In a message to employees thanking them for a resilient third quarter and charting the long-term vision of the company, United Airlines CEO Scott Kirby offered an interesting insight into how he views the future of government bailouts in times of crisis.
United Airlines CEO Assumes Future Bailouts Will Occur, But Not Necessarily For Everyone
Speaking to employees in a video message recorded at Chicago O’Hare (ORD) and shared with Live and Let’s Fly by several employees, Kirby laid out three things that will prepare United for the “inevitable shocks that impact aviation every few years.” Those include:
- Carrying more cash on the balance sheet
- Leading the industry in profitability
- Paying down debt
The second goal is most interesting. Kirby believes that government support in terms of crisis is inevitable:
“We need to be a the top of the industry in terms of profitability. That matters for the obvious reasons, but it also matters because in a crisis, if the crisis is bad enough, history has shown us that national governments all around the world will support their airlines and make sure they can fly through and be there on the other side of the crisis. The reason is because we’re a critical part of the infrastructure and they have to have us. They need us there on the other side.”
Yet he reasons that not every airline can or should depend upon it. Rather, only the strong:
“But what might happen is there are times that governments will let two or three airlines fail if there’s a crisis because they don’t think they’re going to need all the airlines. So it’s important – it’s the old bear analogy, you want to be faster than the other guy – to be at the front of the industry so that again you just have more runway, more ability to deal with the longer-term crises when they happen.”
Kirby is confident that United is well-positioned to be ahead of the curve.
“The good news on that front is that for the first time in a decade, United is now ahead of both Delta and Southwest in terms of profitability. We’ve got to keep it going, but it’s really encouraging as we did that in the third quarter and it looks like we’re going to do it again in the fourth quarter. I think we’re set up to continue doing that forever.”
Careful there, sir. Let’s not forget Doug “Nostradamus” Parker’s famous quip in 2017 that American Airlines would never lose money again.
Kirby concludes with another quotable headline, noting that United’s actions will “position us to be the predator, not the prey when a crisis happens and be able to grow and actually take permeant market share when a crisis happens.”
Talk is cheap, but United’s aircraft orders, initiatives like Aviate and Calibrate, leadership willing to take risk on longhaul routes, and the laser-focused discipline on controlling costs (hence the generally pathetic in-flight meals compared to competitors) certainly positions United well to effectuate these goals.
Kirby is banking on future bailouts, but also believes that governments may be more selective in doling out money next time around. To that, I certainly hope that is the case (I far prefer the German model), but the presumption of aid is not hubris; for better or for worse, I think it is a fair calculation based upon historic practice.
image: @scottkirby / Instagram