At the J.P. Morgan Industrials Conference on Tuesday, United Airlines CEO Scott Kirby said that JetBlue is the only airline worth buying and whether or not United buys them is “in JetBlue’s court.”
Meanwhile, government travel is down and United is replacing that with lower yielding leisure travel. They’re adjusting how their forecasting systems make seats available to do it. And they’re reducing their flying – retiring planes, and cutting back on redeye flying as well.
- Government travel spending is down. Scott Kirby reported that government travel is down about 50%.
Direct government is about 2% of United’s business. Government-adjacent travel is another 2% to 3%. That combined bucket is “running down about 50% right now.”
Then Chief Commercial Officer Andrew Nocella explained that government is about 2% of revenue and indirect government is 4%. The falloff is roughly 50%. That’s more in far-out bookings than close-in bookings, while close-in government bookings remain rather normal.
They discussed a hope that a more efficient government is the long-term outcome, referencing the current administration and DOGE-style cuts, while acknowledging there is short-term pain. They aren’t going to criticize this President!
- They are replacing government travelers with leisure travelers. Government travelers tend to have a distinct booking pattern, closer in and at higher contracted fares than advance-purchase leisure travelers. Airlines will often hold back inventory for them because a late-booking government passenger is worth more than an earlier cheap leisure sale.
So when Kirby says government and government-adjacent demand is down sharply, the first effect is not just empty seats. It is that United’s system is still initially behaving as though those higher-fare bookings might show up.
United’s yield management system had been saving seats for those customers. By April they are not doing that anymore, instead taking more leisure bookings. That is “replacing government with leisure.” But it’s not one-for-one revenue replacement, because it’s at a lower average fare earlier in the booking window.
- They’re cutting flying. United is retiring 21 aircraft early, cutting flying in government-affected markets (bad news for United’s Washington Dulles hub), and canceling redeyes.
Retiring planes saves $100 million in engine overhaul expense. A lot of the cuts are Canada flights as well.
- A big airline merger is a distraction, it’s up to JetBlue whether we buy them. Kirby hates to have things prioritized over their business plan and technology investments in their mobile app, but he wants JFK slots. So whether or not they buy JetBlue comes down to JetBlue (and presumably price). And JetBlue is the only airline to buy.
I would like to have a bigger I’d like to have a presence on the other side of the river at JFK. But man, all the headache, all the brain damage of buying a whole airline to get that, that’s a lot to do. So, yes, really, I think the ball is going to be in JetBlue’s court.
They’re working out a lot of respect for them. They’re working hard. They’re also an airline that focuses on brand loyalty. So from the customer perspective, they have a lot of those sort of core DNA things that are expected there. Also competing with another airline, JFK and Boston that has that too.
So it’s a tough position for it to be in. So it’s sort of their decision on how to sort through that. That’s the only one that I think really is potentially in play one way or another.
Much of Kirby’s presentation was centered around how much he thinks customers love United, how they can coexist with Delta in places like New York, but that there’s really no room for a third premium airline (American) and they’ve stolen Southwest’s customers in Denver.
He acknowledges that United’s cobrand economics aren’t as good as American’s and Delta’s but ascribes that to his deal being older than theirs, but that isn’t really true. United’s deal was inferior to American’s even before it re-upped with Citi in 2024, and United extended its Chase deal to 2029 in February 2020 while Delta renewed its partnership with American Express in 2019. Kirby had a deal back then that ran through 2025, so he’s really saying he’s still encumbered by a deal from a decade ago but United is the one that chose to extend early rather than wait.
“In this economy?”… should also be “under this regime?”… They’ll about anti-trust and enforcing regulations, only if you’re saying ‘mean’ things about them (like the truth; they hate that).
So long as you bend the knee, parrot their lies, pay the bribe, then, by all means, go ahead, merge, acquire, treat your workers and consumers poorly, collude, outright grift, and no one (who matters) will care (or stop you).
That said, I don’t think many of us are actually benefitting from any of this. I think we deserve better. 229 days.
The Chase-United relationship is not just the co-brand, it’s United’s debt stack as well where JPM Chase acts as agent and a major lender, etc. (Chase had the lead role in United’s major 2021 debt deal). I’m sure United will make some noise about exploring options with C1 or whatever, but C1 is much more consumer focused and can’t really replicate the scope and breadth of JPM Chase on the debt side.
They obviously want to buy B6 and to be at JFK – but that’s going to cost money, and I’m sure they’d prefer lower interest rates for any acquisition financing (rates not exactly coming down fast enough, and they may not want to criticize this administration, but the current conflict is not exactly helping the airlines or inflation). So easy for now to put the pressure on B6, hope B6 falters a bit more etc. so it’s possibly cheaper to pick up those pieces, but by the time they are ready to do so, may be hard to get a deal like this done in 2028. Narrow window.
Meanwhile it’s not a great position to be in to try and capture less leisure revenue upfront versus higher paying government revenue later on, but that’s not unique to United of course.
@Peter — Mhm. The era of ‘banks with wings’ continues.
As to “rates not exactly coming down fast enough” … yeah, pretty sure the Fed is gonna keep ’em steady today (and for the foreseeable future, due to the new ‘war’ and resulting rising oil prices, which is inherently inflationary, so a good reason to maintain higher rates, even though the jobs numbers are bad and could get worse, which would be a reason to reduce rates). Tough gig.
As for B6 and United’s ‘partnership,’ in the mean time, could they please do reciprocal lounge access like the AA-B6 NEA… and, if they do merge, would be ‘swell’ if United could adopt Mint’s superior food, beverage, and seat arrangement, instead of reducing jetBlue to United’s weak standards.
Regardless of your political views all, including the ultra liberal 1990, should be glad that government travel is down. One of the first things companies do when facing budgetary issues is look at discretionary items like travel. Sure some is required but you don’t need to always send 10-15 people to the same conference or can use Zoom for monthly update meetings instead of flying in for them. Hopefully our government is taking a hard look at travel and these reductions are permanent. Again, this isn’t a political issue just prudent use of our tax dollars.
Yeah, this government‘s prudent use of our tax dollars. Thanks Pete Hegseth for spending $94 billion taxpayer dollars on Alaska king crab legs, ribeyes, Apple Watches, a baby grand piano and various other prudent decisions.
This administration should all be locked up.
(Got the auto-mod. I’ll try removing a ‘choice’ word.)
@Retired Gambler — What’d Megyn say recently: “‘Sorry you have a micro”…
This ‘waste, fraud, and abuse’ trope (or whatever you’re now pitching…) is laughable when this particular regime is perfectly fine with spending money ($1 billion a day on a new war, anyone?); in fact, they’re also just fine with nationalizing companies, it seems. Forcing them to sell ‘Golden shares’… Psh, this is the most socialist government in my lifetime; except, it’s only socialism for the super-rich; still rugged individualism for everyone else, ourselves included.
@Retired Gambler — Funny, they’re also nationalistic… like, nationalist and socialist… huh, how could we NOT-SEE this… *COUGH*
Scott Kirby is a egotistical clown.
I’m so happy he is getting his peepee slapped by the gas in ord.
Of course Kirby doesn’t want to have to try to take B6 as a whole for a couple very good reasons
1. there is a lot of B6′ network that simply won’t work at UA or any legacy carrier’s costs. Every time someone talks about a legacy carrier acquiring B6, that reality often gets overlooked. UA would endup w/ a bunch of slots for routes that likely won’t work… they don’t work for B6 at B6 revenue and costs.
2. DL is the 800 lb gorilla at JFK and LGA and DL uses those two hubs well together. EWR and a smattering of JFK and LGA do not produce the same synergies. And if UA tries to grow JFK larger, they simply cannibalize their own EWR operation. and even aside from DL, UA will be 4th at JFK, not exactly a position that UA can thrive in esp. given how much they have trash talked AA’s 2nd place position at ORD.
3. there is no assurance that B6 will follow through and lease JFK slots to UA so that UA can compete with B6 in some of B6′ top revenue markets. it is very possible that swapping slots at JFK for more access at EWR will be seen as anti-competitive and the entire deal will be called off
Scott Kirby’s track record in NYC is the worst of any airline CEO – giving away 1/4 of LGA’s slots to DL for $60 million and then repeatedly overscheduling EWR, requiring FAA and DOT intervention, not even considering former UA execs that gave away UA’s previous position at JFK.
Don’t hold your breath for any resolution of UA’s NYC self-made “problems.”
@KittyKat — Speaking of peepees… would Megyn also think Scott has a micro…??
@Retired Gambler – Allowing (if not requiring) Our Elected Betters to work from offices in their home districts or respective state capitals is long overdue.
United isn’t going to buy JetBlue. Corrupted as it is, the DoJ isn’t going to roll over and allow a merger to take place, and it is likely that both Delta and American would challenge such a scenario with an aggressive, legal response.
United has a near monopoly on traffic at EWR as it is. It is the dominant carrier there at an outdated, poorly staffed, and operationally challenged facility, where artificial caps are in place due to chronic staffing shortages. JetBlue has a significant presence there as well, and the two overlap on a lot of routes (and further, out of JFK on the B6 network). United can’t argue with a straight face that it needs B6.
Yes, UA wants back in at JFK. It likely won’t get far. The slots aren’t likely available and even with a plus-upped presence there, such as restoring LAX and SFO (a folly when it withdrew) it faces entrenched competition from Delta, JetBlue, and yes, even American.
As to JetBlue, it is a badly run airline that doesn’t turn a profit, even with the assets it has. The logical merger partner here is American, which, if not for its incompetence in stitching together the NEA, it would have the partner it needs in NY to fix its problem there.
JetBlue’s shelf life as an independent carrier is limited. The network is principally a leisure focused one (corporate travel on B6 isn’t big). The TATL network is a vanity project and doesn’t make much money. Operationally, the airline ranks at the bottom. Always has. Anyone remember the Valentine’s Day snow storm in 2007 when it melted down?
The US economy is entering a period of stagflation and it will get worse. The economy is going to tip into a recession by late this year, eroding all the premium-leisure fluff. Airlines like B6, NK, F9 won’t survive.
@Denver Refugee — “Our Elected Betters” LOL. Nice anti-establishment trope ya got there… the irony, though, is that you ‘small government’ types are a farce… because you’ve directly and indirectly empowered authoritarians, nationally and in your own states, who are more controlling than any left-wing opposition you’ve been fear-mongering about for ages.
I like JetBlue and dislike United so I hope that United doesn’t buy JetBlue. The disallowed purchase of Spirit by the government is the gift that keeps on giving (sarcasm).
Wait until the recession whe all OPM travel will be down.
@Tim Dunn can I get a math lesson…
You claim DL is the “800-pound gorilla” at JFK. You do realize that DL only has 30% of the market share at JFK and B6 had 26%. Me think that gorilla may weigh a bit less then you’re hyping it up to be.
I await your 10 paragraph explanation.
And…FWIW…I’m sure the thought of UA with 26% market share at JFK is causing many a butt to pucker down in Atlanta, mo matter what you say.
I can’t imagine that UA buying B6 will be anything other than a stock swap and debt assumption, with minimal cash involved, so interest rates should not be that much of an issue.
Kirby is probably the biggest numbers guy in the industry, It seems like only yesterday that he said UA wasn’t interested in buying JetBlue, but was content for the foreseeable future to do the “partnership” and try to get more Chase/Mileage Plus credit cards into the hands of people east of the Hudson.
He must now know that JetBlue’s condition has substantially deteriorated for him now to be saying “It’s up to them.”, which I take to mean it’s up to the JetBlue stockholders to accept the number of UA shares UA is offering for each JetBlue share.