The story of United’s financial success is also the story of CEO Scott Kirby’s transition from American West and US Airways as someone who wouldn’t make investments until he saw direct results in the P&L, to an airline CEO that’s preached the importance of both growth and quality – that led the industry in eliminating change fees from most fares, and that made the decision to put seat back entertainment back into planes because most passengers fly in coach and it isn’t only premium cabins where you’re looking to drive a revenue premium.
Scott Kirby tried to charge for water as President of US Airways. American Airlines ordered seats for a new standard domestic product that would lack entertaiment screens when he was still President there. Way back in 2012, he explained at the Phoenix Aviation Symposium why US Airways had just – finally – decided to put internet on planes. He said he resisted because he didn’t think they would ever make money selling internet. And it wasn’t until he could see the data that they were actually losing ticket sales due to lack of wifi that he approved the change.
The question is, what led to Kirby’s change in thinking? And when did it happen, exactly? Scott Kirby now says he wants to invest in food, and is doing it on faith.
United’s food has improved greatly in the last three years, so much so that I no longer complain about it when I see senior executives. Kirby and CFO Mike Leskinen have said that United is spending far more on food now than before the pandemic, and I asked Kirby, who loves his spreadsheets, why he approved this budget increase. Is it so clear that offering better food in premium cabins leads to higher fares?
Kirby said that’s not something he can prove. Instead, he said, it’s based on a thesis — that if United can attract more customers who want to fly it, the airline will be better off in the long run. …”Every year we’re going to consciously spend more for customers in a bet that we’ll just win more brand-loyal customers,” he said. “And we’re not going to do a spreadsheet analysis. I say, ‘here’s the number,’ and that’s what we will do.”
From his time at US Airways, Kirby said he knows all the tricks to shave off a few million in passenger experience costs to please Wall Street analysts. If he changes the meal window by 15 minutes, he said, he might save $8 million. But at a premium airline, he said, moves like that are a fool’s errand.
United Airlines Executive Vice President and CFO Michael Leskinen says that the airline industry is no longer about offering seats and competing only on schedule, price and reliability. Customers become loyal to product, so product matters.
And a lot of these things you can’t put in a spreadsheet. I don’t know, I say what’s the impact of adding $50 million to food on NPS? Are we going to sell more tickets? Are be able to sell more [Audio Dip] because I improved the quality of the chicken that we have on our air. I think you should try to put some math around it. But in the end, this is about driving brand loyalty to United and those customers choosing to fly us because of that.
When did United’s CEO shift away from the spreadsheet and why? He’s said he always wanted to drop change fees and he beleived in screens and there’s a difference between being CEO and just being an airline President.
Maybe that’s true – he seems to codeswitch politically depending on whom is in office. But there seems to be something deeper and more fundamental in how he’s shifted the way he runs an airline. That he’s changed is no mystery. What drove that change remains something of a mystery.
Although we shouldn’t oversell the change, because United’s long haul business class food still probably lags American’s. Their domestic first class food has gotten better. Where they actually really shine is domestic coach buy on board meals. The only other U.S. airline that’s as good or better there is Alaska.
I stopped eating on planes 20 years ago, even before I take 10-12 hrs flight and even in business..
I eat at the lounge before and then might grab a cookie mid flight
I do not understand the obsession of flyers with food in particular on domestic flights that are 3-5 hrs max….
@Doug – Likewise. Focus instead on improving the food offerings at (or better still, near – I’d rather eat before arriving or after leaving) the airport.
And for the overwhelming majority of Americans, missing a meal or three should be the least of their concerns.
Could have fooled me. United First Class has served the same salad and goofy Banana pudding on my last 30 flights. Taco Bell has better Mexican Food. There is no way a Chef is involved.
We quit flying UA a couple of years ago after 2 inedible Business Class meals from DEN to FRA. Still flying LH and the food quality is much better.
@Edward O’Hanrahan — I swear, if I see one more of those freakin’ Magnolia Bakery’s Banana Puddings… bring back Eli’s Chocolate Chip Cookie Pie in the Sky… “For God’s sake, man, there are women and children down here!” (Titanic, 1997)
In reference to United Airlines CEO Scott Kirby, the article notes, “From his time at US Airways, Kirby knows all the tricks to trim costs to please Wall Street analysts.” However, Scott, since you started charging for water on US Airways flights, you’ve overlooked a significant revenue opportunity. Consider collecting most of the discarded or uneaten food from airport food courts and repackaging those leftovers for sale on future United Airlines flights. This approach would reduce food waste, reduce your carbon footprint, and allow passengers to enjoy local offerings. For top-tier elite customers, consider providing repackaged leftovers sourced exclusively from premium airport lounges. Your elite clients may appreciate jettisoned delicacies from the Capital One Lounge, Chase Sapphire, and the American Express Centurion Lounges. Act quickly to repurpose discarded food waste and create a new revenue stream for United Airlines before American Airlines beats you to this new profit opportunity.
Maybe for the overwhelming majority of Americans, missing a meal or three should be the least of their concerns, but it probably isn’t. Passengers, all of them, are hostages in a metal tube with no way out for several or many hours. That is why so many are obsessed with food they may often miss at home, movies.they would never watch at home etc. etc. I think this is smart move by United. I often eat in the lounge before I get on a plane but then often eat the meal as well. Not because it is great, although that is sometimes the case, but because it is something different to spend time on. I am retired so never have to work while flying. I fly Business whenever I can. Whilst orice is not my overriding concern, I will never allow myself to be robbed. I can only watch the screen for so long, read for so long and sleep for so long. Eating a meal gives me something else to do. If it is a good meal, as most meals in Business are, at least where I am in Europe, I will remember it next time I fly.
Hey CEO Scott, also ask your C-suite at United Airlines to consider offering your best customers in high-end elite tiers, such as Chairman’s Circle, Global Services, Premier 1K, or Premier Platinum, access to discarded and then repackaged food leftovers exclusively procured from other airlines, such as Emirates, Singapore Airlines, Qatar Airways, and Turkish Airlines.
@Ken A gets it. Profit or prophet?
I think he is on to something. If you conclude that having a well thought of brand will help the airline sell more premium tickets, you will want to invest in that, and food should be one of the cheaper things to improve. It can be hard to quantify. But I also suspect that BA (which used to have worse food than UA till they went to Do&Co), AF and a number of others have run numbers on how much their brands – of which a large part is the soft product – impacts ticket sales as a zero sum game. I also suspect that improving food is not all about the dollars spent, and improvements could mean changing vendors and menus and generally managing it better.
Merger partner Continental used ‘to dine out’ on its quality Businessfirst five course meal offering.
Around 2006, most US airlines stopped serving meals in economy class but Continental Airlines was one of the few that still served a half submarine sandwiches on longer domestic flights. I specifically flew them to get the sandwich. Now, I am a little fat so I don’t mind no food but I like IFE on board, which American does not have. I don’t want to overuse my phone to watch something. (my phone used to only last 3 years but now I am stretching life to about 5 years) For some flights, I bring my cheap iPad, which I’ll use for some IFE.
While I think this is a sensible move, Kirby has repeatedly proven that you simply can’t trust pretty much anything he says so I’m not sure discerning why he reversed himself is largely an exercise in futility.
I used to be an avid AA Exec Platinum, but the first class upgrades are so rare now, as soon as I hit it, I stop and start looking at other airlines. I.E., the only real value of EP is that when the ship hits the fan, you have a (near) direct line into a reservation agent who can actually help you quickly.
All the other AA EP benefits have been completely watered down.
And, admittedly I am one of those customers who will change to an airline with better food if the flight schedule is nearly the same (otherwise, I always base it on schedule).
-Jon
When did it become a felony to change one’s mind?
” he resisted because he didn’t think they would ever make money selling internet”, typical multi-millionaire mentality (like those in Hollyweird) totally out-of-touch with his everyday-man customers.
Whoa, this one brought the Banana-Pudding-h8rs out!
The truth is, actually, that the range of offerings on UAL is qualitatively better than it was five years ago.
They are definitely trending in the correct direction. Even the “food cart offerings” back in Coach are much, much better. I came back from Maui the other day in E+ (upgrades seldom clear on the Hawai’i routes) and both the breakfast sandwich and the tropical bread pudding were nice.
Can’t complain too much. I once spent $55 on food-for-the-flight out of the dumpster fire known as SFO— and somehow was still hungry.
tl;dr United’s actually making an effort. No need to shoot the messenger over it.
We fly almost exclusively long flights international and frankly bringing food on board is something we do as a backup but I actually do look forward to eating the business class meals and United has substantially upped its game and that does weigh in my mind when we are deciding which airline to fly