United Airlines CEO Scott Kirby on Record Earnings: We Think It's a Multi-Year Trajectory

Let's bring in Scott Kirby, CEO of United Airlines, joining us from the company's headquarters. Scott, you're better than expected numbers, far better than expected numbers for the second quarter you reported yesterday. You raised your guidance for all of 2023. You and I have talked about how you see no slowdown in demand. Do you look at this setup right now for the airlines, for United Airlines? Do you expect this to continue all through 2024 or is at some point do you expect things may return to a more normal pattern?

Look, I think this is the new normal and really our strong results are a surprise to the street, but they're not a surprise to us. It's really a validation of the United Next strategy that we've been talking about for a couple of years and really the structural changes both internationally and to a lesser degree domestically really have reset the industry to a different level and we expect to grow margins again next year. You know, we've exceeded our guidance this year.

We think it's a multi-year trajectory. It really is about those structural changes that happen coming out of COVID. You talk about the structural changes, but at the end of the second quarter, particularly with your hub in Newark, you guys basically had a scheduled meltdown and I bring this up because I know it was in your results and you factored it into the final results, but a lot of people looked at that and they said, wait a second, Scott Kirby last year made it very clear we're going to be ahead of the game. We're not going to let these types of meltdowns, schedule problems happen. What happened and how do you avoid that from repeating in the future?

Well, we had really bad weather in Newark at the end of June. We had a four-day stretch where the airport departure rate was reduced by 58 percent and airlines just aren't built to have your largest hub at a 58 percent reduced departure rate for four days. The important thing for us to do is we are going to have worse weather in Newark and there are other challenges. Let's figure out how to operate for our customers. We've made changes. The most important thing we've done is the level of coordination and communication with the FAA is better than it's ever been. Last weekend, we actually had worse weather in Newark than we did at the end of June. We were able to plan for it and recover quickly and the level of cancellation was actually 77 percent down from what it was at the end of June.

Is this a new reality in the airline business that you have these massive storms that pop up or extreme heat and does this mean that you have to change over the next several years how you plan and be more proactive a little quicker?

Yeah, the short answer is that there are infrastructure constraints in the country and in the aviation system and I think in a lot of parts of the country, we're at the maximum of what we can fly effectively. I mean, you take Newark as an example, there's one set of parallel runways. It's currently scheduled at 40 arrivals and 40 departures per hour. That's a flight every minute and a half. That's about the most that you can handle there. It is a constraint. The only way to grow, I think in airports like that, is to grow with Gage. It's good news that United is getting rid of 300 regional jets and bringing on mainline airplanes, but it is going to be a constraint for the whole country in terms of infrastructure constraint on how much growth can happen in the aviation system.

I have to ask you about the new pilot contract. You have a tentative agreement with your pilots, a raise of 35 to 40 percent cumulatively over the life of the contract depending on the length of service, the aircraft they're flying, etc. This wage increase here, I know a lot of union members will say look it's long overdue, but do you look at the wage inflation that is out there right now, not just for United but for the airline industry? Do you say okay, we've seen this before, then we expect things to come back to a more normal basis in the future? What's your perspective there?

Look, this is a win-win, and I'm really excited to deliver an industry-leading contract for our pilots. I committed to them from day one that we were going to give that to them and I'm glad to see it happening really across the industry. What airline employees did for the country, for the world going through COVID, and to see on the other side that we've made it through that crisis and that we can begin to deliver for our employees and we're able to deliver for our employees and still produce record margins and deliver for investors, for our customers is really encouraging, and this sets the stage for Unitednext. And Unitednext is the most growth that any airline in the world has ever done in history and in absolute growth and really making sure we've knocked down a bunch of those barriers to make sure we can grow and execute effectively and implement Unitednext which all of our employees are excited about. And Unitednext is part of the expansion for your trans-specific routes. Would you add even more if you had more aircraft, Scott?

I wish we had more airplanes. I mean, we're the only large airline in the world that didn't retire widebodies. That's part of the reason we're outperforming as we see a strong international environment which we expect to continue at least through the decade. I wish we had even more. We didn't retire any. In fact, we have about 30 more widebody aircraft than we had when COVID started. We're the only airline in that position, but the international environment is just so, so strong and the supply constraints are so big and so long-lasting for our competitors that we'd be flying every airplane we could. But we're excited to add four new routes across the Pacific.

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