You wrote a piece about, you know, your rationale for approaching American. Why did you decide to show your hand?
Like everything I'm doing at United Airlines, everything that I think about is how do we make a great airline for customers. And I am 100% certain that that merger would be good for customers.
So is the reason you're still talking about a deal that at moment you don't have a partner for because you're trying to put pressure on that partner and create the
No, the reason I'm talking about is because you asked me.
I'm not talking about it on my own.
Today on the CEO Signal, we're talking to Scott Kirby, CEO of United Airlines, one of the world's largest carriers.
Kirby built his career as a numbers guy in the airline business.
And he likes big bets. He took over at the height of the pandemic and ordered hundreds of new planes when much of the industry was pulling back.
Now he's spending heavily on customer experience. His goal is to make people actively want to fly United rather than just choose their flight based on price and timing.
And he's also been looking at an even bigger move. This year he tried to open merger talks with American and Delta. They both said no. So how does Scott Kirby decide what's worth betting on, especially when the odds are long and the stakes are high? From Semafor, this is the CEO Signal.
Good C Penny and great to be back in your hometown of Chicago.
So glad to have you here and we're here at United's headquarters.
Yeah, very appropriate setting for our conversation with Scott Kirby and he's a pretty interesting CEO and we're catching him at a very interesting time for United.
Yes, he's been three decades in the airline industry. I think he was at America West, American and now at United and I think he was fired from American but joined United about 10 years ago and became CEO in 2020.
And Scott Kirby is a math guy who's got a deeply analytical background, but that gives him a fascinating relationship with risk, you know, including his past career playing blackjack where he got good enough to be banned from several casinos. So, I want to hear from him about how he takes calculated risks in the CEO's position.
I really also want to understand how does he deal with making decisions and choices so far in advance from when you ultimately get your equipment?
And he's just taken one of his biggest gambles to date where he made overtures to American Airlines, his old old employer, about a possible merger. American wasn't interested. That seems to gone nowhere. There was subsequent reporting that he also broached a deal with Delta Airlines. So, he has got some pretty ambitious plans for consolidating this industry. I want to hear whether there's anything still going on those, whether he still has hopes of getting greater scale for for United. So, I think it's going to be a fascinating conversation.
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Scott, welcome to the CEO Signal. We're thrilled to have you here.
Yeah, looking forward to it.
Yeah, thanks for joining us, Scott. And I want to start with your rather unusual path into this industry. You started life your professional life studying computer science then operations technology, I think, while training to be a pilot in the for the Air Force. [laughter] But you also had this sideline as a gambler.
Tell us where the blackjack came from.
Yeah, how did the blackjack come into that?
I like math and I like I expected risk reward. You know, those kinds of equations. And so I went to the Air Force Academy intending to be a pilot. I wanted to be a fighter pilot. And while a cadet realized I was not going to be a fighter pilot and I didn't want to be a cargo pilot. So I chose not to go to pilot training. I got my degree in operations research, which is really math, applied math. And the gambling along the way, you know, is consistent with that mathematical mentality. Because everything I've done was positive expected value gambling. You know, the biggest was, you know, I was card counter for many years. Did well.
And got barred from sort of everywhere in Nevada and lots of other places around the country. But
I was going to say you were so good that you were banned from casinos.
from essentially everywhere in Nevada, Atlantic City, bunch of places in the Caribbean.
So did you give it up all together or
Yeah, I stopped a long time ago. Like partly it became it's not practical. You know, at some point like I wanted to bet enough that they kept track of you. It just became impractical.
So how did the skills or the hobby of playing blackjack, how did that inform your journey?
Well, partly I think like that I also play have played and still do sometimes play high stake poker. I've always liked playing poker. And I had to have a mathematical mind, I think.
But it's also it I think it really helps you with risk reward. Like I think every senior executive should have to go play high stakes poker with their own money. Because it helps you balance risk and reward. Far, you know, I say to people sometimes the biggest mistake that most people make in their career is never making a big mistake.
Because they never take a chance. And if you just wait for sure things, you basically never do anything. You don't ever make any big mistakes, but you never do anything big.
So, go back to that differentiation between gambling and the calculated bet. What does that mean in the CEO's position in particular?
Yeah, I think it means make calculated bets where there it's not a guarantee, but the risk reward return is very good. But, the other concept that's important if you're a gambler is something called risk of ruin. And so, if you're a card counter, you bet aggressively when the odds are in your favor, but you bet in a way that even if you go on a really long run of bad luck, which can happen, that you don't go broke. Same thing applies like in business what that means is have an off-ramp. Be willing to make big bets, but think about in advance, but if my big bet is wrong and it goes wrong, how do I have an off-ramp that I'm not putting the company at risk?
I learned early in my career coming from it not from math, but from the law. It was I was trained in a family of lawyers, which was to manage our downside and to have options to get lucky on the upside. It's sort of a similar
is a word I use with our team all the time. I want optionality. Like, you know, want to make you know, our aircraft order. Like, I think this is how we're going to use it, but I also want optionality if all these other things happen that we're prepared to jump on the opportunities.
Definitely. So, you've been CEO now 6 years. And so, how do you rate the hand you're playing now?
I think we're playing it really well. And we've improved our hand. We've improved our hand.
When I I've been at United 10 years now. 4 years as president, 6 years as CEO. When I got to United, United was, you know, out of 10 US airlines was number nine in terms of profitability. You know, the rep sort of financials were bad, the reputation wasn't good. Like, here in Chicago, American Airlines had higher market share with local customers than United had better reputation. Like, kind of across the board, United was at the bottom. And, you know, I set about and my goal has been the whole time is really to build a brand loyalty on that's what we say like an airline that customers love. But, it starts with our employees. And I say I have the easiest job of anyone at United because there really only have one responsibility to create an airline that our employees are proud of because I have believed all along that if our employees were proud of the airline, they would take care of customers and if they took care of customers, everything else was going to take care of itself. And it like truth is it's a really simple and it works really well and like being the CEO is a pretty easy job. Like, that's sort of the secret I don't think most people don't know or that surprises people. It's an easy job because if, you know, I'm just one person and if I but if I can lay out a vision that people believe in and a direction that they want to go and I got 120,000 people that want to go there with me like nothing can stop us.
What's made the biggest difference in raising employees pride and loyalty to the airline?
People want to be on the winning team. Like, you want to be on the winning team? You want Chicago Bears to win when you're here in Chicago. You want your team to win. You want to be on the winning team. And winning matters. Winning is everything and like 10 new international route destinations like our people are puffed up with pride and you know, I tell our flight attendants they're the face of United Airlines. And what I mean by that is like how our customers feel about United is more about how our flight attendants make them feel on the airplane than about anything else.
Yeah, that resonates with me from my own experience being in the hotel business. At the end of the day, one person is not the brand. The brand is really all your people. But, getting people motivated to to get your concept of what is a brand loyal airline. So, say more about how do you explain to the your employees or customers what is a brand loyal airline?
want our customers to love United, to know that they can count on us, to want, you know, to be proud to be affiliated with the brand. And what I've what I've started saying to our employees is I want to raise the bar on ourselves and just become one of the most loved consumer brands around the world. Which is a lot harder for an airline because for an airline, you know, 15 to 20% of the time, we're going to have weather issues, air traffic control delays. Sometimes we're going to have issues that are our own like maintenance, but our safety standards are so high, that's the right thing to do. And no other business has that kind of those kinds of issues that create stress and tension to deal with. And so it's really hard to be a loved consumer brand. And but that's our new goal is to become a loved consumer brand. And one of the other things I've started saying is I want your when you would go on vacation, today your your vacation starts when you land at the destination airport. I want it to start when you arrive at the departure airport.
So, I think I think for a long time you believe like many people in this industry that most passengers chose their flights based on the schedule and the price. But you're you're now talking about this this third factor being more important, brand loyalty. What what changed your thinking?
So, that it's a really good point. The this is the biggest change I think that's happened in aviation the last decade. And and there's two airlines that have done it in the US. Delta has also, you know, I think we've passed them, but Delta's done it and United has done it. For so long most people believed and continue to believe that air travel is a commodity. Meaning all that matters is the schedule. If United flies four flights a day and airline X flies four flights a day, you both get exactly 50% market share. By the way, that all the math models, that's exactly how they work. They don't distinguish between product or any of the other attributes that matter to customers. And and And just has built the whole industry. And if that's what you think about air travel, your whole goal is cut costs. And the industry is now populated with executives at a lot of airlines who've made their career on cost-cutting. And when you cost cut, all you're doing is cost-cutting. It almost all comes at the expense of the customer. Because like we can't change airport fees, we can't change fuel price, you know, all those things are fixed. All you can do is take the cheese off the pizza. And cut the customer expenses. And I I I believed that starting my career. The epiphany really moment for me was when JetBlue first started. And JetBlue put live TV on the airplane. I thought that was a gimmick. But everyone seemed to love it. And I JetBlue was I think 11 airplanes at the time. I flew out. I was, you know, the chief commercial officer at little America West Airlines. I flew out, flew on a JetBlue flight. Like, 'Oh my god, this is different. This makes a difference.' That was the turning point for me. And I didn't go all the way to where I am today immediately. But that was the moment for me to say, 'This is not just a commodity.'
It feels like there's the people side of it, and then there's the equipment side, and there's the features, if you will. Starlink and other things. Is there one that sticks out, or is it really you got to do it all?
I think you have to do it all. And there's I talk about it in four buckets. There's product. So that's the hard product. Even when other people talk about, you know, doing stuff that's beyond the schedule, they almost exclusively focus on the hard product. You know, what does your seat look like? What are the meals like? And that's really important. Second, I'll say reliability. That's sort of a must-have. But it matters a lot. And like we've become number one in every single one of our hubs. Third, I'll say is technology. Technology is the place that we have the biggest lead. You know, I the most common comment I get from customers is probably about the United Airlines app and how much better it is than any other airline that they've ever flown. Which leads to number four, which is really the most important one, which is service. How do our people treat customers and make them feel? And but to get to service, you you have to do all the other stuff to make our employees proud. My goal from day one is to have make the employ- And our employees are proud. We put Starlink on the airplane, like that's a really big deal to customers. And there when we put seatback entertainment, it's been, you know, that's a billion dollar expense. Which airline does not the kind of thing the airline did. To put seatback entertainment, and you get on an airplane and the customers are happy and they're watching stuff. That makes the flight attendants proud. And so part of what I One of the other things I say is, my goal is to create an airline that they're proud of, but also to eliminate their need to apologize for anything. So today Wi-Fi is one of the things they have to apologize for. Wi-Fi's crappy on every airline. The legacy Wi-Fi systems, like it's physics, like I understand why. It is physics. But Starlink is transformational. It's going to be like Wi-Fi in your living room. And so they have to apologize for that. And you know, within a year or so they're not going to have to.
The big place that we're going is really I think a revolution. We're going to use technology how we communicate to customers. Call it every flight to story. I want to essentially tell every customer anytime a flight delay or cancellation in clear plain English, totally transparent, what someone would what our what our employees would tell me about the flight. And that's another place where employees have to All that uncertainty about there's a weather delay and like if we can get And I think we're AI is going to enable us to get good at this at being able to tell customers what's going on. You're taking away the things they have to apologize for. Because if you're apologizing, you're behind the eight ball.
So United is still not leading leading on every measure. I mean, things like on-time arrivals. What's still to be done?
Well, we aren't the I said I'm careful to say I think we're the best in totality. We're not the best at everything. Places that I don't think we're the best yet. Primarily there's product. And primarily it's against Middle Eastern and Asian Airlines. It's a different competitive set. They're part of they're sort of govern it government entities.
financial situation different.
it's really it's hard, but I would still like to. Like I don't know if we're going to talk about consolidation, but that's part of like sort of my push on consolidation. Is how do we create a US airline that doesn't need government subsidies, doesn't want them, doesn't need them, but that has the scale to compete and be the best at everything. I'd like to create an airline that all US citizens are proud of and think of as a flag carrier of the United States. Like if you're in Dubai, like you may complain about some stuff about Emirates, but you're proud of Emirates. And same in Singapore. And I would like to do that here in this country. But that's I think the one primary area. Like you just talk about on-time performance. I said earlier like we're the number one airline everywhere that we fly. But when you fly in Chicago, when you have a hub in Chicago, your on overall on-time performance is going to be lower than it is in Orlando. The weather is worse here. And and so there's a lot of apples and oranges if you just compare the overall metrics. And our goal is to be number one in each place that we operate and we now are.
So, let's go back to that moment you mentioned in COVID where you had to make you made a very big call on a very big investment. Was that the moment where the risk of ruin was highest in
No. That was so we did the first we were the first like I don't know if anyone else that really thought COVID was a global pandemic before us. We were ahead of that curve. We raised $2 billion unsecured at 3% interest 2 days before the NBA walked off the court and shut world shut down. We couldn't have done that at any price 2 days later. But then when COVID started, all the experts, like the consensus like across the board with air travel demand will never recover.
Well, I think so out of the United and the
Yeah, and you know, it wasn't just that but like you know, and you did surveys and people said I'm never going to fly again. Of course that's what they said in the middle of COVID. You know, they were scared. And I never thought that was I always thought that was wrong because I I thought COVID was going to be deep. I thought it was going to last a long time, but I thought it would end and when it ended, travel's about human nature. Nothing was going to change about human nature. But the experts all said travel demand will never recover. And so literally every global long haul in airline in the world with the exception of United Airlines permanently retired part of their wide body fleets. They bought into that consensus. That's what that's the safe thing to do. Permanently. They just retired them. Sent them to the boneyard, you know, chopped them up, turned them into beer cans. And every single airline did that except United. I watched that and first I thought I think that's wrong. I think travel demand is going to recover. But also when everyone else is doing that and turning left, like this is the best this is probably the best risk reward that will ever exist in the history of the industry. And what I said to our board like because we did the biggest aircraft orders in history when everyone else was shrinking and downsizing. And what I said to our board was because they you know, they must have asked the question like everyone else is shrinking. Are you sure about this? Like I said, I'm not sure. I think I'm right. I'm not 100% sure. But also we because everyone else is shrinking, we don't actually have to be totally right. We just have to not be totally wrong.
So how'd you convince the doubters? In other words, did that logic was that that simple?
it was I think it was that. I think they you know, I have a great board. I think they trusted us, trusted the team. By the way, that's the role of a board. The role of a board anywhere is not really to make specific decisions. It's to It's to push you on decisions like that, to think about decisions like that. The real role of the board is hiring and primarily firing the CEO. I shouldn't say that as a CEO, but the role of the board is pulling the trigger when it's not working. Very few of them do it effectively, but that's the role of the board. And the point of that is, you know, the board, you know, had put me in the seat. They did trust me. They pushed me on it, but gave me the rope to go do it.
So, when you're making a contrarian call like that, you don't just have to persuade the board. You've got to persuade your stockholders, bondholders, etc. How What What do you turn to? What do you
have to persuade them. You know, I didn't I didn't on day one. I got tons of I've had multiple moments in my career where I've gotten tons of pushback on day one. But, what you do is focus on the right decision for the long term. And you just do it. Now, I say actually I told the board like if I'm wrong, you guys should fire me. I'm like And And that's like a lot of executives complain about Wall Street is short-term focused. And it's absolutely short-term focused. And I can't do the right thing for the long term. I think that's just BS. Like, you should do the right thing for the long term, but you should also accept that if you do the right thing for the if you make the decision for the long term and you turn out to be wrong, you should lose your job over it. They don't want to have the risk of losing their job, and so they don't do it. But, we shouldn't complain about Wall Wall Street is is short-term focused, and it always will be. You should do the right thing, but you should also accept the consequences when your decisions are wrong.
So, you're in a hugely capital-intensive business, and you have to choose your product, your aircraft yours is in advance so far in advance of when they're going to be in service. How How manage that risk balance between matching the purchase and the fleet you're going to need 5 years from now, 7 years from now?
You got to mostly well, several things I guess. One, look through the short-term trends. Like people often ask me like, oh, if there's a recession or what are you going to do in change? Like, we're buying aircraft for 30 years. There's going to be some recessions during that time. Like, I'm not going to change anything because, you know, if you got to look through the ups and downs and focus on the long term. Mostly, I think you have to be confident that you have the right long-term vision and strategy and that it's working. Like, it's one thing to talk about the long term. I talked about the long term earlier. But, every quarterly result ought to be a mile marker that I see where I'm going in the future and that's the mile marker that I expected and it's working. And if you're not delivering the results that you've said you're going to get you to the nirvana in the long term, you should question whether it's the right long-term strategy. That's another thing that people make, you know, mistake on on the long-term strategy like, oh, here's my long-term strategy. So, you should ignore my results right now. You can't do that. Like, if you're if it's not consistent if your short-term results are not consistent with where you're going in the long term, you should question your long-term strategy.
And sometimes long-term strategy requires you to take hits in the short term.
And then you have to explain it.
Yeah, you just but you should be willing to do that.
So, what kind of calls you making now with the United fleet as you think about the future?
Yeah, So, right now we're basically growing as fast as I'm just as I'm comfortable with. We're going faster than any airline history's ever done. We're doing it year after year after year. We're adding about 100 narrow bodies a year and 24 wide bodies a year. And that's faster than anyone's ever grown in history by a wide margin. And that's a number that feels, you know, not analytically precise, but feels like we can manage it. We can maintain all of our customer standards. We can maintain most importantly we can maintain all maintain all of our safety standards. You know, not just be the best airline in the world. That means by definition we have to be the safest. We have to have the highest safety standard. That we can do all of that. And so that kind of growth level feels right. I have a list down in my office of kind of where those airplanes go. But the thing that's even more interesting to me is I have the list of options of things that I think might happen. Some I think will probably happen. Some that just might happen. And where do I put airplanes for those? And so I look out, you know, six or seven years and say as long as I feel pretty confident that for the next six or seven years I've got a place to put all these airplanes, then I'm comfortable ordering them.
So I think that gets us on to a question of scale.
You're already one of the biggest airlines in the world and you basically you're the biggest and you're basically talking about growing the fastest of any airline. And I love the fact that you have both, you know, constraints where you're going to put airplanes and also options. I love that. You've also got Star Alliance, right? So what can you not achieve at your current scale?
You know, there's tons that we can do. And like my my goal one of my goals is is to be the undisputed flag carrier of the United States. But there are some holes in our network that were are going to be really hard to fill. I'll give you just two examples. One is JFK. You know, we're going to be back in JFK next year. It was a really big mistake for United to pull out. I feel like I was partly responsible. That was one of my goals when I was the president of American Airlines was to get United pushed out of JFK. Sadly I succeeded. I'm now paying the price. We're going to be back. We're not going
to be back in as big a way as I would like. And if you just like JFK is such an important airport to as an entry way to the United States. Newark is awesome. Dulles are awesome. Chicago's great. San Francisco. But it's a hole in our network that is hard to fill on our own because the slots are precious and everyone that has them isn't willing to give them up. So it's hard. Second is South America. We're the number one airline across the Atlantic. 53 destinations out. By the way, we only had 23 10 years ago. 53 now.
We're the number one airline by far across Pacific. 34 destinations across Pacific. I think the second place airline is like 10 or 12 across the Pacific. But we're relatively small in South America. And the reason is because there's really only one hub that works for South America and it's Miami. And I wish we could, you know, I wish we could get 40 or 50 gates in Miami, but probably hard to do. I don't know. I don't think American's going to give them up. And if we could, we'd put a hub there. And so those are the example two examples of holes in our network. If you really want to be this airline that has the scale to be the airline the flag carrier for the whole country, those are just hard holes to fill on a standalone basis.
So it's public knowledge now that you made approaches to your two closest competitors.
Just one is public knowledge. We've only knowledge American.
Second airline was on your list, Delta. But you you you wrote a piece about you know, your rationale for approaching American. When that became public a lot of people came out with all the reasons why it would never happen. Regulators wouldn't wouldn't sign off on this. Why did you decide to show your hand?
So because I think it'd be great for customers. Only way a merger works if it's good for customers. Like everything I'm doing at United Airlines, everything that I think about is how do we make a great airline for customers. And I am 100% certain that that merger would be good for customers.
