Morgan Stanley Exceptional Leaders: United Airlines: Leading for the Long Haul

Most people confuse management and leadership. If you can inspire 120,000 people with a vision, you can accomplish a whole lot more than if you're going through a checklist every day.

Congratulations. Yeah. Today's the day 100 years. Happy birthday.

That is fantastic.

I went to the Air Force Academy, intending to be a pilot and then an astronaut. And while there, you get to fly. And I was out in an F4 dogfighting, aerial, broke the sound barrier. And at the end of it, the pilot told me to close my eyes and fly straight and level by feel. And I was at a 30 degree left bank and he said, 'Use the instruments.' And I did, and I felt like I was going to fly out of the seat to the right. And he laughed at me and said, 'You're never going to be a fighter pilot, you're going to be a cargo pilot.' And at that moment I decided, I'm sure you're right about the first one, but you are dead wrong about the second one. So I didn't go to pilot training.

You're trying to figure out on the fly what's going to happen, trying to look over the horizon, trying to read extensively. I've done that my whole life. I read three hours a day on average. But I'm genuinely curious. And when you do that, you can connect dots I think that other people can't connect and don't see. This has happened, you know, a lot of times in my career to try to see things and how to take advantage of stuff when I have a view that is different than the consensus view.

I'm really good at time management and I don't waste time in my personal life, professional life. I'm not on social media. What a time suck. I don't really watch TV. Another time suck. But in business, less than four hours of meetings a day on my calendar is my rule. It gives you time to think, gives you time to read. It gives me time to just call people and ask questions. But also I have a great team. I feel like if I am trying to micromanage, I've done something wrong.

I don't think it's changed so much because of data. In fact, I probably use data less explicitly the further I go in my career. I could tell you pretty close what it's been for the last 30 days. I know about the operation. I know what we've done. I know what each of the other airlines have done, but I really use that more to paint the palette of thinking about other, bigger decisions. And I draw a big distinction between management and leadership. Management is about compliance. It's about running the checklist. How many people showed up for work on time. But leadership is different. It's about inspiration and vision. And compliance is really important. You need people to do that. But leadership is more rare. The further you move up anywhere in your career, the more your job indexes from management functions to leadership functions.

I've learned a lot more from watching people make mistakes, and I've learned a lot more of the positive examples from reading. Winston Churchill's top of my list of heroes, like what would Winston Churchill do in a situation like this. Abraham Lincoln is another one. But I also learn from myself too, like mistakes that I've made. Like when you make a mistake, to thine own self be true. What a great line. When you screw something up, I don't mind making a mistake. I hate making a mistake twice.

I have spent a lot of time out talking with people. I have the easiest job of anyone at United because I have only really one responsibility: create a company that our employees are proud of. And so I look for that pride, and I spend a lot of time out in the operation. Every week I'm out, either virtually or in person, talking to groups of new captains and talking to groups of new pursers at United. And you can tell if people feel proud of the company. People want to be on a winning team and winning is contagious.

Covid. Oh, sure. When Covid started, the data to me pointed to like, this is a global pandemic. And it was hard for me to understand why no one else knew it. We were just a couple of weeks ahead of the globe. But we went off and raised $2 billion at 3% interest two days before the NBA walked off the court and it would have been impossible. And we shrunk more than everyone else quickly. But then during Covid, the data got wrong. All the experts believed that air travel demand would never recover. And all the surveys, if you did surveys, people said they were never going to fly again. And so, literally every global long-haul airline in the world except United, permanently retired part of their global long-haul widebody fleet and shrunk. And we looked at that and said, 'I just think that's the wrong decision.' Instead, we did the biggest aircraft orders in history during Covid.

The foundation of an airline is the route network. That is our asset. You have to learn the whole airline. You have to learn what makes it tick, what makes it work, what makes it profitable, what doesn't work, what works operationally. You really have to learn the whole network to be good at route planning.

Flying globally is what customers want. So that's the starting point, but it also creates unique challenges and opportunities. We're just exposed to everything that happens anywhere in the world. If there's war in the Middle East, we're not just hit by fuel prices. We fly to those places. When the war in Ukraine started, we flew over Russia. Anytime something happens in the globe, we're exposed to it. But it's what our customers want. When you're an airline as large as United, to find new destinations means that we can't just use data. We're flying to places like Nuuk, Greenland, which no US airline has ever flown to. And so you have to go find other sources and other ideas and make bets on what will work. And this summer, we're starting two destinations in Spain and Portugal that are part of pilgrimages where people fly into Lisbon and they walk 200 miles to another destination. We've seen a lot of one way traffic in, but not return traffic, and realize that, and it's been booked up like crazy. So it's done really well.

We really are at the top of the food chain for aviation and for industries at large. We're growing faster every year in absolute than any airline in history has done, which gives you lots of opportunities. And if you come to United, it feels like you're on the winning team. I just came from speaking to a group of new hires. We had people from all of the major airlines. A lot of them were talking about, 'In my area, United is doing this and you're the leader here.' And so they're all excited to come. People that come to United are usually coming for a career. We still create the kind of careers that used to be common in the United States. A pilot, a mechanic, a gate agent can start here when they're 20 years old. And when they get to the top of the scale, and certainly with a little bit of overtime, they can make six digits. They have great benefits, they can work for a lifetime. They can buy a house, they can send their kids to college. It's an important part of the fabric of America. And being able to create those kinds of careers, we're proud to do it.

What we've tried to do is actually hire people for attitude instead of hiring for technical skills. We can train someone to be a flight attendant. We can train someone to be a gate agent. What we can't train is to be a people person that cares. So we try to hire people that have that attitude that really are people people. We're in the business of connecting people and uniting the world.

So I push back actually a little bit on the premiumization of the industry. It is happening. But I start by saying we're investing nose to tail for all customers. And I think actually the gap between our economy and other airlines' economy is probably bigger even than the gap between premium to premium. There's a gap in both places. But things like Starlink throughout the airplane, seatback entertainment throughout the airplane, the app. We have the best technology of any airline in the world. Anyone that uses it knows it. So we're really focused on creating products, technology, service that all customers like. We have a lot of premium demand and we're investing more heavily. The latest 787, I think it's probably the best airplane flying in the Western world. The CRJ450, when you're flying to small cities, it's like flying on a private airplane. It's the opposite trend of what most airlines do. We took 18% of the seats off the airplane.

I try to go by the philosophy that Henry Ford had and Steve Jobs had. Henry Ford said something along the lines, 'If you asked people what they want, they'd tell you a faster horse.' And Steve Jobs famously eschewed any kind of consumer survey stuff because he wanted to invent something that they didn't know they wanted yet. Some of the things that we put in the app are not the kind of things that people ask questions about. We put a scorecard in for frequent fliers last year. How many flights did you take? How many hours? How many miles did you fly? We've started putting the airport map so you can see when you're on the ground where you have to taxi. I want us to surprise and wow our customers every year with something new, something they get on the airplane. They say, 'I've never seen an airline do that. I never even thought of this before.' So we're trying to figure out what people will love, even if they haven't asked for it yet.

We've also added technology on the app that if you opt in, we'll track you so we can know to wait for you for connecting gates. We want to do things like deliver food to your gate. If you need a connecting flight and you want to be able to order food. But one of the other things is it'll give real-time waits, trying to get really real-time data to customers, and we're the only airline that's doing it.

It's a great tool. It's going to do a lot of things. It does do a lot of things really well, but I do not think the primary use case of AI is replacing the work that everyone does. And if that's the primary use case, it's for sure a bubble because we're spending way too much for that. Too many people are getting dependent on AI. The thing that people are using AI for, summarizing documents, that seems to me to be the number one use case. I actually want to read the book because all the cool learnings are on page 312 in a little paragraph. There's some cool insight. And I think you're going to miss all that. The cool thing about AI is the things that you can do that were impossible or impractical. One of my favorite examples is anytime there's a delay or cancellation, I want the team to pretend I'm on the airplane and I've called the network operating center, 'Why is my flight delayed?' Whatever they would tell me, I want to tell customers 100% of the time. And we're better at it than any other airline in the world. But we're not even into the game yet. We're still in the pregame. Really hard to do without AI. It's also going to help us in our network operating center, when we're deciding which flights when stuff happens, when the weather hits and airports close, it's one of those problems that has multiple tentacles that can last for days, crew and maintenance and all kinds of other implications. And they're all stochastic, you don't know for sure what's going to happen down the line.

Oh, oil prices and the war in Iran. From the time that MAU left Asia for the Middle East, I thought the forward curve was wrong. It was going to be higher for longer. And so we've been preparing for that. The experts that I talked to back then all told me, 'Worst case, the Strait of Hormuz are open by the end of March.' I think oil prices are going to be higher for longer. We at United are preparing for that. That's our base case planning assumption. I think there may be opportunity to take advantage of it when our competitors are managing more by hope instead of reality.

I want United to have launched a new era in aviation, what it means to be an airline. A lot of it's going to be technology. Technology that takes all of the uncertainty and stress of travel, make travel fun. And my second one is to leave behind a CEO who's better than me.

And this has been real fun.