United CEO Scott Kirby warns travelers to beware what airline they are booking on after his carrier's successful Covid-19 vaccine staff mandate. But for all his boasting, more than half of United's domestic flights are flown by airlines that have no such mandate.
United Airlines CEO Scott Kirby may not want the carrier’s successful Covid-19 vaccine mandate to be a competitive advantage. But when it comes to promoting his airline over others he says to travelers, “caveat emptor” — or “let the buyer beware” — when it comes to booking flights.
“Customers can book with confidence on United … but if you’re booking on an airline that doesn’t have a vaccine requirement, they’ve got government rules they have to follow and caveat emptor,” he said during a third-quarter earnings call on Wednesday. Kirby outlined the possibility for large-scale operational meltdowns if unvaccinated staff who are required to submit to regular Covid-19 tests test negative and cannot work.
In citing potential operational disruptions, Kirby was indirectly pointing the finger at Southwest Airlines. The Dallas-based carrier has said it will allow unvaccinated staff to continue working if they seek an exemption and submit to regular testing. Southwest was also subject to a major staffing-related operational meltdown that cancelled nearly 2,000 flights over the Indigenous People’s Day weekend holiday in the U.S. earlier in September.
But the comments also set up something of a contradiction for United. While Kirby warned travelers to beware what airline they book flights with, the carrier has not asked nor is requiring its regional affiliates who operate United Express flights to implement the same Covid-19 requirements, said United President Brett Hart during the call. These affiliates, including Mesa Airlines, Republic Airways and SkyWest Airlines, operate the majority of United’s domestic flights — 59 percent in October according to Cirium schedules — and do so with little discernible difference from their partner except for the planes they fly.
“We have and are strongly encouraging them and pushing them to do it,” said Kirby. “We think it’s the right thing for them to do.”
Spokespeople for Mesa, Republic and SkyWest were not immediately available for comment.
United was the first U.S. carrier to implement a broad Covid-19 vaccine mandate in August. As a result, roughly 99.7 percent of its staff — excluding those who have received exemptions — are vaccinated and it is moving to lay off those who have refused to get their jab.
Emerging Premium Leisure Segment
United joined competitor Delta Air Lines in citing the emergence of a new travel category in recent months: premium leisure. These are leisure travelers who are willing to pay a bit more — or redeem extra points — to sit in a premium economy or business class seat.
Andrew Nocella, chief commercial officer at United, said on the call that this trend has helped make the airline’s Premium Plus premium-economy cabin the “best performing” financially in its Atlantic segment this year. Long-term, United expects premium leisure travelers to drive a 2-3 point improvement in overall leisure travel yields.
But United has not gone as far as Delta in committing to reconfiguring its long-haul aircraft to capture more of these travelers. The airline will wait to see how business travel comes back before making any interior modification decisions, said Nocella. Despite this, United is moving forward with the paused installation of Premium Plus seats on its 14 Boeing 767-300ERs without the product, and plans to install the cabin on the 50 Airbus A321XLRs it has on order with deliveries from 2024.
United is downright bullish on the international travel recovery. For 2022, the carrier already forecasts 10 percent international capacity growth compared to 2019 while domestic capacity will be flat year-over-three-years. This is quite the switch from the years immediately preceding the pandemic when United was on a domestic growth kick focused on its mid-continent hubs in Chicago, Denver and Houston.
But the outlook is not uniform across regions. The airline is piling on across the North Atlantic where the news that the U.S. would drop country-specific travel restrictions in favor of a vaccine requirement for all arriving flyers from November 8 prompted a surge in bookings. Earlier in October, United unveiled five new destinations — Amman, Jordan; Bergen, Norway; Azores, Portugal; and Palma de Mallorca and Tenerife, Spain — amid an eight-route transatlantic expansion for next summer. The Pacific, however, is forecast to recover 12-18 months later with 2022 capacity expected to still be down significantly versus three years earlier.
“Our bookings across the Atlantic are now approaching 2019 levels. We expect a very strong bounce back next year, in particular, starting in the spring and summer,” said Nocella. He added that United has “one more significant international network announcement” for 2022 to come later in October.
As part of its 2022 forecast, United expects the 52 Boeing 777-200s with Pratt & Whitney engines that have been grounded since an engine failure in February to return to service in the first half. The airline has begun modifications to these jets ahead of a U.S. Federal Aviation Administration directive with the hope of speeding their return.
United’s growth next year fits the narrative leaders have outlined for several months. That is that market changes — from airlines closing their doors to consolidation and carriers retiring aircraft — have set up United to outperform its competitors across the Atlantic and the Pacific for years to come. Executives bet that the airline’s decision not to retire any aircraft coupled with its long-standing market leadership, particularly to Asia, will make United the de facto “U.S. flag carrier” in the recovery.
But, despite the bullishness, executives repeatedly said that growth plans could be dialed back if demand does not meet forecasts. This is necessary considering the ups and downs that the market has seen during the Covid-19 crisis. As recently as July, United executives forecasted a significant uptick in travel through the fall with business travelers returning, however, by early September the Delta variant had arrested that optimism and forced the airline to walk back its forecast.
And The Numbers
United posted a $329 million net loss, excluding a $1.1 billion benefit in federal Covid-19 relief, in the third quarter. Revenues decreased 32 percent to $7.8 billion and expenses also 32 percent to $6.7 billion. And the airline remained off many of its 2019 metrics: passenger unit revenues were down 11.7 percent, traffic was down nearly 37 percent and capacity down 28 percent. Unit costs, excluding fuel and special items, however, were up nearly 15 percent.
The airline expects revenues of 70-75 percent of 2019 in the fourth quarter when it forecasts flying roughly 77 percent of its capacity two years ago. And demand is strong for November and beyond, including the year-end holidays, with bookings above 2019 levels, said Nocella.
Photo credit: United CEO Scott Kirby warns travelers to beware before they buy tickets on an airline without a Covid-19 vaccine staff mandate. Denver International Airport