on the low end of the airline industry, as you
Speaker 3: can see, but air traveler mains a good value, and
Speaker 3: we are increasingly finding that really across the board, customers
Speaker 3: are willing to pay for a little at least a
Speaker 3: little bit for a better experience.
Speaker 2: You know, that deflation that you're talking about, how much
Speaker 2: do you need to see consolidation at the lower end
Speaker 2: of the offerings in order to actually bring supply into balance.
Speaker 3: Well, I think the low end, whether it havings through
Speaker 3: consolidation or airline shrinking or airlines just going out of business.
Speaker 3: I think the low end of the market is it's
Speaker 3: a painful process, but in the process of shrinking back
Speaker 3: to the niche that works for the low end, and
Speaker 3: that really is flying in big leisure markets, mostly flying
Speaker 3: to Orlando in Vegas and really shrinking back to that niche.
Speaker 1: And they're going through that process.
Speaker 3: I don't know if it'll be consolidation or liquidation or
Speaker 3: just shrinking dramatically, but they really outgrew the niche and
Speaker 3: they're in the painful process of shrinking back to that niche.
Speaker 2: Do I expect And you're talking about a particular niche,
Speaker 2: it makes me think you're talking about jet Blue as
Speaker 2: position for that. Are you expanding the partnership that United
Speaker 2: has with jet Blue.
Speaker 3: Well, I wasn't talking about them, but jet Blue is
Speaker 3: a great partner for us. We love their focus on customers. Really,
Speaker 3: it's more cultural than anything. Is the reason we wanted
Speaker 3: to partner with jet Blue, because we both believe in
Speaker 3: doing the right thing for customers, that the industry is
Speaker 3: not a commodity, and the.
Speaker 1: Partnership is great so far.
Speaker 3: If their opportunities to expand in the future, we'd certainly
Speaker 3: look at that. You know, Jet Blue I is, you know,
Speaker 3: trying to turn the corner they've had. They, like much
Speaker 3: of the industries, you know, had challenges, but they have
Speaker 3: the right strategy, the right vision, and we have a
Speaker 3: lot of hope for them in the future and we
Speaker 3: appreciate the partnership with them.
Speaker 2: The first two weeks of January have been tremendous. They
Speaker 2: broke records when it comes to revenues and ticketing, both
Speaker 2: in consumers and also business travel. What does that say
Speaker 2: for the setup for the remainder of twenty twenty six?
Speaker 2: Do you expect this to be an incredibly active year?
Speaker 3: You know, we have come in pretty hot to start
Speaker 3: the year. I think that's indicative of an underlying economy
Speaker 3: that has more underlying strength.
Speaker 1: I think than most appreciate.
Speaker 3: Saw that all through the last year, see it continuing
Speaker 3: into this year and people getting back to travel. I'm
Speaker 3: sure that applies in other industries as well. We're not
Speaker 3: sure if it'll last for the whole year. You know,
Speaker 3: I think our base case probably is that we'll we
Speaker 3: haven't built that into our guidance. We've been more conservative
Speaker 3: that in our guidance. But if it continues like this,
Speaker 3: it's going to be a really good year for United Airlines.
Speaker 2: Where specifically is it good, is it done? Domestic? Is
Speaker 2: it international? We saw international really strong, although inbound traffic
Speaker 2: to the United States fell off from a couple of
Speaker 2: different countries. We saw that with Canada, we saw that
Speaker 2: with China. I mean, where do you see the growth
Speaker 2: really coming from?
Speaker 3: You know, though the rising tide is lifting all of
Speaker 3: those boats. So it's everything is better across the world.
Speaker 3: But the best remains international, remains, premium, remains business travel,
Speaker 3: and you know, speaking to international, about eighty percent of
Speaker 3: the customers on United Airlines international flights are US citizens.
Speaker 3: And we really never saw much slow down there, even
Speaker 3: we did see some you know, some slow down from
Speaker 3: some parts of geography. Those mostly bottomed out started to recover.
Speaker 3: But really we see the most strength and international and premium.
Speaker 3: But everything is getting better across the board, at least
Speaker 3: in the first few weeks of January.
Speaker 1: As we come into the new year, we're.
Speaker 2: Here in Davos and there's a lot of discussion about
Speaker 2: geopolitical tensions. There's a lot of discussion about the dispute
Speaker 2: over Greenland and tariffs and treaties, and it feels as
Speaker 2: though some people are saying that the world order is changing.
Speaker 2: We've heard that from Mark Harney of Canada. I just
Speaker 2: wonder how you plan for the year ahead with some
Speaker 2: of these geopolitical tensions. Do you feel it when you
Speaker 2: are transporting people between polices and seeing some of the
Speaker 2: barriers maybe get a little bit higher.
Speaker 3: So we've spent a decade with a strategy to build
Speaker 3: a brand loyal airline that would have resilience in the
Speaker 3: face of all the kind of issues that affect aviation
Speaker 3: that happened all the time, and last year had more
Speaker 3: than its fair share of surprises that impacted demand and
Speaker 3: impacted travel. And yet you know, we had of a
Speaker 3: no excuses culture here, you know, and then we just
Speaker 3: overcame obstacles and with the only airline in the country
Speaker 3: that grew EPs last year. And it's really that brand
Speaker 3: loyal strategy gives us a resilience in the face of
Speaker 3: what there are going to always be gealpolitical issues. We're
Speaker 3: the largest global airline from the US. We're exposed to
Speaker 3: all levels of the all around the globe, and so
Speaker 3: we deal with stuff all the time, and you know
Speaker 3: what has short term impact. Staying focused on the long
Speaker 3: term and that brand strategy has been really successful for us.
Speaker 1: I think it will be this year.
Speaker 3: You know, we enter this year with a strong booking environment,
Speaker 3: feeling like a pretty good economy, really more us focused
Speaker 3: on our customer base, and you know, as we've said
Speaker 3: on this in this interview, like our bookings are just
Speaker 3: we're setting one record after another as we come into
Speaker 3: the year. So we feel pretty good that our guidance
Speaker 3: as solid and as long as things stay like they are,
Speaker 3: were going to wind up being conservative as we get
Speaker 3: through the full year.