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