WEBVTT - United Airlines CEO Scott Kirby Talks Airline Optimism 0:00:02.480 --> 0:00:08.160 Bloomberg Audio Studios, podcasts, radio news from. 0:00:07.960 --> 0:00:11.879 Morgan Stanley, reiterating its overweight on United Airlines, expecting forward 0:00:11.920 --> 0:00:15.840 guidance to reinforce US airline optimism. Let stock is up 0:00:15.880 --> 0:00:19.200 by six percent in early trading. Let's stick with United, 0:00:19.280 --> 0:00:21.919 the Airline reporting its best first quarter performance in five 0:00:22.000 --> 0:00:25.680 years and offering investors dual forecasts in the face of 0:00:25.800 --> 0:00:29.480 economic uncertainty, writing in a statement, the company's outlook is 0:00:29.520 --> 0:00:32.519 dependent on the macro environment, which the company believes is 0:00:32.600 --> 0:00:36.440 impossible to predict this year with any degree of confidence. 0:00:36.760 --> 0:00:39.120 Joining us now the main map the United Airline CEO 0:00:39.159 --> 0:00:41.360 Scott Kirby. Scott, welcome back to the program, Sarah. It's 0:00:41.360 --> 0:00:43.360 good to catch up with you once again. Let me 0:00:43.440 --> 0:00:47.120 just understand maybe your approach to this earnings report, how 0:00:47.159 --> 0:00:49.600 you and the team decided, you know what, this time, 0:00:49.640 --> 0:00:52.120 I think we have to do something different and offer 0:00:52.120 --> 0:00:54.160 a dual forecast. Where did that come from, Scott? 0:00:54.720 --> 0:00:56.800 Yeah, we did. We thought it was appropriate to do 0:00:56.880 --> 0:00:59.880 something different. It starts with, you know, the environment has 0:01:00.200 --> 0:01:03.280 more difficult but first, you know, we did have you know, 0:01:03.360 --> 0:01:06.479 as you said in the intro, the best margins we've 0:01:06.480 --> 0:01:08.560 had in five years. We grew margins over year, were 0:01:08.680 --> 0:01:10.880 only two airlines that are profitable, and as we kind 0:01:10.880 --> 0:01:13.280 of went through it, we still see a viable path 0:01:13.360 --> 0:01:16.279 to getting to our as long as bookings remain stable 0:01:16.280 --> 0:01:18.360 as they are today and getting to our original guidance. 0:01:18.880 --> 0:01:22.440 But we also recognize that there's more macroeconomic uncertainty, that 0:01:22.480 --> 0:01:25.000 people are fearful of a recession hasn't happened yet, but 0:01:25.040 --> 0:01:27.480 that they're fearful of a recession, and so we wanted 0:01:27.480 --> 0:01:30.080 to also give investors some outlook on what we think 0:01:30.120 --> 0:01:32.679 of recession could look like if it happens here at 0:01:32.760 --> 0:01:35.520 United So really the goal was to just give investors 0:01:35.880 --> 0:01:39.360 more information. Is non traditional. We're the first ones that 0:01:39.400 --> 0:01:41.000 I ever know if they have done something like this, 0:01:41.120 --> 0:01:43.640 and so far the feedback has been has been really positive, 0:01:43.640 --> 0:01:46.360 and I think investors and others appreciate that we try 0:01:46.400 --> 0:01:48.800 to give them a more fullsome range as we get 0:01:48.840 --> 0:01:50.160 guidance since time, Scott. 0:01:49.920 --> 0:01:51.600 Can you give us a sense if you were catering 0:01:51.600 --> 0:01:55.360 more to investor nervousness or whether you're responding to actual 0:01:55.440 --> 0:01:57.920 weakness that you see in some of the forward bookings 0:01:58.120 --> 0:01:58.840 by clients. 0:02:00.320 --> 0:02:03.560 So as I'm guessing your refriend to our capacity changes, 0:02:03.600 --> 0:02:06.680 and we're going to pull about four points of capacity 0:02:06.680 --> 0:02:09.360 from the second half of this year. That's really just 0:02:09.520 --> 0:02:13.280 a pure tactical economic decision. We do see weakness, and 0:02:13.320 --> 0:02:15.959 because we see weakness, it means we're starting to cancel 0:02:16.000 --> 0:02:18.600 some of the utilization. Flying that red eye flight that 0:02:18.720 --> 0:02:22.680 was barely profitable and really peak strong times becomes unprofitable. 0:02:22.680 --> 0:02:25.280 When the demand environment weekends a little bit, customers have 0:02:25.320 --> 0:02:27.320 more choice to fly better times a day, and so 0:02:27.360 --> 0:02:30.480 they do, and so we're all we're really doing tactically 0:02:30.760 --> 0:02:34.360 is pulling some of that marginal flying. Marginaling good times 0:02:34.440 --> 0:02:36.520 turns negative and bad times, so we're just pulling that 0:02:36.560 --> 0:02:37.200 out of the system. 0:02:37.360 --> 0:02:39.880 How much do you see going forward, though, any kind 0:02:39.919 --> 0:02:43.440 of retrenchment from consumers whatsoever. A lot of people have 0:02:43.480 --> 0:02:47.000 been talking about how particularly international travel is going to 0:02:47.000 --> 0:02:50.040 come down with people from overseas now coming to the US. 0:02:50.080 --> 0:02:52.600 Are you seeing that forward bookings or has that kind 0:02:52.639 --> 0:02:54.959 of been more of a narrative than a reality. 0:02:55.800 --> 0:02:57.600 It's been more of a narrative than a reality. We 0:02:57.919 --> 0:03:00.680 saw weakness starting at the end of January. We saw 0:03:00.680 --> 0:03:03.480 a step down, but it is stabilized in March and 0:03:03.560 --> 0:03:06.119 even the first two weeks of April it has stabilized. 0:03:06.160 --> 0:03:09.040 And the weakest area we see is actually the low 0:03:09.240 --> 0:03:14.119 end domestic consumer here in the United States. International has 0:03:14.160 --> 0:03:17.280 remained quite strong. International for what it's worth is eighty 0:03:17.280 --> 0:03:20.639 two percent US point of sale, so it's much more 0:03:20.639 --> 0:03:22.799 dependent on the US economy than foreigners coming to the 0:03:22.880 --> 0:03:25.480 United States. It's also less corporate than it used to be. 0:03:26.040 --> 0:03:28.400 And because of that, you know, the leisure traveler is 0:03:28.440 --> 0:03:32.280 still going, the premium leisure is still there. Typically, even 0:03:32.280 --> 0:03:35.640 in times of economic weakness, the high end consumer outperforms, 0:03:36.120 --> 0:03:37.960 and that's what we thought would happen. That's what we've 0:03:38.000 --> 0:03:40.480 seen so far. We'll keep watching it, of course, but 0:03:40.520 --> 0:03:41.920 that's certainly what we've seen so far. 0:03:42.040 --> 0:03:44.040 How much does this really puts you in a position 0:03:44.080 --> 0:03:47.600 to consolidate market share right now? We keep seeing that 0:03:47.760 --> 0:03:50.360 among a lot of the leaders in different industries. This 0:03:50.440 --> 0:03:53.000 is time for them to compete on price, to compete 0:03:53.000 --> 0:03:56.640 on some of the offerings, and frankly squeeze some of 0:03:56.680 --> 0:03:59.600 the other weaker players in the markets that you emerge 0:03:59.600 --> 0:04:01.800 in the other side a lot stronger. Do you see 0:04:01.800 --> 0:04:03.320 that happening with United right now? 0:04:03.360 --> 0:04:06.080 Well, you know, we've had a five year strategy to 0:04:06.160 --> 0:04:09.360 win brand loyal customers and we've done that. So really 0:04:09.400 --> 0:04:12.080 nothing is changing now. We're not doing anything incremental, anything different. 0:04:12.600 --> 0:04:15.320 We're continuing the path that we have been on because 0:04:15.320 --> 0:04:17.960 it's worked. It's led to the best margins in good times. 0:04:18.000 --> 0:04:20.920 I think that lead is going to expand in tough times, 0:04:21.040 --> 0:04:24.200 not because we're doing anything special, but just because we'll 0:04:24.200 --> 0:04:26.839 have more seats to sell available to those customers. And 0:04:26.839 --> 0:04:29.360 when you're the brand loyal airline, when times get tough 0:04:29.400 --> 0:04:31.480 and you have more seats to sell, more customers migrate 0:04:31.520 --> 0:04:33.840 to you, and so we'll wind up selling more seats 0:04:33.839 --> 0:04:35.720 at lower prices because that's the way our your management 0:04:35.760 --> 0:04:38.800 system works. But we'll sell just as many seats. It's 0:04:38.839 --> 0:04:40.960 going to make it much harder at the bottom of 0:04:40.960 --> 0:04:42.839 the customer choice pyramid, Scott. 0:04:42.880 --> 0:04:44.320 As you know, there's a lot of tension right now 0:04:44.320 --> 0:04:46.880 between the United States and China that's been expressed in 0:04:47.320 --> 0:04:49.720 several rounds of tarifs from either side. We hope they 0:04:49.720 --> 0:04:51.560 can come to the table and have some talks, but 0:04:51.680 --> 0:04:55.240 so far not great for the maintenance of your plane, sir, 0:04:55.360 --> 0:04:57.960 and the exposure that you have to China to Hong Kong. 0:04:58.240 --> 0:05:00.000 How are you managing that situation at the moment? 0:05:01.680 --> 0:05:06.200 So united We actually we have more of our heavy 0:05:06.279 --> 0:05:09.240 maintenance work done here in the United States than any 0:05:09.279 --> 0:05:12.719 airline in the country. We've been growing here in the US. 0:05:12.800 --> 0:05:14.320 In fact, over a three year period, we're going to 0:05:14.360 --> 0:05:17.080 hire about five thousand technicians here in the United States, 0:05:17.120 --> 0:05:22.520 building huge new facilities in Houston and in Orlando. And 0:05:22.600 --> 0:05:24.400 most of our work is done in the Free Trade 0:05:24.480 --> 0:05:26.600 Zone outside of Hong Kong the work that is done 0:05:26.640 --> 0:05:29.400 in China. So we're monitoring it day by day. But 0:05:29.800 --> 0:05:32.039 you know, we have a high percentage here in the 0:05:32.120 --> 0:05:35.640 United States, more than anyone else, and feel good about 0:05:35.680 --> 0:05:36.120 our setup. 0:05:36.160 --> 0:05:38.719 Becouse, some CEOs have been quite outspoken about what they'd 0:05:38.760 --> 0:05:41.880 like to see from the administration on policy. Are you 0:05:41.920 --> 0:05:44.160 willing to do that? Is there a reason why maybe 0:05:44.200 --> 0:05:47.120 you'd be a little bit more hesitant away in Well. 0:05:47.040 --> 0:05:50.080 I've spent a lot of time in DC this year, 0:05:50.600 --> 0:05:53.920 as I always do, but I've mostly been focused on 0:05:54.000 --> 0:05:56.960 listening instead of talking, and so I wanted to understand 0:05:57.240 --> 0:06:00.240 where the administration was coming from, what their goals were, 0:06:00.480 --> 0:06:02.720 how they were trying to get there, and I actually 0:06:02.839 --> 0:06:04.240 got by the end of March, felt like I had 0:06:04.240 --> 0:06:06.640 a pretty good understanding of that. And if you have 0:06:06.760 --> 0:06:09.520 that kind of understanding and you can put everything that's 0:06:09.560 --> 0:06:12.200 happening into context, you know, it makes it a lot 0:06:12.320 --> 0:06:16.600 easier to run, manage the business, to not make panicky decisions. 0:06:17.360 --> 0:06:19.560 And you know what I think is happening here is 0:06:19.880 --> 0:06:21.400 you know, we're nowhere near the end of the game. 0:06:21.480 --> 0:06:23.640 Yet you know, these are still the opening moves of 0:06:23.680 --> 0:06:27.279 the chess game. And I think I and most people 0:06:27.279 --> 0:06:29.800 that I talk to, you know, or things have slowed down, 0:06:29.839 --> 0:06:31.479 but we're all in a kind of a take of 0:06:31.520 --> 0:06:34.200 breath mode. And let's wait till we get to whatever 0:06:34.240 --> 0:06:35.880 the new normal is going to be before we start 0:06:35.920 --> 0:06:37.200 making big long term decision. 0:06:37.200 --> 0:06:38.680 We've all got to take a deep breath. Your stock 0:06:38.760 --> 0:06:40.800 is out this morning by about six and a half percent. 0:06:40.839 --> 0:06:42.480 I wanted to talk about something with you that we've 0:06:42.520 --> 0:06:44.839 been talking about for a while on this program, Scott. 0:06:44.880 --> 0:06:46.919 As you know, one of the most disruptive parts of 0:06:46.920 --> 0:06:49.560 FLYINGK right now is the boarding process. And when you 0:06:49.600 --> 0:06:52.560 get on, everyone is wrestling to find space to put 0:06:52.560 --> 0:06:54.919 that bank over their seat. How do we address that 0:06:54.960 --> 0:06:57.800 situation Scott, but so Couldtelli was a traveler. It is 0:06:57.839 --> 0:07:00.400 the most annoying experience. And it's not you, I said, 0:07:00.520 --> 0:07:02.799 it's something we're saying across the board. 0:07:03.839 --> 0:07:06.440 As a father of seven, I understand it trying to 0:07:06.440 --> 0:07:08.840 get out with a bunch of kids, and I'd say, 0:07:08.880 --> 0:07:10.880 we're fixing that. At United. The biggest thing we can 0:07:10.920 --> 0:07:12.680 do we had to put bigger bends on the airplane. 0:07:12.720 --> 0:07:15.600 We're about we're over fifty percent through the fleet at United, 0:07:15.720 --> 0:07:17.560 but we're putting bends on all the airplanes that are 0:07:17.680 --> 0:07:21.119 large enough that on one hundred percent full airplane, every 0:07:21.160 --> 0:07:24.040 single customer can bring a rollerboard on and put it 0:07:24.080 --> 0:07:26.560 in the overhead. And I think that at its core 0:07:26.680 --> 0:07:28.000 is how we're going to solve It's gott. 0:07:27.840 --> 0:07:29.840 How much more can you get people to pay for 0:07:29.920 --> 0:07:31.960 things that they used to know they could get. I 0:07:32.000 --> 0:07:33.960 know that Fred Terry used to do that with cans 0:07:33.960 --> 0:07:36.920 of soda and then they had to backtrack or checking bags. 0:07:37.200 --> 0:07:39.920 Are there other things that you can monetize or doesn't 0:07:39.960 --> 0:07:43.200 really come down to the credit took hard business. The 0:07:43.240 --> 0:07:49.320 loyalty program, counting on the front of the cabin, you know, yeah. 0:07:49.320 --> 0:07:51.560 You know, I actually we're kind of going the opposite direction. 0:07:52.160 --> 0:07:54.760 If we haven't disaggregated the product, give customers what they want. 0:07:54.760 --> 0:07:56.400 If you want the premium product, you can get it. 0:07:56.400 --> 0:07:58.560 You can go the regular economy product all the way 0:07:58.560 --> 0:08:01.560 down to basic economy. But you know, we got Starlink 0:08:01.560 --> 0:08:03.200 coming next year. We're going to have the best, the 0:08:03.240 --> 0:08:05.520 fastest WiFi in the sky and that's going to be 0:08:05.560 --> 0:08:08.000 free for our customer. So WiFi is going to be free, 0:08:08.040 --> 0:08:10.360 and it's going to be by far the best experience, 0:08:10.440 --> 0:08:15.240 the most bandwidth, the fastest speeds for any customers. And 0:08:15.440 --> 0:08:18.560 you know, in a lot of ways, increasingly, instead of 0:08:18.560 --> 0:08:20.840 being an airline that also has a loyalty business, we 0:08:20.880 --> 0:08:23.440 are becoming a loyalty business that runs an airline. I 0:08:23.480 --> 0:08:26.080 mean being able to get customers to Tahiti and Cape down. 0:08:26.120 --> 0:08:29.320 That's the coolest sexy reward that you get in the 0:08:29.320 --> 0:08:34.160 loyalty program. But you know, the large airlines, particularly like United, 0:08:34.240 --> 0:08:37.800 you know, we really have the best, the deepest loyalty program. 0:08:37.840 --> 0:08:40.920 And I talked earlier about brand loyal customers like customers 0:08:40.920 --> 0:08:44.360 that want to fly United Airlines, and that is the strength. 0:08:44.360 --> 0:08:47.600 That's what's given us the resilience to have strong earnings 0:08:47.720 --> 0:08:50.400 even in a tough macro environment. It's what's going to 0:08:50.480 --> 0:08:54.000 let us outperform even if the economy gets weaker from here. 0:08:54.640 --> 0:08:57.319 That loyalty of customers, whether you call it the loyalty 0:08:57.360 --> 0:09:00.679 business or just having brand loyal customers, is the foundation 0:09:00.920 --> 0:09:02.320 that's letting a United out perform. 0:09:02.440 --> 0:09:04.679 A masterclass in communications from the firm in the last 0:09:04.679 --> 0:09:07.079 twenty four hours, Scott, appreciate your time. Thank you. Scott 0:09:07.160 --> 0:09:09.079 Kirby there, the United Airlines CEO.