For the United Airlines CEO, the top job means “taking care of people”
For the United Airlines CEO, the top job means “taking care of people”
When Scott Kirby took the helm at United Airlines in May, the country was just eight weeks into the coronavirus pandemic. But more than six months later, even with a vaccine in sight, the beleaguered airline industry continues to burn through millions of dollars each day. In October, federal aid under the Coronavirus Aid, Relief and Economic Security Act expired, and United was among several airlines to lay off thousands of employees. While a host of issues make the future of air travel uncertain, Kirby himself remains optimistic that United will pull through.
“Marketplace” host Kai Ryssdal spoke with Kirby about the many challenges ahead for United Airlines. The following is an edited transcript of their conversation; to hear the broadcast interview, use the audio player above.
Kai Ryssdal: Let me toss you the easy softball first, and if you’ll pardon the pun: give me the 30,000-foot view of commercial aviation right now in this economy.
Scott Kirby: Well, it’s really tough right now. We were at the tip of the spear, one of the first industries to see the impact of the coronavirus, one of the largest impacts. Our revenues — we just updated our guidance — are going to be down 70% in the fourth quarter. But as bad as that is, you know, we’ve been using the Winston Churchill quote that we’ve perhaps reached the end of the beginning. And because of the wonderful news on vaccines, we can now see the light at the end of the tunnel and have confidence on the ultimate recovery. But we’ve got a ways to go to get through the remaining intermediate phase of the pandemic until we get to a critical mass on vaccines.
Ryssdal: What’s your time horizon? How much longer do you think until you get back to something near normal?
Kirby: Well, it really does depend on the vaccine rollout. We think we need to get 60% of the traveling public essentially vaccinated before we start getting back to normal. We perhaps have been more conservative than some. We’ve really thought all the way back to May that that was gonna take until towards the end of next year. I hope it happens sooner. You know, there’s certainly a lot of forecasts that the vaccine will be widely distributed well before that. And I hope those forecasts are right. But we’re still planning as if it is towards the end of 2021.
Ryssdal: Right. OK, so let me turn to getting out of this mess. Congress, as you know, has not been able to agree on another relief plan. What does United and what do airlines want to see out of a relief plan if it comes?
Kirby: Well, I think it really is important for the U.S. economy that Congress act. Huge credit to the bipartisan effort that happened back in March for a quick and effective response. But now we have this barbell economy. There are parts of the economy that are gangbusters right now if you’re in online distribution, if you’re selling home repair, goods. But there are parts that are in the most devastating depression in history. Take aviation, with revenues down 70% still. Even it’s travel tourism, you know, your local restaurants, leisure-related, and those parts of the economy need support. And you look at aviation, we’re a critical part of the infrastructure in the United States. And as we’re furloughing employees, and that infrastructure degrades, it retards our ultimate ability to participate in the bounce-back and support the ultimate recovery, and the recovery will be less robust, if critical infrastructure is allowed to degrade. And we’re hoping that Congress will get something done, not just for aviation, but for the parts of the economy that really are suffering right now and need help.
Ryssdal: But as you know, Mr. Kirby, airlines and United got billions of dollars in that first package, and then, as soon as you could, you furloughed and laid people off. Why do you get another bite at the apple if that’s what you did?
Kirby: So that was as the legislation was designed. It was a six-month legislation, six-month program. Most people thought that this would be in the rearview mirror within six months. That’s why it was designed to cover our payroll costs during that time period, but not beyond. And it’s a reason that it needs to, to be extended, because this is just taken longer than most people thought. You know, if we’d have known, I think if Congress had known how long this was gonna last back then, the programs that supported aviation and other industries would have lasted longer. But that, you know, to me is just evidence, and it’s the reason, by the way, there’s broad bipartisan, bicameral support for including aviation in any legislation that passes.
Ryssdal: As you know, though, sir, airlines spent a huge portion — Bloomberg has it above 90% of their cash flow — on stock buybacks back in the middle of this decade. You had the cash, and now you need cash. Why, again, do you have to come to the American taxpayer?
Kirby: Well, hindsight is 20/20. At United, we didn’t spend anywhere close to 90% of our cash flow on share buybacks. And during the pandemic, we have been raising money, not just through the government, of course, but we’ve raised at United about $23 billion through a combination of share sales — so reversing the share buybacks and actually selling shares — and new debt. So we’ve raised far more. But this pandemic was a crisis not of airlines’ making. It was, you know, something happening outside of our control that caused this. And that has been the reason that it’s been important for the government to step in in a situation like this, where there’s critical crisis that impacts the U.S. economy and some portions of the economy even more heavily than others, to provide support to those areas. Unlike the great financial crisis, this is certainly not a crisis of our making. This is something that happened outside of the control of airlines, or restaurants, or of any other business that’s been severely impacted in this time.
Ryssdal: Couple of other things I want to tick through here. First of all, the announcements y’all made last week about climate change, and what United is doing to that. You’re committing to be carbon neutral by the middle of the century, and you launched the big carbon recapture program. Tell me why you’re not just proceeding with what airlines have done for a long time now, carbon offsets and carbon credits and those kinds of things.
Kirby: Well, thank you. And what we announced was a program to be 100% green, which is different than what everyone else is [doing], not just airlines, but other companies when they talk about net zero. And everyone else relies on traditional carbon offsets. And the fundamental challenge with traditional carbon offsets — this is things like agreeing to plant trees is the most common one, or not cut down trees — is that they simply cannot come close to scaling to the size of the problem. Man-made emissions have grown by over 4,000 times since the industrial era began. We simply cannot plant 4,000 times as many trees, there’s simply not enough surface area on the planet. And so the only way we’re going to actually solve the climate change problem is starting to have real solutions to reduce carbon in the atmosphere. And we were pleased to be able to partner with Occidental and the first and largest direct air capture and carbon sequestration project on the planet. We’ll learn a lot from this, they’ll learn a lot from this. And it can be the start of what can be a revolution because it’s the only solution that is both permanent and scalable. And I think it is what we’re going to have to do if we really, as a planet, want to address climate change. And it’s important that we avoid the easy siren song of traditional carbon offsets and start focusing on real solutions, because the traditional offset just won’t be more than a tiny drop in the bucket.
Ryssdal: Last thing and then I’ll let you go. I want to talk about business travel, which, as you more than most are well aware, is is the bread and butter of airline profits these days, or has been or was till March. There are predictions, you know, Bill Gates has said 50% is never going to come back, but take your pick on others, it’s a fair bet that a lot of companies are going to see some worth in Zoom meetings than in sending people across the country. What are you going to do as you’re running United to make up for that loss in business travel? First of all, do you buy it? And then how are you gonna make up for it?
Kirby: The biggest answer is I don’t buy it. And I recognize that my view is not the consensus. I do think it’ll take a couple of years for business demand to come back. But humans are social creatures, we need the interaction. As nice a substitute as Zoom and [Microsoft] Teams have been during the pandemic when there’s no alternative, it is nowhere close to being there in person, building relationships, having a dinner, having drinks at the end of a conference. And I think that the first time a company loses a sale to a competitor, because they tried to do a sales call on Zoom and their competitor showed up in person, is the last time that they will try to make sales calls on Zoom. And so you can put me firmly in the camp of thinking business demand will recover. This debate, by the way, happened 20 years ago when video conferencing first started and turned out not to be the case. And I think it’s fundamental to what human nature is. It’s not the same doing these online as it is being there in person. I do think it’ll take a couple more years for business demand to recover, but we’re expecting it to fully recover.
Ryssdal: Fair point. And this will actually be the last thing, and I apologize for the head fake earlier. But you mentioned people and being in the same room and all of that, and I want to ask you a question about you. You and I have never met, we’re doing this on the phone, and you know, had times been different, I’d have come out to Chicago or wherever you would happen to be waiting out this pandemic and talk to you, but you come across in my research as a hard-charging, elbows out, straight-ahead kind of guy. And I wonder whether being in the actual top job at a big company like United changes you a little bit.
Kirby: It absolutely changes you. The level of responsibility is important. You know, coming into the top job, particularly at this moment, during the crisis, you know, will be the defining event of my career. It emphasizes why I’m sure I already knew this, but doubles down the emphasis on people because so much of what I’ve done, almost everything that I’ve done in the last eight or nine months, has been about safety, about health, about finding out what the right policies in a really uncertain environment, to take care of people. It’s been about minimizing the devastating impact on our employees. It’s been about making sure that we take whatever steps are required to make sure that we can get all the way through the crisis and have these great jobs available for everyone on the other side. I’m not sure if it’s the title or the timing, but the combination of those two things are certainly a potent reminder of my main job is about people and taking care of people. And if I focus on that, you know, we have 100,000 great people at United Airlines, and they’ll figure out how to take care of running the airline, taking care of each other and our customers.
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