Chapter 1: What is the main topic discussed in this episode?
Hello and welcome. This is The Michelle Hussein Show. I'm Michelle Hussein. I speak with people like Elon Musk.
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You certainly ask interesting questions.
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News. 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 is starting 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 and 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 4Q.
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Chapter 2: What is the current demand outlook for United Airlines?
I am wondering, are you seeing international travelers, tourists come back to the United States? I know that was kind of a soft spot and sort of a tell in terms of the international reputation of the country.
Well, our business is about 80% U.S. point of sale, but we have and we saw a drop in 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 dip, 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 planning to expand or cut back? I know that it was constrained 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 in absolute growth, actually faster, I think, than any airline in the world has ever grown for several years in a row. And that's worked really well for United, and that's been successful. So we really haven't much changed our capacity.
Chapter 3: How is corporate travel influencing United Airlines' profitability?
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. 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 particular international demand has extended to the fourth quarter, there's an opportunity for us to actually fly less in the peak in the third quarter, which will be good for our RASM.
But it turns out it's going to actually be good for our cost structure, too, because 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 single digits just to compensate for higher costs. Do you see that on track, the same type of price increases, and are 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 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 who work for United are also saying, OK, well, things are going up. We want to pay increase.
Yeah. Well, our 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 in technology to helps us run the airline better.
But like you look at the third quarter, you know, there are a number of airlines that have talked about missing their, 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, you best in the industry, cost performance.
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