Bloomberg Audio Studios, Podcasts, Radio news.
Scott.
Great to see you after a quarter. We did beat expectations, but cut guidance. We'll get into all the numbers. I want to start with the big news over the past couple of weeks. Are you going to buy American Airlines?
Well, thanks for being here in first liason and first I'm not gonna comment on that, but I will tell you a little bit about repeat some of the things that I that I've said in the past. And first, it was a great quarter, even though fuel prices doubled. You know, the team that you know I did an incredible job and really a look full guidance given guidance for the full year. Being able to be solidly profitable
even in this escalating fuel price environment. I think is really the entrege of where we want to go for the future, which is we've built a brand loyal airline by a tracking customer by giving them quality, by giving them value, an airline that customers love and that you know, gives us resilience in tough times. But it also lets us think about what's the next phase for United Airlines.
We've spent the last couple of years thinking about We've proving that this strategy to where brand loyal customers works, But how do we become.
A truly globally competitive airline.
Now I don't have the nentwery yet, I'm not saying anything specific about what they are. But today there's a big trade deficit in the United States with foreign flagged airlines, and they fly sixty five percent of the long haul seats into the US, even though only forty percent of the customers are foreigners. And that trade deficit is bad
for United airlines. It is bad for US aviation. It's bad for US workers because we actually create some of the really best jobs with the best benefits in the country, not just jobs but careers. And it's bad for the United States of America. And so I would like to solve that and create a truly global, great airline that all US citizens can be proud of.
So it's important, in other words, for the United States to fortify its airline industry with the competitor in mind, not necessarily of the big three in the US of American, United, and Delta, but internationally with some of the long haul carriers that you see as really the main competition for the United.
States is acrea.
You know, I feel like what we've at United have done here in the United States.
By building a brand loyal airline, you know, we.
Really have attracted all the brand is certainly in our hubs. We've attracted the brand loyal customers, and we've won huge market share kind of everywhere that we fly by being better, by being high quality, and that's what's caused us to win. And I think the next phase for us is can we take that around the globe? Can we do that everywhere that we fly? And look, there's some really good airlines in the Middle East or some really good airlines in Asia, and they do some things better than us,
But can we create a US airline? And I don't have the answer, dot hundred percent sure we can do it, and not proposing any specifics today, of course, but it's an aspirational vision that I think United is in a unique position to go after because of the success we've had, because our people are great, because of the investments we've
made in product and technology to get there. That we're in a end, because we have the willingness to try to do big things that we are in a unique position to try to achieve that and do something big for United but also for the country.
You've been really vocal about how it's an opportunity when there is a crisis or when there's serious pressures in the industry right now as high oil prices to potentially pick up other assets that could be distressed, others that are weaker, that are falling out of favor. Are there characteristics of airlines that you would consider taking over, assets that you would potentially acquire in this type of period.
Yeah, you know, with one.
The best way to prepare for a crisis is to be prepared before it starts. We knew something would happen. I didn't know when we knew something would happen. So we're carrying triple the cash we had pre COVID. We've moved to the top of the industry profit margins, we have the best credit rating that we've had in over thirty years, and we're committed to getting to investment grade abalacy.
That gives us the ability to look through the problems the spike and oil prices to the other side and not have to make short term, you know, strategic bad strategic decisions. And as I look at assets like maybe they will maybe they won't come available. We've actually even had some discussions with one airline about buying some. But the kinds of things were most focused on are again back to this, how do we create a great airline for a decommoditize great airline for customers that can really
be stronger internationally. So things that support growing an international network are more interesting to us because that's where our focus and I think that's where our big future growth potential is.
President Trump gave a nod to you in a conversation yesterday talking about how he likes what you're doing. He said that he didn't really want to see a tie up between America and United I know you're not saying anybody, do you think that this is a more amenable period for tie ups than it has been in the past. This is sort of a window that airlines can capitalize on to execute mergers that have been hard fought in the past.
Well, I'm not sure, but that's certainly the market can sens us. That's what people think, and what I think it is, more than any think, is an opportunity to maybe, instead of looking at everything through the traditional lens, which is mostly a domestic lens, to maybe think about what does quality mean? What do customers want? What do customers really want? And I think we have proven it United.
Customers want great technology. People love our app it's so much better than any other airline in the world.
They like the information that we can give them.
People want great service, people want high reliability. Customers want a great product. You know, customers want value, and value is much bigger than just the price.
And customers want quality. They want value.
And I think, you know, whether it's this administration or not, I think thinking about what do customers really want?
It. Look, we have proof points like here in well three of our hubs where we had big competitors, three different hubs.
We want about twenty points of market share with the local community over the last year. Those are massive moves at an airline with against three different competitors that are biking those markets.
And it's all because we built a quality.
Airline that takes care of customers and put the customers first.
You've talked about how you are going to raise prices. All the airlines are raising prices, and we've seen this. Are you surprised by how little customers have stopped flying, how much demanded structure actually has been.
So you know, airfares have gone as well, goes up.
We need about fifteen to twenty percent increase in airfares to recover one hundred ultimately recover one hundred percent of fuel price, and so fares have gone up. But in real terms, you know, airfares in twenty twenty five or twenty seven percent below where they were twenty nineteen pre COVID, So we're just like starting to catch up. We haven't been caught up to inflation. Even with the increase in fuel prices. I did expect a bigger price less tessity
effect from customers. We've seen actually remarkably strong demand continuing even in the face of what are necessarily higher prices. What we are anticipating somewhere down the road that elastic blastasey.
Is real become one on one.
We all took it, and that that's going to happen and that there will be less demand. That's partly why are you know we're going to trim some flying out of the third Nothing not get to be rid of airplanes or changing anything strategically, but we're just going to
trim some of the marginals. The Tuesday, Wednesday, Saturday is the reradie flying out of the second half of the year, because I think both well as possibility of being higher for longer, but also in the face of higher fuel prices, there will be less.
Demanded, so we need to supply less to the market.
Is there any scenario where you could see cutting capacity more than that? I mean there's been discussion around fight flights to Europe getting canceled as a result of just simply a lack of physical jet fuel available to fly back.
Yeah.
Well, first, on the physical jet fuel, we have not seen problems yet. Prices are higher, but we haven't actually seen shortages.
But we're closely.
Watching everywhere on the globe, and in particular Asia and Europe are the two sort of hot spots that were most focused on, and it's not impossible that something like that would happen. I think we'll manage through with It'll be higher priced, but that we'll manage through without getting to shortages.
I hope.
So, even though it could happen, but even if there starts to be shortaged, I think what you'll see you've already seen it in Asia. You've seen a little bit already starting to happen in Europe. Is it's more likely to take short haul services out of the system than the long haul global flights. You know, there's options for shortthul you can drive, you can take a train, and
the global long haul to keep the world connected. I think will probably be the last in the tail of where flying would have to stop.
So probably going to be able to manage through it.
In the meantime, we've seen other airlines really struggling internationally, left fans of for example, cutting flights. We've seen the Asian carriers really struggle as a results of just a physical lack of jecule. Does this give you an opening in some ways on the international scale, given the fact that they're facing some real constraints.
You know, we talked earlier about there may be opportunity in this. I doubt that it's anything because of what's happening on international carriers. That'll be a temporary phenomena. They're not going to give up slots. You know, I'd like to get more slots in other places, but people aren't
going to give up slots. I don't think over something like this, So I think the opportunity is more, how do we really create a great US airline that's folks on US citizens primarily and getting them around the globe. How do we eliminate that, you know, sixty five forty trade deficit.
Do you think it's appropriate for the government to give to get a stake in Spirit Airlines as we struggle to fortify the US airlines.
You know, on that point, Like, first, I think you can see this, even in this fuel crisis fuel spike, that well run airlines like United Airlines can say made solidly profitable. And I don't think that this is anywhere close to the US airline industry needing a bailout.
The kinds of things that have happened in the past.
And the problems that Spirit predate the run up in fuel. It was a fundamentally flawed business model, and I feel bad that, you know, like as much as we're competitive with them, Like, I don't want to see people lose their jobs.
By the way, a lot of them are coming to United.
I talked to all of our new hard pilot class, and every time there's a whole bunch of hands.
That game Spirit.
So but I don't want to see anyone lose their jobs. But this was a fundamentally flawed business model that I've been on the going back into the last administration saying it's going to fail because the business model doesn't work. And so I think the spiking fuel price is just moving forward by a couple of months.
I just want to finish up. You are the economist who has the most front row view to the American economy, more so than anyone else. Do you think now the economy is better or worse than people think it is?
You know, I certainly if I read the headlines, is better than what the people in the headlines said.
Although the stock market, you know, is acting like it's pretty good.
So people that are vote with their money, that aren't just experts on TV are seen to be voting that the economy is pretty good, and that's what we see. I think the risks are higher in the economy right now, you know, like.
What's happening with oil.
It's such an inelastic demand for oil, and if you get to the point where we have to have demand destruction to overcome oil shortages, I think that could impact the economy, but we just don't.
See it yet.
Scott Kirby, always wonderful to speak with you. Thank you so much. That was Scott Kirby, the CEO of United Airlines,