United Airlines CEO Scott Kirby has done a phenomenal job running the airline over the past several years, and I have a lot of respect for him. He has improved the passenger experience, the route network has kept growing under his leadership, and United is also making progress when it comes to improved profitability. It really feels like the airline has a strategy that it’s executing on.
However, Kirby is also a bit “out there” when it comes to the things he says. Kirby has repeatedly claimed that United is the “best airline in the history of aviation,” and he has proposed mega-mergers with either American or Delta, to essentially create a “flag carrier” for the US.
While he has been rejected for these merger proposals (since regulatory approval seems highly unlikely), it’s not an idea he’s ready to drop, and here’s the latest example of that…
CEO wants United to be flag carrier that Americans are proud of
Yesterday, United held a press event to formally unveil its new Airbus A321XLR, and also to announce a huge international expansion. As usual, Kirby had a lot to say to media, including the following:
“I want to create an airline that U.S. citizens, all U.S. citizens, think of as the flag carrier of the United States, and they’re proud of the airline. Just like somebody in Dubai is proud of Emirates. I want American U.S. citizens to feel the same way about United Airlines, and that’s my goal.”
It’s pretty clear that this entire narrative is framed around Kirby’s goal of still seeing some mega consolidation between the “big three” carriers, and merging with either American or Delta.
Why? Well, we’re a huge country, and generally airline loyalty is based on where someone lives. Kirby says he wants all Americans to view United as the flag carrier and be proud of it, so clearly that also means he wants United to be, by far, the largest carrier in the country. He wants United to be to the United States as Air Koryo is to North Korea… or something.
What’s Kirby’s real motive for this consolidation narrative?
Kirby is a very bright and deliberate guy, and I can’t for the life of me figure out what his real motive is with all of this consolidation talk. Does he really, truly believe that he can convince regulators and the public that a merger between two of the “big three” carriers would be good for consumers?
I definitely think he believes that if there’s ever a chance of this getting approval, it would be under Trump, which also explains why he has been so flattering of him. But even so, this seems completely far-fetched and unrealistic to me, since a deal like this would require a lot more than approval from the federal government.
The irony in Kirby’s statements about Emirates is that he wants the US flag carrier to be similar to a government owned airline in the Gulf, which has no unions, and serves a market that’s a tiny percentage of the size of the United States (in terms of both population and land mass). This new narrative is quite the departure from the old narrative of accusing Gulf carriers of not being profit driven, but instead, of getting endless subsidies (a narrative I disagree with, but that’s what he said).
It goes without saying that if we started eliminating the “big three” carriers, the “checks” we have in place to promote competition (from a pricing and passenger experience perspective) would go out the window.
Investors in the United States are simply insatiable when it comes to the ever-increasing profits they demand, and obviously the goal of any sort of consolidation would be to be able to raise fares. Americans want competition, they don’t want a single airline to be proud of.
To give the most obvious example of why this would be bad for consumers, airlines have raised prices due to higher fuel costs, and airline executives (and particularly Kirby) have argued that these fare increases are here to stay, as they think they can keep those higher fares even after jet fuel prices decline.
In other words, if they have any opportunity to raise fares, they will. So why would we not believe that a single “flag carrier” in the United States would raise fares as much as possible?
I just don’t get this narrative. Does Kirby think we’re all thinking “gee, I do like competitive airfare pricing, but what I like even more is one flag carrier I can be proud of, which has nearly unlimited pricing power?” Yeah, no…
Bottom line
United CEO Scott Kirby obviously isn’t ready to drop his narrative any time soon around a mega merger with either American or Delta. This week, Kirby has reiterated how he wants United to be the flag carrier of the United States, and be an airline that all Americans are proud of, comparing it to Emirates.
There’s a certain irony to United’s CEO comparing the airline to Emirates, which is government owned, has no unions, and serves a very small country. If United wants to keep improving the passenger experience, that’s awesome, and something we can all get behind. But if the airline wants to achieve this “flag carrier” status by merging and eliminating competition (which is clearly the goal), I don’t think that’s something that most consumers would appreciate.
What do you make of Kirby’s comments?
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