Scott Kirby is the most interesting airline CEO to listen to. He gives lectures in airline economics rather than just repeating marketing talking points.
He does over-market his product. In this morning’s presentation at J.P. Morgan he claimed that the airline has caught up in customer service with Southwest. He touts their premium product – United’s seats are ‘o.k.’ and certainly lag many competitors.
They do have plenty of premium seats, and their Polaris lounges are good. He also acknowledges that since they are “working on the next” seat, suggesting that all business class products refresh on a “10-15 year” cycle.
But he argues that business class is “a lot more than just the seat,” and that while the “seat matters a lot” the product is also “service, experience on board, app” as well as their clubs. The meals and service are a weakness in United’s business class. Their bedding remains good. There have been significant cutbacks across the board since the product was introduced eight years ago. Clubs are improved.
Where Kirby really shines though is laying out his analytical framework. He talks about customer segments of
- global travelers
- domestic road warriors
- and low cost
What he seems to leave out of the equation is premium leisure, which is telling about their model. For United, basic economy is a tool to offer less to customers who would be tempted to buy from Spirit and Frontier, rather than as American suggests as an introduction to their product and an opportunity to win loyal customers.
Most helpful to me, in thinking about Kirby’s leadership and his model for running the airline, is his story around moving to no change fees, and his journey to believing that passenger experience matters (which should be obvious, but much of the industry hasn’t believed it).
- Elimination of change fees. United was first to introduce no change fees on an ostensibly permanent basis during the pandemic. Other carriers matched, under more generous terms that United had to adapt to. Kirby has said it’s a change he’s always wanted to make. He shed additional light on why.
He believes that the lack of change fees used to be a huge advantage for Southwest with the domestic road warrior segment he talks about. Eliminating change fees, while a “billion dollar decision,” has neutralized Southwest’s advantage.
- Experience matters. Scott Kirby came up from America West, becoming Executive Vice President. That airline took over US Airways and he became its President. Then that carrier took over American Airlines where he served as President, before becoming United’s CEO. He acknowledged the contract in viewing service with history “at America West.”
However he’s been “convinced by Delta that product and service mattered.” He’s seen them differentiate themselves to earn a revenue premium, and no longer just offer a commodity product. I don’t think I’ve given him enough credit for shifting views, and see him only anchored in the past (having watched him make cuts, for instance, to the Polaris soft product and impose the most draconian basic economy restrictions).
Two other interesting notes. Talking about basic economy he sees upgauging as an advantage. Flying larger planes means they can “afford to sell the seats at basic economy prices” (rather than ‘having to’ liquidate unsold inventory).
And he has somewhat changed his tune on Boeing. Having been the loudest airline CEO calling out Boeing production problems and even calling for leadership change at the plane maker, he is now “encouraged at Boeing.”
Boeing is slowing down production, which he supports, saying they need to “go slow to go fast” and that “I think they’re doing that.” He acknowledges that United has been “public in the market for [Airbus] A321s” and that “if we get a deal where the economics work” United will place an Airbus order. United though is not in a hurry for planes, and was clear that they won’t overpay to hit next year’s growth target.
Kirby also shared that he has read every transcript of every earnings call of every competitor for two decades. Smart.
The J.P. Morgan conference where he spoke is the same one that served as a starting gun for the airline industry realizing what was happening with Covid four years ago. He was the most alarmist by far. American Airlines CEO Doug Parker gave a presentation that was mostly business as usual. Kirby was planning for a drop in revenue of 70%. Things wound up worse than that.
At the other end of the pandemic United is stronger than at the start. American Airlines even revealed that its co-brand – which once had the most spend volume of any airline card – has slipped to third (behind Delta and also United).
While United Airlines has real problems still, I think – they have been slow to retrofit planes with functional internet which is why I mostly avoid them but will still fly them next week – and while some don’t love his politics, Kirby’s tenure at the airline has been better than I expected.
You left out one thing: he made UA miles nearly as worthless as SkyPesos.
I hope his shifting views show up in the onboard soft product in Polaris. Maybe he is realizing that it doesn’t necessarily take a lot of money to improve the customer experience enough to expand net revenue. (I was talking to a successful health club CEO about this just the other day.)
By the way, I suspect the AA card is generating a lot more revenue since they started counting spending towards status.
I suspect Kirby’s positive comments regarding Boeing are just blowing smoke. There’s no evidence that Boeing has turned the corner. Rather, it’s a great way to place added pressure on Airbus to come to the table with a more competitive deal.
Living in Washington DC, I can’t use Delta unless I want to connect. My experience with United and AA over the past 5- 10 years has been mixed although United has improved. I am Lifetime Gold/current Plat on United and I use my BA Gold status on AA. (One Word Emerald)
United makes it easy to change my flight. This is why I fly UA msot. If I have to call call, I get an agent on the phone pretty quickly but the quality is very hit or miss. HUCA frequently. No club access. Occasional upgrades. I buy first if I need it.
No upgrades on AA because I fly with my BA number. (No one gets upgraded anyway) Phone agents are way better than UA but impossible to reach. Flight changes are a nightmare. I find much better value in AA redemptions than UA redemptions generally with many more options.. Inflight service sometimes non existent on AA. Club access with One World Emerald. I have to buy first if I need it.
I’ll give Kirby this, if only grudgingly: I have not had a United itinerary blow up on me in years. Even when flights are delayed the app provides alternatives proactively: I arrived at ORD to find my onward leg running a couple of hours late, but the app advised I could confirm an earlier-departing flight and be on my way, if I hustled through the acid-trip tunnel, in 30 minutes — which I did. Compare that positive experience with AA now refusing to put you on an earlier flight than booked with empty seats and forcing a longer-than-necessary layover on you.
There’s a lot I’d change about UA but stand today’s operation up next to Air Smisek circa 2012 and the contrast, the diminishing FF program being a prominent exception, is striking.
“Scott Kirby is the most interesting airline CEO to listen to.” More interesting than Michael O’Leary? A funky mix of quirkiness and humor, always shooting off his mouth, craving the spotlight, and dropping bombastic lines left and right. Every time you see him talk, he’s pushing his airline economics mojo (studied that stuff at Trinity-Dublin) and has a knack for slashing costs like nobody else.
@Bruno Jin – preferences vary, I like that O’Leary is unabashed and I guess he’s funnier but I find Kirby far more thoughtful and he offers lengthier explanations that are worth engaging. I may disagree but he lays out a full case, rather than just making bold claims.
“He claimed that the airline has caught up in customer service with Southwest.”
That’s like jumping up in the cafeteria and yelling. You’re only the second ugliest girl in school. United’s soft product is what keeps me from flying them international.
Disagree about the UA and WN comparison. Just what exactly are UA catching up to?
I live in DEN and WN is a joke when it comes to customer service, especially in IRROPS. Just you wait until this storm hits later this week. Watch how quickly WN will run around, waving their arms and screaming. They will cancel at the first hint of a snowflake.
I’ve been flying UA heavily for a long time. They work for me, especially with the frequency of flights to and from Australia. I dont gripe about the devaluation in MP because thats a trend thats industry wide. I’ve been able to get the seats I want when I want for the most part.
UA’s Million Miler program also seems to be way ahead of both DL and AA.
And while GS isnt perfect, it makes my life much much easier.
While I wouldn’t invite Kirby over for dinner, I’d certainly let him buy me a drink at a Polaris lounge and enjoy the conversation 🙂
I fall into the “global travelers” category. Been a 1K for years. Their product is fine but there’s little to distinguish it from others. Mileage Plus was always a strong point, in my mind making loyalty worth the effort. But that is slowly slipping by too. This year I’ve starting taking a different approach, being more a free agent. It seems weird but it’s kind of freeing too. Foreign carriers often offer a much better product.
Scott Kirby LOVES to try to convince the world how smart he is – but he really hasn’t moved United positively esp. with respect to Delta despite 7 years of trying.
United, including under Scott Kirby, has not innovated anything. Copying Southwest’s lack of change fees is not innovation.
Copying Delta’s approach to service including onboard AVOD is not innovation.
HE hasn’t even innovated in terms of massive fleet purchases because he was part of that at American.
United now has more commitments for fleet spending than American, Delta and Southwest COMBINED.
you have to be drunk and stupid to think that United won’t end up in worse financial shape than American and not gain any advantage – Delta grew at the same rate as United in 2023- 17% – made $2 billion more than United, and spent less money in the process.
United was the #2 airline financially and in other positions depending on the metric and before covid and still is.
nothing has changed. All that is constant is Scott Kirby’s need for approval – and United’s constant coming up short.
The whole “we can now afford to sell Basic Economy” is a crock. Basic Economy is not price competitive at all. In fact, on AA, when you look for a price in Coach, Basic Economy is the default. Then you have to look/choose regular Economy and it’s $50 to $75 more at least.
Looking at flights to Denver in June, AA was about $150 higher than WN from Dallas. I’m EP on AA but booked WN.
@TimDunn … Who else loves to try to convince the world how smart he is ? Hint : his initials : TD .
I can’t trust United until they reinstate the unlimited United Club access that Lifetime members paid cash for. American and Delta did this for their lifetime members. C’mon, Mr. Kirby: Tell your staff to make this right.
With all due respect, you’ve been the CEO of how many airlines?
Tim Dunn, Same question: You’ve been the CEO of how many airlines? And I know – Delta is the world’s only PERFECT airline.
In the interest of full disclosure, I have been the CEO of ZERO airlines. So take what I write with that in mind. I know my limitations, I’m merely an observer – and a curmudgeon.
Hey, we’re talking about the best airline in the history of the world according to Kirby. The veracity of that statement tells you everything you need to know about his credibility.
Someone tell Mr Kirby Kutbacks to raise catering quality then. Maybe I’ll forgive him for destroying AAs after the merger.
Alternatively he can give up because he can’t beat the world’s only perfect airline.
Ghost,
sorry but there is plenty of room for evaluating the performance of someone or something just because you didn’t make it or run it.
Scott Kirby has managed to “fail up” going through more airlines than just about any other senior manager in the industry.
Let’s not forget that he was pushed out of AA.
He made plenty of mistakes, learned from alot, and copied others (as have other airlines) but he is NOT any more gifted than others in the industry – past or present.
call
And as for your incessant comment about PERFECT, you would do well to listen to listen to the calls or read the transcripts. Many airlines presented at the JP Morgan conference today which is where Gary got the material for this story.
While Scott Kirby INCESSANTLY needs to tell the world how smart he is and how United has figured out how to do so much better than its competitors, listen to the response of Delta execs when they were REPEATEDLY asked to compare their results to other airlines or how Delta is positioned to other airlines.
REPEATEDLY DL execs say “we don’t (or won’t) speak about other airlines and what they can do or how we compare but we can and tell you why DL is doing what it is and why DL is winning.”
In life, when you are at the top, everyone knows it. Scott Kirby and United is not at the top and they incessantly need to tell everyone how good they are.
Yes, United is doing well.
They just aren’t the best and they really haven’t closed the gap with Delta in Kirby’s 7 years at United even though he said in its first earnings calls at United that he would.
I’m going to go out on a not very long limb and say that United will never beat Delta financially in the time that Kirby has left on planet earth.
Delta has a broad and deep management team. Any one of them could drop dead and the rest would keep going and succeeding.
Delta is run as a team.
If United Airlines is at the top of the game in legacy airline carrier…why don’t they offer the flight attendants a leading industry contract!!! customers and labor industry employees all benefit, it’s an insult how United Airlines is negotiating with flight attendant contract…#factcheck
He needs to put some effort into making the experience in coach better. That is how most people fly, and there’s a lot of room for improvement. How about starting with the seats and the lack of comfort there? Little things matter.
“Scott Kirby LOVES to try to convince the world how smart he is”
Wow pot calling the kettle black. Showing once again you have ZERO self introspection.
dear mocker,
I am here to tell the truth and cut through the bias that is rampant in the airline industry.
Tamara,
United may be at the top of ITS game but it is not at the top of the airline industry.
It is mind-numbing how docile UA FAs are compared to AA and even WN FAs in trying to get a new contract.
No FAs are going to get retro so every delay just increases the amount FAs have lost by waiting or believing that UA will make it up.
And as much as people want to bristle at it, even if UA FAS got 50% more profit sharing than DL FAs, they still wouldn’t match what DL gets in profit sharing
Tim-
I never complained about retro pay and only got it when Continental Airlines Bethune a leading WIN WITH EMPLOYEES ADVOCATE…but when you have leaders advocating they are the BEST, than giving employees a share of the pie since they provide the BEST not the BOARDROOM is in best interest for employees, passengers and stock holders. Until you walk in someone’s shoes you cannot feel the soil 🙁
From a segmentation perspective, I’m curious what would differentiate a “premium leisure” customer as anything but a what you would call a “global traveler” or “domestic road warrior” in their spare time. Seems if you’ve locked in a “global traveler”, they’ll pick you airline first when they want to book premium leisure due to other FF earnings.
Typo alert… He worked for America West not American West.
United has gone a long way, but it really missed out when it didn’t buy the A220s, and clearly you can’t offer a premium product on the 737-7 that United tried to use.
Let’s hope the new 787 Kirby has ordered will have a game changing business class.
Scott Kirby told us for years that UA couldn’t order the A321 because AA had most favored nation pricing on it.
Funny thing is that Delta managed to order the A321CEO and then the -NEO long before UA got around to.
All DL did was ALSO order A330-900s and A350s
DL also got the MRO agreement for the Rolls Royce engines on the A330NEOs and A350s as well as from Pratt and Whitney for the A220 (then the C Series) and the A321NEO engines.
Did Delta just outsmart UA on getting the A321 while AA really had MFN pricing on the A321 or was Kirby just blowing his usual smoke?
M thank you for the perceptive comment. Far more insightlful than ones from Tim Dunn – single handily accounts for the most premium thumb exercise scrolling past.
TD – If you have so much to contribute start your own blog and stop polluting others.
Mr. Kirby is not in any hurry to get new planes? Bullocks! He should wish for new planes as fast as possible with his aged fleet of airliners. The newer planes should help with all of the mishaps that are occurring regularly now. Just being smart.
You bringing up his “politics” confirms what I and many others think of you. You are a know-nothing hack. Need more proof? Your comments about UA and Boeing are completely WRONG. https://www.foxbusiness.com/markets/united-tells-boeing-stop-making-max-10s-airline-ordered-report
It doesn’t matter how you look at it.
Since Covid all services industry has gone down hill.
Some airlines taking out the seat back screens. This is a big mistake. One big of the 3 service is trying to become a narrow body airlines and will not survive.
I was hoping to read that United would be dropping their basic economy and stop looking for the Walmart type flyer. I actually believe this will be the future of the major carriers and if they don’t do it they’re going to continue to lose market share to some of the larger International carriers going east or west. Passengers are sick of seeing the trailer trash board the aircraft along with their behavior and pathetic dress code. They belong on the Spirits and the Frontiers of the world. The sooner Airlines get rid of basic economy the better off the world will be.