United Airlines CEO Scott Kirby Talks Earnings, Fare Increases

**SPEAKER_1** (0:02)
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**SPEAKER_2** (0:07)
Earning season ramping up with results from the major airlines, United, boosting its full year outlook, citing strong consumer demand, even in the face of higher fuel prices. The United Airlines CEO, Scott Kirby, saying, United is built to thrive in every environment. Our brand loyal customers value their travel on United, whether they're in Polaris or in economy. United Airlines CEO, Scott Kirby, joins the program for more. Scott, welcome to the program, sir, it's good to see you. Before we get into the results, I just want to take a step back, because if we were back in the middle of March, and I was sitting here and you were telling me what you were about to do, I'd be like, Scott Kirby's gone nuts because energy prices have gone sky high, people are gonna stop flying, they just won't pay up. Scott, can you take us behind the scenes, how you and the company navigated that energy shock over the past few months?

**Scott Kirby** (0:55)
Thanks for having me this morning, and really it is pretty remarkable. You look kind of at the full year what happened. Fuel prices are up $6 billion compared to what we thought at the start of the year.
And that compares to the best year in history where we made a little under $5 billion. And the fact that we're sitting here today raising guidance and talking about at least having a shot at growing earnings on a year-over-year basis is a remarkable testament to the strength of demand and the demand and the economy are really strong, but also that United Airlines has had the right, the brand-loyal United Next strategy that we had is the right strategy, and the people of United are doing a better job than any airline anywhere in the world at implementing that, at taking care of customers, and we've been able to get to attract enough of those brand-loyal customers to United that we've mostly been able to overcome the fuel price spike. So I'm really proud of the team for what they've done in a tough environment to make it feel just normal if you're flying on United or if you're working at United.

**SPEAKER_4** (1:51)
Scott, I remember earlier this year we were talking about how you expected demand destruction as prices got higher. You didn't see that. Neither did other people. And you said you were surprised that you didn't see more demand destruction. Are you starting to see any signs of that or at least customer fatigue in pricing?

**Scott Kirby** (2:09)
No, we aren't. Demand is incredibly strong for us. In fact, our fourth quarter yields are booked 14 points higher at this point in time than they were at the same point in time for 3Q.
Corporate demand so far in July is up 30 percent. We really haven't. I think if you sort of take a step back from it and look at what's really happened, it's air travel share of the travel pie got really, really small coming out of COVID. And even with fares where they are today, air travel is 13 percent, the prices are 13 percent lower in real terms than they were pre-COVID. While hotels are up significantly, cruise lines and rental cars and everything else is up. And so I think we're just returning to a normal historic share of the travel pie for air travel. So the total cost of the trip is staying consistent with inflation. But after under indexing to airlines, it's now over indexing to airlines. And so the total cost of the trip isn't changing nearly as much as just air fares returning to the normal historical relationship that we've had to the total travel pie.

**SPEAKER_4** (3:11)
Oil prices have continued to inflect upward as a result of a new resurgence in the conflict in the Middle East. And I'm just wondering, is there more room to go with respect to responding to those extra oil price costs with higher higher fares going forward?

**Scott Kirby** (3:27)
Well, like I said, air fares are down 13% from, in real terms, from pre-COVID. So a short answer is yes. And in fact, there's been another fare increase this week. There were five or six when oil prices first spiked, and then when oil came down, they sort of paused, but there was another one this week. So demand is strong, the consumer is strong, and it really is like our overall cost base is not just air fares, but our cost base with airport fees, maintenance and labor, those have actually gone up even more. And so it really is just a case of recovering all the inflationary cost increases that have happened, you know, and recovering from the COVID trough in pricing.