At the start of Wednesday’s United Airlines earnings call, CEO Scott Kirby outlined four reasons he believes United is positioned to win relative to competitor airlines:
- Cost-cutting. United says they’ll “lead on costs,” with expenses excluding fuel down 4% in 2023. They’ve become more staff-efficient during Covid-19 (despite government subsidies meant to prevent shedding employees) and they expect to retain these efficiencies through use of technology.
- Hub locations. Their hub locations have hurt them during the pandemic. New York and California have been ‘more closed’ than many other states, and they’re business travel reliant. THey’re also more international-heavy than American or Delta. However as those come back these disadvantages turn into advantages.
- Premium focus. They’re improving their product, bringing on new planes, and even retrofitting existing narrowbodies to offer seat back entertainment and they think customers will pay more for the product. I think the biggest change is actually installing better wifi, since United’s nearly-unusable wifi is why I’ve largely avoided booking them whenever possible the past several years.
- ESG (“Environmental, Social, and Governance”) United is focused on biofuels, carbon sequestration, and electric planes. Scott Kirby says their environmental focus is real “not greenwashing” and that “employees customers and regulators” care about this. Airlines are one of the most heavily regulated industries and getting out ahead rather than being dragged into more environmental investments doesn’t just make the Biden administration happy (which matters!) but is a bet that this is the direction the world is headed. Airlines worldwide are committing to long-term environmental goes, so better to frontload the investment.
United emphasizes how they will meet their cost targets, and that their model for full revenue recovery is conservative betting that they’re not fully back until 2026. However they’re ready to shift back to their normal strategy which means that most point-to-point flying from the pandemic goes away, though a few flights that have done well will remain despite strategic focus moving away from this type of flying.