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.
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.