Bloomberg Audio Studios, podcasts, radio, news.
I would like to welcome everyone on Bloomberg television and Bloomberg radio. I am here in Los Angeles with the CEO of United Airlines, Scott Kirby. There is an incredible airline behind us. There are incredible exhibits here. We would be talking about all these new planes that United just bought. But instead, the world has sent some other things. I really want to start with this question of how you plan for the future with a backdrop that is probably the most uncertain for airlines in particular since COVID.
Well, thanks for having me, Lisa. And I love the United Blue. But it was a coincidence, but carry on. You know, really the way we planned is being prepared in advance. And when we came out of COVID, I made a commitment to our employees. I was to do everything possible to put United in a position where we never again furlough employees, which has happened over decades, multiple times at United. And to do that, we knew there was some industry crisis would come. I didn't know what it was that would eventually come, but we're carrying triple the cash on the balance sheet that we had pre-COVID. We've moved to the top of the industry in terms of margins, and we have the best credit rating that we've had in over 30 years. And what that does is give us the financial resources to look to the other side of the crisis to continue investing in airplanes like this to continue a full speed investing in the future while we make tactical adjustments in the short term but have the financial resources that we can look through the crisis to the recovery on the other side.
You keep calling it a crisis. Last week we heard from American, we heard from Delta. They were talking about even upgrading their forecasts for the year saying that consumer demand was so strong it could overcome whatever short-term shock this is. You have a very different forecast. Why do you think it's not going to be that short-term and not that moderate?
So, first I have to say I say exactly the same thing about demand. Demand is the strongest it's been ever. The top 10 booking weeks of the year have all been in 2026 so far. So, demand is incredibly strong right now. But I do think that oil prices are higher for longer. It's reasonable for us to plan for that regardless because the downside is pretty limited. Like we leave a little bit of demand on the table by not flying quite as much this summer. So what? That's not a big deal. But it gives us more optionality on the other side for the recovery. And so we're really focused on what the recovery is going to look like. And I think our forecast of oil going to 175 and staying through up to 100 through the end of next year is reasonable. I hope it's better and there's a good chance it's better. But I think it's also reasonable. And planning and preparing for that really lets us come out stronger as we go through it.
And on the other side, you've talked about how you're cutting about 5% of capacity in particular in the Middle East and some of the routes there in order to reduce capacity, preserve margins. Do you think that's it? Or if prices go even higher, do you expect that to actually be an even bigger cut to capacity?
We'll watch and see what happens, particularly with demand. If our forecast of fuel prices is correct, then my guess is there's going to be an impact to the economy as well. And I hope not, but we'll watch that as it goes along. But what we're doing right now really is taking out flying that, you know, is pretty marginal even in good times. And when oil prices double, it would lose money. And so there's just no point in flying flights that are going to lose money that can't cover the cost of fuel. So it just seems reasonable to do it. We'll be nimble and see what happens with prices and demand.
The Middle East has been an area of expansion for a while. I know that a number of the airlines have really been moving heavily into the region. Are you adjusting any of your thinking longer term as a result of the conflict and potentially how long it could go on?
Well, we'll see, but I would guess that when this is over that places like Dubai come back 100%. I don't know. We'll watch and see, but I would bet on Dubai for the long term.
Going forward, you've talked about how you want to take advantage of this time, how you see this as a crisis, not unlike what we saw during the pandemic, and that you'd be even interested in potentially picking up some assets. What does that mean? Airplanes, routes?
Yeah. So, first I don't think it's a crisis like COVID. But it's going to be a stress event. That's the word I use more. Is stress event for the industry if our fuel forecast is right. But it's nowhere near the magnitude of what happened in COVID. And in a stress event like that, I want us to be we start in the strongest position. I want us to be consistently ahead of the curve. Like every time there's something happening, I want us to be first. Let everyone else follow. And if we when we're doing that, you know, it's and others take longer to adjust, it is going to amp up the stress on them. They many of them start with weak income statements, weak balance sheets. And we'll be there to pick up some of those assets and might be a win-win for them. But we'll be there to pick up some of those assets as we go through the crisis.
Wholesale acquisition of a company or just piece by piece?
We'll see. There's lots of rumors about that going forward.
I'm curious also there's been questions about hedging against oil prices. I know a lot of the airlines have really moved away from that because it hasn't been profitable. Delta has a refinery investment that has helped somewhat to offset some of these costs. Do you have any plans around that in any capacity?
You know, it's we're so big it's hard to effectively hedge. We're just so big. We move the market if we try to hedge. It's really hard to hedge the crack spread. You know, Jeff, you know, oil prices have gone up. The crack spread has gone up even more. It's really hard to hedge there. And so probably not. I actually tried to do a deal with Adnoc years ago when I was at American and it foundered over a force majeure clause where they wanted for it just been a swap foundered over a force majeure where they said well we need a force majeure and I said well that's the whole point like what if the Straits of Hormuz closes I said this 10 years ago like that's when I want your hedge and you can't get out of it so it's just really hard for us to hedge.
