For CEO Scott Kirby, United Airlines is positioned as the “goldilocks” carrier when it comes to riding the wave of a new surge in international traffic.
United Airlines CEO Sees International Travel Rebound Around Corner
During the JP Morgan Industrials Conference last week, Kirby noted:
“As soon as international borders open up, would you rather go to the Rock and Roll Hall of Fame or go to Paris? I’m betting on Paris.”
While that is not the first time a United CEO has betrayed loyalty to Cleveland, he’s hardly wrong. JP Morgan analyst Jamie Baker remarked “international margins could eclipse domestic” and looking at Kirby, said, “It sounds like you agree with me.”
Kirby nodded and said:
“The international environment in totality is going to be better than the domestic environment. Domestic supply will be ahead of demand for a while.”
That may be the case as U.S. carriers restore more service in light of a recent surge in domestic demand, but many health experts caution that international borders will be to slow to re-open this summer. This is particularly true of tourist favorites like Rome or Paris, where a third wave of COVID-19 and slow vaccine rollout have prompted a fresh round of lockdowns.
Meanwhile, Kirby argues that United is well positioned to offer goldilocks (not to little, not too much) capacity levels and fares in order to capitalize on international markets.
Although he did not invoke it by name, Kirby referred to the demise of budget carriers like Norwegian Air and WOW:
“The business models don’t work. They never made money. They never had a chance to make money. They’re gone.”
But the low-cost transatlantic market is not dead yet, with Norse Atlantic Airways looking to take over whether Norwegian left off and carriers like LEVEL and TAP Air Portugal also helping to keep fares low.
On the other side, Kirby doesn’t see huge capacity concerns thanks to the retirement or grounding of larger aircraft:
“The 380s are not flying, the 747s are not flying. It will be a different supply and demand environment.”
In short, United sees profitability in restoring flights to Europe and Asia as soon as it can.
CONCLUSION
United Airlines was the largest transatlantic carrier before the pandemic. It was also the largest transpacific carrier before the pandemic. Indeed, so much of United’s route network is centered on longhaul international flying. But while Kirby wasn’t going to tell a group of investors that United is pessimistic about the future of its bread and butter routes, continued travel restrictions will keep United’s longhaul route network limited for many months to come.
International traffic isn’t to pick up this year with the pandemic and increased fuel prices. Maybe 2023.
UA had more transatlantic seats available than BA did in say 2019? Number of flights probably but are you sure they also had more seats for sale than BA or even DL?
Big gamble. Go United@
Domestic is and will be clearly over supplied….and for as long as i can see into the future. just look at all the airline aircraft order-books. International will take a long time to get going, but i’d bet the margins will be a significant improvement over what can be obtained domestically……provided you have the cash to ride it out.
Think they should be focusing on premium leisure travel. The business traveler is not coming back to 2019 levels. However, those who did well over the last year have the money to spend on leisure travel and are willing to do so
Go with smaller Polaris cabins, expand the PP cabins, increase the pitch to 42 inches and serve multi-course meals there. Add PP to the Hawaii flights, while selling first as Polaris First to the islands on the long haul flights (EWR, IAD, ORD, IAH,GUM)
Cleveland gets no respect, huh. Folks, New York might be the big apple, but Cleveland’s a plum!
Seriously get rid of the 2-4-2 cabins and put some of the high J premium dense planes to Hawaii.
I agree… United is optimistic about long haul international because it HAS TO BE. If United were to project to investors pessimism about its international network – markets specifically for which it has billions and billions of encumbered assets (shiny new airplanes, real estate and slots) – that would send shockwaves through the industry and impair its creditworthiness. I think there’s merit to the projection, but United is no doubt preparing behind the scenes for another lost summer of international tourist demand and depressed international premium yields for another year or more to come.
I am as big a United fan as anyone but I would be lying if I said I didn’t have viability concerns (going forward) about all those huge business class cabins and the structure of United’s pre-pandemic global network. I still feel like it’s going to be a very different airline for a while…