April 16, 2025 • 9 mins
Scott Kirby, United Airlines CEO discusses the company having its best first quarter performance in five years. He is joined by Bloomberg's Jonathan Ferro, Lisa Abramowicz and Annmarie Hordern.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news from.
Speaker 2 (00:07):
Morgan Stanley, reiterating its overweight on United Airlines, expecting forward
guidance to reinforce US airline optimism. Let stock is up
by six percent in early trading. Let's stick with United,
the Airline reporting its best first quarter performance in five
years and offering investors dual forecasts in the face of
economic uncertainty, writing in a statement, the company's outlook is
(00:29):
dependent on the macro environment, which the company believes is
impossible to predict this year with any degree of confidence.
Joining us now the main map the United Airline CEO
Scott Kirby. Scott, welcome back to the program, Sarah. It's
good to catch up with you once again. Let me
just understand maybe your approach to this earnings report, how
you and the team decided, you know what, this time,
(00:49):
I think we have to do something different and offer
a dual forecast. Where did that come from, Scott?
Speaker 3 (00:54):
Yeah, we did. We thought it was appropriate to do
something different. It starts with, you know, the environment has
more difficult but first, you know, we did have you know,
as you said in the intro, the best margins we've
had in five years. We grew margins over year, were
only two airlines that are profitable, and as we kind
of went through it, we still see a viable path
to getting to our as long as bookings remain stable
(01:16):
as they are today and getting to our original guidance.
But we also recognize that there's more macroeconomic uncertainty, that
people are fearful of a recession hasn't happened yet, but
that they're fearful of a recession, and so we wanted
to also give investors some outlook on what we think
of recession could look like if it happens here at
United So really the goal was to just give investors
more information. Is non traditional. We're the first ones that
(01:39):
I ever know if they have done something like this,
and so far the feedback has been has been really positive,
and I think investors and others appreciate that we try
to give them a more fullsome range as we get
guidance since time, Scott.
Speaker 1 (01:49):
Can you give us a sense if you were catering
more to investor nervousness or whether you're responding to actual
weakness that you see in some of the forward bookings
by clients.
Speaker 3 (02:00):
So as I'm guessing your refriend to our capacity changes,
and we're going to pull about four points of capacity
from the second half of this year. That's really just
a pure tactical economic decision. We do see weakness, and
because we see weakness, it means we're starting to cancel
some of the utilization. Flying that red eye flight that
was barely profitable and really peak strong times becomes unprofitable.
(02:22):
When the demand environment weekends a little bit, customers have
more choice to fly better times a day, and so
they do, and so we're all we're really doing tactically
is pulling some of that marginal flying. Marginaling good times
turns negative and bad times, so we're just pulling that
out of the system.
Speaker 1 (02:37):
How much do you see going forward, though, any kind
of retrenchment from consumers whatsoever. A lot of people have
been talking about how particularly international travel is going to
come down with people from overseas now coming to the US.
Are you seeing that forward bookings or has that kind
of been more of a narrative than a reality.
Speaker 3 (02:55):
It's been more of a narrative than a reality. We
saw weakness starting at the end of January. We saw
a step down, but it is stabilized in March and
even the first two weeks of April it has stabilized.
And the weakest area we see is actually the low
end domestic consumer here in the United States. International has
remained quite strong. International for what it's worth is eighty
(03:17):
two percent US point of sale, so it's much more
dependent on the US economy than foreigners coming to the
United States. It's also less corporate than it used to be.
And because of that, you know, the leisure traveler is
still going, the premium leisure is still there. Typically, even
in times of economic weakness, the high end consumer outperforms,
and that's what we thought would happen. That's what we've
(03:38):
seen so far. We'll keep watching it, of course, but
that's certainly what we've seen so far.
Speaker 1 (03:42):
How much does this really puts you in a position
to consolidate market share right now? We keep seeing that
among a lot of the leaders in different industries. This
is time for them to compete on price, to compete
on some of the offerings, and frankly squeeze some of
the other weaker players in the markets that you emerge
in the other side a lot stronger. Do you see
that happening with United right now?
Speaker 3 (04:03):
Well, you know, we've had a five year strategy to
win brand loyal customers and we've done that. So really
nothing is changing now. We're not doing anything incremental, anything different.
We're continuing the path that we have been on because
it's worked. It's led to the best margins in good times.
I think that lead is going to expand in tough times,
not because we're doing anything special, but just because we'll
(04:24):
have more seats to sell available to those customers. And
when you're the brand loyal airline, when times get tough
and you have more seats to sell, more customers migrate
to you, and so we'll wind up selling more seats
at lower prices because that's the way our your management
system works. But we'll sell just as many seats. It's
going to make it much harder at the bottom of
the customer choice pyramid, Scott.
Speaker 2 (04:42):
As you know, there's a lot of tension right now
between the United States and China that's been expressed in
several rounds of tarifs from either side. We hope they
can come to the table and have some talks, but
so far not great for the maintenance of your plane, sir,
and the exposure that you have to China to Hong Kong.
How are you managing that situation at the moment?
Speaker 3 (05:01):
So united We actually we have more of our heavy
maintenance work done here in the United States than any
airline in the country. We've been growing here in the US.
In fact, over a three year period, we're going to
hire about five thousand technicians here in the United States,
building huge new facilities in Houston and in Orlando. And
(05:22):
most of our work is done in the Free Trade
Zone outside of Hong Kong the work that is done
in China. So we're monitoring it day by day. But
you know, we have a high percentage here in the
United States, more than anyone else, and feel good about
our setup.
Speaker 2 (05:36):
Becouse, some CEOs have been quite outspoken about what they'd
like to see from the administration on policy. Are you
willing to do that? Is there a reason why maybe
you'd be a little bit more hesitant away in Well.
Speaker 3 (05:47):
I've spent a lot of time in DC this year,
as I always do, but I've mostly been focused on
listening instead of talking, and so I wanted to understand
where the administration was coming from, what their goals were,
how they were trying to get there, and I actually
got by the end of March, felt like I had
a pretty good understanding of that. And if you have
that kind of understanding and you can put everything that's
(06:09):
happening into context, you know, it makes it a lot
easier to run, manage the business, to not make panicky decisions.
And you know what I think is happening here is
you know, we're nowhere near the end of the game.
Yet you know, these are still the opening moves of
the chess game. And I think I and most people
that I talk to, you know, or things have slowed down,
(06:29):
but we're all in a kind of a take of
breath mode. And let's wait till we get to whatever
the new normal is going to be before we start
making big long term decision.
Speaker 2 (06:37):
We've all got to take a deep breath. Your stock
is out this morning by about six and a half percent.
I wanted to talk about something with you that we've
been talking about for a while on this program, Scott.
As you know, one of the most disruptive parts of
FLYINGK right now is the boarding process. And when you
get on, everyone is wrestling to find space to put
that bank over their seat. How do we address that
situation Scott, but so Couldtelli was a traveler. It is
(06:57):
the most annoying experience. And it's not you, I said,
it's something we're saying across the board.
Speaker 3 (07:03):
As a father of seven, I understand it trying to
get out with a bunch of kids, and I'd say,
we're fixing that. At United. The biggest thing we can
do we had to put bigger bends on the airplane.
We're about we're over fifty percent through the fleet at United,
but we're putting bends on all the airplanes that are
large enough that on one hundred percent full airplane, every
single customer can bring a rollerboard on and put it
(07:24):
in the overhead. And I think that at its core
is how we're going to solve It's gott.
Speaker 1 (07:27):
How much more can you get people to pay for
things that they used to know they could get. I
know that Fred Terry used to do that with cans
of soda and then they had to backtrack or checking bags.
Are there other things that you can monetize or doesn't
really come down to the credit took hard business. The
loyalty program, counting on the front of the cabin, you know, yeah.
Speaker 3 (07:49):
You know, I actually we're kind of going the opposite direction.
If we haven't disaggregated the product, give customers what they want.
If you want the premium product, you can get it.
You can go the regular economy product all the way
down to basic economy. But you know, we got Starlink
coming next year. We're going to have the best, the
fastest WiFi in the sky and that's going to be
free for our customer. So WiFi is going to be free,
and it's going to be by far the best experience,
(08:10):
the most bandwidth, the fastest speeds for any customers. And
you know, in a lot of ways, increasingly, instead of
being an airline that also has a loyalty business, we
are becoming a loyalty business that runs an airline. I
mean being able to get customers to Tahiti and Cape down.
That's the coolest sexy reward that you get in the
loyalty program. But you know, the large airlines, particularly like United,
(08:34):
you know, we really have the best, the deepest loyalty program.
And I talked earlier about brand loyal customers like customers
that want to fly United Airlines, and that is the strength.
That's what's given us the resilience to have strong earnings
even in a tough macro environment. It's what's going to
let us outperform even if the economy gets weaker from here.
(08:54):
That loyalty of customers, whether you call it the loyalty
business or just having brand loyal customers, is the foundation
that's letting a United out perform.
Speaker 2 (09:02):
A masterclass in communications from the firm in the last
twenty four hours, Scott, appreciate your time. Thank you. Scott
Kirby there, the United Airlines CEO.
Bloomberg Audio Studios, podcasts, radio news from.
Speaker 2 (00:07):
Morgan Stanley, reiterating its overweight on United Airlines, expecting forward
guidance to reinforce US airline optimism. Let stock is up
by six percent in early trading. Let's stick with United,
the Airline reporting its best first quarter performance in five
years and offering investors dual forecasts in the face of
economic uncertainty, writing in a statement, the company's outlook is
(00:29):
dependent on the macro environment, which the company believes is
impossible to predict this year with any degree of confidence.
Joining us now the main map the United Airline CEO
Scott Kirby. Scott, welcome back to the program, Sarah. It's
good to catch up with you once again. Let me
just understand maybe your approach to this earnings report, how
you and the team decided, you know what, this time,
(00:49):
I think we have to do something different and offer
a dual forecast. Where did that come from, Scott?
Speaker 3 (00:54):
Yeah, we did. We thought it was appropriate to do
something different. It starts with, you know, the environment has
more difficult but first, you know, we did have you know,
as you said in the intro, the best margins we've
had in five years. We grew margins over year, were
only two airlines that are profitable, and as we kind
of went through it, we still see a viable path
to getting to our as long as bookings remain stable
(01:16):
as they are today and getting to our original guidance.
But we also recognize that there's more macroeconomic uncertainty, that
people are fearful of a recession hasn't happened yet, but
that they're fearful of a recession, and so we wanted
to also give investors some outlook on what we think
of recession could look like if it happens here at
United So really the goal was to just give investors
more information. Is non traditional. We're the first ones that
(01:39):
I ever know if they have done something like this,
and so far the feedback has been has been really positive,
and I think investors and others appreciate that we try
to give them a more fullsome range as we get
guidance since time, Scott.
Speaker 1 (01:49):
Can you give us a sense if you were catering
more to investor nervousness or whether you're responding to actual
weakness that you see in some of the forward bookings
by clients.
Speaker 3 (02:00):
So as I'm guessing your refriend to our capacity changes,
and we're going to pull about four points of capacity
from the second half of this year. That's really just
a pure tactical economic decision. We do see weakness, and
because we see weakness, it means we're starting to cancel
some of the utilization. Flying that red eye flight that
was barely profitable and really peak strong times becomes unprofitable.
(02:22):
When the demand environment weekends a little bit, customers have
more choice to fly better times a day, and so
they do, and so we're all we're really doing tactically
is pulling some of that marginal flying. Marginaling good times
turns negative and bad times, so we're just pulling that
out of the system.
Speaker 1 (02:37):
How much do you see going forward, though, any kind
of retrenchment from consumers whatsoever. A lot of people have
been talking about how particularly international travel is going to
come down with people from overseas now coming to the US.
Are you seeing that forward bookings or has that kind
of been more of a narrative than a reality.
Speaker 3 (02:55):
It's been more of a narrative than a reality. We
saw weakness starting at the end of January. We saw
a step down, but it is stabilized in March and
even the first two weeks of April it has stabilized.
And the weakest area we see is actually the low
end domestic consumer here in the United States. International has
remained quite strong. International for what it's worth is eighty
(03:17):
two percent US point of sale, so it's much more
dependent on the US economy than foreigners coming to the
United States. It's also less corporate than it used to be.
And because of that, you know, the leisure traveler is
still going, the premium leisure is still there. Typically, even
in times of economic weakness, the high end consumer outperforms,
and that's what we thought would happen. That's what we've
(03:38):
seen so far. We'll keep watching it, of course, but
that's certainly what we've seen so far.
Speaker 1 (03:42):
How much does this really puts you in a position
to consolidate market share right now? We keep seeing that
among a lot of the leaders in different industries. This
is time for them to compete on price, to compete
on some of the offerings, and frankly squeeze some of
the other weaker players in the markets that you emerge
in the other side a lot stronger. Do you see
that happening with United right now?
Speaker 3 (04:03):
Well, you know, we've had a five year strategy to
win brand loyal customers and we've done that. So really
nothing is changing now. We're not doing anything incremental, anything different.
We're continuing the path that we have been on because
it's worked. It's led to the best margins in good times.
I think that lead is going to expand in tough times,
not because we're doing anything special, but just because we'll
(04:24):
have more seats to sell available to those customers. And
when you're the brand loyal airline, when times get tough
and you have more seats to sell, more customers migrate
to you, and so we'll wind up selling more seats
at lower prices because that's the way our your management
system works. But we'll sell just as many seats. It's
going to make it much harder at the bottom of
the customer choice pyramid, Scott.
Speaker 2 (04:42):
As you know, there's a lot of tension right now
between the United States and China that's been expressed in
several rounds of tarifs from either side. We hope they
can come to the table and have some talks, but
so far not great for the maintenance of your plane, sir,
and the exposure that you have to China to Hong Kong.
How are you managing that situation at the moment?
Speaker 3 (05:01):
So united We actually we have more of our heavy
maintenance work done here in the United States than any
airline in the country. We've been growing here in the US.
In fact, over a three year period, we're going to
hire about five thousand technicians here in the United States,
building huge new facilities in Houston and in Orlando. And
(05:22):
most of our work is done in the Free Trade
Zone outside of Hong Kong the work that is done
in China. So we're monitoring it day by day. But
you know, we have a high percentage here in the
United States, more than anyone else, and feel good about
our setup.
Speaker 2 (05:36):
Becouse, some CEOs have been quite outspoken about what they'd
like to see from the administration on policy. Are you
willing to do that? Is there a reason why maybe
you'd be a little bit more hesitant away in Well.
Speaker 3 (05:47):
I've spent a lot of time in DC this year,
as I always do, but I've mostly been focused on
listening instead of talking, and so I wanted to understand
where the administration was coming from, what their goals were,
how they were trying to get there, and I actually
got by the end of March, felt like I had
a pretty good understanding of that. And if you have
that kind of understanding and you can put everything that's
(06:09):
happening into context, you know, it makes it a lot
easier to run, manage the business, to not make panicky decisions.
And you know what I think is happening here is
you know, we're nowhere near the end of the game.
Yet you know, these are still the opening moves of
the chess game. And I think I and most people
that I talk to, you know, or things have slowed down,
(06:29):
but we're all in a kind of a take of
breath mode. And let's wait till we get to whatever
the new normal is going to be before we start
making big long term decision.
Speaker 2 (06:37):
We've all got to take a deep breath. Your stock
is out this morning by about six and a half percent.
I wanted to talk about something with you that we've
been talking about for a while on this program, Scott.
As you know, one of the most disruptive parts of
FLYINGK right now is the boarding process. And when you
get on, everyone is wrestling to find space to put
that bank over their seat. How do we address that
situation Scott, but so Couldtelli was a traveler. It is
(06:57):
the most annoying experience. And it's not you, I said,
it's something we're saying across the board.
Speaker 3 (07:03):
As a father of seven, I understand it trying to
get out with a bunch of kids, and I'd say,
we're fixing that. At United. The biggest thing we can
do we had to put bigger bends on the airplane.
We're about we're over fifty percent through the fleet at United,
but we're putting bends on all the airplanes that are
large enough that on one hundred percent full airplane, every
single customer can bring a rollerboard on and put it
(07:24):
in the overhead. And I think that at its core
is how we're going to solve It's gott.
Speaker 1 (07:27):
How much more can you get people to pay for
things that they used to know they could get. I
know that Fred Terry used to do that with cans
of soda and then they had to backtrack or checking bags.
Are there other things that you can monetize or doesn't
really come down to the credit took hard business. The
loyalty program, counting on the front of the cabin, you know, yeah.
Speaker 3 (07:49):
You know, I actually we're kind of going the opposite direction.
If we haven't disaggregated the product, give customers what they want.
If you want the premium product, you can get it.
You can go the regular economy product all the way
down to basic economy. But you know, we got Starlink
coming next year. We're going to have the best, the
fastest WiFi in the sky and that's going to be
free for our customer. So WiFi is going to be free,
and it's going to be by far the best experience,
(08:10):
the most bandwidth, the fastest speeds for any customers. And
you know, in a lot of ways, increasingly, instead of
being an airline that also has a loyalty business, we
are becoming a loyalty business that runs an airline. I
mean being able to get customers to Tahiti and Cape down.
That's the coolest sexy reward that you get in the
loyalty program. But you know, the large airlines, particularly like United,
(08:34):
you know, we really have the best, the deepest loyalty program.
And I talked earlier about brand loyal customers like customers
that want to fly United Airlines, and that is the strength.
That's what's given us the resilience to have strong earnings
even in a tough macro environment. It's what's going to
let us outperform even if the economy gets weaker from here.
(08:54):
That loyalty of customers, whether you call it the loyalty
business or just having brand loyal customers, is the foundation
that's letting a United out perform.
Speaker 2 (09:02):
A masterclass in communications from the firm in the last
twenty four hours, Scott, appreciate your time. Thank you. Scott
Kirby there, the United Airlines CEO.
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