Speaker 1: Bloomberg Audio Studios, podcasts, radio news to riadujon Era.
Speaker 2: Now that's where our collegue, Lisa Bromwitz is, of course,
Speaker 2: the co host of Bloomberg Surveillance.
Speaker 3: She's sitting down with the CEO of United Airlines, Scott Kirby.
Speaker 1: Lisa, take it away.
Speaker 3: Thank you so much, David. I am here still in
Speaker 3: Rio with Scott Kirby, the CEO of United Airlines.
Speaker 1: Scott.
Speaker 3: Always wonderful to speak with you.
Speaker 1: Great to be really.
Speaker 3: Thanks for being here. I was actually surprised by the
Speaker 3: tone here, and I shouldn't be surprised because every conversation
Speaker 3: I have with different executives in the airline industry, things
Speaker 3: are better than expected, Demands actually picking up. It's been
Speaker 3: more resilient. This summer's going to be a record summer.
Speaker 3: You're hearing the same thing. Is that kind of your
Speaker 3: tone as well, a.
Speaker 2: Lot of questions for people around the globe, really like
Speaker 2: because we're you know, US airline obviously, like what do
Speaker 2: you think is going to happen to the Gulf? And
Speaker 2: people are worried about oil prices, but demand you know,
Speaker 2: certainly us anything related to the US feel strong. I
Speaker 2: think there are other parts of the globe that you know,
Speaker 2: maybe are a little more concerned about demand, but really
Speaker 2: strong in the US and mostly strong around the globe.
Speaker 2: And people have the view that, you know, the hope
Speaker 2: that this gets from at some point and that we're
Speaker 2: back on track to what was looking to be a
Speaker 2: really good year to start the year.
Speaker 3: Where are you seeing demand kind of fizzle around the
Speaker 3: world or at least fade just to touch in response
Speaker 3: to higher prices.
Speaker 2: You know, we don't really see it at unit because
Speaker 2: you know, eighty percent of our traffic, even international traffic,
Speaker 2: is US point of sale. But you can, I think
Speaker 2: see you know, starting to see that the glimmers.
Speaker 1: And you know, Asia is the first place.
Speaker 2: You know, the impact of oil and refinery issues in
Speaker 2: Asia have been the worst. And you know, and I
Speaker 2: think Africa, you know, certainly the Middle East has had
Speaker 2: an impact. So you can, I think, since some worry,
Speaker 2: not really evidence of we can give demand. But you know,
Speaker 2: you talk to people in one on ones, you get
Speaker 2: sent some concern that if this goes you know, sort
Speaker 2: of been the standard line all along, if.
Speaker 1: This goes till July, it's going to be a problem
Speaker 1: in March. If this goes into April, it's going to
Speaker 1: be a problem. And it keeps getting pushed down the road.
Speaker 1: Fortunately because demand stays strong.
Speaker 3: Well, and so so far you raise prices about twenty percent,
Speaker 3: capacity about five percent. Is that enough? Do you anticipate
Speaker 3: more price increases and more capacity limitations?
Speaker 1: You know, time will tell.
Speaker 2: Depends on what's happening with the economy, what happens with
Speaker 2: oil prices.
Speaker 1: But I feel pretty good about where we are right now.
Speaker 2: You know, we laid out a path to getting to
Speaker 2: one hundred percent fuel recovery.
Speaker 1: It certainly looks like we're still pretty much solidly on
Speaker 1: that path. And you know, even though oil has come
Speaker 1: down a little as I actually would move it a
Speaker 1: little earlier from when we set it.
Speaker 2: But we feel pretty good about where the demand environment is.
Speaker 2: And you know, the consumer has been resilient even with fares,
Speaker 2: you know, but in truth, like fares are up twenty percent,
Speaker 2: but they're still in real terms lower than they were
Speaker 2: in twenty nineteen. So air travel means by far the
Speaker 2: best value is part of the travel chain. And been
Speaker 2: pleasantly surprised that the resilience of.
Speaker 3: The consumer so far is it on driven by the
Speaker 3: premium consumer who seems to be insatiable or is it
Speaker 3: really across the board?
Speaker 2: You know, I always talk about it, at least at United,
Speaker 2: we're investing those to tail for customers, and most of
Speaker 2: the things that we're doing for the product applied to everyone,
Speaker 2: Seeback entertainment and every sing starlink on every aircraft, you know,
Speaker 2: great new interiors place to everyone. And you know, the
Speaker 2: premium is a has been stronger for a couple of years.
Speaker 1: It's still a little.
Speaker 2: Bit stronger, but it's pretty hard to you know, I
Speaker 2: think it's been strong, you know, across the board.
Speaker 1: For us, but you know, we skew to the high end.
Speaker 2: You know, even the economy past years are you know,
Speaker 2: skewing towards the top end of that K curve for
Speaker 2: for air travel and international of course skews even higher.
Speaker 1: But we really haven't.
Speaker 2: We haven't seen any any noticeable cracks and demand sort
Speaker 2: of anywhere in the cabin.
Speaker 3: I mean, you've been upgrading all your planes quite considerably,
Speaker 3: knows to tail, whether it's the full down seats to
Speaker 3: have you sleep across the exactly. Actually you've got kids.
Speaker 3: I wish i'd had that one ask anyway, moving forward,
Speaker 3: moving along, do you find that it's difficult to upgrade
Speaker 3: as quickly as you want because of just some of
Speaker 3: the delays and deliveries that we're seeing in certain of
Speaker 3: the aircraft maks.
Speaker 1: Yeah, you know, we we got ahead of it. We
Speaker 1: started ahead. You know, we ordered a lot of aircraft.
Speaker 2: We got ahead of the supply chain, you know, as
Speaker 2: being the first really back during COVID, we anticipated problems.
Speaker 2: So we actually over ordered because we anticipated problem. The
Speaker 2: problems have been bigger than we thought, but we've mostly
Speaker 2: managed through those. And you know, like seat manufacturing, seats
Speaker 2: are a big issue across the industry, we've mostly stayed
Speaker 2: ahead it. We've been somewhat impacted by it, but we've
Speaker 2: mostly stayed ahead of that. And you know, even you
Speaker 2: startlingk for example, you know we're going to have the
Speaker 2: whole fleet done, we expect next year. It can't be
Speaker 2: done fast enough. But by being the first big airline
Speaker 2: to order, like, we're at the front of the queue,
Speaker 2: and so most of the things we're doing because we're
Speaker 2: at the front of the queue, we're much less impacted
Speaker 2: than other competitors around the globe.
Speaker 3: There were reports that you were talking about Rolls Royce
Speaker 3: a couple of minutes ago talking about how they've been
Speaker 3: a problem in terms of just honoring contracts and what
Speaker 3: exactly is the role in some of the delays that
Speaker 3: we're seeing, particularly with Airbus.
Speaker 2: Well, you know, engines are really the issue. I think
Speaker 2: they're going to constrain supply around the globe for probably
Speaker 2: the next decade.
Speaker 1: There's not enough engine capacity.
Speaker 2: There's something like nine hundred aircraft around the globe that
Speaker 2: are grounded right now that should be flying because they
Speaker 2: don't have engines that can fly. And it's a really
Speaker 2: it's not an easy problem to fix, and it's going
Speaker 2: to take time. And so really kind of we need
Speaker 2: all the engine manufacturers and really the forgings and castings
Speaker 2: that go into the blades and the engines are really
Speaker 2: I think the biggest constraint, and you know that takes
Speaker 2: time to fix.
Speaker 1: But we just start fixing that.
Speaker 2: You know, all the aircraft that's Boeing and Airbus, they're
Speaker 2: going to be able to produce a lot of aircraft.
Speaker 1: I think they're both starting to get things on.
Speaker 2: Track for producing aircraft, but they're going to be producing
Speaker 2: gliders because it's just not enough engines.
Speaker 3: Gliders are not going to fly for the industry. Quite literally,
Speaker 3: I cannot imagine that trying to have long haul flight
Speaker 3: on a glider. Do you think though, that Rolls Royce
Speaker 3: has been a bad actor? Are not as much of
Speaker 3: a good actor relative to say some of the others
Speaker 3: that if been wrapping up Well.
Speaker 2: That's certainly been our personal experience with United at roles
Speaker 2: and that's.
Speaker 1: What I hear from others around the industry too.
Speaker 3: Is that constrained to airbus deliveries more than Boeing?
Speaker 2: You know, they beat each head constraints. You know, Rolls,
Speaker 2: you know, has been constrained. Pratt and Whitney, you know,
Speaker 2: has had a lot of challenge, well publicized challenges. By
Speaker 2: the way, I respect Pratt Whitney is working really really
Speaker 2: hard to fix them. And that's all you can ask really,
Speaker 2: GE's doing, you know, the best of the engine manufacturers,
Speaker 2: but all of them have had.
Speaker 1: Challenges going forward.
Speaker 3: It seems like all of the airlines are trying to
Speaker 3: upgrade as quickly as they can because it is going
Speaker 3: to be about the experience that you're living to the
Speaker 3: customer that's going to determine success. How much have you
Speaker 3: seen the pressures kind of come into play, the sort
Speaker 3: of pressures in the industry that you had been expecting
Speaker 3: as a result of some of the higher prices.
Speaker 1: Well, I think we're the ones creating pressure.
Speaker 2: To be honest with you, we're investing more than anyone,
Speaker 2: and we're doing the kinds of things really that no
Speaker 2: one has ever done, you know, whether you know it's
Speaker 2: the relaxed brow here in the United States putting starlink
Speaker 2: on every airplane, but also the technology like you use
Speaker 2: the United app, it is materially different than I don't
Speaker 2: know who has the second best app.
Speaker 1: In the world, but they're way behind it United, and
Speaker 1: we're just doing more and more of that.
Speaker 2: It just changes how it feels to fly, and it's remarkable.
Speaker 2: That's how you win brand loyal customers. We changed the
Speaker 2: whole experience. It's it's not just about the route network.
Speaker 2: It's about the technology, the service, the reliability.
Speaker 1: And the product. And you've got to focus on all
Speaker 1: four of those.
Speaker 2: You gotta have all four of those things to win customers.
Speaker 2: And you know, it's been working really well at United.
Speaker 2: We're just continue to push to find ways to invest
Speaker 2: more and more and more new creative ideas to make
Speaker 2: people think, hey, it's cool to fly United.
Speaker 3: Are you still thinking about consolidation in any form?
Speaker 2: Well, everyone's asking me about it, trying to take it off.
Speaker 3: Yeah, yeah, we're putting it back on.
Speaker 1: It is.
Speaker 3: It's still on the table for you.
Speaker 1: You know, I you know, I said it at a
Speaker 1: conference last week.
Speaker 2: You know, I kind of came for the last couple
Speaker 2: of years at least thought that a big, kind of
Speaker 2: transformative deal to take create a great US airline that
Speaker 2: compete on the globe was really where the opportunity was.
Speaker 2: And but I've always known that that would have required
Speaker 2: a willing partner, and we don't have one. So I
Speaker 2: think it means that United is a likely city out
Speaker 2: the consolidation game.
Speaker 3: Meanwhile, going forward, we got the best jobs report in
Speaker 3: a long time on Friday, and a lot of it
Speaker 3: was driven by leisure hiring. We heard that across the board.
Speaker 3: How much of this is coming from just the organic
Speaker 3: demand heading into summer, and how much of this is
Speaker 3: really being driven by World Cup traveling?
Speaker 2: You know, world Cup is a tiny, tiny piece of it.
Speaker 2: It really is the fundamentals of demand, and you see
Speaker 2: it everywhere that demand is strong. People are still investing
Speaker 2: in experiences. You know, I've told you before, Like to me,
Speaker 2: the economy, we're a really good real time brometer the economy.
Speaker 2: The economy feels stronger, the jobs report is consistent. Like
Speaker 2: I wasn't that surprised by the job's report because it
Speaker 2: looks to me like the economy is doing pretty well.
Speaker 3: Do you think that oil prices will, say at this
Speaker 3: level and continue to be a challenge at a time
Speaker 3: when every airline executive here expects it to go down,
Speaker 3: almost except for you, but everyone expects the prices to
Speaker 3: go down.
Speaker 2: I've thought, really since mid March that oil is going
Speaker 2: to be higher for longer. I continue to think that
Speaker 2: at some point I'll be wrong, it'll go down. But
Speaker 2: it's just hard for me to see any kind of
Speaker 2: outcome that the straits get reliably and sustainably open. They
Speaker 2: may open for a little bit, you know, but just
Speaker 2: the dynamics make it hard for me to think that
Speaker 2: that's going to happen. So I think this kind of
Speaker 2: ninety to one hundred and ten dollars a barrel, you
Speaker 2: know what, do I know, I'm an airline ceo, but
Speaker 2: like we're planning for that sort of for the indefinite
Speaker 2: future at ninety to one hundred and ten dollars level.
Speaker 3: Coming into this conflict, the baseline assumption was that if
Speaker 3: price has got to that level, then stay at that level,
Speaker 3: there'd be bankruptcies, you'd have a lot of difficulties in
Speaker 3: the airline industry, and certainly there have been pressures. Yeah,
Speaker 3: but the resilience of the consumer and the ability to
Speaker 3: absorb pricing has surprised everybody. Do you think that that
Speaker 3: will be the likely response to a persistently high oil price.
Speaker 3: Not necessarily people going out of business, but airline ticket
Speaker 3: price is going up and staying up.
Speaker 2: Yeah, I think airline prices the consumer has been even
Speaker 2: more resilient. I thought the consumer would be resilient. It's
Speaker 2: been more resilient than I thought it the consumer would be.
Speaker 2: So I think that will happen. But I also think,
Speaker 2: you know, you still look around like United, Delta, and
Speaker 2: Southwest by the way, all three going to be solidly
Speaker 2: profitable this year. My guess is at all ninety to
Speaker 2: one hundred and ten, like everyone else, is losing money,
Speaker 2: some a lot of money. That means there's a big
Speaker 2: chunk of those route networks you know, if you're losing
Speaker 2: money overall, there's a big chunk that's losing a lot
Speaker 2: of money. My guess is the longer this plays out,
Speaker 2: the more and more it you know, sort of pushes
Speaker 2: executives to make hard decisions that they would rather not make,
Speaker 2: to just stop playing places.
Speaker 3: And lose money going forward. Is there any place that
Speaker 3: you want to be expanding in just to sort of
Speaker 3: wrap it up in our lovely beach here that we're
Speaker 3: sitting at in real.
Speaker 1: Yeah, we want.
Speaker 2: We we look forward to spand expanding really around the globe.
Speaker 2: A lot of our growth has been international. It slowed
Speaker 2: down this year partly because you know, Bowe has been
Speaker 2: behind on why by deliveries are starting to catch up.
Speaker 2: But we're looking for you know, international has been great
Speaker 2: for US. United was born on third base for international
Speaker 2: with hubs in Newark, which is the best at you know,
Speaker 2: Pacific Gateway, San Francisco best you know a Pacific Gateway
Speaker 2: Newark Atlantic Dallas is probably the second best Plant Gateway.
Speaker 2: So international has just been gangbusters for US and we're
Speaker 2: opening up you know, it's crazy to me our team
Speaker 2: is opening up cities and I'm pretty informed, like I
Speaker 2: didn't actually know that city.
Speaker 3: Yeah, Scott Kirby. Always wonderful to speak with you. Scott Kirby,
Speaker 3: the CEO of United