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I would love to welcome in Scott Kirby, the CEO of United Airlines, And Scott, it's really tremendous to see not only what you did, but also the fact that you see significant upside to the fourth quarter, and I want to just start there. Where do you see the acceleration in demand?
You know, actually you look across the full year.
The first three quarters were really good for United in a lot of macro volatility that happened for the aviation industry. That demonstrates the resilience of our revenue, diverse, brand loyal business model.
But you look to the fourth quarter, it's even.
More exciting because as the economy started to get back to a solid footing, at least for aviation, demonstrates a lot of upside.
We think we're going to be able to grow earnings for the full year even in this environment.
So it really is creating value for all of our customers all the way from basic economy to winning much higher market share in the brand loyal customers really is a great resilient strategy when times are difficult, but a lot of upside as the economy recovers here in four Q.
I guess I want to drill into the economy because Scott earlier in the year had been the economy section that had struggled the most. I'm just wondering how much it's picking up, whether you've had to discount tickets to bring people in to compete, or whether consumers are willing to absorb higher prices and take their trips.
Yeah.
Well, as we've talked about before, ALESA, the airline industries are a pretty good real time indicator of the economy, and you know, we saw for much of the first half of the year economic stress and ticket prices were lower as a result of that. But as we got into the third quarter, bookings at least for future travel,
the economy started to pick up. Bookings started to pick up, and as we finished the quarter, you know, we've set records each of the last several weeks on most corporate revenue that we've ever booked in a single week, and a number of records, particularly in business travel. Really kind of strong across the board, though internationals come back stronger.
At the period has extended.
Premium is obviously stronger than main cabin but really we've seen improvement.
You know, as we've moved through the third.
Quarter, kind of across the board on revenue streams, with the biggest strength in the corporate segment.
And that's actually something that we see across the board, particularly because they're all these deals, so people have to actually get on a plane and go see some of their clients. I am wondering, are you seeing international travelers tourists come back to the United States. I thought that was kind of a soft spot and a sort of a tell in terms of the international reputation of the country.
Well, our business is about eighty percent US point of sale. But we have and we saw a drop at international traffic earlier in the year. It's not quite back to last year's levels, but it has recovered and it's close to last year's level. So we did see a dep but even that has come back, and we think that's on the trend to getting back to normal pretty soon.
Are you planning to keep capacity pretty much the same? Are you expanding to Are you planning to expand or cut back? I know that it was trained earlier this year just because of demand, but as demand picks up, are you going to bring more planes on deck?
Well?
We've been growing, you know, in absolute growth, actually faster I think than in the airline in the world has ever grown for several years in a row. And that's worked really well for you nine and that's been successful. So we really haven't much changed our capacity. We tweak it here and there. The biggest change we're going to make for next year, I think is actually to reshape the seasonality of the year.
You know, one of the things that's happened that's good.
For our business is this third quarter peak has extended into the fourth quarter, and it's made the fourth quarter actually a better quarter from a margin perspective than the third quarter. And what we think is as that particularly international demand has extended into the fourth quarter, there's an opportunity for us to actually fly less in the peak in the third quarter, which would be good for our RASM.
But it turns out it's going to actually be good for our cost structure too, because we've we have to build staffing and infrastructure everything up to that peak for six weeks of the peak summer. And so next year we're going to actually try to reshape our schedule some to lower the peak and let the demand spread across more of the year.
I know, earlier this year when we were talking, you said that you do expect to raise prices by you know, single digits, just to compensate for higher costs. You see that on track the same type of price increases and our consumers okay with it? Are they absorbing it?
You know?
This year prices have come down, as we talked about, just you know, as there was echo macro volatility, at least for aviation. I do expect them to normalize next year, and I think just over time that you should expect to see airfares grow consistent with inflation is likely what's going to happen over time.
How much do you see staff wage increases? Also playing into this the idea that a lot of the people work for United are also saying, okay, well things are going up, we want.
To pay increase. Yeah.
A lot of people are the best in the world, and they deserve industry leading contracts. Every time we sign a new contract with one of our union groups, they expect and deserve and will be paid at the top of the industry. So that's built into our forecast, that's built into everything that we're doing.
One of the great things that we're doing though.
At United Is, I think we're the best in the world at managing our real core costs and being more efficient at the airline. We've invested heavily in technology. It helps us run the airline better. But like you look at the third quarter. You know the number of airlines that have talked about missing their cost guidance because of storms,
and there were storms in the quarter. But we've invested so heavily in our recovery tools that we had best in the industry cost performance, and we're driving our costs lower, not by taking things away from the customer, but by actually investing in technology that lets us run a better operation for customers and is lower costs at the same time,
and that also helps fund investments for the customer. We're spending over a billion dollars a year and incremental investments for the customer, but also importantly investments in our people and having them have the best pay and the best contracts in the world.
Scott, I love saying that you're my favorite economists to speak to.
You. You have this real time.
View of the economy, and right now what you're saying is kind of flying in the face of the weakness and some of the worries that we're hearing, whether it's from the government shutdown is going to cause disruptions, or whether it's the unemployment picture that people are increasingly worried about. How do you square those two things, This reacceleration that you're talking about with the weakness that policymakers seem to be so worried about.
Well, uncertainty really is I think what drives the economy in one direction or another. And there was a lot of uncertainty to start the year. As we kind of got into the third quarter and some of the macro issues, the Reconciliation Bill passed, and geopolitical situation improved, Tariffs settled into having some confidence what they're going to be. We saw that improved. Now we do now have new issues that things pop up all the time. What's happening with
the shutdown could become an issue. So far it hasn't been. You know, first, the FA is doing I think a great job of running the system. We have our lowest cancelation rate in the last decade, our second best on time performance.
The controllers are professionals.
There's not news about it, but the controllers are professionals view their job as safety view their job is taking care of the public, and kudos to them. They're almost all of them are showing up to work and doing their job. And has it the first couple of weeks of October. Has it really affected bookings? I think if this goes on for too long, certainly the risks escalate in the economies that goes on. I think the economy is better than most people think, but it's still tenuous.
It's still a little balanced on a knife edge, and we shouldn't have unforecedare So let's get the shutdown settled.
Scott Kirby, thank you so much for your time. I really appreciate it. That with Scott Kirby, the CEO of United Airlines,