United Airlines CEO: It Is “Blindingly Obvious” Frontier And Southwest Can’t Grow In 2023

What would inhibit an airline from growing in 2023? A lack of pilots? A lack of airplanes? Perhaps poor infrastructure? For United Airlines CEO Scott Kirby, the biggest indicator is not even what might be coming, but how airlines are performing now when irregular operations inevitably take place. Specifically, Kirby points to the poor performance of Southwest Airlines and Frontier Airlines, United’s two largest competitors in Denver, to argue that it is “blindingly obvious” that their growth plans are not achievable.

United Airlines CEO Uses Southwest And Frontier To Make Point That Airlines Cannot Possibly Grow As Promised in 2023

I’ve been mulling over the United Airlines’ investor conference yesterday and continue to be drawn to United CEO Scott Kirby’s insistence that capacity growth is unrealistic for most U.S. carriers in 2023. He asserts that other airlines are fooling themselves when promising growth this year.

Here’s what Kirby said in full context, in response to a question about whether airlines would face more regulatory scrutiny if they scaled up flight schedules but experienced horrible operational performance.

“Well, I think what it’s going to lead to one way or another is less capacity. You just — it’s not mathematically possible for all the airlines to achieve their aspirations. And now, I’ll just give you the data. I’m not trying to pick on these two airlines. But, like this seems so blindingly obvious to me. And we talked about it a year ago, we were right all this year with capacity coming in 7 points lower, and I feel even more confident that we’re right today. And the data I’ll give you is snowstorm started — pretty big snowstorm started in Denver yesterday afternoon and it continued through this morning, 11 inches of snow. So, that’s a tough operating environment. There are 3 large airlines — there’s three airlines, so two in addition to United have big operations there.”

While Kirby does not name the airlines, he’s talking about Frontier Airlines and Southwest Airlines, which both have a large presence at Denver International Airport, often referred to as United’s most profitable hub. Kirby goes on to distinguish United from Frontier and Southwest, particularly in terms of completion factor, meaning the percentage of scheduled flights that are completed.

“Yesterday in Denver and our mainline, we had a 100% completion factor, so no cancellation. One airline canceled 12% of their flights, the other one canceled 27% of their flights. Starting off today, we’ve canceled a little less than 1%. Each of them have canceled 33% of their flights, like this isn’t new. And there’s like a dozen of the Wall Street analysts that breathlessly publish a weekly report on industry scheduled capacity. You guys are looking at the wrong data. If you want a forward indicator of what’s going to happen with capacity, you should watch completion factor.

“One of you should start looking at completion factor because airlines that are running like that, it means they can’t fly their schedule, and they’re going to have to adjust one way or another. That’s my thesis. That’s what happened last year, is what I think is going to happen next year. And all of the structural issues are multiyear — I mean all of them are three years at best to address. And you put all of them together, this is a long-term structural issue.

“And I think, it challenges us too, but we just did more to invest for that future, saw it coming earlier than others and are better prepared to deal with it than everyone else. But it does challenge us too. But really like don’t take my word for it, don’t take the others’ word for it, just watch the data. That’s what’s happening with completion factors, and that’s going to tell you whether we’re right again this year or everyone else is right when they say they’re going to achieve their aspirations.”

United’s growth has not matched earlier targets because it has built in more slack into the system. Kirby asserts that Frontier and Southwest still have not done so, meaning there is little room for error. So when bad weather hits, the weather itself may be the catalyst, but the ultimate cause of the flight cancellations is simply a lack of resources (mostly human, but technological as well) that can deal with such disruptions.

This is a very interesting theory to me, seems to make sense and one that I will be watching closely in the days and weeks ahead.

CONCLUSION

How is it that one storm can have such a dramatically different impact on carriers operating from the same airport with identical (or similar) aircraft types? Kirby says this problem essentially illuminates why other airlines will not grow in 2023.  I think he’s right.

image: United Airlines