1 00:00:02,480 --> 00:00:08,160 Speaker 1: Bloomberg Audio Studios, podcasts, radio news from. 2 00:00:07,960 --> 00:00:11,879 Speaker 2: Morgan Stanley, reiterating its overweight on United Airlines, expecting forward 3 00:00:11,920 --> 00:00:15,840 Speaker 2: guidance to reinforce US airline optimism. Let stock is up 4 00:00:15,880 --> 00:00:19,200 Speaker 2: by six percent in early trading. Let's stick with United, 5 00:00:19,280 --> 00:00:21,919 Speaker 2: the Airline reporting its best first quarter performance in five 6 00:00:22,000 --> 00:00:25,680 Speaker 2: years and offering investors dual forecasts in the face of 7 00:00:25,800 --> 00:00:29,480 Speaker 2: economic uncertainty, writing in a statement, the company's outlook is 8 00:00:29,520 --> 00:00:32,519 Speaker 2: dependent on the macro environment, which the company believes is 9 00:00:32,600 --> 00:00:36,440 Speaker 2: impossible to predict this year with any degree of confidence. 10 00:00:36,760 --> 00:00:39,120 Speaker 2: Joining us now the main map the United Airline CEO 11 00:00:39,159 --> 00:00:41,360 Speaker 2: Scott Kirby. Scott, welcome back to the program, Sarah. It's 12 00:00:41,360 --> 00:00:43,360 Speaker 2: good to catch up with you once again. Let me 13 00:00:43,440 --> 00:00:47,120 Speaker 2: just understand maybe your approach to this earnings report, how 14 00:00:47,159 --> 00:00:49,600 Speaker 2: you and the team decided, you know what, this time, 15 00:00:49,640 --> 00:00:52,120 Speaker 2: I think we have to do something different and offer 16 00:00:52,120 --> 00:00:54,160 Speaker 2: a dual forecast. Where did that come from, Scott? 17 00:00:54,720 --> 00:00:56,800 Speaker 3: Yeah, we did. We thought it was appropriate to do 18 00:00:56,880 --> 00:00:59,880 Speaker 3: something different. It starts with, you know, the environment has 19 00:01:00,200 --> 00:01:03,280 Speaker 3: more difficult but first, you know, we did have you know, 20 00:01:03,360 --> 00:01:06,479 Speaker 3: as you said in the intro, the best margins we've 21 00:01:06,480 --> 00:01:08,560 Speaker 3: had in five years. We grew margins over year, were 22 00:01:08,680 --> 00:01:10,880 Speaker 3: only two airlines that are profitable, and as we kind 23 00:01:10,880 --> 00:01:13,280 Speaker 3: of went through it, we still see a viable path 24 00:01:13,360 --> 00:01:16,279 Speaker 3: to getting to our as long as bookings remain stable 25 00:01:16,280 --> 00:01:18,360 Speaker 3: as they are today and getting to our original guidance. 26 00:01:18,880 --> 00:01:22,440 Speaker 3: But we also recognize that there's more macroeconomic uncertainty, that 27 00:01:22,480 --> 00:01:25,000 Speaker 3: people are fearful of a recession hasn't happened yet, but 28 00:01:25,040 --> 00:01:27,480 Speaker 3: that they're fearful of a recession, and so we wanted 29 00:01:27,480 --> 00:01:30,080 Speaker 3: to also give investors some outlook on what we think 30 00:01:30,120 --> 00:01:32,679 Speaker 3: of recession could look like if it happens here at 31 00:01:32,760 --> 00:01:35,520 Speaker 3: United So really the goal was to just give investors 32 00:01:35,880 --> 00:01:39,360 Speaker 3: more information. Is non traditional. We're the first ones that 33 00:01:39,400 --> 00:01:41,000 Speaker 3: I ever know if they have done something like this, 34 00:01:41,120 --> 00:01:43,640 Speaker 3: and so far the feedback has been has been really positive, 35 00:01:43,640 --> 00:01:46,360 Speaker 3: and I think investors and others appreciate that we try 36 00:01:46,400 --> 00:01:48,800 Speaker 3: to give them a more fullsome range as we get 37 00:01:48,840 --> 00:01:50,160 Speaker 3: guidance since time, Scott. 38 00:01:49,920 --> 00:01:51,600 Speaker 1: Can you give us a sense if you were catering 39 00:01:51,600 --> 00:01:55,360 Speaker 1: more to investor nervousness or whether you're responding to actual 40 00:01:55,440 --> 00:01:57,920 Speaker 1: weakness that you see in some of the forward bookings 41 00:01:58,120 --> 00:01:58,840 Speaker 1: by clients. 42 00:02:00,320 --> 00:02:03,560 Speaker 3: So as I'm guessing your refriend to our capacity changes, 43 00:02:03,600 --> 00:02:06,680 Speaker 3: and we're going to pull about four points of capacity 44 00:02:06,680 --> 00:02:09,360 Speaker 3: from the second half of this year. That's really just 45 00:02:09,520 --> 00:02:13,280 Speaker 3: a pure tactical economic decision. We do see weakness, and 46 00:02:13,320 --> 00:02:15,959 Speaker 3: because we see weakness, it means we're starting to cancel 47 00:02:16,000 --> 00:02:18,600 Speaker 3: some of the utilization. Flying that red eye flight that 48 00:02:18,720 --> 00:02:22,680 Speaker 3: was barely profitable and really peak strong times becomes unprofitable. 49 00:02:22,680 --> 00:02:25,280 Speaker 3: When the demand environment weekends a little bit, customers have 50 00:02:25,320 --> 00:02:27,320 Speaker 3: more choice to fly better times a day, and so 51 00:02:27,360 --> 00:02:30,480 Speaker 3: they do, and so we're all we're really doing tactically 52 00:02:30,760 --> 00:02:34,360 Speaker 3: is pulling some of that marginal flying. Marginaling good times 53 00:02:34,440 --> 00:02:36,520 Speaker 3: turns negative and bad times, so we're just pulling that 54 00:02:36,560 --> 00:02:37,200 Speaker 3: out of the system. 55 00:02:37,360 --> 00:02:39,880 Speaker 1: How much do you see going forward, though, any kind 56 00:02:39,919 --> 00:02:43,440 Speaker 1: of retrenchment from consumers whatsoever. A lot of people have 57 00:02:43,480 --> 00:02:47,000 Speaker 1: been talking about how particularly international travel is going to 58 00:02:47,000 --> 00:02:50,040 Speaker 1: come down with people from overseas now coming to the US. 59 00:02:50,080 --> 00:02:52,600 Speaker 1: Are you seeing that forward bookings or has that kind 60 00:02:52,639 --> 00:02:54,959 Speaker 1: of been more of a narrative than a reality. 61 00:02:55,800 --> 00:02:57,600 Speaker 3: It's been more of a narrative than a reality. We 62 00:02:57,919 --> 00:03:00,680 Speaker 3: saw weakness starting at the end of January. We saw 63 00:03:00,680 --> 00:03:03,480 Speaker 3: a step down, but it is stabilized in March and 64 00:03:03,560 --> 00:03:06,119 Speaker 3: even the first two weeks of April it has stabilized. 65 00:03:06,160 --> 00:03:09,040 Speaker 3: And the weakest area we see is actually the low 66 00:03:09,240 --> 00:03:14,119 Speaker 3: end domestic consumer here in the United States. International has 67 00:03:14,160 --> 00:03:17,280 Speaker 3: remained quite strong. International for what it's worth is eighty 68 00:03:17,280 --> 00:03:20,639 Speaker 3: two percent US point of sale, so it's much more 69 00:03:20,639 --> 00:03:22,799 Speaker 3: dependent on the US economy than foreigners coming to the 70 00:03:22,880 --> 00:03:25,480 Speaker 3: United States. It's also less corporate than it used to be. 71 00:03:26,040 --> 00:03:28,400 Speaker 3: And because of that, you know, the leisure traveler is 72 00:03:28,440 --> 00:03:32,280 Speaker 3: still going, the premium leisure is still there. Typically, even 73 00:03:32,280 --> 00:03:35,640 Speaker 3: in times of economic weakness, the high end consumer outperforms, 74 00:03:36,120 --> 00:03:37,960 Speaker 3: and that's what we thought would happen. That's what we've 75 00:03:38,000 --> 00:03:40,480 Speaker 3: seen so far. We'll keep watching it, of course, but 76 00:03:40,520 --> 00:03:41,920 Speaker 3: that's certainly what we've seen so far. 77 00:03:42,040 --> 00:03:44,040 Speaker 1: How much does this really puts you in a position 78 00:03:44,080 --> 00:03:47,600 Speaker 1: to consolidate market share right now? We keep seeing that 79 00:03:47,760 --> 00:03:50,360 Speaker 1: among a lot of the leaders in different industries. This 80 00:03:50,440 --> 00:03:53,000 Speaker 1: is time for them to compete on price, to compete 81 00:03:53,000 --> 00:03:56,640 Speaker 1: on some of the offerings, and frankly squeeze some of 82 00:03:56,680 --> 00:03:59,600 Speaker 1: the other weaker players in the markets that you emerge 83 00:03:59,600 --> 00:04:01,800 Speaker 1: in the other side a lot stronger. Do you see 84 00:04:01,800 --> 00:04:03,320 Speaker 1: that happening with United right now? 85 00:04:03,360 --> 00:04:06,080 Speaker 3: Well, you know, we've had a five year strategy to 86 00:04:06,160 --> 00:04:09,360 Speaker 3: win brand loyal customers and we've done that. So really 87 00:04:09,400 --> 00:04:12,080 Speaker 3: nothing is changing now. We're not doing anything incremental, anything different. 88 00:04:12,600 --> 00:04:15,320 Speaker 3: We're continuing the path that we have been on because 89 00:04:15,320 --> 00:04:17,960 Speaker 3: it's worked. It's led to the best margins in good times. 90 00:04:18,000 --> 00:04:20,920 Speaker 3: I think that lead is going to expand in tough times, 91 00:04:21,040 --> 00:04:24,200 Speaker 3: not because we're doing anything special, but just because we'll 92 00:04:24,200 --> 00:04:26,839 Speaker 3: have more seats to sell available to those customers. And 93 00:04:26,839 --> 00:04:29,360 Speaker 3: when you're the brand loyal airline, when times get tough 94 00:04:29,400 --> 00:04:31,480 Speaker 3: and you have more seats to sell, more customers migrate 95 00:04:31,520 --> 00:04:33,840 Speaker 3: to you, and so we'll wind up selling more seats 96 00:04:33,839 --> 00:04:35,720 Speaker 3: at lower prices because that's the way our your management 97 00:04:35,760 --> 00:04:38,800 Speaker 3: system works. But we'll sell just as many seats. It's 98 00:04:38,839 --> 00:04:40,960 Speaker 3: going to make it much harder at the bottom of 99 00:04:40,960 --> 00:04:42,839 Speaker 3: the customer choice pyramid, Scott. 100 00:04:42,880 --> 00:04:44,320 Speaker 2: As you know, there's a lot of tension right now 101 00:04:44,320 --> 00:04:46,880 Speaker 2: between the United States and China that's been expressed in 102 00:04:47,320 --> 00:04:49,720 Speaker 2: several rounds of tarifs from either side. We hope they 103 00:04:49,720 --> 00:04:51,560 Speaker 2: can come to the table and have some talks, but 104 00:04:51,680 --> 00:04:55,240 Speaker 2: so far not great for the maintenance of your plane, sir, 105 00:04:55,360 --> 00:04:57,960 Speaker 2: and the exposure that you have to China to Hong Kong. 106 00:04:58,240 --> 00:05:00,000 Speaker 2: How are you managing that situation at the moment? 107 00:05:01,680 --> 00:05:06,200 Speaker 3: So united We actually we have more of our heavy 108 00:05:06,279 --> 00:05:09,240 Speaker 3: maintenance work done here in the United States than any 109 00:05:09,279 --> 00:05:12,719 Speaker 3: airline in the country. We've been growing here in the US. 110 00:05:12,800 --> 00:05:14,320 Speaker 3: In fact, over a three year period, we're going to 111 00:05:14,360 --> 00:05:17,080 Speaker 3: hire about five thousand technicians here in the United States, 112 00:05:17,120 --> 00:05:22,520 Speaker 3: building huge new facilities in Houston and in Orlando. And 113 00:05:22,600 --> 00:05:24,400 Speaker 3: most of our work is done in the Free Trade 114 00:05:24,480 --> 00:05:26,600 Speaker 3: Zone outside of Hong Kong the work that is done 115 00:05:26,640 --> 00:05:29,400 Speaker 3: in China. So we're monitoring it day by day. But 116 00:05:29,800 --> 00:05:32,039 Speaker 3: you know, we have a high percentage here in the 117 00:05:32,120 --> 00:05:35,640 Speaker 3: United States, more than anyone else, and feel good about 118 00:05:35,680 --> 00:05:36,120 Speaker 3: our setup. 119 00:05:36,160 --> 00:05:38,719 Speaker 2: Becouse, some CEOs have been quite outspoken about what they'd 120 00:05:38,760 --> 00:05:41,880 Speaker 2: like to see from the administration on policy. Are you 121 00:05:41,920 --> 00:05:44,160 Speaker 2: willing to do that? Is there a reason why maybe 122 00:05:44,200 --> 00:05:47,120 Speaker 2: you'd be a little bit more hesitant away in Well. 123 00:05:47,040 --> 00:05:50,080 Speaker 3: I've spent a lot of time in DC this year, 124 00:05:50,600 --> 00:05:53,920 Speaker 3: as I always do, but I've mostly been focused on 125 00:05:54,000 --> 00:05:56,960 Speaker 3: listening instead of talking, and so I wanted to understand 126 00:05:57,240 --> 00:06:00,240 Speaker 3: where the administration was coming from, what their goals were, 127 00:06:00,480 --> 00:06:02,720 Speaker 3: how they were trying to get there, and I actually 128 00:06:02,839 --> 00:06:04,240 Speaker 3: got by the end of March, felt like I had 129 00:06:04,240 --> 00:06:06,640 Speaker 3: a pretty good understanding of that. And if you have 130 00:06:06,760 --> 00:06:09,520 Speaker 3: that kind of understanding and you can put everything that's 131 00:06:09,560 --> 00:06:12,200 Speaker 3: happening into context, you know, it makes it a lot 132 00:06:12,320 --> 00:06:16,600 Speaker 3: easier to run, manage the business, to not make panicky decisions. 133 00:06:17,360 --> 00:06:19,560 Speaker 3: And you know what I think is happening here is 134 00:06:19,880 --> 00:06:21,400 Speaker 3: you know, we're nowhere near the end of the game. 135 00:06:21,480 --> 00:06:23,640 Speaker 3: Yet you know, these are still the opening moves of 136 00:06:23,680 --> 00:06:27,279 Speaker 3: the chess game. And I think I and most people 137 00:06:27,279 --> 00:06:29,800 Speaker 3: that I talk to, you know, or things have slowed down, 138 00:06:29,839 --> 00:06:31,479 Speaker 3: but we're all in a kind of a take of 139 00:06:31,520 --> 00:06:34,200 Speaker 3: breath mode. And let's wait till we get to whatever 140 00:06:34,240 --> 00:06:35,880 Speaker 3: the new normal is going to be before we start 141 00:06:35,920 --> 00:06:37,200 Speaker 3: making big long term decision. 142 00:06:37,200 --> 00:06:38,680 Speaker 2: We've all got to take a deep breath. Your stock 143 00:06:38,760 --> 00:06:40,800 Speaker 2: is out this morning by about six and a half percent. 144 00:06:40,839 --> 00:06:42,480 Speaker 2: I wanted to talk about something with you that we've 145 00:06:42,520 --> 00:06:44,839 Speaker 2: been talking about for a while on this program, Scott. 146 00:06:44,880 --> 00:06:46,919 Speaker 2: As you know, one of the most disruptive parts of 147 00:06:46,920 --> 00:06:49,560 Speaker 2: FLYINGK right now is the boarding process. And when you 148 00:06:49,600 --> 00:06:52,560 Speaker 2: get on, everyone is wrestling to find space to put 149 00:06:52,560 --> 00:06:54,919 Speaker 2: that bank over their seat. How do we address that 150 00:06:54,960 --> 00:06:57,800 Speaker 2: situation Scott, but so Couldtelli was a traveler. It is 151 00:06:57,839 --> 00:07:00,400 Speaker 2: the most annoying experience. And it's not you, I said, 152 00:07:00,520 --> 00:07:02,799 Speaker 2: it's something we're saying across the board. 153 00:07:03,839 --> 00:07:06,440 Speaker 3: As a father of seven, I understand it trying to 154 00:07:06,440 --> 00:07:08,840 Speaker 3: get out with a bunch of kids, and I'd say, 155 00:07:08,880 --> 00:07:10,880 Speaker 3: we're fixing that. At United. The biggest thing we can 156 00:07:10,920 --> 00:07:12,680 Speaker 3: do we had to put bigger bends on the airplane. 157 00:07:12,720 --> 00:07:15,600 Speaker 3: We're about we're over fifty percent through the fleet at United, 158 00:07:15,720 --> 00:07:17,560 Speaker 3: but we're putting bends on all the airplanes that are 159 00:07:17,680 --> 00:07:21,119 Speaker 3: large enough that on one hundred percent full airplane, every 160 00:07:21,160 --> 00:07:24,040 Speaker 3: single customer can bring a rollerboard on and put it 161 00:07:24,080 --> 00:07:26,560 Speaker 3: in the overhead. And I think that at its core 162 00:07:26,680 --> 00:07:28,000 Speaker 3: is how we're going to solve It's gott. 163 00:07:27,840 --> 00:07:29,840 Speaker 1: How much more can you get people to pay for 164 00:07:29,920 --> 00:07:31,960 Speaker 1: things that they used to know they could get. I 165 00:07:32,000 --> 00:07:33,960 Speaker 1: know that Fred Terry used to do that with cans 166 00:07:33,960 --> 00:07:36,920 Speaker 1: of soda and then they had to backtrack or checking bags. 167 00:07:37,200 --> 00:07:39,920 Speaker 1: Are there other things that you can monetize or doesn't 168 00:07:39,960 --> 00:07:43,200 Speaker 1: really come down to the credit took hard business. The 169 00:07:43,240 --> 00:07:49,320 Speaker 1: loyalty program, counting on the front of the cabin, you know, yeah. 170 00:07:49,320 --> 00:07:51,560 Speaker 3: You know, I actually we're kind of going the opposite direction. 171 00:07:52,160 --> 00:07:54,760 Speaker 3: If we haven't disaggregated the product, give customers what they want. 172 00:07:54,760 --> 00:07:56,400 Speaker 3: If you want the premium product, you can get it. 173 00:07:56,400 --> 00:07:58,560 Speaker 3: You can go the regular economy product all the way 174 00:07:58,560 --> 00:08:01,560 Speaker 3: down to basic economy. But you know, we got Starlink 175 00:08:01,560 --> 00:08:03,200 Speaker 3: coming next year. We're going to have the best, the 176 00:08:03,240 --> 00:08:05,520 Speaker 3: fastest WiFi in the sky and that's going to be 177 00:08:05,560 --> 00:08:08,000 Speaker 3: free for our customer. So WiFi is going to be free, 178 00:08:08,040 --> 00:08:10,360 Speaker 3: and it's going to be by far the best experience, 179 00:08:10,440 --> 00:08:15,240 Speaker 3: the most bandwidth, the fastest speeds for any customers. And 180 00:08:15,440 --> 00:08:18,560 Speaker 3: you know, in a lot of ways, increasingly, instead of 181 00:08:18,560 --> 00:08:20,840 Speaker 3: being an airline that also has a loyalty business, we 182 00:08:20,880 --> 00:08:23,440 Speaker 3: are becoming a loyalty business that runs an airline. I 183 00:08:23,480 --> 00:08:26,080 Speaker 3: mean being able to get customers to Tahiti and Cape down. 184 00:08:26,120 --> 00:08:29,320 Speaker 3: That's the coolest sexy reward that you get in the 185 00:08:29,320 --> 00:08:34,160 Speaker 3: loyalty program. But you know, the large airlines, particularly like United, 186 00:08:34,240 --> 00:08:37,800 Speaker 3: you know, we really have the best, the deepest loyalty program. 187 00:08:37,840 --> 00:08:40,920 Speaker 3: And I talked earlier about brand loyal customers like customers 188 00:08:40,920 --> 00:08:44,360 Speaker 3: that want to fly United Airlines, and that is the strength. 189 00:08:44,360 --> 00:08:47,600 Speaker 3: That's what's given us the resilience to have strong earnings 190 00:08:47,720 --> 00:08:50,400 Speaker 3: even in a tough macro environment. It's what's going to 191 00:08:50,480 --> 00:08:54,000 Speaker 3: let us outperform even if the economy gets weaker from here. 192 00:08:54,640 --> 00:08:57,319 Speaker 3: That loyalty of customers, whether you call it the loyalty 193 00:08:57,360 --> 00:09:00,679 Speaker 3: business or just having brand loyal customers, is the foundation 194 00:09:00,920 --> 00:09:02,320 Speaker 3: that's letting a United out perform. 195 00:09:02,440 --> 00:09:04,679 Speaker 2: A masterclass in communications from the firm in the last 196 00:09:04,679 --> 00:09:07,079 Speaker 2: twenty four hours, Scott, appreciate your time. Thank you. Scott 197 00:09:07,160 --> 00:09:09,079 Speaker 2: Kirby there, the United Airlines CEO.