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.