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Curry edition here now, that's where our colleague Lisa Abramowicz is, of course, the co-host of Bloomberg Surveillance. She's sitting down with the CEO of United Airlines, Scott Kirby. Lisa, take it away.
Thank you so much, David. I am here, still in Rio, with Scott Kirby, the CEO of United Airlines. Scott, always wonderful to speak with you.
Great to be here, Lisa. Thank you.
I was actually surprised by the tone here, and I shouldn't be surprised because every conversation I have with different executives in the airline industry, things are better than expected. Demand's actually picking up. It's been more resilient. This summer's going to be a record summer. You're hearing the same thing. Is that kind of your tone as well?
Yeah, a lot of questions for people around the globe really, because we're a US airline, obviously, what do you think's going to happen in the Gulf? And people are worried about oil prices, but demand, certainly US, anything related to US, feels strong. I think there are other parts of the globe that maybe are a little more concerned about demand, but really strong in the US and mostly strong around the globe. People have the view that they hope that this gets resolved at some point and that we're back on track to what was looking to be a really good year to start the year.
Where are you seeing demand kind of fizzle around the world, or at least fade just a touch in response to higher prices?
You know, we don't really see it at United because so 80% of our traffic, even international traffic, is US point of sale. But you can, I think, see the glimmers in Asia is the first place. The impact of oil and refinery issues in Asia have been the worst. And I think Africa, certainly Middle East, has had an impact. So you can, I think, sense some worry, not really evidence of weakening of demand, but you talk to people in one-on-ones, you get a sense of concern that if this goes, sort of been a standard line all along, if this goes till July, it's going to be a problem. In March, if this goes into April, it's going to be a problem. And it keeps getting pushed down the road, fortunately, because demand stays strong.
Well, and so far, you've raised prices about 20% and cut capacity about 5%. Is that enough? Do you anticipate more price increases and more capacity limitations?
You know, time will tell. Depends on what's happening with the economy, what happens with oil prices. But I feel pretty good about where we are right now. We laid out a path to getting to 100% fuel recovery. It certainly looks like we're still pretty much solidly on that path. And oil even has come down a little, so that actually would move it a little earlier from where we set it. But we feel pretty good about where the demand environment is and the consumer's been resilient even with fares up. But in truth, fares are up 20% but they're still in real terms lower than they were in 2019. So air travel remains by far the best value as part of the travel chain. And I've been pleasantly surprised at the resilience of the consumer so far.
Is it all driven by the premium consumer who seems to be insatiable or is it really across the board?
I always talk about at least at United we're investing nose to tail for customers. And most of the things that we're doing for the product apply to everyone. Seat back entertainment, every single Starlink on every aircraft, great new interiors. Applies to everyone. And the premium has been stronger for a couple of years. It's still a little bit stronger, but it's pretty hard to, I think it's been strong across the board for us. But we skew to the high end. Even the economy passengers are skewing towards the top end of that curve for air travel. And international, of course, skews even higher. But we really haven't seen any noticeable cracks in demand sort of anywhere in the cabin.
And you've been upgrading all your planes quite considerably.
Whether it's the fold down seats to have you sleep across the—
Yeah, exactly. Especially if you've got kids.
I wish that I'd had that one. Anyway, moving along. Do you find that it's difficult to upgrade as quickly as you want because of just some of the delays in deliveries that we're seeing in certain of the aircraft manufacturers?
We got ahead of it. We started ahead, we ordered a lot of aircraft. We got ahead of the supply chain as being the first really back during COVID. We anticipated problems, so we actually over-ordered because we anticipated problems. The problems have been bigger than we thought, but we've mostly managed through those. Seat manufacturing, seats are a big issue across the industry. We've mostly stayed ahead of it. We've been somewhat impacted by it, but we've mostly stayed ahead of that. Starlink for example, we're going to have the whole fleet done, we expect, next year. It can't be done fast enough, but by being the first big airline to order, we're at the front of the queue. And so most of the things we're doing, because we're at the front of the queue, we're much less impacted than other competitors around the globe.
There were reports that you were talking about Rolls-Royce a couple of minutes ago talking about how they've been a problem in terms of just honoring contracts. And what exactly is the role in some of the delays that we're seeing, particularly with Airbus?
Engines are really the issue. I think they're going to constrain supply around the globe for probably the next decade. There's not enough engine capacity. There's something like 900 aircraft around the globe that are grounded right now that should be flying because they don't have engines that can fly. And it's not an easy problem to fix and it's going to take time. So really, we need all the engine manufacturers, and really the forgings and castings that go into the blades and the engines are really, I think, the biggest constraint. And that takes time to fix, but we need to start fixing that. All the aircraft at Boeing and Airbus, they're going to be able to produce a lot of aircraft, I think. They're both starting to get things on track for producing aircraft, but they're going to be producing gliders because there's just not enough engines.
