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00:00I am here still in Rio with Scott Kerber, the CEO of United Airlines. Scott, always wonderful
00:05to speak with you. Great to be here, Lisa. Thanks for being here. I was actually surprised by the
00:09tone here and I shouldn't be surprised because every conversation I have with different executives
00:12in the airline industry, things are better than expected. Demand's actually picking up. It's been
00:16more resilient. This summer's going to be a record summer. You're hearing the same thing. Is that kind
00:19of your tone as well? Yeah, a lot of questions for people around the globe really like because we're
00:23a U.S. airline, obviously, like what do you think is going to happen in the Gulf? And people are
00:27worried about oil prices. But demand, certainly U.S., anything related to the U.S., feels strong.
00:33I think there are other parts of the globe that maybe are a little more concerned about demand,
00:37but really strong in the U.S. and mostly strong around the globe. And people have the view that
00:42hope that this gets resolved at some point and that we're back on track to what was looking
00:46to be a really good year to start the year. Where are you seeing demand kind of fizzle
00:49around the world or at least fade just a touch in response to higher prices? We don't really
00:54see it at United because 80 percent of our traffic, even international traffic, is U.S. point
01:00of sale. But you can, I think, see, you know, starting to see the glimmers in, you know, Asia
01:05is the first place, you know, the impact of oil and refinery issues in Asia have been the
01:11worst. And, you know, I think Africa, you know, certainly the Middle East has had an impact.
01:17So you can, I think, sense some worry, not really evidence of weakening of demand, but,
01:22you know, you talk to people in one on ones, you get sent some concern that if this goes,
01:26you know, sort of in the standard line all along, if this goes to July, it's going to
01:30be a problem in March. If this goes into April, it's going to be a problem. And it keeps getting
01:34pushed down the road, fortunately, because demand stays strong.
01:36Well, and so, so far, you've raised prices about 20 percent. You've cut capacity about
01:405 percent. Is that enough? Do you anticipate more price increases and more capacity limitations?
01:45You know, time will tell. Depends on what's happening with the economy, what happens with
01:48oil prices. But I feel pretty good about where we are right now. You know, we laid out a path
01:53to getting to 100 percent fuel recovery. It certainly looks like we're still pretty much solidly on that
01:58path. And, you know, oil has come down a little. So I actually would move it a little earlier
02:03from when we said it. But we feel pretty good about where the demand environment is. And,
02:07you know, the consumer has been resilient, even with fares, you know, up. But in truth,
02:11like fares are up 20 percent. But they're still, in real terms, lower than they were in 2019. So
02:15air travel remains by far the best value as part of the travel chain. And so I've been pleasantly
02:23surprised with the resilience of the consumer so far. Is it all driven by the premium consumer who
02:27seems to be insatiable? Or is it really across the board? You know, I always talk about, at least at
02:31United, we're investing nose to tail for our customers. And most of the things that we're
02:35doing for the product apply to everyone. Seatback entertainment in every seat, Starlink on every
02:40aircraft, you know, great new interiors applies to everyone. And, you know, the premium has been
02:46stronger for a couple of years. It's still a little bit stronger. But it's pretty hard to, you know,
02:51I think it's been strong, you know, across the board for us. But, you know, we skew to the high
02:56end.
02:56And, you know, even the economy pastures are, you know, skewing towards the top end of that
03:01K-curve for air travel. And international, of course, skews even higher. But we really
03:06haven't seen any noticeable cracks in demand sort of anywhere in the cabin.
03:11And you've been upgrading all your planes quite considerably.
03:14Yeah.
03:15Nose to tail, whether it's the fold-down seats to have you sleep across.
03:18One of my favorites.
03:19Yeah, exactly.
03:19Especially if you've got kids. I wish I'd had that one else.
03:21Anyway, moving forward, moving along. Do you find that it's difficult to upgrade as quickly as you
03:26want because of just some of the delays and deliveries that we're seeing in certain of the
03:29aircraft manufacturers?
03:30Yeah. You know, we got ahead of it. We started ahead. You know, we ordered a lot of aircraft.
03:34We got ahead of the supply chain, you know, as being the first really back during COVID.
03:39We anticipated problems. So we actually overordered because we anticipated problems. The problems have
03:44been bigger than we thought. But we've mostly managed through those. And, you know, like seat
03:49manufacturing seats are a big issue across the industry. We've mostly stayed ahead of it. We've
03:55been somewhat impacted by it. But we've mostly stayed ahead of that. And, you know, even, you know,
03:59Starlink, for example, you know, we're going to have the whole fleet done. We expect next year.
04:04It can't be done fast enough. But by being the first big airline to order, like we're at the front
04:08of the queue. And so most of the things we're doing because we're at the front of the queue, we're
04:12much
04:13less impacted than other competitors around the globe.
04:15There were reports that you were talking about Rolls-Royce a couple of minutes ago, talking about
04:19how they've been a problem in terms of just honoring contracts. And what exactly is the role in some of
04:26the delays that we're seeing, particularly with Airbus?
04:28Well, you know, engines are really the issue. I think they're going to constrain supply around the
04:34globe for probably the next decade. There's not enough engine capacity. There's something like 900
04:40aircraft around the globe that are grounded right now that should be flying because they don't have
04:44engines that can fly. And it's a really it's not an easy problem to fix. And it's going to take
04:50time.
04:51And so really kind of we need all the engine manufacturers and really the forgings and castings
04:55that go into the blades. The engines are really, I think, the biggest constraint. And, you know,
05:00that takes time to fix. But we start fixing that. You know, all the aircraft that Boeing and Airbus,
05:05they're going to be able to produce a lot of aircraft. I think they're both starting to get things on
05:09track
05:10for producing aircraft. But they're going to be producing gliders because it's just not enough
05:14engines. Well, gliders are not going to fly for the industry, quite literally. I cannot imagine
05:18that trying to have a long haul flight on a glider. Do you think, though, that Rolls-Royce has been
05:22a bad actor or not as much of a good actor relative to, say, some of the others that have
05:27been ramping up?
05:28Well, that's certainly been our personal experience with United at Rolls. And that's what I hear from
05:34others around the industry, too. Has that constrained Airbus deliveries more than Boeing?
05:39You know, they each had constraints. You know, Rolls, you know, has been constrained. Pratt & Whitney,
05:44you know, has had a lot of well-publicized challenges. By the way, I respect Pratt & Whitney
05:48is working really, really hard to fix them. And that's all you can ask, really. GE is doing,
05:53you know, the best of the engine manufacturers. But all of them have had challenges.
05:58Going forward, it seems like all of the airlines are trying to upgrade as quickly as they can,
06:01because it is going to be about the experience that you're living to the customer that's going to
06:05determine success. How much have you seen the pressures kind of come into play,
06:09the sort of pressures in the industry that you had been expecting as a result of some of the higher
06:14prices? Well, I think we're the ones creating pressure, to be honest with you. We're investing
06:19more than anyone. And we're doing the kinds of things, really, that no one has ever done. You know,
06:24whether it's the relaxed row here in the United States, putting Starlink on every airplane,
06:28but also the technology. Like, you use the United app. It is materially different than,
06:33I don't know who has the second best app in the world, but they're way behind United.
06:38And we're just doing more and more of that. It just changes how it feels to fly. And it's remarkable.
06:43That's how you win brand loyal customers. You change the whole experience. It's not just about
06:46the route network. It's about the technology, the service, the reliability, and the product. And
06:52you've got to focus on all four of those. You've got to have all four of those things to win
06:56customers.
06:57And, you know, it's been working really well at United. We're just continuing to push to find
07:01ways to invest more and more and more in new creative ideas to make people think, hey,
07:06it's cool to fly United. Are you still thinking about consolidation in any form?
07:10Well, everyone's asking me about it. So you're still thinking about it?
07:13I'm trying to take it off the table. Yeah, yeah. We're putting it back on. So here it is. It's
07:17still on the table for you. You know, I said at a conference last week, you know,
07:22I kind of came for the last couple of years at least thought that a big kind of transformative
07:28deal to take create a great U.S. airline that compete around the globe was really where the
07:33opportunity was. And but I've always known that that would have required a willing partner. And
07:38we don't have one. So I think it means that United is likely sitting out the consolidation game.
07:44Meanwhile, going forward, we got the best jobs report in a long time on Friday. And a lot of it
07:50was
07:50driven by leisure hiring. We heard that across the board. How much of this is coming from just
07:54the organic demand heading into summer? And how much of this is really being driven by World Cup
07:58traveling? You know, World Cup is a tiny, tiny piece of it. It really is the fundamentals of demand.
08:06And you you see it everywhere that demand is strong. People are still investing in experiences.
08:11You know, I've told you before, like to me, the economy, we're a really good real time
08:16barometer of the economy. The economy feels stronger. The jobs report is consistent with.
08:20But I wasn't that surprised by the jobs report because it looks to me like the economy is doing
08:25pretty well. Do you think that oil prices will stay at this level and continue to be a challenge at
08:29a
08:29time when every airline executive here expects it to go down almost except for you. But everyone
08:33expects prices to go down. I've thought really since mid-March that oil was going to be higher for
08:39longer. I continue to think that at some point I'll be wrong. It'll go down. But it's just hard for
08:45me
08:45to see any kind of outcome that the straights get reliably and sustainably open. They may open for
08:51a little bit, you know, but just the dynamics make it hard for me to think that that's going to
08:56happen.
08:57So I think this kind of 90 to 110 dollars a barrel, you know, what do I know? I'm an
09:02airline CEO. But
09:03like we're planning for that sort of for the indefinite future, that 90 to 110 dollar level.
09:08Coming into this conflict, the baseline assumption was that if prices got to that level,
09:13then stay at that level, there'd be bankruptcies. You'd have a lot of difficulties in the airline
09:18industry. And certainly there have been pressures. Yeah. But the resilience of the consumer and the
09:21ability to absorb pricing has surprised everybody. Yeah. Do you think that that will be the likely
09:25response to a persistently high oil price? Not necessarily people going out of business, but airline
09:30ticket prices going up and staying up. Yeah. I think airline prices, the consumer has been even more
09:35resilient. I thought the consumer would be resilient. It's been more resilient than I thought the consumer would be.
09:40So I think that will happen. But I also think, you know, you still look around like United and Delta
09:44and Southwest, by the way, are all three going to be solidly profitable this year. My guess is at all
09:4990 to 110, like everyone else is losing money, some a lot of money. That means there's a big chunk
09:54of
09:54those route networks. You know, if you're losing money overall, there's a big chunk that's losing a lot
09:59of money. My guess is the longer this plays out, the more and more it, you know, sort of pushes
10:04executives
10:05to make hard decisions that they would rather not make to just stop flying places that lose money.
10:10Going forward, is there any place that you want to be expanding in just to sort of wrap it up
10:13in our lovely beach
10:14here that we're sitting at in Rio? Yeah, we look forward to expanding really around the globe.
10:19A lot of our growth has been international. It slowed down this year, partly because, you know,
10:26Boeing's been behind on wide-body deliveries. They're starting to catch up, but we're looking for, you know,
10:30international has been great for us. United was born on third base for international with hubs in Newark,
10:35which is the best at, you know, Pacific Gateway. San Francisco, the best, you know, Pacific Gateway,
10:41Newark Atlantic. Dallas is probably the second best Atlantic Gateway. So international has just been
10:46gangbusters for us, and we're opening up. You know, it's crazy to me, our team is opening up cities that,
10:50and I'm pretty informed, like, I didn't actually know that city name.
10:54Yeah.
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