During United’s fourth quarter earnings call they made several revealing statements about their business, travel, and their mental models for the U.S. recovery from Covid-19. Here are 8 things that stood out to me:
- United commended President Biden for re-entering the Paris Accord dealing with greenhouse gas emissions. United Airlines is woke!
- United says it will permanently reduce costs by $2 billion. That was precisely the target of disgraced United CEO Jeff Smisek’s “Project Quality.” There’s not one item that’ll drive that savings, it’s everywhere. While United would probably (officially) disagree, you will feel this as a passenger.
- There are going to be great airfare deals on domestic trips, don’t expect that for international. United says domestic capacity will grow ahead of passenger demand, while international capacity will lag demand, and United’s international profits will return “quicker and stronger” than domestic.
That doesn’t match my intuitions because international airlines are likely to return to their U.S. routes ahead of demand, however later in the call United reminded that 747s and A380s have been taken largely out of the equation – so even returning flights will have less capacity than before – and Norwegian will no longer be flying transatlantic.
- Aircraft maintenance and airline club work needs to restart. The piece about investing in clubs is good to hear.
- Their working model is that airlines will recover quickly once people feel they can go anywhere in the country, with restaurants at full capacity. So when Covid is no longer top of mind constraining behavior is when travel will return with vigor.
- CEO Scott Kirby emphasized the need to compete on brand value “like the hotels” and not just on price. Of course he wants this, because it’s how you earn a revenue premium, but it is inconsistent with virtually everything he’s ever done in the airline industry up until now.
- United Airlines President Brett Hart speculated on a third government airline bailout, suggesting that if it happens it’ll mean more money to United (stating the obvious). The key takeaway here is they’re not just speaking privately about bailout number three.
- Expect United Airlines to make Covid-19 testing easier, to comply with the CDC requirement for inbound U.S. passengers.
So far they say the new rules going into effect January 26th are largely only affecting their Mexico business, since Mexico didn’t have travel requirements and now taking a trip is more cumbersome. For most other places in the world travel was already depressed in the face of onerous restrictions, so the increased testing hoops aren’t game changers on their own. And the CDC will allow antigen tests, making meeting their requirements easier.
In the long-term United believes testing increases confidence in travel, but I’d point out that the U.S. only requires it in one direction. And it’s not required for connecting flights. So there’s no claim here that inbound testing makes travel Covid-free.
I stopped flying United years ago. They have to be the worse airline in the U.S., this just confirms it. Airline maintenance needs to restart, what have they been doing with the planes in the air currently? Shows they know very little on how to word things.
@ Gary — Thank goodness that McConnell will block pretty much anything the Dems want to do. No more bailouts!
International will be the last segment of travel to return and they want to charge a premium? Business travel will also not recover for awhile. Is Management being realistic here?
@ Gene – I fully expect the filibuster to die, meaning the Republicans have to hope the WV Democrat Senator will object. Expect the Democrats to force a few votes on popular programs to use for the next election if the Republicans stick together..
They bet the farm on OPM flyers and basic economy once a year flyers.
Everyone in between was fired by United.
Let’s see how they deal now that OPM is dead.
Sigh. That wacky Kirby would squeeze a silver dollar until the eagle screams. That’s just his nature but now he’s going to earn extra money from customers by making things even worse? It’s no coincidence that when Kirby came on board at United, the Polaris improvements came to a screeching halt. Poor United, they were once a great airline.
Weren’t the republicans the ones who pushed for the $25B bailout? Literally first articles googling it.
Once the pandemic is over, I will always fly Delta, even if it costs more. These clowns haven’t cared a bit about Americans’ lives and don’t deserve the business.
Regarding #8. I just returned from Jamaica on United. The resorts are roughly 50% full, so definitely hurting. This new testing requirement will probably cut another 20%-25% of their business. While one has to test negative to get into the country, the risk of testing positive for the return to the US and needing to spend another 10 days in quarantine is a risk that most won’t accept. While the resort I stayed at is assuming the cost of the 10 day quarantine, the lack of vacation days is problematic for most. I realize Mexico has a significant number of flights compared to Jamaica, but I think the issue is the same, does one risk~17 days (13 vacation days) for a weeks vacation?
“..United Airlines Reveals They View The World..”
What be they view?? I think your editor has taken the week off.
Regarding #6, what exactly would that value be? Prior to the pandemic, I was close to bailing on UA after many years of being a 1K. What was once enjoyable, international travel, became something that had the fun and comfort sucked out of it.
I beg to differ.
“United commended President Biden for re-entering the Paris Accord dealing with greenhouse gas emissions.”
that simply means. WASHINGTON, SEND US MORE MONEY, WE WILL GO BANKRUPT. There’s no poetry in there.
great list, Gary, esp. items 1,2,3 and 6
UA might think twice about the Paris Accord when fuel prices skyrocket as they very well may do. When you start working on killing domestic production and kill off the Canadian oil industry, there will be enormous impacts on the supply and price of oil.
UA is already the least fuel inefficient US airline based on its current fleet and configuration – the largest fleet of 777-200s (the least fuel efficient widebody in US airline fleets), premium configured 767s and regional jets (50 seats on a plane designed for 70 seats), and buying used copies of the smallest version of last generation’s narrowbodies (A319s, 737-700s).
and of course the whole climate change crew has never admitted that the whole work from home shift has taken hundreds of billions of miles of car travel off of US roadways – and anyone in any US city knows it. There is a far bigger reduction in pollution from less travel than could possibly be done by forcing producers out of the market.
As for the revenue premiums, since Delta reported passenger yields for the 4th quarter a whopping 25% higher than United, it is clear that the highest value passengers are not flying United now – or in much lower quantities than they are flying Delta.
And all of this takes place just weeks before Southwest starts service at O’Hare and then later IAH and as it grows DEN. The pressure on UA’s yields will be very significant in 2021.
Of course the