00:00Before we get into the results, I just want to take a step back because if we were back in
00:04the middle of March and I was sitting here and you were telling me what you were about to do,
00:09I'd be like, Scott Kirby's gone nuts because energy prices have gone sky high, people are going to stop flying,
00:14they just won't pay up.
00:15Scott, can you take us behind the scenes, how you and the company navigated that energy shock over the past
00:21few months?
00:23Thanks for having me this morning and really it is pretty remarkable. You look kind of at the full year
00:28at what happened. Fuel prices are up $6 billion compared to what we thought at the start of the year
00:34and that compares to the best year in history where we made a little under $5 billion and the fact
00:39that we're sitting here today raising guidance and talking about at least having a shot at growing earnings on a
00:44year-over-year basis is a remarkable testament to the strength of demand and the demand and the economy are
00:51really strong,
00:51but also that United Airlines has had the right, the brand-loyal United Next strategy that we had as the
00:56right strategy and the people of United are doing a better job than any airline anywhere in the world at
01:01implementing that, at taking care of customers and we've been able to get to attract enough of those brand-loyal
01:06customers to United that we've mostly been able to overcome the fuel price spike.
01:11So I'm really proud of the team for what they've done in a tough environment to make it feel just
01:17normal if you're flying on United or if you're working at United.
01:20Scott, I remember earlier this year we were talking about how you expected demand destruction as prices got higher.
01:27You didn't see that, neither did other people, and you said you were surprised that you didn't see more demand
01:31destruction.
01:31Are you starting to see any signs of that or at least customer fatigue in pricing?
01:37No, we aren't. Demand is incredibly strong for us.
01:42In fact, our fourth quarter yields are booked 14 points higher at this point in time than they were at
01:47the same point in time for 3Q.
01:50Corporate demand so far in July is up 30%.
01:53We really haven't.
01:55And I think as you sort of take a step back from it and look at what's really happened, it's
01:59air travel share of the travel pie got really, really small coming out of COVID.
02:05And even with fares where they are today, air travel is 13%, the prices are 13% lower in real
02:10terms than they were pre-COVID, while hotels are up significantly, cruise lines and rental cars and everything else is
02:16up.
02:16And so I think we're just returning to a normal historic share of the travel pie for air travel.
02:22So the total cost of the trip is staying consistent with inflation.
02:26But after under-indexing to airlines, it's now over-indexing to airlines.
02:30And so the total cost of the trip isn't changing nearly as much as just airfares returning to the normal
02:36historical relationship that we've had to the total travel pie.
02:39Oil prices have continued to inflect upward as a result of a new resurgence in the conflict in the Middle
02:46East.
02:46And I'm just wondering, is there more room to go with respect to responding to those extra oil price costs
02:52with higher fares going forward?
02:55Well, you know, like I said, airfares are down 13% in real terms from pre-COVID.
03:01So a short answer is yes.
03:02And in fact, there's been another fair increase this week.
03:06There were five or six when oil prices first spiked.
03:09And then when oil came down, you know, they sort of paused.
03:12But there was another one this week.
03:14And so demand is strong.
03:17The consumer is strong.
03:18And it really is like our overall cost base is not just airfares, but our cost base with airport fees
03:24and maintenance and labor, those have actually gone up even more.
03:26And so it really is just a case of recovering all the inflationary cost increases that have happened, you know,
03:33and recovering from the COVID trough in pricing.
03:36We were joking, Scott, earlier that the airline industry also is an AI trade for a lot of different reasons.
03:42But in part because of the business travel and how much is picked up, how much do you see that
03:46being driven by all the capital markets activity that we keep talking about with the big banks,
03:50the idea that everyone needs to fly around, meet their clients as they prepare for these incredible fundraising exercises?
03:57Well, I think it's probably more translated through and just what it means for the overall economy as opposed to,
04:02you know, just specifically the AI trade.
04:05But the economy is strong.
04:06And part of it is AI and all the build out that's happening with AI.
04:10But, you know, as I said, you know, 30 percent up in business travel so far in July.
04:15Business demand is really strong.
04:16The U.S. economy is really strong.
04:18And we're a beneficiary of that.
04:21One thing that we've seen is increasing creativity when it comes to how you approach different premium offerings,
04:27the latest being that in premium economy or economy plus, the middle seat gets blocked out and there's a shared
04:33table.
04:34I mean, is there something different about the creativity being used recently, whether it's different types of offerings, different segmentation,
04:41more specific offers to different slices of the consumer base?
04:46We really are trying to build a great brand loyal airline nose to tail.
04:50We're investing heavily in premium, but we're investing just as heavily in the economy cabinet.
04:57We recognize that today's, you know, basic economy customer is tomorrow's Polaris customer.
05:01And we're just trying to build a great airline for everyone.
05:04And, you know, Starlink is an example.
05:06The Relax Row, which is in economy, is I think one of the coolest things we've done in a long
05:10time.
05:10You know, an extra, you know, a blocked middle seat in coach is just another example.
05:16And, you know, at United, we really are trying to just try everything that we can to make the experience
05:22better for customers.
05:23And believing that if we do that, we will have a brand loyal customer base that does really well when
05:32times are good.
05:32But it's also worth proving how resilient we are in times where something like, you know, this oil price spike
05:38happens.
05:38I mean, the fact that we've got oil prices up $6 billion year over year and we have a legitimate
05:43shot at growing earnings on a year over year basis
05:45is just a remarkable testament to what it means to invest for the customer and get customers to want to
05:51fly us to decommoditize this industry.
05:53And really proud of the United team for what they've done to execute on that strategy.
05:56Scott, more people in New York might be more willing to fly you when you get back to JFK.
06:00Is that still in the works for next year?
06:02That is.
06:03We're very excited about it.
06:04Looking forward to getting back to JFK.
06:07Looking forward to once we're back to JFK, we'll be the only airline with Starlink on the airplanes.
06:12For those of you that care about true high-speed Wi-Fi, we'll be the only ones in those markets.
06:18Looking forward to it.
06:19Scott, I love the idea to Relax Row.
06:21When I was a teenager, young, in my 20s flying, when I saw an empty row of three seats and
06:28the plane taking off, I'd never been more excited.
06:30And as soon as you got up to about 35,000 feet, I was on it, trying to lie down
06:35and move the armrest to make this work.
06:37Scott, have you had that idea for a long time?
06:40I've wanted to do it.
06:41In fairness, Air New Zealand is the one that came up with it, and I've wanted to do it ever
06:44since they did it, and now we are.
06:47I'm excited about it.
06:47By the way, I spent a number of trips when I was young and non-reving doing the same thing.
06:52When we get to be our age, it's a lot harder to do that on those three seats, and so
06:56the Relax Row is going to be a lot better.
06:58And plus, you can hang out with your kids.
07:01Of all the stuff we've done, I personally think it is one of the coolest things we've done.
07:07It's going to be great for kids and families.
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