United CEO Scott Kirby appeared on CBS’s Face The Nation yesterday. I want to unpack some of the statements he made concerning the current state of the airline industry.
Five Takeaways From United CEO Scott Kirby On Face The Nation
Here are a few things that caught my attention in no particular order.
1. Kirby Plans to Bring All Furloughed Workers Back
“We have confidence in the long-term future of being able to bring everyone back. But getting through a crisis where revenue is down 85% is just not sustainable for an industry like aviation or almost any business for that matter.”
While it’s a nice platitude that I hope United (and other carriers) will be able to follow through on sooner rather than later, sadly most displaced workers do not have the luxury of waiting around for boom times to return.
2. Kirby Stakes Recovery On More Government Support
“But the reality is, without more government support for the whole economy, there’s going to be more layoffs to come across the economy.”
Kirby has always struck me as a conservative. Although we’ve never personally talked politics, I’ve studied him closely and get a strong sense that he prefers the Grand Old Party. Yet in a market like this, no airline CEO is going to turn down government aid. In fact, Kirby makes the argument that more government support is essential to prop up the industry.
3. Kirby Does Not Appear Interested in More Private Equity
Host Margaret Brennan asks Kirby, “Why can’t you go to the private markets for that money? What specifically do you need from the federal government?”
Kirby responds:
“So at United we have gone to the private market. We raised about 18 billion dollars since this started in capital and- to get through the crisis. But in a world where we’re still burning 25 million dollars per day, you just can’t go forever on that…But really, you know, without government support for an industry that’s as critical and an economic engine for the whole economy, that’s really the point for aviation, is we drive economic activity not just for ourselves, but for the communities that we serve.”
Kirby deflects on the issue of why United cannot raise more private equity. That’s because it likely can. Instead, Kirby again makes the case that a government bailout is sensible and fair because aviation drives economic activity with a unique multiplier effect.
4. Kirby Expects Realistic Recovery To Occur By End Of 2021
“People are not going to get back and travel like they did before until there’s a vaccine that’s been widely distributed and available to a large portion of the population. And I hope that happens sooner, but our guess is that’s the end of next year.”
Kirby conditions any resumption in travel on an effective, widely-distributed vaccine. He expects that will happen around the end of 2021.
5. Masks Are Important, But Airflow And HEPA Filters Are Key
“The air- aircraft are designed to have the air come out of the ceiling to the floorboards and refilter through HEPA great filters every two to three minutes. It’s literally no place that you can ever be that’s anywhere close to an airplane.”
Kirby boats about Clean Plus and how United was one of the first carriers to require masks worldwide. Yet he points to the airflow onboard plus the use of HEPA filters to argue that flying is very safe.
CONCLUSION
You can watch the entire six-minute interview here.
Kirby’s predictions for recovery and reluctance to tap into additional private loans both weaken, not strength, his broader argument for a second bailout. If United is unwilling to tap into private equity because it is burning cash so fast, why is it willing to tap into taxpayer pockets for the same thing?
image: CBS News / Fair Use Exception
“If United is unwilling to tap into private equity because it is burning cash so fast, why is it willing to tap into taxpayer pockets for the same thing?”
Fiscal conservatives love to rage about socialism, but are usually first in line to get a government handout.
They’re really not fiscal conservatives then
Only when it suits them. And nearly every single member of Congress is dedicated to bringing as much federal money to their constituents as possible, regardless of party or perceived fiscal stances.
Sadly, you’re completely correct. That illustrates a stunning degree of hypocrisy from supposed fiscal conservatives. I suppose if they were straightforward about not really being fiscally conservative, that would be okay but some how I just don’t see Lindsey Graham thanking California for extra revenue for his state.
They love to talk about cuts of tens of millions for things like the arts & humanities as it is red meat for their base, but have no issues jacking up the deficit for tens of billions of increases in defense spending, or a trillion or so for tax cuts for the rich / corporations
The reality is that United’s business model has been heavily dependant on high-yield international business travel for some time. It remains to be seen how much of that revenue will be permanently replaced by platforms like Zoom in a post-covid world.
Socialism for the rich, free enterprise for the poor …
For what it’s worth, Kirby has donated to both GOP and Democrat candidates. Most recently to Dick Durbin.
I’d expect he is very strategically bi-partisan in his public-facing position. In fact, I left out his gratuitous praising of both Dems and the White House in the Face the Nation interview.
I can’t wait to hear the complaints from the ME3 about U.S. airlines and THEIR government subsidies.
AA,DL and UA will learn to tolerate the taste of crow now, won’t they?
To bad there wasn’t a questions about the ME3 taking handouts and what the US3 updated argument is.
interest rates are cheaper on the public fisc.
and down the line you can ask for forgiveness. Not a likely scenario
in the private equity sector.
The reality is that United’s business model has been heavily dependant on high-yield international business travel for some time. It remains to be seen how much of that revenue will be permanently replaced by platforms like Zoom in a post-covid world.
In case you’re interested: Scott Kirby’s political donations.
https://www.campaignmoney.com/political/contributions/scott-kirby.asp?cycle=16
Both liberals and conservatives here, but mostly moderate republicans
Until the masks are gone, flying will never recover. The “flying experience ” hasn’t been great for years but now it’s just miserable and dehumanizing