In what are truly unprecedented times for the travel industry, how companies navigate the COVID-19 crisis will directly influence their future success. It is a defining moment for airlines: survive, thrive, or expire. How does United Airlines aim to not only survive this pandemic but continue working toward their goal of becoming the best airline on the planet? Roger Hale sat down with Jake Cefolia, Senior Vice President of Worldwide Sales at United, to get the inside scoop. Listen now.
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Episode Transcript
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Speaker 1 (00:04):
[inaudible]
Speaker 2 (00:06):
Welcome to Roger that the business travel podcast
hosted by Roger Hale, CEO of edtrap.
Join us as Roger interviews,business leaders from around the
travel industry to unravel thetrue drivers impacting this
complex industry.
And now here's your host, RogerHale, and welcome to another
(00:27):
edition of the Roger thatpodcast.
You know, we've heard a lot ofwords
Speaker 3 (00:31):
It's to describe the current state of the airline
industry and really the broadertravel industry.
But I think we can all agreethat unprecedented is definitely
a pretty accurate description ofthe times we're going through
right now.
And it really is a definingmoment for a number of
companies, how they respond tothis crisis is really, truly
going to impact their future.
(00:51):
And so visiting with us today isJake's a folia, he's a senior
vice president of worldwidesales at United airlines United,
and the other airlines are goingto play a key role in the
overall recovery of a largeportion of the business
industry, because a lot of thetravel starts with somebody
booking an airline ticket.
(01:12):
And so the whole weight of theindustry is on the airlines and
how well they're able to respondand joining us today, as I said,
is Jake with United and Jake.
I want you to now don't feel thepressure, but the entire
industry is on your shoulders.
So how is United going torespond to all this pressure?
Speaker 4 (01:31):
Well, thanks a lot, Roger.
No pressure.
Speaker 3 (01:35):
Yeah.
Alright.
Combined future of the wholeindustry is riding on you in the
answers that you give us today.
So hopefully you had a bigbreakfast this morning and are
ready to tackle this, but let'sstart out just, I mean, Jake,
you're kind of a, you know,everybody knows Jake because
you're such a personable personand everyone, you know, you've
been in the industry for a longtime, but there are probably
(01:56):
some of those out there who arenot as familiar with you.
Can you give us just a littlebit of background of, you know,
how long you've been at Unitedhow'd you get in the position
that you're currently and justkind of set the stage for us?
Speaker 4 (02:06):
Yeah, we'll do.
We'll do.
And before I jump into thatthough, Roger, I do want to just
thank you for giving United theopportunity here to talk to your
clients.
You know, it is so important.
I think, you know, it's a clichethat communication is key and
it's everything, but in asituation like what we're going
through now, it really is.
And so having platforms ofreally trusted industry partners
(02:27):
like ad Travis or United to helpamplify our message is just so
important for us.
So thank you for giving us anopportunity here to speak to
your clients and to yourpartners and prospective
clients.
And, uh, yeah, a little bitabout myself.
I've been with United for about13 years now.
I actually started my airlinecareer while I was in college.
I worked on the ramp my entiretime through college.
(02:48):
And so it was a great intro tothe business to kind of see how
the operation works.
And it taught me a lot.
And I, you know, frankly, manyof the things that I still keep
with me today, like city codes,for example, you have to marry
all the city codes as sortingbags.
And, uh, so it was a great introto the business and it taught me
so many things about work ethicand, and even leadership had an
opportunity when I was 19 yearsold to be a supervisor on the
(03:10):
ramp and learned a lot at anearly age.
I also learned that I don't wantto work on the ramp for the rest
of my life.
And it's not a knock to anybodythat does that.
It's just, it is hard, hardphysical force.
And so I did keep my nose to thegrindstone and got through
college.
First job out of college waswith British airways and sales.
And then I worked for Northwestairlines for about eight years
and then joined United as themanaging director for the
(03:31):
central division and Canada, andthen have had an opportunity to
really manage every singledifferent part of the United
sales at some time or another.
I went to Hong Kong for a whileto manage the most or Asia PAC
division there.
After the merger, I managed theglobal accounts corporate
division for the combined Unitedcontinental.
And I managed our internationaldivisions.
(03:52):
I think the moral of the storyis I just can't hold it.
Speaker 3 (03:55):
So, uh, but
Speaker 4 (03:57):
Little by little I've , I've gotten a chance to build
experience in every part ofsales.
And then when my predecessor isthe same today, Philippian
retired two years ago, I wasgiven the opportunity to lead
the whole team, which is a greatprivilege.
And that's the quick and dirtybackground.
Speaker 3 (04:12):
Yeah.
Well, and obviously, as you say,you know, just been in the
industry for a long time, youyourself are an industry icon
and you know, and so when I saidthat these are unprecedented
times in the industry, I know,you know, I've been in the
industry about 40 years, causeI'm a little bit further down
the pathway than you are on Jakegaining, but I've never seen
(04:32):
anything like this.
So I know one of the firstthings that everybody wants to
hear is kind of like, okay,well, where are we now?
You know, this is the middle ofJune in 2020, and where are we
now?
Because you know, 60 days intothe crises from a United
airlines perspective,
Speaker 4 (04:48):
Thankfully we are definitely seeing some
improvements.
We're seeing provementsequentially every week and you
know, the real strength that'scoming now is more on the
leisure side.
And so we're seeing a lot of VFRtraffic, you know, people have
been cooped up for so long nowand they want to get out and see
their friends and family.
And so we're seeing a lot of VFRtraffic.
That's central America, LatinAmerica, really all over the
(05:11):
country.
I think unprecedented is asevere understatement.
Nobody's ever seen anything likethis before.
Roger.
Speaker 3 (05:17):
Yeah.
Well, it's very interesting thatleisure is leading the way I
really would've thought itwould've been the other way
around.
So that's something that's, as Isaid was not something I
would've thought of would be thecase, but you know, in looking
at the corporate and I agreewith you, you know, we've were,
our customers are starting toloosen the travel policy and
say, okay, now you can travel.
You know, we're not going to putsuch a broad stop on the
(05:39):
program, but I think gettingpeople back in the airplanes and
back on the road that has a lotto do with traveler confidence.
But can you just kind of give usan overview of really under that
banner of traveler confidence,how is United working to gain
that confidence of the travelerget back out on the road?
Speaker 4 (05:58):
Yeah, no, that's a, that's a great question, Roger.
And actually that's, that's theessence of where we are now.
And, and I, I think it even goesbeyond just traveler confidence
as well.
We also need to build confidencewithin executive teams and
within travel management teamswith our customers because
ultimately, you know, forbusiness travel, the decision is
generally not made by theindividual traveler.
(06:20):
They have to concur of course,but the decisions on when to
travel and under whatcircumstances are generally made
by management.
And so we need to buildconfidence both in management
and then of course for thetraveler as well, because even
if management authorizes travel,the traveler themselves have to
be confident.
So we know that that'severything right now.
And we actually, in order tohelp instill that confidence, we
(06:41):
have come out with a brandedkind of cleaning program and
it's beyond cleanings.
I would call it United cleanplus because it acknowledges
that cleaning is really, reallyimportant.
And it's going to be one of thekeys to creating a safe
environment for customers onboard.
But it goes beyond that.
It's also things like socialdistancing, it's things like
hygiene with hand sanitizer withhaving wipes, for people to
(07:03):
clean their own space.
It's also about wearing masks.
And so it really is about havinga systematic industry leading
program that provides a cleanand safe environment with all
the other things that go alongwith safety.
And in fact, we're the firstairline is actually we've backed
that whole cleaning program upto before the journeys and
(07:25):
begins.
And so at check-in now Unitedcustomers are asked to fill out
a questionnaire and we'recalling it ready to fly.
And it's a, it's a short healthquestionnaire that makes sure
that they haven't beenexhibiting any symptoms or
haven't been around anybodywho's been diagnosed with COVID.
And then we're also asking themto acknowledge that they will
(07:45):
comply with the maskrequirements and the masks are
required now throughout thejourney.
And of course, if somebody isdrinking or reading, they can
take their mask off.
When they're going through TSA,you need to take the mask down
so people can see the ID, butwere conceived their face and
match it with the ID.
Right?
But ultimately we want customersto be ready to fight.
Part of that is, is having amask and making sure that that
(08:07):
they're not symptomatic.
And then advice actually camefrom the Cleveland clinic.
And so part of this queen plusinitiative was to partner with
really well respected brands inhealth and safety.
And one of those is Clorox.
And so a lot of our disinfectiontechniques and products now are
coming from that partnershipwith Clorox.
And then Cleveland clinic isgoing to be an ongoing partner
(08:29):
to ours.
As we continue to learn moreabout covert, we're going to be
able to continue to create moreand more safety practices.
And that's just one example ofthe most recent one that came
from a recommendation of ourgreat partner, the Cleveland
clinic on United claim plus.
Speaker 3 (08:44):
Gotcha.
And as far as overall, are youfinding that your travelers are
embracing what you all have doneon the clean plus program?
Speaker 4 (08:53):
They really are.
And for some reason, somepsychology behind that, I think
relative to, I think airplaneshave always incorrectly, but
have always been viewed as aplace where, Hey, I'm stuck in a
small metal tube, but lots ofother people, I think people
have always been somewhatcautious and that's not a bad
thing, but you know, the realityof the fact is that COVID has
not been transmitted onboardairplanes and many people don't
(09:16):
know that they think that that'sa very likely place for it to
happen.
It's actually one of the leastlikely places for it to happen
because of the air filtration onboard, the HEPA filters, which
everybody's been hearing so muchabout like operating quality air
filtration, that air is filteredevery two to three minutes for
the whole cabin and combinedwith external air.
(09:36):
Also the air flow in theaircraft is from ceiling to
floor.
And so it doesn't lend itself todroplets propagating kind of
horizontally throughout theaircraft.
They kind of just dropped to thefloor and pull into the filter.
And also just the way thatpeople are sitting in a way that
it's configured.
I mean, there's a naturalphysical barrier between you and
another customer in front of youbecause of the seat and the seat
(09:59):
pack.
And so in reality, you know,transmission on board airplanes
is essentially nil, but it's aplace where people have always
felt kind of a sense of cautionand concern there.
And so because of that, we arefinding great compliance that
people are interested in orcleaning practices.
And they're generally complyingwith the things that they need
to do and the important things,everything, everybody knows, the
(10:21):
important things right now arewearing a mask really, really
important, making sure thatyou're washing your hands
frequently, that you're using ansanitizer and that you're not
touching your face.
And most importantly nottraveling when you're sick and
if people are doing thosethings, I think we're going to
be able to continue to provide avery safe place for people going
forward.
Speaker 3 (10:39):
So kind of shifting gears just a little bit, as you
talk about, you know, in 95 and98% drop in revenue, obviously
that impacts the company andfrom a managed travel
perspective, you know, we lookat it and say, well, gosh,
there's a lot of technologyinvestments that I know a United
was in the middle of when thiscrisis hit.
So just wondering if you couldtalk a little bit about how is
(11:02):
this current crises impactingyour technology investments and
specifically, you know, NDC,because that's what everybody's
talking about is NDC.
Speaker 4 (11:12):
Yeah.
Well, we're, we're staying thecourse on NDC.
I mean, there's kind of, youknow, there's kind of a couple
of pictures here from the 30,000foot level.
When we think about our financesover the short to medium term,
it's all about liquidity.
It's about reducing our cashburn rate.
It's about reducing our costoutlays.
And it's about having a largecapital balance as large as we
(11:33):
can have of capital so that wejust have an opportunity to
weather the storm.
We're now convinced and highlyconfident that we can do that.
We had a tremendous treasuryteam and finance and, you know,
really a concerted effort acrossthe company to position
ourselves to better weather andconfident.
Now that that's going to be thecase, even if we have a
sustained low level of demandfor quite some time, we were
(11:56):
kind of beyond that.
But relative to NDC, we actuallyare far enough along with the
investments that we've alreadymade, that a lot of what
requires us to, to be able toconnect through API APIs on NDC
is just the actual execution onthat.
And so we are full speed aheadand continuing to respond to
(12:18):
clients.
In fact, we've seen an upsurgein interest in that for many of
our TMC partners.
And so we're going to continueto stay the course on NDC.
I do think that there are goingto be, you know, many technology
investments that may have to getdeferred a little bit.
And you have to imagine that ifwe're in a situation where we
are, you know, negative cashflow right now, and we'll be
(12:39):
likely for some time that, youknow, we're going to be dipping
into savings and we're going tobe taking out more loans.
And so when we come out of thisand we get back to a point where
we're earning a margin, again,much of that profit is going to
have to go back towards payinginterest and paying down those
loans.
And so just by necessity, Imean, the math just says, you're
going to have less available toinvest, and we're going to
(13:01):
prioritize those investments andplaces like, you know, safety
and, you know, the innovationsthat we think we're going to
continue to be able to deliveron, on the health and safety
front.
And of course, you know, as weget out of this, we have our
normal capital planning process.
And, you know, I think if we'vecome out quickly and the economy
is still doing okay and there'sdemand out there both business
(13:21):
and leisure, then of course, alarge component of our capital
always goes towards aircraft.
And so we just have to see howlong this lasts and kind of what
our financial condition is andwe get out of it.
And then we'll kind ofreprioritize.
What are our capitalexpenditures look like beyond
that, but NDC full speed ahead.
Speaker 3 (13:37):
Gotcha.
And in a component of that, youknow, where everyone kind of,
you know, everybody can see isthis next generation storefront,
which, you know, we've seen thatout there in the industry and
been a lot of talk about it.
Some people are embracing it andyou know, some of the online
tools are not as gung ho to makethe investments into the next
generation storefront.
And so could you just give us alittle bit of an update on that
(13:59):
kind of wears you not asposition.
And is that something that youfeel is key in the corporate
market space to get that NGS outthere for what you want, the
vision you have for Unitedairlines?
Speaker 4 (14:11):
Well, I mean, look, we, we think that if executed
the right way and if there'sconsistency in, or even beyond
consistency, more like universaladoption and NGS, then we do
think it can be helpful becauseit does give customers an
opportunity to do easiercomparison shopping.
And so I think conceptually, welike the idea, but the devil is
(14:34):
in the details cause we do needto make sure it is a true, you
know, light for lightcomparison.
And even, even with NGS, we haveseen some circumstances where it
hasn't been, you know, applesversus apples in the same
column.
And so I think the devil isgoing to be in the details
around both more of a universaladoption by all suppliers and
also just consistency and thedefinitions.
(14:58):
And so that's kind of where weare now.
It's probably why it's takenthis long to kind of come up
with some standards and to rollthat out more widely
Speaker 3 (15:07):
Southwest announced, they were really making a new
focus on the corporate, thebusiness traveler and have moved
to participating in the GDS,which used to be like a religion
with them.
They weren't going to, you know,they weren't going to be
involved in the GDS and they've,and they've moved over and at
least gotten into one of the GDSis at this point, as I see that
(15:27):
as their entryway into themanaged travel programs of the
corporations.
So just your thoughts onSouthwest have been out there
for a number of years, but thiswas kind of a new initiative for
them.
Does that change anything atUnited?
Speaker 4 (15:42):
Yeah, look, I mean, Southwest is, is a five
competitor and, and I, you know,kind of niche corporate airline.
And I don't think that they'vehad very much success in large
or global corporations, whichhas kind of been our, our
wheelhouse, but certainly theyhave some appeal to, you know,
the independent business personor the small business.
But it's hard to say that, youknow, they're in the GDS are
(16:04):
gonna be in the GDS when theydon't have an agreement with
Sabre who we know has, you know,kind of the largest penetration
here in the U S so we alwayswelcome competition and, and
certainly welcome Southwest tocome compete on our turf in the,
in the corporate space, becausewe think we've got great
relationships, we've got broaddistribution and we have a great
product that appeals to theglobal, uh, business traveler.
Speaker 3 (16:27):
Yeah.
And speaking of the product, youknow, and that is one of the
things that, uh, United has beenvery successful at is over the
last couple of years ofproviding a differentiated
experience for their mostfrequent travelers.
And with COVID kind of blew thatall up, you know, the lounges
are closed the upgrades and youknow, it just completely changed
(16:49):
that.
So could you talk a little bitabout, okay, as we ramp back up,
how do you get back todifferentiating the experience
for your most frequenttravelers?
Speaker 4 (17:00):
Oh, you can see it today.
If you want to, to Roger, justby taking head out to the
airport,
Speaker 3 (17:03):
There you go.
Yeah.
Clubs
Speaker 4 (17:06):
Open it at every one of our hub locations.
And, and to the extent customersare buying tickets and heading
back to the airport insufficient numbers, that we're
going to open the rest of ourclubs.
And to the extent they're flyinginternationally, we're going to
open our Polaris lounges and weare still offering all of those
kind of the extras.
And we are still allowing ourtop tier premier members to
board early.
We are still doing ourcomplimentary upgrades into both
(17:27):
economy plus, and the firstcabin, we're all still also
still offering the bonus miles.
Also our miles never at Byron.
So those bonus miles, actuallyfor premier members, it's like a
currency.
And a lot of people spend a lotof time figuring out how to
spend that currency.
And so I think there's stilleven today, even in this
circumstance, I think there'sstill a tremendous amount of
both differentiation and valuein the premier programs.
(17:50):
And it is true that we're not,we don't have most of our spoke
lounges are not yet open.
And so it's not, you know, Idon't want to say it's the exact
same experience, but we do thinkthere's still a differentiated
experience for our premiermembers.
And there is still a tremendousamount of value in that premier
status.
And so we just need people tostart using it again and buying
tickets and getting on here.
Speaker 3 (18:11):
Yeah.
Yeah.
Well, and that's important.
Cause I know prior to covert, Iwas a frequent business traveler
and it does really help with theexperience and again about
talking about confidence andcomfort and all that, to have
those perks that make the travela little bit easier.
And so I know there's, I've beengetting personally been getting
questions from folks about, Hey,am I going to be able to have
(18:32):
that same type of experience?
So that's good to hear thaty'all are really staying focused
on that.
And as much as you can offeringthese frequent business
travelers, you know, making thatwhole process a little better in
their eyes than just thestandard experience.
Speaker 4 (18:46):
Yeah, absolutely.
And I'd say maybe just the twothings that I'd add on to that
one is, is that for all thosepremier members, just
recognizing that it's going tobe a light travel year this
year, we've already had goneahead and rolled them over for
full year 20, 21 and two theirsame premier status.
And then I think the other thingthat's important for your
customers to know is that wealso have our corporate
(19:07):
preferred program.
And this is almost like if likepremiere status plus.
And so whatever premiere statusyou hold and where that would
put you on the list for thingslike upgrades.
If you also are flying on acorporate tour code, you get,
you know, kind of that statusplus.
And so if you're a gold memberand you're flying on a corporate
tour code, you actually wouldget upgraded before all the
(19:29):
other gold members.
And so, and thosedifferentiation, you know, that
that differentiation is still inplace as well.
And so, you know, just as, Hey,we love all of our customers.
We love our premier members evenmore.
And we love our corporatepremier members.
Even more than that, we're stilltaking good care of everybody.
Speaker 3 (19:45):
Good, good.
Well, in one of the otherconcerns that I've heard or
topics that have come up isthis, you know, managing the
supply, as things start to rampup, I know you've parked a lot
of airplanes.
You've got, you know, pilots andflight attendants who are either
furloughed or at least, youknow, they're not just sitting
there ready to jump on a planewith five minutes notice.
(20:07):
So how are y'all doing that?
How are you making sure thatyou're able to match the supply
to the demand?
Is it, you know, have you gotthat to where you're, you're
pretty nimble.
Speaker 4 (20:18):
That's a great question.
And that's exactly, I mean,we're spending most of our time
right now in the operationworking on exactly that problem
because we do, we don't want toput capacity back before the
demand materializes.
That is a formula to just haveyour cash burn skyrocket, which,
you know, no airlines can affordthat.
And so we don't want to come outtoo quickly, but also we don't
want to come back too slowly andmiss any opportunities.
(20:41):
And so what we're trying to dois Darien realize our cost
structure.
And essentially what that meansis that we would like to have,
as many of our costs reallyfluctuate with our flying volume
and, you know, the way thatworks today in the airline
businesses, everybody has kindof a minimum number of hours
that they're entitled to work.
And if we add up all the minimumhours that everybody who's
(21:03):
employed for United, you know,that gives us a schedule way
more than what demand would beable to satisfy today.
So we wouldn't have moreflexibility and being able to
flex people's hours up and downso that we actually don't
furlough anybody, which wouldthen really make it a lot slower
for us to be able to bring backcapacity because you'd have to
hire people, you'd have to trainpeople, they'd have to get their
(21:24):
currency requirements met.
And so we want to keep everybodyon the payroll, but just pay
commensurate with the number ofhours that we're actually
flying.
And so that's really been thekey for us and that's going to
be the focal point of thebusiness as we try and
variabilize demand.
Now, the other big challengeinherent in that question is
(21:45):
understanding what the demand isgoing to be at any given time.
And anybody that's kind ofwatching airline capacity
probably has noticed that we'vegot a few competitors that are
putting a lot more capacity outthere than we are right now.
And in fact, an amount ofcapacity that isn't really
justified by the current levelof demand.
And clearly what, you know,they're just looking at forecast
(22:06):
that shows something differentthan what we're seeing today.
And so they would expect demandto come back much more quickly.
We're seeing some competitorsput back essentially half of
their capacity.
And right now we're still seeingdemand down like 80%.
And so, so that's too muchcapacity for where demand is
now.
Obviously they're seeingsomething different than what
we're seeing.
If the demand that they'reseeing ends up materializing
(22:28):
then will be about 30 to 60 daysbehind them.
We'll be able to quickly rampthat demand up.
But we think it's prudent to bemore cautious so that we can
manage that cash burn.
If that demand doesn't actuallyshow up, they'll ultimately
probably either end up cancelingflights or just absorbing the
higher level of costs, then theycan pay for it with where
revenue is going to be
Speaker 3 (22:48):
October one.
This is a date that will live ininfamy possibly.
And you know, it's the date thaton, you know, under the loan
agreements that most, all thecarriers were able to take from
the government.
You know, it said, Hey, youcan't fire or lay anybody off
until October one and you can'tdrop cities, you can drop
(23:10):
frequencies, but you can't dropcities for the most part until
October one.
So what's going to happen, youknow, and I know this was a
little bit of crystal ballinghere, but I guess, you know, for
our travel managers out there,could you give them some insight
into how is United looking atthis October one date and what
could they anticipate?
Is it going to be that all of asudden, boom, you know, half the
(23:33):
capacity comes out of the citiesand all of a sudden you're not
serving near the number ofcities you were before.
Just what does October 2nd looklike in your mind right now?
Speaker 4 (23:43):
Yeah, I mean, w and without being evasive, it's
just, we don't know, because wedon't know where demand is going
to be, but I can tell you thatour entire network strategy is
predicated on us being able toserve small cities.
And that's how, you know, that'show we make hubs work.
And that's how we're able tooperate.
They international or bigTranscon long haul service is by
(24:03):
consolidating two customers fromhere, four customers from there,
five customers from somewhereelse consolidating all of that
business in a hub so that we canfill up, you know, a triple
seven going to Hong Kong.
And so, and so our networkpredisposition, our planners,
predisposition is we want to flyas many of those smaller cities
as we possibly can so that wecan consolidate traffic and keep
(24:25):
the hub operating in a, in ahealthy manner.
So I think that thepredisposition, I don't expect
there to be any real reductionsin, uh, in any of the cities
that we serve for that reason,but it is going to depend on
demand.
And certainly, you know, we, wedon't want to have a situation
where we're underwater on aroute and you can't really see a
(24:46):
way out of that because we'renot seeing a recovery and
demand.
And so I think we would be,we're going to scrutinize any of
those incredibly, incrediblyhard.
And the predisposition is goingto be that we keep our network
fully intact.
Speaker 3 (24:59):
I believe in your earnings call.
Y'all did give a little bit of aforecast of what you thought the
recovery would look like, and,you know, can you share
anything, you know, for ourtravel managers out there, as
far as, I mean, are you thinkingthat, you know, that it'll be
50% by the end of the year 30%by October, how's United looking
(25:20):
at the slope of that recoveryfrom a planning, from planning
side of things.
Speaker 4 (25:24):
Yeah.
And I'll start by saying anybodythat says that they know what
this recovery is going to looklike is wrong.
We're aligned for both, becausenobody really knows, but, but we
do have a lot of differentforecasts and we use a lot of
different inputs to make thoseforecasts.
The input that we think is mostcredible is when we talk to many
experts that we actually consultwith on a regular basis that are
(25:46):
more the scientists, theepidemiologists, and people that
know about propagation diseases,the people that can kind of try
and project as best as possiblewhen a vaccine may be available.
And then what impacts thosethings would have on all sorts
of kind of social activities,including flying for leisure or
for business.
We kind of use that input tomodel.
(26:07):
We think the most likelyscenario is that until there's a
vaccine and we'll get to about50% of previous demand levels
and just kind of flat line thereuntil there's a vaccine that
gives everybody that confidencefrom a population standpoint to
kind of get back to life as itwere before.
And so where we are now, likekind of down 80, what we're
(26:27):
essentially doing is projectinga straight line between now and
the end of the year.
So we'll be climbing from 80 to50 on a straight line until the
end of the year, and then staythere until there's a vaccine
that both is, is effective andsafe.
And that's been, um, you know,essentially the population has
been vaccinated or enough ofthem to keep the disease from
(26:48):
being able to continue topropagate.
And, uh, so that's where ourforecast is.
That's where our planning is.
We obviously have lots of modelsthat would enable us to flex up
or down from there, but that'skind of our base case.
And we're working off net ofnow.
Speaker 3 (27:01):
Yeah.
You know, it's kind of whenthose things show, one of those
models is going to be correct.
It's going to be spot on now,figuring out which one of those
models it is.
That's that, that's where, youknow, that takes a, a little bit
of luck in there.
Agreed, agreed.
That that's the tough part,because somebody's going to
point back and said, see, mymodel had this exactly right.
(27:22):
You know, you talked about, youknow, Hey, getting life back to
normal and that, and, and rightbefore this crisis hit, you all
had to change at the top of yourorganization.
You know, Scott Kirby took overand as the CEO from Oscar.
And so just your thoughts onlife under Scott, you've now
been a couple of months intothat.
Speaker 4 (27:43):
Yeah.
Well, it's, you know,fortunately Scott was a known
entity for us.
He's been with United for aboutfour years now.
I've had a chance to work veryclosely with him during that
whole period of time.
And so I have a real good senseof who's got Kirby and he's, he
is a very engaged, veryinvolved, very energetic,
(28:03):
driven, ambitious.
And I'd say a bit aggressive.
And I think in normalcircumstances, you know, you
could say a bit of a risk takerand that part of him certainly
isn't playing out right now.
Uh, you know, B has been morecautious, I think really from
the beginning on nest, but Scotthas been working side by side
with Oscar really, since he cameto the company, Oscar Munoz who
just retired as the CEO fromUnited.
(28:25):
And so we've had a chance to seea lot of Scott's strategies and,
and working style.
And so it really hasn't been asignificant change for us.
I will say the one thing thatwas maybe a little bit of a
surprise to me, and I think aconcern for many people is Oscar
was a beloved leader withinUnited.
He just had such a way ofconnecting with the entire team,
(28:47):
particularly the front line, andjust had a certain amount of,
you know, warmth and, andcharisma.
And he built a tremendous amountof trust with the frontline
because he did what he said hewas going to do.
And, and he didn't always dothings that were liked by the
frontline, but he, he listened alot and things that he felt like
(29:10):
I had merit and that were goingto help frontline and help our
customers.
You followed up on any backthose things up.
And so he was, he was beloved,but I think he was beloved
mostly for just his warmth andengagement.
He loved being out at theairports.
He loved being in our hangersand, uh, and even, you know,
walking around our conferencefloors at our headquarters in
Chicago.
And so people weren't sure whatto expect of Scott.
(29:33):
Now, I've seen that side ofScott before as well.
And it's, it's different,certainly is not an Oscar clone,
but I can tell you, his humanityhas come through strong as we've
gone through this crisis.
And I think a great example ofthat is just with everything
that's been happening relativeto race relations and social
unrest, he came out with a verydefinitive statement about a
(29:55):
zero tolerance workspace for anyracism and, and made a personal
commitment to raise the dialogueand, and use United's platform
as being a well known companywith a large voice to actually
do something about it and notjust within our own halls, but
for society as well.
And so that was certainly a moveamong many others that have
(30:16):
helped to really ingratiate him.
And, and, uh, and you know, Ithink a lot of the popularity
of, of Oscar has rubbed rightoff on Scott.
And so anybody who had thatconcern I think is going to put
that to rest.
Speaker 3 (30:27):
I know United is in good hands with him leading the
charge.
When you look 12 to 24 monthsout, what does success look like
for you and your teams inworking with the corporate
travel managers and your TMCpartners, and also United in
general, kind of, you know,where do y'all want to be 1224
(30:47):
months down the road?
Speaker 4 (30:49):
Yeah, well, I think that one's pretty straight
forward.
I'll, I'll actually start withthe high level answer first.
And this is what we, you know,one of the things we love about
Scott is his vision andparticularly his ambition around
achieving that vision.
It's just contagious.
It's just, everybody is excitedto be a part of the mission.
And his ambition is he wants tobe the best airline on the
planet.
(31:09):
And the way that you do that isyou serve your customers better
than anybody else does.
And so he really has energizedall of our customer service,
frontline professionals byarticulating that mission.
We want to serve our customerswell, we want to have the
highest customer satisfactionnumbers in the industry.
And, and he's also going to givethem the tools and resources to
do that.
So he doesn't just say, Hey, goout and do that.
(31:30):
Customer satisfaction isimportant.
Go make it happen.
But he also says, what do youneed to make that happen?
And then it delivers theresources that are necessary to
be able to deliver that.
And so that is a real, you know,kind of, uh, you know, one of
these cycles that is justself-sustaining because the more
people get the tools, the moreenergetic and energized they are
(31:51):
to use those tools to servetheir customers well.
And then the happier thecustomers are, and then the more
engaged the workforce gets.
And so first and foremost, wewant to be the best airline for
customers.
The other way you can be thebest airline for customers is by
flying the places that they wantto go to when they want to get
there with the least amount oftotal journey time.
And so that's really all aboutour network growth strategy that
(32:14):
we've been on for going on threeyears now.
And I suspect it's going to bedependent on demand.
It really is.
And that's the big unknown now,but when demand does return and
it will, then we're going topick up where we left off
relative to that network growthstrategy.
And ultimately we think becauseof where our hubs are positioned
(32:34):
in the biggest business demandmarkets, and because of, you
know, our absolute determinationto serve our customers better
than anybody else can, we thinkwe've got a lot of runway ahead
of us to be able to continue to,to grow.
And that's just a real virtuouscycle that we can make, you know
, better profits.
We can put those profits backinto our customer initiatives
(32:56):
and attract more customers and,you know, that will, that will
keep going.
And so that's what I'm really,really excited about on the
managed travel side, we've kindof adopted the exact same
approach and that we, in fact,this year for the first time, it
set out goals were four goalsthat we had.
The one that was weighted thehighest and was first on our
list is customer satisfaction.
(33:18):
And we've for a long timemeasured our B2B customer
satisfaction.
So we want to know how we'redoing for you, Roger.
And we probably asked you thatin surveys a few times a year,
and we also want to know ourcorporate customers, what their
travel managers think of us.
And we want to know, you know,what the TMCs who are serving
those corporate customers mightthink.
So we did a lot of surveying tounderstand our B to B sentiment.
(33:41):
What we hadn't done beforethough, is measured the
sentiment of the travelersassociated with those B2B
accounts.
And we actually took that on forthe first time this year.
And so we were going to reallystart doing more around,
engaging with you, not just on,are we serving you well, Roger,
do you, your team have the toolsthey needed to do their job and
are the programs structuredappropriately, but also how are
(34:04):
we treating your travelers,right?
And what are the, what are thethings that we can do to improve
your travelers perception of us,and then you as a partner for
advocating for them.
So we're going to get right backon track with that, obviously
this year, you know, we've hadto take a detour on just about
everything that we set up forgoals, but we can get right back
on track with that.
And really the only limiter nowis, is the information we don't
(34:26):
have enough corporate travelerstraveling to be able to get
statistically valid samples onthe surveys so that we can go
back and do something with them.
So as soon as we get the volumeback, we're going to be right
back on track with thatinitiative as well.
Speaker 3 (34:39):
Good.
So the future is bright.
The future is riding tonight.
Speaker 4 (34:42):
Well, I think so we just got to get, we just got to
get out of this, uh, this darkspot now.
I, you know, we know it won'tlast forever and I, and I do
feel like we're gonna be able topick up right where we left off,
uh, when we, when we do get out
Speaker 3 (34:54):
Yeah.
And share it very much share thesame sediment as, uh, as that
we're, you know, looking,looking forward to getting this
behind us.
And again, the confidence isthere that the industry is going
to come back.
There's just so, so much goodthat comes out of this industry,
that I know that, you know,people are going to be getting
back to it as soon as they can.
And as soon as they feelcomfortable about it and, you
(35:15):
know, Jake, I really appreciatetaking the time to join us today
and give us a little bit ofinsight into United, how you're
handling this crisis.
And most importantly, how, youknow, looking beyond the crises
and what are we doing to keepgrowing in the industry.
And I know I mentioned that, youknow, Scott has came in and took
over for really an icon inOscar.
(35:36):
And, and you kind of did thesame thing a couple of years
ago, you came in and had to stepinto some shoes of, of Dave.
Who'd been, who is an industryicon and, you know, been in here
for years and years.
And I have to tell you thateverything I see personally, and
all of the input that I get fromdifferent people in the industry
is you, you're doing a great jobof filling those shoes.
(35:58):
It's, it's really been fun towatch.
I think there was some, a littlebit of concern out there as, Oh,
Hey, this is going to bedifferent now at United, but
you've really done an excellentjob of rallying your team up
under you and really deliveringon what you said you wanted to
do when you took over theposition.
So, so hats off to you for the,you know, the times you've been
in this, uh, position and hatethat you get this test, you
(36:21):
know, shortly after in beinginvolved in it that, Hey, let's,
let's take 95% of the revenueand throw it out the window.
Yeah.
Let's blame the sales guy forthat
Speaker 4 (36:33):
Truly do appreciate those, those kinds of comments.
And it means it means even morecoming from you because I've
known you for a very long time.
And, and I know you're a toughgrader.
Uh, and so, so I appreciatethose comments.
And, uh, and you're right.
Dave had some very big shoes tofill.
I learned a lot from him.
I haven't had a chance to workfrom him.
And I really credit my team whohave been, I think, energized by
(36:55):
the direction that we're headedin and everything that's
happening with the company.
And they're the ones that reallymake me look good.
But, uh, but we just trulyappreciate the partnership with
ad trap and you all do such atremendous job for your clients.
And I believe me, I know I'vehad you knocking on my door on
more than one occasion with somethings that we need to do to, uh
, to make things right with,with customers.
(37:16):
And so I know you're a big, abig advocate and your whole team
is for your clientele as well.
So, um, so it means a lot to methat, to hear those words coming
from you.
Speaker 3 (37:24):
Yeah, well, absolutely.
And, and again, appreciatetaking the time to give us the
update on United.
This is a time, and we're allgoing through here that we
never, I don't think in ourwildest dreams thought we would
be navigating through thiscrises like we are today, but we
will get to the other side.
So, and United sounds like it'sgoing to be very well positioned
(37:45):
once we get to the other side.
So again, Jake, thanks fortaking the time, a big thank you
to our, to our listeners aswell.
We appreciate you tuning in tothe Roger that podcast and be
sure to listen for futurebroadcast.
Speaker 2 (37:59):
Thanks for listening to this episode of Roger, that
the business travel podcast,like what you hear, check out
more episodes, highlightingcurrent industry trends and
events@addtrev.com forward slashpodcast, or subscribe to Roger
that for more information on howyour company can travel smarter,
visit[inaudible] dot com[inaudible]
Speaker 5 (38:37):
[inaudible].
[inaudible]
Speaker 2 (00:06):
Welcome to Roger that the business travel podcast
hosted by Roger Hale, CEO of edtrap.
Join us as Roger interviews,business leaders from around the
travel industry to unravel thetrue drivers impacting this
complex industry.
And now here's your host, RogerHale, and welcome to another
(00:27):
edition of the Roger thatpodcast.
You know, we've heard a lot ofwords
Speaker 3 (00:31):
It's to describe the current state of the airline
industry and really the broadertravel industry.
But I think we can all agreethat unprecedented is definitely
a pretty accurate description ofthe times we're going through
right now.
And it really is a definingmoment for a number of
companies, how they respond tothis crisis is really, truly
going to impact their future.
(00:51):
And so visiting with us today isJake's a folia, he's a senior
vice president of worldwidesales at United airlines United,
and the other airlines are goingto play a key role in the
overall recovery of a largeportion of the business
industry, because a lot of thetravel starts with somebody
booking an airline ticket.
(01:12):
And so the whole weight of theindustry is on the airlines and
how well they're able to respondand joining us today, as I said,
is Jake with United and Jake.
I want you to now don't feel thepressure, but the entire
industry is on your shoulders.
So how is United going torespond to all this pressure?
Speaker 4 (01:31):
Well, thanks a lot, Roger.
No pressure.
Speaker 3 (01:35):
Yeah.
Alright.
Combined future of the wholeindustry is riding on you in the
answers that you give us today.
So hopefully you had a bigbreakfast this morning and are
ready to tackle this, but let'sstart out just, I mean, Jake,
you're kind of a, you know,everybody knows Jake because
you're such a personable personand everyone, you know, you've
been in the industry for a longtime, but there are probably
(01:56):
some of those out there who arenot as familiar with you.
Can you give us just a littlebit of background of, you know,
how long you've been at Unitedhow'd you get in the position
that you're currently and justkind of set the stage for us?
Speaker 4 (02:06):
Yeah, we'll do.
We'll do.
And before I jump into thatthough, Roger, I do want to just
thank you for giving United theopportunity here to talk to your
clients.
You know, it is so important.
I think, you know, it's a clichethat communication is key and
it's everything, but in asituation like what we're going
through now, it really is.
And so having platforms ofreally trusted industry partners
(02:27):
like ad Travis or United to helpamplify our message is just so
important for us.
So thank you for giving us anopportunity here to speak to
your clients and to yourpartners and prospective
clients.
And, uh, yeah, a little bitabout myself.
I've been with United for about13 years now.
I actually started my airlinecareer while I was in college.
I worked on the ramp my entiretime through college.
(02:48):
And so it was a great intro tothe business to kind of see how
the operation works.
And it taught me a lot.
And I, you know, frankly, manyof the things that I still keep
with me today, like city codes,for example, you have to marry
all the city codes as sortingbags.
And, uh, so it was a great introto the business and it taught me
so many things about work ethicand, and even leadership had an
opportunity when I was 19 yearsold to be a supervisor on the
(03:10):
ramp and learned a lot at anearly age.
I also learned that I don't wantto work on the ramp for the rest
of my life.
And it's not a knock to anybodythat does that.
It's just, it is hard, hardphysical force.
And so I did keep my nose to thegrindstone and got through
college.
First job out of college waswith British airways and sales.
And then I worked for Northwestairlines for about eight years
and then joined United as themanaging director for the
(03:31):
central division and Canada, andthen have had an opportunity to
really manage every singledifferent part of the United
sales at some time or another.
I went to Hong Kong for a whileto manage the most or Asia PAC
division there.
After the merger, I managed theglobal accounts corporate
division for the combined Unitedcontinental.
And I managed our internationaldivisions.
(03:52):
I think the moral of the storyis I just can't hold it.
Speaker 3 (03:55):
So, uh, but
Speaker 4 (03:57):
Little by little I've , I've gotten a chance to build
experience in every part ofsales.
And then when my predecessor isthe same today, Philippian
retired two years ago, I wasgiven the opportunity to lead
the whole team, which is a greatprivilege.
And that's the quick and dirtybackground.
Speaker 3 (04:12):
Yeah.
Well, and obviously, as you say,you know, just been in the
industry for a long time, youyourself are an industry icon
and you know, and so when I saidthat these are unprecedented
times in the industry, I know,you know, I've been in the
industry about 40 years, causeI'm a little bit further down
the pathway than you are on Jakegaining, but I've never seen
(04:32):
anything like this.
So I know one of the firstthings that everybody wants to
hear is kind of like, okay,well, where are we now?
You know, this is the middle ofJune in 2020, and where are we
now?
Because you know, 60 days intothe crises from a United
airlines perspective,
Speaker 4 (04:48):
Thankfully we are definitely seeing some
improvements.
We're seeing provementsequentially every week and you
know, the real strength that'scoming now is more on the
leisure side.
And so we're seeing a lot of VFRtraffic, you know, people have
been cooped up for so long nowand they want to get out and see
their friends and family.
And so we're seeing a lot of VFRtraffic.
That's central America, LatinAmerica, really all over the
(05:11):
country.
I think unprecedented is asevere understatement.
Nobody's ever seen anything likethis before.
Roger.
Speaker 3 (05:17):
Yeah.
Well, it's very interesting thatleisure is leading the way I
really would've thought itwould've been the other way
around.
So that's something that's, as Isaid was not something I
would've thought of would be thecase, but you know, in looking
at the corporate and I agreewith you, you know, we've were,
our customers are starting toloosen the travel policy and
say, okay, now you can travel.
You know, we're not going to putsuch a broad stop on the
(05:39):
program, but I think gettingpeople back in the airplanes and
back on the road that has a lotto do with traveler confidence.
But can you just kind of give usan overview of really under that
banner of traveler confidence,how is United working to gain
that confidence of the travelerget back out on the road?
Speaker 4 (05:58):
Yeah, no, that's a, that's a great question, Roger.
And actually that's, that's theessence of where we are now.
And, and I, I think it even goesbeyond just traveler confidence
as well.
We also need to build confidencewithin executive teams and
within travel management teamswith our customers because
ultimately, you know, forbusiness travel, the decision is
generally not made by theindividual traveler.
(06:20):
They have to concur of course,but the decisions on when to
travel and under whatcircumstances are generally made
by management.
And so we need to buildconfidence both in management
and then of course for thetraveler as well, because even
if management authorizes travel,the traveler themselves have to
be confident.
So we know that that'severything right now.
And we actually, in order tohelp instill that confidence, we
(06:41):
have come out with a brandedkind of cleaning program and
it's beyond cleanings.
I would call it United cleanplus because it acknowledges
that cleaning is really, reallyimportant.
And it's going to be one of thekeys to creating a safe
environment for customers onboard.
But it goes beyond that.
It's also things like socialdistancing, it's things like
hygiene with hand sanitizer withhaving wipes, for people to
(07:03):
clean their own space.
It's also about wearing masks.
And so it really is about havinga systematic industry leading
program that provides a cleanand safe environment with all
the other things that go alongwith safety.
And in fact, we're the firstairline is actually we've backed
that whole cleaning program upto before the journeys and
(07:25):
begins.
And so at check-in now Unitedcustomers are asked to fill out
a questionnaire and we'recalling it ready to fly.
And it's a, it's a short healthquestionnaire that makes sure
that they haven't beenexhibiting any symptoms or
haven't been around anybodywho's been diagnosed with COVID.
And then we're also asking themto acknowledge that they will
(07:45):
comply with the maskrequirements and the masks are
required now throughout thejourney.
And of course, if somebody isdrinking or reading, they can
take their mask off.
When they're going through TSA,you need to take the mask down
so people can see the ID, butwere conceived their face and
match it with the ID.
Right?
But ultimately we want customersto be ready to fight.
Part of that is, is having amask and making sure that that
(08:07):
they're not symptomatic.
And then advice actually camefrom the Cleveland clinic.
And so part of this queen plusinitiative was to partner with
really well respected brands inhealth and safety.
And one of those is Clorox.
And so a lot of our disinfectiontechniques and products now are
coming from that partnershipwith Clorox.
And then Cleveland clinic isgoing to be an ongoing partner
(08:29):
to ours.
As we continue to learn moreabout covert, we're going to be
able to continue to create moreand more safety practices.
And that's just one example ofthe most recent one that came
from a recommendation of ourgreat partner, the Cleveland
clinic on United claim plus.
Speaker 3 (08:44):
Gotcha.
And as far as overall, are youfinding that your travelers are
embracing what you all have doneon the clean plus program?
Speaker 4 (08:53):
They really are.
And for some reason, somepsychology behind that, I think
relative to, I think airplaneshave always incorrectly, but
have always been viewed as aplace where, Hey, I'm stuck in a
small metal tube, but lots ofother people, I think people
have always been somewhatcautious and that's not a bad
thing, but you know, the realityof the fact is that COVID has
not been transmitted onboardairplanes and many people don't
(09:16):
know that they think that that'sa very likely place for it to
happen.
It's actually one of the leastlikely places for it to happen
because of the air filtration onboard, the HEPA filters, which
everybody's been hearing so muchabout like operating quality air
filtration, that air is filteredevery two to three minutes for
the whole cabin and combinedwith external air.
(09:36):
Also the air flow in theaircraft is from ceiling to
floor.
And so it doesn't lend itself todroplets propagating kind of
horizontally throughout theaircraft.
They kind of just dropped to thefloor and pull into the filter.
And also just the way thatpeople are sitting in a way that
it's configured.
I mean, there's a naturalphysical barrier between you and
another customer in front of youbecause of the seat and the seat
(09:59):
pack.
And so in reality, you know,transmission on board airplanes
is essentially nil, but it's aplace where people have always
felt kind of a sense of cautionand concern there.
And so because of that, we arefinding great compliance that
people are interested in orcleaning practices.
And they're generally complyingwith the things that they need
to do and the important things,everything, everybody knows, the
(10:21):
important things right now arewearing a mask really, really
important, making sure thatyou're washing your hands
frequently, that you're using ansanitizer and that you're not
touching your face.
And most importantly nottraveling when you're sick and
if people are doing thosethings, I think we're going to
be able to continue to provide avery safe place for people going
forward.
Speaker 3 (10:39):
So kind of shifting gears just a little bit, as you
talk about, you know, in 95 and98% drop in revenue, obviously
that impacts the company andfrom a managed travel
perspective, you know, we lookat it and say, well, gosh,
there's a lot of technologyinvestments that I know a United
was in the middle of when thiscrisis hit.
So just wondering if you couldtalk a little bit about how is
(11:02):
this current crises impactingyour technology investments and
specifically, you know, NDC,because that's what everybody's
talking about is NDC.
Speaker 4 (11:12):
Yeah.
Well, we're, we're staying thecourse on NDC.
I mean, there's kind of, youknow, there's kind of a couple
of pictures here from the 30,000foot level.
When we think about our financesover the short to medium term,
it's all about liquidity.
It's about reducing our cashburn rate.
It's about reducing our costoutlays.
And it's about having a largecapital balance as large as we
(11:33):
can have of capital so that wejust have an opportunity to
weather the storm.
We're now convinced and highlyconfident that we can do that.
We had a tremendous treasuryteam and finance and, you know,
really a concerted effort acrossthe company to position
ourselves to better weather andconfident.
Now that that's going to be thecase, even if we have a
sustained low level of demandfor quite some time, we were
(11:56):
kind of beyond that.
But relative to NDC, we actuallyare far enough along with the
investments that we've alreadymade, that a lot of what
requires us to, to be able toconnect through API APIs on NDC
is just the actual execution onthat.
And so we are full speed aheadand continuing to respond to
(12:18):
clients.
In fact, we've seen an upsurgein interest in that for many of
our TMC partners.
And so we're going to continueto stay the course on NDC.
I do think that there are goingto be, you know, many technology
investments that may have to getdeferred a little bit.
And you have to imagine that ifwe're in a situation where we
are, you know, negative cashflow right now, and we'll be
(12:39):
likely for some time that, youknow, we're going to be dipping
into savings and we're going tobe taking out more loans.
And so when we come out of thisand we get back to a point where
we're earning a margin, again,much of that profit is going to
have to go back towards payinginterest and paying down those
loans.
And so just by necessity, Imean, the math just says, you're
going to have less available toinvest, and we're going to
(13:01):
prioritize those investments andplaces like, you know, safety
and, you know, the innovationsthat we think we're going to
continue to be able to deliveron, on the health and safety
front.
And of course, you know, as weget out of this, we have our
normal capital planning process.
And, you know, I think if we'vecome out quickly and the economy
is still doing okay and there'sdemand out there both business
(13:21):
and leisure, then of course, alarge component of our capital
always goes towards aircraft.
And so we just have to see howlong this lasts and kind of what
our financial condition is andwe get out of it.
And then we'll kind ofreprioritize.
What are our capitalexpenditures look like beyond
that, but NDC full speed ahead.
Speaker 3 (13:37):
Gotcha.
And in a component of that, youknow, where everyone kind of,
you know, everybody can see isthis next generation storefront,
which, you know, we've seen thatout there in the industry and
been a lot of talk about it.
Some people are embracing it andyou know, some of the online
tools are not as gung ho to makethe investments into the next
generation storefront.
And so could you just give us alittle bit of an update on that
(13:59):
kind of wears you not asposition.
And is that something that youfeel is key in the corporate
market space to get that NGS outthere for what you want, the
vision you have for Unitedairlines?
Speaker 4 (14:11):
Well, I mean, look, we, we think that if executed
the right way and if there'sconsistency in, or even beyond
consistency, more like universaladoption and NGS, then we do
think it can be helpful becauseit does give customers an
opportunity to do easiercomparison shopping.
And so I think conceptually, welike the idea, but the devil is
(14:34):
in the details cause we do needto make sure it is a true, you
know, light for lightcomparison.
And even, even with NGS, we haveseen some circumstances where it
hasn't been, you know, applesversus apples in the same
column.
And so I think the devil isgoing to be in the details
around both more of a universaladoption by all suppliers and
also just consistency and thedefinitions.
(14:58):
And so that's kind of where weare now.
It's probably why it's takenthis long to kind of come up
with some standards and to rollthat out more widely
Speaker 3 (15:07):
Southwest announced, they were really making a new
focus on the corporate, thebusiness traveler and have moved
to participating in the GDS,which used to be like a religion
with them.
They weren't going to, you know,they weren't going to be
involved in the GDS and they've,and they've moved over and at
least gotten into one of the GDSis at this point, as I see that
(15:27):
as their entryway into themanaged travel programs of the
corporations.
So just your thoughts onSouthwest have been out there
for a number of years, but thiswas kind of a new initiative for
them.
Does that change anything atUnited?
Speaker 4 (15:42):
Yeah, look, I mean, Southwest is, is a five
competitor and, and I, you know,kind of niche corporate airline.
And I don't think that they'vehad very much success in large
or global corporations, whichhas kind of been our, our
wheelhouse, but certainly theyhave some appeal to, you know,
the independent business personor the small business.
But it's hard to say that, youknow, they're in the GDS are
(16:04):
gonna be in the GDS when theydon't have an agreement with
Sabre who we know has, you know,kind of the largest penetration
here in the U S so we alwayswelcome competition and, and
certainly welcome Southwest tocome compete on our turf in the,
in the corporate space, becausewe think we've got great
relationships, we've got broaddistribution and we have a great
product that appeals to theglobal, uh, business traveler.
Speaker 3 (16:27):
Yeah.
And speaking of the product, youknow, and that is one of the
things that, uh, United has beenvery successful at is over the
last couple of years ofproviding a differentiated
experience for their mostfrequent travelers.
And with COVID kind of blew thatall up, you know, the lounges
are closed the upgrades and youknow, it just completely changed
(16:49):
that.
So could you talk a little bitabout, okay, as we ramp back up,
how do you get back todifferentiating the experience
for your most frequenttravelers?
Speaker 4 (17:00):
Oh, you can see it today.
If you want to, to Roger, justby taking head out to the
airport,
Speaker 3 (17:03):
There you go.
Yeah.
Clubs
Speaker 4 (17:06):
Open it at every one of our hub locations.
And, and to the extent customersare buying tickets and heading
back to the airport insufficient numbers, that we're
going to open the rest of ourclubs.
And to the extent they're flyinginternationally, we're going to
open our Polaris lounges and weare still offering all of those
kind of the extras.
And we are still allowing ourtop tier premier members to
board early.
We are still doing ourcomplimentary upgrades into both
(17:27):
economy plus, and the firstcabin, we're all still also
still offering the bonus miles.
Also our miles never at Byron.
So those bonus miles, actuallyfor premier members, it's like a
currency.
And a lot of people spend a lotof time figuring out how to
spend that currency.
And so I think there's stilleven today, even in this
circumstance, I think there'sstill a tremendous amount of
both differentiation and valuein the premier programs.
(17:50):
And it is true that we're not,we don't have most of our spoke
lounges are not yet open.
And so it's not, you know, Idon't want to say it's the exact
same experience, but we do thinkthere's still a differentiated
experience for our premiermembers.
And there is still a tremendousamount of value in that premier
status.
And so we just need people tostart using it again and buying
tickets and getting on here.
Speaker 3 (18:11):
Yeah.
Yeah.
Well, and that's important.
Cause I know prior to covert, Iwas a frequent business traveler
and it does really help with theexperience and again about
talking about confidence andcomfort and all that, to have
those perks that make the travela little bit easier.
And so I know there's, I've beengetting personally been getting
questions from folks about, Hey,am I going to be able to have
(18:32):
that same type of experience?
So that's good to hear thaty'all are really staying focused
on that.
And as much as you can offeringthese frequent business
travelers, you know, making thatwhole process a little better in
their eyes than just thestandard experience.
Speaker 4 (18:46):
Yeah, absolutely.
And I'd say maybe just the twothings that I'd add on to that
one is, is that for all thosepremier members, just
recognizing that it's going tobe a light travel year this
year, we've already had goneahead and rolled them over for
full year 20, 21 and two theirsame premier status.
And then I think the other thingthat's important for your
customers to know is that wealso have our corporate
(19:07):
preferred program.
And this is almost like if likepremiere status plus.
And so whatever premiere statusyou hold and where that would
put you on the list for thingslike upgrades.
If you also are flying on acorporate tour code, you get,
you know, kind of that statusplus.
And so if you're a gold memberand you're flying on a corporate
tour code, you actually wouldget upgraded before all the
(19:29):
other gold members.
And so, and thosedifferentiation, you know, that
that differentiation is still inplace as well.
And so, you know, just as, Hey,we love all of our customers.
We love our premier members evenmore.
And we love our corporatepremier members.
Even more than that, we're stilltaking good care of everybody.
Speaker 3 (19:45):
Good, good.
Well, in one of the otherconcerns that I've heard or
topics that have come up isthis, you know, managing the
supply, as things start to rampup, I know you've parked a lot
of airplanes.
You've got, you know, pilots andflight attendants who are either
furloughed or at least, youknow, they're not just sitting
there ready to jump on a planewith five minutes notice.
(20:07):
So how are y'all doing that?
How are you making sure thatyou're able to match the supply
to the demand?
Is it, you know, have you gotthat to where you're, you're
pretty nimble.
Speaker 4 (20:18):
That's a great question.
And that's exactly, I mean,we're spending most of our time
right now in the operationworking on exactly that problem
because we do, we don't want toput capacity back before the
demand materializes.
That is a formula to just haveyour cash burn skyrocket, which,
you know, no airlines can affordthat.
And so we don't want to come outtoo quickly, but also we don't
want to come back too slowly andmiss any opportunities.
(20:41):
And so what we're trying to dois Darien realize our cost
structure.
And essentially what that meansis that we would like to have,
as many of our costs reallyfluctuate with our flying volume
and, you know, the way thatworks today in the airline
businesses, everybody has kindof a minimum number of hours
that they're entitled to work.
And if we add up all the minimumhours that everybody who's
(21:03):
employed for United, you know,that gives us a schedule way
more than what demand would beable to satisfy today.
So we wouldn't have moreflexibility and being able to
flex people's hours up and downso that we actually don't
furlough anybody, which wouldthen really make it a lot slower
for us to be able to bring backcapacity because you'd have to
hire people, you'd have to trainpeople, they'd have to get their
(21:24):
currency requirements met.
And so we want to keep everybodyon the payroll, but just pay
commensurate with the number ofhours that we're actually
flying.
And so that's really been thekey for us and that's going to
be the focal point of thebusiness as we try and
variabilize demand.
Now, the other big challengeinherent in that question is
(21:45):
understanding what the demand isgoing to be at any given time.
And anybody that's kind ofwatching airline capacity
probably has noticed that we'vegot a few competitors that are
putting a lot more capacity outthere than we are right now.
And in fact, an amount ofcapacity that isn't really
justified by the current levelof demand.
And clearly what, you know,they're just looking at forecast
(22:06):
that shows something differentthan what we're seeing today.
And so they would expect demandto come back much more quickly.
We're seeing some competitorsput back essentially half of
their capacity.
And right now we're still seeingdemand down like 80%.
And so, so that's too muchcapacity for where demand is
now.
Obviously they're seeingsomething different than what
we're seeing.
If the demand that they'reseeing ends up materializing
(22:28):
then will be about 30 to 60 daysbehind them.
We'll be able to quickly rampthat demand up.
But we think it's prudent to bemore cautious so that we can
manage that cash burn.
If that demand doesn't actuallyshow up, they'll ultimately
probably either end up cancelingflights or just absorbing the
higher level of costs, then theycan pay for it with where
revenue is going to be
Speaker 3 (22:48):
October one.
This is a date that will live ininfamy possibly.
And you know, it's the date thaton, you know, under the loan
agreements that most, all thecarriers were able to take from
the government.
You know, it said, Hey, youcan't fire or lay anybody off
until October one and you can'tdrop cities, you can drop
(23:10):
frequencies, but you can't dropcities for the most part until
October one.
So what's going to happen, youknow, and I know this was a
little bit of crystal ballinghere, but I guess, you know, for
our travel managers out there,could you give them some insight
into how is United looking atthis October one date and what
could they anticipate?
Is it going to be that all of asudden, boom, you know, half the
(23:33):
capacity comes out of the citiesand all of a sudden you're not
serving near the number ofcities you were before.
Just what does October 2nd looklike in your mind right now?
Speaker 4 (23:43):
Yeah, I mean, w and without being evasive, it's
just, we don't know, because wedon't know where demand is going
to be, but I can tell you thatour entire network strategy is
predicated on us being able toserve small cities.
And that's how, you know, that'show we make hubs work.
And that's how we're able tooperate.
They international or bigTranscon long haul service is by
(24:03):
consolidating two customers fromhere, four customers from there,
five customers from somewhereelse consolidating all of that
business in a hub so that we canfill up, you know, a triple
seven going to Hong Kong.
And so, and so our networkpredisposition, our planners,
predisposition is we want to flyas many of those smaller cities
as we possibly can so that wecan consolidate traffic and keep
(24:25):
the hub operating in a, in ahealthy manner.
So I think that thepredisposition, I don't expect
there to be any real reductionsin, uh, in any of the cities
that we serve for that reason,but it is going to depend on
demand.
And certainly, you know, we, wedon't want to have a situation
where we're underwater on aroute and you can't really see a
(24:46):
way out of that because we'renot seeing a recovery and
demand.
And so I think we would be,we're going to scrutinize any of
those incredibly, incrediblyhard.
And the predisposition is goingto be that we keep our network
fully intact.
Speaker 3 (24:59):
I believe in your earnings call.
Y'all did give a little bit of aforecast of what you thought the
recovery would look like, and,you know, can you share
anything, you know, for ourtravel managers out there, as
far as, I mean, are you thinkingthat, you know, that it'll be
50% by the end of the year 30%by October, how's United looking
(25:20):
at the slope of that recoveryfrom a planning, from planning
side of things.
Speaker 4 (25:24):
Yeah.
And I'll start by saying anybodythat says that they know what
this recovery is going to looklike is wrong.
We're aligned for both, becausenobody really knows, but, but we
do have a lot of differentforecasts and we use a lot of
different inputs to make thoseforecasts.
The input that we think is mostcredible is when we talk to many
experts that we actually consultwith on a regular basis that are
(25:46):
more the scientists, theepidemiologists, and people that
know about propagation diseases,the people that can kind of try
and project as best as possiblewhen a vaccine may be available.
And then what impacts thosethings would have on all sorts
of kind of social activities,including flying for leisure or
for business.
We kind of use that input tomodel.
(26:07):
We think the most likelyscenario is that until there's a
vaccine and we'll get to about50% of previous demand levels
and just kind of flat line thereuntil there's a vaccine that
gives everybody that confidencefrom a population standpoint to
kind of get back to life as itwere before.
And so where we are now, likekind of down 80, what we're
(26:27):
essentially doing is projectinga straight line between now and
the end of the year.
So we'll be climbing from 80 to50 on a straight line until the
end of the year, and then staythere until there's a vaccine
that both is, is effective andsafe.
And that's been, um, you know,essentially the population has
been vaccinated or enough ofthem to keep the disease from
(26:48):
being able to continue topropagate.
And, uh, so that's where ourforecast is.
That's where our planning is.
We obviously have lots of modelsthat would enable us to flex up
or down from there, but that'skind of our base case.
And we're working off net ofnow.
Speaker 3 (27:01):
Yeah.
You know, it's kind of whenthose things show, one of those
models is going to be correct.
It's going to be spot on now,figuring out which one of those
models it is.
That's that, that's where, youknow, that takes a, a little bit
of luck in there.
Agreed, agreed.
That that's the tough part,because somebody's going to
point back and said, see, mymodel had this exactly right.
(27:22):
You know, you talked about, youknow, Hey, getting life back to
normal and that, and, and rightbefore this crisis hit, you all
had to change at the top of yourorganization.
You know, Scott Kirby took overand as the CEO from Oscar.
And so just your thoughts onlife under Scott, you've now
been a couple of months intothat.
Speaker 4 (27:43):
Yeah.
Well, it's, you know,fortunately Scott was a known
entity for us.
He's been with United for aboutfour years now.
I've had a chance to work veryclosely with him during that
whole period of time.
And so I have a real good senseof who's got Kirby and he's, he
is a very engaged, veryinvolved, very energetic,
(28:03):
driven, ambitious.
And I'd say a bit aggressive.
And I think in normalcircumstances, you know, you
could say a bit of a risk takerand that part of him certainly
isn't playing out right now.
Uh, you know, B has been morecautious, I think really from
the beginning on nest, but Scotthas been working side by side
with Oscar really, since he cameto the company, Oscar Munoz who
just retired as the CEO fromUnited.
(28:25):
And so we've had a chance to seea lot of Scott's strategies and,
and working style.
And so it really hasn't been asignificant change for us.
I will say the one thing thatwas maybe a little bit of a
surprise to me, and I think aconcern for many people is Oscar
was a beloved leader withinUnited.
He just had such a way ofconnecting with the entire team,
(28:47):
particularly the front line, andjust had a certain amount of,
you know, warmth and, andcharisma.
And he built a tremendous amountof trust with the frontline
because he did what he said hewas going to do.
And, and he didn't always dothings that were liked by the
frontline, but he, he listened alot and things that he felt like
(29:10):
I had merit and that were goingto help frontline and help our
customers.
You followed up on any backthose things up.
And so he was, he was beloved,but I think he was beloved
mostly for just his warmth andengagement.
He loved being out at theairports.
He loved being in our hangersand, uh, and even, you know,
walking around our conferencefloors at our headquarters in
Chicago.
And so people weren't sure whatto expect of Scott.
(29:33):
Now, I've seen that side ofScott before as well.
And it's, it's different,certainly is not an Oscar clone,
but I can tell you, his humanityhas come through strong as we've
gone through this crisis.
And I think a great example ofthat is just with everything
that's been happening relativeto race relations and social
unrest, he came out with a verydefinitive statement about a
(29:55):
zero tolerance workspace for anyracism and, and made a personal
commitment to raise the dialogueand, and use United's platform
as being a well known companywith a large voice to actually
do something about it and notjust within our own halls, but
for society as well.
And so that was certainly a moveamong many others that have
(30:16):
helped to really ingratiate him.
And, and, uh, and you know, Ithink a lot of the popularity
of, of Oscar has rubbed rightoff on Scott.
And so anybody who had thatconcern I think is going to put
that to rest.
Speaker 3 (30:27):
I know United is in good hands with him leading the
charge.
When you look 12 to 24 monthsout, what does success look like
for you and your teams inworking with the corporate
travel managers and your TMCpartners, and also United in
general, kind of, you know,where do y'all want to be 1224
(30:47):
months down the road?
Speaker 4 (30:49):
Yeah, well, I think that one's pretty straight
forward.
I'll, I'll actually start withthe high level answer first.
And this is what we, you know,one of the things we love about
Scott is his vision andparticularly his ambition around
achieving that vision.
It's just contagious.
It's just, everybody is excitedto be a part of the mission.
And his ambition is he wants tobe the best airline on the
planet.
(31:09):
And the way that you do that isyou serve your customers better
than anybody else does.
And so he really has energizedall of our customer service,
frontline professionals byarticulating that mission.
We want to serve our customerswell, we want to have the
highest customer satisfactionnumbers in the industry.
And, and he's also going to givethem the tools and resources to
do that.
So he doesn't just say, Hey, goout and do that.
(31:30):
Customer satisfaction isimportant.
Go make it happen.
But he also says, what do youneed to make that happen?
And then it delivers theresources that are necessary to
be able to deliver that.
And so that is a real, you know,kind of, uh, you know, one of
these cycles that is justself-sustaining because the more
people get the tools, the moreenergetic and energized they are
(31:51):
to use those tools to servetheir customers well.
And then the happier thecustomers are, and then the more
engaged the workforce gets.
And so first and foremost, wewant to be the best airline for
customers.
The other way you can be thebest airline for customers is by
flying the places that they wantto go to when they want to get
there with the least amount oftotal journey time.
And so that's really all aboutour network growth strategy that
(32:14):
we've been on for going on threeyears now.
And I suspect it's going to bedependent on demand.
It really is.
And that's the big unknown now,but when demand does return and
it will, then we're going topick up where we left off
relative to that network growthstrategy.
And ultimately we think becauseof where our hubs are positioned
(32:34):
in the biggest business demandmarkets, and because of, you
know, our absolute determinationto serve our customers better
than anybody else can, we thinkwe've got a lot of runway ahead
of us to be able to continue to,to grow.
And that's just a real virtuouscycle that we can make, you know
, better profits.
We can put those profits backinto our customer initiatives
(32:56):
and attract more customers and,you know, that will, that will
keep going.
And so that's what I'm really,really excited about on the
managed travel side, we've kindof adopted the exact same
approach and that we, in fact,this year for the first time, it
set out goals were four goalsthat we had.
The one that was weighted thehighest and was first on our
list is customer satisfaction.
(33:18):
And we've for a long timemeasured our B2B customer
satisfaction.
So we want to know how we'redoing for you, Roger.
And we probably asked you thatin surveys a few times a year,
and we also want to know ourcorporate customers, what their
travel managers think of us.
And we want to know, you know,what the TMCs who are serving
those corporate customers mightthink.
So we did a lot of surveying tounderstand our B to B sentiment.
(33:41):
What we hadn't done beforethough, is measured the
sentiment of the travelersassociated with those B2B
accounts.
And we actually took that on forthe first time this year.
And so we were going to reallystart doing more around,
engaging with you, not just on,are we serving you well, Roger,
do you, your team have the toolsthey needed to do their job and
are the programs structuredappropriately, but also how are
(34:04):
we treating your travelers,right?
And what are the, what are thethings that we can do to improve
your travelers perception of us,and then you as a partner for
advocating for them.
So we're going to get right backon track with that, obviously
this year, you know, we've hadto take a detour on just about
everything that we set up forgoals, but we can get right back
on track with that.
And really the only limiter nowis, is the information we don't
(34:26):
have enough corporate travelerstraveling to be able to get
statistically valid samples onthe surveys so that we can go
back and do something with them.
So as soon as we get the volumeback, we're going to be right
back on track with thatinitiative as well.
Speaker 3 (34:39):
Good.
So the future is bright.
The future is riding tonight.
Speaker 4 (34:42):
Well, I think so we just got to get, we just got to
get out of this, uh, this darkspot now.
I, you know, we know it won'tlast forever and I, and I do
feel like we're gonna be able topick up right where we left off,
uh, when we, when we do get out
Speaker 3 (34:54):
Yeah.
And share it very much share thesame sediment as, uh, as that
we're, you know, looking,looking forward to getting this
behind us.
And again, the confidence isthere that the industry is going
to come back.
There's just so, so much goodthat comes out of this industry,
that I know that, you know,people are going to be getting
back to it as soon as they can.
And as soon as they feelcomfortable about it and, you
(35:15):
know, Jake, I really appreciatetaking the time to join us today
and give us a little bit ofinsight into United, how you're
handling this crisis.
And most importantly, how, youknow, looking beyond the crises
and what are we doing to keepgrowing in the industry.
And I know I mentioned that, youknow, Scott has came in and took
over for really an icon inOscar.
(35:36):
And, and you kind of did thesame thing a couple of years
ago, you came in and had to stepinto some shoes of, of Dave.
Who'd been, who is an industryicon and, you know, been in here
for years and years.
And I have to tell you thateverything I see personally, and
all of the input that I get fromdifferent people in the industry
is you, you're doing a great jobof filling those shoes.
(35:58):
It's, it's really been fun towatch.
I think there was some, a littlebit of concern out there as, Oh,
Hey, this is going to bedifferent now at United, but
you've really done an excellentjob of rallying your team up
under you and really deliveringon what you said you wanted to
do when you took over theposition.
So, so hats off to you for the,you know, the times you've been
in this, uh, position and hatethat you get this test, you
(36:21):
know, shortly after in beinginvolved in it that, Hey, let's,
let's take 95% of the revenueand throw it out the window.
Yeah.
Let's blame the sales guy forthat
Speaker 4 (36:33):
Truly do appreciate those, those kinds of comments.
And it means it means even morecoming from you because I've
known you for a very long time.
And, and I know you're a toughgrader.
Uh, and so, so I appreciatethose comments.
And, uh, and you're right.
Dave had some very big shoes tofill.
I learned a lot from him.
I haven't had a chance to workfrom him.
And I really credit my team whohave been, I think, energized by
(36:55):
the direction that we're headedin and everything that's
happening with the company.
And they're the ones that reallymake me look good.
But, uh, but we just trulyappreciate the partnership with
ad trap and you all do such atremendous job for your clients.
And I believe me, I know I'vehad you knocking on my door on
more than one occasion with somethings that we need to do to, uh
, to make things right with,with customers.
(37:16):
And so I know you're a big, abig advocate and your whole team
is for your clientele as well.
So, um, so it means a lot to methat, to hear those words coming
from you.
Speaker 3 (37:24):
Yeah, well, absolutely.
And, and again, appreciatetaking the time to give us the
update on United.
This is a time, and we're allgoing through here that we
never, I don't think in ourwildest dreams thought we would
be navigating through thiscrises like we are today, but we
will get to the other side.
So, and United sounds like it'sgoing to be very well positioned
(37:45):
once we get to the other side.
So again, Jake, thanks fortaking the time, a big thank you
to our, to our listeners aswell.
We appreciate you tuning in tothe Roger that podcast and be
sure to listen for futurebroadcast.
Speaker 2 (37:59):
Thanks for listening to this episode of Roger, that
the business travel podcast,like what you hear, check out
more episodes, highlightingcurrent industry trends and
events@addtrev.com forward slashpodcast, or subscribe to Roger
that for more information on howyour company can travel smarter,
visit[inaudible] dot com[inaudible]
Speaker 5 (38:37):
[inaudible].
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