United CEO Scott Kirby Talks Earnings

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Great to be here in Chicago and thank you so much. I am here with Scott Kirby, the CEO of United Airlines, after earnings came out. He really echoed what we heard from Delta, which was a first reporter, which is stability, solidness, a sense of recovery. You said, the world is less uncertain today than it was during the first six months of twenty twenty five. What was the inflection point where you saw that certainty come into play.

You know, this year a lot of uncertainty in the first half of the year at macro uncertainty and that led to an impact on bookings and demand at United and across the whole industry. But it felt like there was a turning point at the end of June where the tax bill passed and the situation in the Middle East was calmer and tariffs, while not certain, yet narrowing the range.

And it really.

Felt like people felt enough confidence or enough lower level of uncertainty that they kind of came off the sidelines and were unfrozen. And particularly for business demand, I mean, you can't stay on the sidelines forever.

And that was enough of a trigger.

It really was like a light switch flipped at the end of June, particularly for business demand. Double digit acceleration in business demand as we ended June, and that's continued, you know through yesterday.

We've talked a lot about the K shaped recovery and the idea that high end consumers have really been driving the economy. Corporations kind of dropped off with business travel, as you said, they picked back up. What about the rest of the travelers, the main cabin how much have they rebounded back to where they would have been had there not been some of the headline volatility, So you sort of separated.

Into those three pieces.

Business demand dropped off at the start of the year, that seems like it's bounced back to what we were expecting it to be as we moved into July. Premium and higher end leisure sort of stayed consistent throughout.

It never really dropped off.

And the biggest impact for the consumer was in low end leisure. That's come back some in July, but not as much. I'd say that's sort of fifty percent recovered to what we were expecting at the start of the year. So business back to mostly a full recovery, and low end leisure kind of fifty percent recover.

Premium leisure never never fell off.

We've seen sort of one entrance into the CPI report. The idea of inflation has been airline tickets have actually prices have been coming down, and there's this question of whether discounting is required to bring some of the main cabin back and whether that's going to be a persistent trend that competing on price is going to be really important. How much do you see that as persisting into the second half of the.

Air The airline industry is always good value, It always as attractive prices, but I think it's more of a supply demand imbalance that there are a number of airlines. You know, there are two brand loyal airlines in the United States who are now generating the bulk of the industry's profits because those customers that care about quality, care about service, that care about technology are were just better and they're choosing us, And you can see it in the data. You can see it in the numbers. For

Those seats are coming out.

So my guess is that's going to lead to a firmer pricing environment as we move into mid August.

And actually we can already see that in our numbers for later in the year.

Are you expecting to take any capacity out?

You know, we're we continue to prune, but there's not going to be any structural changes to our capacity.

And you know, we are encouraged by the environment. And in fact, just in the.

Last couple of weeks for US at least, the yields have turned positive on domestics. They've been down, you know for several months as we started the year, but yields have now turned positive for forward.

Bookings at least.

So why have you knock on with the more bullish potential estimates? Then? For your forecast given that you sound incredibly positive and you have seen this ongoing rebound, you.

Know, it's been a good year.

I mean, it's actually pretty remarkable that we've grown earnings and margins for the first half of the year despite everything that's happened.

But a lot has happened this year, and.

We like to have a policy of being conservative on our guidance because stuff does happen, and we want to be able to absorb some unexpected events in our guidance. We intentionally build it conservatively. We did that's we do that all the time. But so really what happened this time is we've been able to build that conservativism back.

So you know, if nothing else happens.

This year, which is a big if, and if demand stays as strong booking demand stays as strong as it is right now.

There's probably upside.

But we'd rather be conservative than than get out two four out over our skis.

One reason why I was really excited to speak with you is say you have a real time view of not only the consumer and the appetite there, but also international demand and whether there has been any damage to the brand Americana, the idea of foreign travelers coming to the United States for tourism, et cetera. You've said that there has been a drop off at European travelers. How sustained do you expect that to be? Are you seeing any permanent shifts in that international inbound landscape?

You know there has been a drop off in in inbound. Your demand of Europe is one but it's a single digit decline. So in US point of sale has more than made up for it. It's eighty percent of our business. I don't think it'll be permanent. You know, the the United States is the greatest country on Earth. It's a great place for people to come, a great place for people to visit. Demand is affected by all kinds of things.

A big book.

Quite a bit fewer, I mean enough. You know, it's a small, relatively small percentage of the business. But when you're talking about one, two, three percent changes in demand, you can see it. When you're talking about small changes, but those My guess is that we will get back to normal. And you know, people's desire to travel see the world, whether you're an American or European or a Canadian is strong, and this is a great place to visit.

And my guess is it'll get back to normal.

And if you're a senior and you're applying to colleges right now in the US, you probably are pretty good shape.

That's all I can say.

There's also a question about the further uncertainty, and tariffs are almost a certainty at this point. How do you expect to absorb them? Are you planning or do you have a base case for whether you'll increase prices or whether it'll just hit margins more significant.

Line, know, for United we're fortunate that most of our aircraft come from Boeing so here in the US, and even in the airbus deliveries we have are mostly produced here in the United States, so tariffs don't have as big of a direct impact on US as they do perhaps on our competitors. The bigger issue for US is the impact that has on the macro economy. And you know, I feel really good you were right earlier you said

People are moving forward.

And I think on tariffs there's a narrower range of outcomes, like probably not going to be one hundred and forty five percent on time. There's a narrower range of outcomes, and people have had six months to sort of figure out how to deal with it and have some contingency planning. Whatever the reasons are, it does feel like there's more certainty with Boeing.

Do you expect the deliveries to be on time or do you expect there to be more competition with all the other countries that are making deals to buy Boeing plans?

You know, that will be an interesting point of what happens with tariff's. My guess is aviation ultimately will wind up excluded. It's the one industry US exports six times more aviation products than we import, so the trade big trade surplus on that side. So my guess is those will wind up excluded. But Boeing, you know, is back on track. You know, if narrow bodies are actually ahad of schedule for US, wide bodies are still behind. I think that's less a Boeing issue, probably more engine issue

But Boeing seems to have turned the corner on production.

I just want to finish on Newark and whether Newark's turned the corner. I do know that we could go for an hour about the delays and some of the drama around that airport. You guys have a huge presence there. You have made this partnership with Jeff Blue and move to JFK. Do you expect to expand more in the Tri state area to try to diversify your presence away.

From you at first?

I'm really pleased with what Secretary Toffy and the Department Transportation FA have done. My entire career at United have been trying to get Newark on an equal footing with the Gordian JFK. That's essentially putting slot controls have the number of flights at the airport equal to the capacity of the airport. And we've finally done that, and you can already see the results. In June, Newark was the most reliable of the three New York Area airports, and

Our goal is to be the.

Premier flag carrier of the United States and we need.

To be in JFK to do that.

So the Jet Blue Partnership is a great way for us to have a partner who cared has the same sort of culture on DNA, for customers to get back and have a presence on both sides of the river.

Scott Kirby, thank you so much for taking the time today.