1 00:00:02,720 --> 00:00:07,240 Speaker 1: Bloomberg Audio Studios, podcasts, radio News. 2 00:00:08,039 --> 00:00:10,160 Speaker 2: Great to be here in Chicago and thank you so much. 3 00:00:10,200 --> 00:00:14,040 Speaker 2: I am here with Scott Kirby, the CEO of United Airlines, 4 00:00:14,080 --> 00:00:16,639 Speaker 2: after earnings came out. He really echoed what we heard 5 00:00:16,840 --> 00:00:20,800 Speaker 2: from Delta, which was a first reporter, which is stability, solidness, 6 00:00:20,880 --> 00:00:23,040 Speaker 2: a sense of recovery. You said, the world is less 7 00:00:23,079 --> 00:00:26,160 Speaker 2: uncertain today than it was during the first six months 8 00:00:26,200 --> 00:00:30,040 Speaker 2: of twenty twenty five. What was the inflection point where 9 00:00:30,040 --> 00:00:31,480 Speaker 2: you saw that certainty come into play. 10 00:00:31,840 --> 00:00:34,760 Speaker 3: You know, this year a lot of uncertainty in the 11 00:00:34,800 --> 00:00:38,159 Speaker 3: first half of the year at macro uncertainty and that 12 00:00:38,240 --> 00:00:41,280 Speaker 3: led to an impact on bookings and demand at United 13 00:00:41,280 --> 00:00:44,360 Speaker 3: and across the whole industry. But it felt like there 14 00:00:44,360 --> 00:00:47,320 Speaker 3: was a turning point at the end of June where 15 00:00:48,240 --> 00:00:50,840 Speaker 3: the tax bill passed and the situation in the Middle 16 00:00:50,840 --> 00:00:55,040 Speaker 3: East was calmer and tariffs, while not certain, yet narrowing 17 00:00:55,080 --> 00:00:55,800 Speaker 3: the range. 18 00:00:55,920 --> 00:00:56,680 Speaker 1: And it really. 19 00:00:56,560 --> 00:01:00,720 Speaker 3: Felt like people felt enough confidence or enough lower level 20 00:01:00,760 --> 00:01:03,160 Speaker 3: of uncertainty that they kind of came off the sidelines 21 00:01:03,200 --> 00:01:05,440 Speaker 3: and were unfrozen. And particularly for business demand, I mean, 22 00:01:05,600 --> 00:01:07,080 Speaker 3: you can't stay on the sidelines forever. 23 00:01:07,200 --> 00:01:09,040 Speaker 1: And that was enough of a trigger. 24 00:01:09,280 --> 00:01:11,720 Speaker 3: It really was like a light switch flipped at the 25 00:01:11,840 --> 00:01:14,560 Speaker 3: end of June, particularly for business demand. Double digit acceleration 26 00:01:14,640 --> 00:01:18,080 Speaker 3: in business demand as we ended June, and that's continued, 27 00:01:18,160 --> 00:01:19,160 Speaker 3: you know through yesterday. 28 00:01:19,280 --> 00:01:21,480 Speaker 2: We've talked a lot about the K shaped recovery and 29 00:01:21,520 --> 00:01:24,839 Speaker 2: the idea that high end consumers have really been driving 30 00:01:24,880 --> 00:01:27,960 Speaker 2: the economy. Corporations kind of dropped off with business travel, 31 00:01:27,959 --> 00:01:30,520 Speaker 2: as you said, they picked back up. What about the 32 00:01:30,560 --> 00:01:33,039 Speaker 2: rest of the travelers, the main cabin how much have 33 00:01:33,080 --> 00:01:36,040 Speaker 2: they rebounded back to where they would have been had 34 00:01:36,080 --> 00:01:38,200 Speaker 2: there not been some of the headline volatility, So you 35 00:01:38,280 --> 00:01:39,200 Speaker 2: sort of separated. 36 00:01:38,840 --> 00:01:39,880 Speaker 1: Into those three pieces. 37 00:01:40,000 --> 00:01:42,040 Speaker 3: Business demand dropped off at the start of the year, 38 00:01:42,480 --> 00:01:44,640 Speaker 3: that seems like it's bounced back to what we were 39 00:01:44,680 --> 00:01:48,560 Speaker 3: expecting it to be as we moved into July. Premium 40 00:01:48,600 --> 00:01:52,080 Speaker 3: and higher end leisure sort of stayed consistent throughout. 41 00:01:52,120 --> 00:01:53,440 Speaker 1: It never really dropped off. 42 00:01:53,280 --> 00:01:56,480 Speaker 3: And the biggest impact for the consumer was in low 43 00:01:56,520 --> 00:01:59,880 Speaker 3: end leisure. That's come back some in July, but not 44 00:02:00,000 --> 00:02:02,120 Speaker 3: as much. I'd say that's sort of fifty percent recovered 45 00:02:02,160 --> 00:02:03,800 Speaker 3: to what we were expecting at the start of the year. 46 00:02:03,800 --> 00:02:08,440 Speaker 3: So business back to mostly a full recovery, and low 47 00:02:08,520 --> 00:02:10,560 Speaker 3: end leisure kind of fifty percent recover. 48 00:02:10,639 --> 00:02:12,400 Speaker 1: Premium leisure never never fell off. 49 00:02:12,440 --> 00:02:16,400 Speaker 2: We've seen sort of one entrance into the CPI report. 50 00:02:16,440 --> 00:02:19,440 Speaker 2: The idea of inflation has been airline tickets have actually 51 00:02:19,720 --> 00:02:22,360 Speaker 2: prices have been coming down, and there's this question of 52 00:02:22,400 --> 00:02:25,320 Speaker 2: whether discounting is required to bring some of the main 53 00:02:25,360 --> 00:02:27,959 Speaker 2: cabin back and whether that's going to be a persistent 54 00:02:28,040 --> 00:02:30,360 Speaker 2: trend that competing on price is going to be really important. 55 00:02:30,440 --> 00:02:32,760 Speaker 2: How much do you see that as persisting into the 56 00:02:32,760 --> 00:02:33,440 Speaker 2: second half of the. 57 00:02:33,440 --> 00:02:36,679 Speaker 3: Air The airline industry is always good value, It always 58 00:02:36,760 --> 00:02:39,200 Speaker 3: as attractive prices, but I think it's more of a 59 00:02:39,240 --> 00:02:42,520 Speaker 3: supply demand imbalance that there are a number of airlines. 60 00:02:42,560 --> 00:02:44,600 Speaker 3: You know, there are two brand loyal airlines in the 61 00:02:44,680 --> 00:02:46,560 Speaker 3: United States who are now generating the bulk of the 62 00:02:46,560 --> 00:02:51,120 Speaker 3: industry's profits because those customers that care about quality, care 63 00:02:51,160 --> 00:02:54,280 Speaker 3: about service, that care about technology are were just better 64 00:02:54,480 --> 00:02:57,360 Speaker 3: and they're choosing us, And you can see it in 65 00:02:57,360 --> 00:02:59,640 Speaker 3: the data. You can see it in the numbers. For 66 00:02:59,680 --> 00:03:02,760 Speaker 3: the more commoditized part of the business. You know, there's 67 00:03:02,760 --> 00:03:05,639 Speaker 3: simply more seats available. There's been more seats available than 68 00:03:05,680 --> 00:03:09,680 Speaker 3: there is demand, but encouragingly there's a big change coming 69 00:03:09,720 --> 00:03:11,680 Speaker 3: in mid August. Well, we've talked about demand, and I've 70 00:03:11,680 --> 00:03:14,960 Speaker 3: seen an inflection demand. There's also an inflection coming in supply, 71 00:03:15,360 --> 00:03:17,160 Speaker 3: as by the time we get to mid August, there 72 00:03:17,160 --> 00:03:19,079 Speaker 3: are a lot of seats the same thing happened last year, 73 00:03:19,120 --> 00:03:21,480 Speaker 3: a lot of seats coming out of the industry, particularly 74 00:03:21,480 --> 00:03:24,360 Speaker 3: from the low end carriers who've been struggling. 75 00:03:24,600 --> 00:03:25,560 Speaker 1: Those seats are coming out. 76 00:03:25,720 --> 00:03:27,320 Speaker 3: So my guess is that's going to lead to a 77 00:03:27,320 --> 00:03:29,880 Speaker 3: firmer pricing environment as we move into mid August. 78 00:03:29,919 --> 00:03:31,680 Speaker 1: And actually we can already see that in our numbers 79 00:03:31,720 --> 00:03:33,040 Speaker 1: for later in the year. 80 00:03:33,080 --> 00:03:34,760 Speaker 2: Are you expecting to take any capacity out? 81 00:03:35,840 --> 00:03:38,800 Speaker 3: You know, we're we continue to prune, but there's not 82 00:03:38,840 --> 00:03:42,200 Speaker 3: going to be any structural changes to our capacity. 83 00:03:42,640 --> 00:03:44,160 Speaker 1: And you know, we are encouraged by the environment. And 84 00:03:44,200 --> 00:03:44,880 Speaker 1: in fact, just in the. 85 00:03:44,880 --> 00:03:48,560 Speaker 3: Last couple of weeks for US at least, the yields 86 00:03:48,560 --> 00:03:51,280 Speaker 3: have turned positive on domestics. They've been down, you know 87 00:03:51,320 --> 00:03:53,800 Speaker 3: for several months as we started the year, but yields 88 00:03:53,840 --> 00:03:55,560 Speaker 3: have now turned positive for forward. 89 00:03:55,280 --> 00:03:56,120 Speaker 1: Bookings at least. 90 00:03:56,200 --> 00:03:58,040 Speaker 2: So why have you knock on with the more bullish 91 00:03:58,120 --> 00:04:01,360 Speaker 2: potential estimates? Then? For your forecast given that you sound 92 00:04:01,440 --> 00:04:04,440 Speaker 2: incredibly positive and you have seen this ongoing rebound, you. 93 00:04:04,440 --> 00:04:05,880 Speaker 1: Know, it's been a good year. 94 00:04:06,040 --> 00:04:08,520 Speaker 3: I mean, it's actually pretty remarkable that we've grown earnings 95 00:04:08,560 --> 00:04:10,920 Speaker 3: and margins for the first half of the year despite 96 00:04:10,960 --> 00:04:11,800 Speaker 3: everything that's happened. 97 00:04:11,800 --> 00:04:13,520 Speaker 1: But a lot has happened this year, and. 98 00:04:13,480 --> 00:04:16,719 Speaker 3: We like to have a policy of being conservative on 99 00:04:16,960 --> 00:04:19,560 Speaker 3: our guidance because stuff does happen, and we want to 100 00:04:19,560 --> 00:04:24,000 Speaker 3: be able to absorb some unexpected events in our guidance. 101 00:04:24,080 --> 00:04:26,960 Speaker 3: We intentionally build it conservatively. We did that's we do 102 00:04:27,040 --> 00:04:29,839 Speaker 3: that all the time. But so really what happened this 103 00:04:29,880 --> 00:04:32,840 Speaker 3: time is we've been able to build that conservativism back. 104 00:04:32,960 --> 00:04:35,800 Speaker 1: So you know, if nothing else happens. 105 00:04:35,440 --> 00:04:38,000 Speaker 3: This year, which is a big if, and if demand 106 00:04:38,040 --> 00:04:40,400 Speaker 3: stays as strong booking demand stays as strong as it 107 00:04:40,480 --> 00:04:41,240 Speaker 3: is right now. 108 00:04:41,120 --> 00:04:42,320 Speaker 1: There's probably upside. 109 00:04:42,360 --> 00:04:45,800 Speaker 3: But we'd rather be conservative than than get out two 110 00:04:46,000 --> 00:04:46,960 Speaker 3: four out over our skis. 111 00:04:47,080 --> 00:04:49,080 Speaker 2: One reason why I was really excited to speak with 112 00:04:49,160 --> 00:04:51,480 Speaker 2: you is say you have a real time view of 113 00:04:51,600 --> 00:04:54,320 Speaker 2: not only the consumer and the appetite there, but also 114 00:04:54,480 --> 00:04:58,520 Speaker 2: international demand and whether there has been any damage to 115 00:04:58,560 --> 00:05:02,719 Speaker 2: the brand Americana, the idea of foreign travelers coming to 116 00:05:02,800 --> 00:05:05,599 Speaker 2: the United States for tourism, et cetera. You've said that 117 00:05:05,600 --> 00:05:08,839 Speaker 2: there has been a drop off at European travelers. How 118 00:05:08,880 --> 00:05:10,760 Speaker 2: sustained do you expect that to be? Are you seeing 119 00:05:10,800 --> 00:05:14,720 Speaker 2: any permanent shifts in that international inbound landscape? 120 00:05:14,760 --> 00:05:18,200 Speaker 3: You know there has been a drop off in in inbound. 121 00:05:18,240 --> 00:05:21,279 Speaker 3: Your demand of Europe is one but it's a single 122 00:05:21,279 --> 00:05:24,520 Speaker 3: digit decline. So in US point of sale has more 123 00:05:24,520 --> 00:05:27,120 Speaker 3: than made up for it. It's eighty percent of our business. 124 00:05:27,440 --> 00:05:29,960 Speaker 3: I don't think it'll be permanent. You know, the the 125 00:05:30,040 --> 00:05:32,919 Speaker 3: United States is the greatest country on Earth. It's a 126 00:05:32,920 --> 00:05:34,800 Speaker 3: great place for people to come, a great place for 127 00:05:34,800 --> 00:05:38,080 Speaker 3: people to visit. Demand is affected by all kinds of things. 128 00:05:38,120 --> 00:05:40,400 Speaker 3: That we have fewer students coming to the US right now, 129 00:05:41,080 --> 00:05:43,080 Speaker 3: you know, not surprisingly that's. 130 00:05:42,960 --> 00:05:43,400 Speaker 1: A big book. 131 00:05:44,520 --> 00:05:46,280 Speaker 3: Quite a bit fewer, I mean enough. You know, it's 132 00:05:46,320 --> 00:05:48,400 Speaker 3: a small, relatively small percentage of the business. But when 133 00:05:48,440 --> 00:05:50,960 Speaker 3: you're talking about one, two, three percent changes in demand, 134 00:05:51,040 --> 00:05:53,960 Speaker 3: you can see it. When you're talking about small changes, 135 00:05:54,839 --> 00:05:56,960 Speaker 3: but those My guess is that we will get back 136 00:05:57,000 --> 00:06:00,320 Speaker 3: to normal. And you know, people's desire to travel see 137 00:06:00,360 --> 00:06:03,599 Speaker 3: the world, whether you're an American or European or a 138 00:06:03,600 --> 00:06:06,760 Speaker 3: Canadian is strong, and this is a great place to visit. 139 00:06:07,160 --> 00:06:08,719 Speaker 1: And my guess is it'll get back to normal. 140 00:06:08,800 --> 00:06:11,080 Speaker 2: And if you're a senior and you're applying to colleges 141 00:06:11,200 --> 00:06:13,719 Speaker 2: right now in the US, you probably are pretty good shape. 142 00:06:13,720 --> 00:06:14,640 Speaker 1: That's all I can say. 143 00:06:14,839 --> 00:06:17,880 Speaker 2: There's also a question about the further uncertainty, and tariffs 144 00:06:17,920 --> 00:06:20,760 Speaker 2: are almost a certainty at this point. How do you 145 00:06:21,000 --> 00:06:22,960 Speaker 2: expect to absorb them? Are you planning or do you 146 00:06:23,000 --> 00:06:25,880 Speaker 2: have a base case for whether you'll increase prices or 147 00:06:25,920 --> 00:06:28,360 Speaker 2: whether it'll just hit margins more significant. 148 00:06:27,800 --> 00:06:30,720 Speaker 3: Line, know, for United we're fortunate that most of our 149 00:06:30,760 --> 00:06:34,240 Speaker 3: aircraft come from Boeing so here in the US, and 150 00:06:34,279 --> 00:06:37,039 Speaker 3: even in the airbus deliveries we have are mostly produced 151 00:06:37,040 --> 00:06:39,120 Speaker 3: here in the United States, so tariffs don't have as 152 00:06:39,160 --> 00:06:41,479 Speaker 3: big of a direct impact on US as they do 153 00:06:41,560 --> 00:06:44,200 Speaker 3: perhaps on our competitors. The bigger issue for US is 154 00:06:44,720 --> 00:06:47,640 Speaker 3: the impact that has on the macro economy. And you know, 155 00:06:47,839 --> 00:06:50,719 Speaker 3: I feel really good you were right earlier you said 156 00:06:50,720 --> 00:06:52,920 Speaker 3: we have a real time indication of the economy. We're 157 00:06:52,960 --> 00:06:55,520 Speaker 3: a very good real time indicator of what's going on 158 00:06:55,600 --> 00:06:58,039 Speaker 3: with the commany not always advanced, but good real time 159 00:06:58,160 --> 00:07:01,240 Speaker 3: and It really does feel like something changed at the 160 00:07:01,279 --> 00:07:03,880 Speaker 3: end of the jew the level of confidence, at least 161 00:07:03,960 --> 00:07:04,919 Speaker 3: less uncertainty. 162 00:07:05,160 --> 00:07:06,960 Speaker 1: People are moving forward. 163 00:07:07,160 --> 00:07:09,880 Speaker 3: And I think on tariffs there's a narrower range of outcomes, 164 00:07:09,920 --> 00:07:11,600 Speaker 3: like probably not going to be one hundred and forty 165 00:07:11,640 --> 00:07:13,960 Speaker 3: five percent on time. There's a narrower range of outcomes, 166 00:07:14,040 --> 00:07:15,920 Speaker 3: and people have had six months to sort of figure 167 00:07:15,920 --> 00:07:18,160 Speaker 3: out how to deal with it and have some contingency planning. 168 00:07:18,360 --> 00:07:21,640 Speaker 3: Whatever the reasons are, it does feel like there's more 169 00:07:21,640 --> 00:07:22,640 Speaker 3: certainty with Boeing. 170 00:07:22,880 --> 00:07:24,720 Speaker 2: Do you expect the deliveries to be on time or 171 00:07:24,720 --> 00:07:26,200 Speaker 2: do you expect there to be more competition with all 172 00:07:26,240 --> 00:07:28,440 Speaker 2: the other countries that are making deals to buy Boeing plans? 173 00:07:28,720 --> 00:07:30,880 Speaker 3: You know, that will be an interesting point of what 174 00:07:30,920 --> 00:07:34,400 Speaker 3: happens with tariff's. My guess is aviation ultimately will wind 175 00:07:34,520 --> 00:07:38,040 Speaker 3: up excluded. It's the one industry US exports six times 176 00:07:38,040 --> 00:07:41,760 Speaker 3: more aviation products than we import, so the trade big 177 00:07:41,800 --> 00:07:43,720 Speaker 3: trade surplus on that side. So my guess is those 178 00:07:43,720 --> 00:07:47,720 Speaker 3: will wind up excluded. But Boeing, you know, is back 179 00:07:47,760 --> 00:07:49,560 Speaker 3: on track. You know, if narrow bodies are actually ahad 180 00:07:49,560 --> 00:07:52,560 Speaker 3: of schedule for US, wide bodies are still behind. I 181 00:07:52,600 --> 00:07:55,680 Speaker 3: think that's less a Boeing issue, probably more engine issue 182 00:07:55,720 --> 00:07:57,560 Speaker 3: and the supply chain for engines. I think that's a 183 00:07:57,640 --> 00:08:01,760 Speaker 3: longer term, multi year a challenge to get the wide 184 00:08:01,800 --> 00:08:03,120 Speaker 3: body back on track. 185 00:08:03,200 --> 00:08:05,480 Speaker 1: But Boeing seems to have turned the corner on production. 186 00:08:05,800 --> 00:08:07,880 Speaker 2: I just want to finish on Newark and whether Newark's 187 00:08:07,920 --> 00:08:10,640 Speaker 2: turned the corner. I do know that we could go 188 00:08:10,680 --> 00:08:12,720 Speaker 2: for an hour about the delays and some of the 189 00:08:13,360 --> 00:08:17,280 Speaker 2: drama around that airport. You guys have a huge presence there. 190 00:08:17,600 --> 00:08:20,680 Speaker 2: You have made this partnership with Jeff Blue and move 191 00:08:21,520 --> 00:08:24,120 Speaker 2: to JFK. Do you expect to expand more in the 192 00:08:24,160 --> 00:08:26,840 Speaker 2: Tri state area to try to diversify your presence away. 193 00:08:26,600 --> 00:08:27,400 Speaker 1: From you at first? 194 00:08:27,440 --> 00:08:30,640 Speaker 3: I'm really pleased with what Secretary Toffy and the Department 195 00:08:30,640 --> 00:08:34,920 Speaker 3: Transportation FA have done. My entire career at United have 196 00:08:35,000 --> 00:08:37,040 Speaker 3: been trying to get Newark on an equal footing with 197 00:08:37,040 --> 00:08:40,120 Speaker 3: the Gordian JFK. That's essentially putting slot controls have the 198 00:08:40,200 --> 00:08:42,480 Speaker 3: number of flights at the airport equal to the capacity 199 00:08:42,520 --> 00:08:45,040 Speaker 3: of the airport. And we've finally done that, and you 200 00:08:45,040 --> 00:08:48,320 Speaker 3: can already see the results. In June, Newark was the 201 00:08:48,320 --> 00:08:53,000 Speaker 3: most reliable of the three New York Area airports, and 202 00:08:53,080 --> 00:08:54,960 Speaker 3: the future looks really good. So we feel really good 203 00:08:54,960 --> 00:08:57,200 Speaker 3: about Newark, and it's a crown jewel and we're going 204 00:08:57,240 --> 00:08:59,120 Speaker 3: to grow it, and you know, it's always going to 205 00:08:59,120 --> 00:09:01,480 Speaker 3: be a crown jewel for you. But from the first 206 00:09:01,559 --> 00:09:03,560 Speaker 3: day I got here to United I wanted us to 207 00:09:03,600 --> 00:09:04,560 Speaker 3: get back into JFK. 208 00:09:04,960 --> 00:09:07,560 Speaker 1: Our goal is to be the. 209 00:09:07,040 --> 00:09:10,480 Speaker 3: Premier flag carrier of the United States and we need. 210 00:09:10,400 --> 00:09:12,080 Speaker 1: To be in JFK to do that. 211 00:09:12,160 --> 00:09:14,640 Speaker 3: So the Jet Blue Partnership is a great way for 212 00:09:14,720 --> 00:09:16,720 Speaker 3: us to have a partner who cared has the same 213 00:09:16,760 --> 00:09:19,880 Speaker 3: sort of culture on DNA, for customers to get back 214 00:09:20,280 --> 00:09:21,880 Speaker 3: and have a presence on both sides of the river. 215 00:09:22,040 --> 00:09:24,280 Speaker 2: Scott Kirby, thank you so much for taking the time today.