‘Brutally honest’ Scott Kirby takes over as new United Airlines CEO
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United Airlines has a new passionate, analytical and also sometimes impulsive leader in its new CEO Scott Kirby, who takes over the corner office from Oscar Munoz as of Wednesday, 20 May.
An airline industry veteran, the transition puts United in what are considered to be very capable hands as it faces the worst crisis in its 94-year history. While this gives many people some comfort during uncertain times, Kirby’s take over also raises some feelings of trepidation among flyers for what his promotion could mean for the passenger experience at the Chicago-based carrier.
“The one thing people don’t like is he’s brutally honest, but you know what you’re getting”, Cowen analyst Helane Becker told TPG.
Kirby joined United as president in August 2016. He came to the carrier from American Airlines, where he had held the same role under CEO Doug Parker at the Fort Worth, Texas-based carrier. Kirby and Parker are credited with two of the industry’s mega mergers: the combination of American and US Airways in 2013, and of America West Airlines and US Airways in 2005.
Kirby’s industry resume is extensive. His experience dates to the mid-1990s at American and America West where he rose through the ranks on the planning side of the business.
That background in planning is already on display at United. One of Kirby’s achievements is the success of his mid-continent hub growth plan: the airline grew faster than the industry average with a focus on adding connecting flights at its hubs at Chicago O’Hare (ORD), Denver (DEN) and Houston Bush Intercontinental (IAH) in 2018 and 2019. That was welcome growth after years of “capacity discipline” and domestic cuts that followed United’s 2010 merger with Continental Airlines.
“Connectivity is the core at the airline and everything he’s done since he got there is build up the connectivity United was lacking”, said Brad DiFiore, managing director at air service advisers Ailevon Pacific Aviation Consulting. “He understands that the network is core.”
— Airline Maps (@airlinemaps) June 5, 2019
In addition to his frankness and planning background, Kirby is also known for some seemingly impulsive decisions — and not always passenger-friendly moves. One of his early missteps with staff was an attempt to convert a quarterly employee bonus program to a lottery in 2018. However, he quickly backtracked after an outcry from staff.
“All of us make missteps. One of the things I would say is one of his strengths: he listens to people”, said Kim Day, who, as CEO of Denver International Airport, has worked closely with Kirby and his team to manage United’s large hub in the Mile High City.
Day faced a similar challenge convincing Kirby on the necessity of reconfiguring the airport’s Great Hall, something he initially opposed but has since come to support. United remains committed to the project, as well as to a concourse expansion that will see it add 24 gates to its hub in the future, she said.
On the passenger front, Kirby has a history of maximising revenue — sometimes at the expense of comfort. He and Parker have widely been credited for bringing a lower-cost ethos to American, in both good and bad ways. There is a general sense among long-time flyers of the airline that the product has been cheapened since the 2013 merger.
Kirby has a checkered history on this front at United. He is credited for accelerating installation of Polaris business class seats on the airline’s wide-body jets after a slow roll out and introducing the Bombardier CRJ550. But he’s also presided over a reduction in onboard flight-attendant staffing on some flights, done in the name of standardizing with industry norms.
“Scott’s not a passenger experience person”, Atmosphere Research president Henry Harteveldt told TPG, adding that Kirby is sometimes “blindsided” by numbers. “He’s got to shed the America West, low-cost airline mindset and he’s got to recognize that United Airlines is a better class of airline”.
Of course, Kirby has been president at United for four years now. He has had ample opportunity to cheapen the airline’s onboard experience and other customer-facing aspects of its business and — for the most part — has not.
The past may be a poor example for the future of United — really any carrier — given the deep crisis resulting from the coronavirus pandemic. Analysts estimate the industry could be 30% smaller at year-end than it was at the end of 2019, and the International Air Transport Association (IATA) does not expect passenger traffic to return to pre-COVID-19 levels until around 2023.
On top of those dire forecasts, Boeing CEO David Calhoun told the Today Show earlier in May that a major U.S. carrier will “most likely” go out of business before the crisis passes.
“[Kirby] is through and through an aviation guy whose lifelong goal is to run the premier airline in the world”, Sara Nelson, international president of the Association of Flight Attendants-CWA that represents cabin crew at United, said to TPG in an interview. “That means he’s going to fight like hell for the airline and that’s critical right now”.
United lost $1.7 billion during the three months ending in March, and it continues to haemorrhage as much as $45 million a day as few people fly amid fears of the coronavirus. The airline cut its schedule by 90% in May and June but, in a positive sign, plans to only cut about 75% of its schedule in July.
Kirby has already warned staff, investors and travellers that tough decisions lie ahead for the airline. Those decisions will likely include a not insignificant number of furloughs and layoffs to reduce headcount once staffing protections under the federal government’s coronavirus aid package, the CARES Act, end 30 September.
United Airlines plans to fly ~25% of planned capacity in July, up from just ~10% in May/June.
— Edward Russell (@e_russell) May 19, 2020
Already, United’s leadership team has stumbled on the staffing front. It attempted to reclassify a number of passenger service agents and other fleet service employees as part-time workers to save money. The move raised the ire of the union, as well as an outcry from Washington over potential violations to CARES Act rules.
United partially walked back the changes, but the situation shows one of the many challenges that lie ahead for Kirby as he navigates the airline through the crisis.
“I think he’ll do fine”, said Becker when asked whether Kirby was up for the challenge of the crisis. “He’s one of the smartest people I know”.
Munoz leaves a significantly improved United in Kirby’s hands. The airline successfully moved upmarket with the introduction of the popular Polaris business class seats and lounges, while at the same time expanding its footprint in the domestic U.S. market where it had ceded share to competitors for years. In addition, he also improved the relationship between the carrier and much of its staff, signing long overdue agreements with pilots in late 2015 and flight attendants in 2016.
Not everything that Munoz set out to do is done. Negotiations on yet another pilot contract have been underway since March 2018 with no agreement yet in sight. Not to mention the airline being in the middle of a crisis.
As for Munoz, he is not leaving United. He is stepping up to be the executive chairman of the board at the carrier, a role that many describe as being more strategic than day-to-day.
Kirby is not going it alone in United’s Willis Tower executive suite. He is supported by United veteran Brett Hart, who takes over as president, as well as Andrew Nocella as commercial chief and Gerry Laderman as chief financial officer. And this is not to mention the tens of thousands of staff that allow the airline to do what it does every day, and the union leaders who he works with closely.
“If anybody can do this, Scott and I can”, Air Line Pilot Association (ALPA) United chapter chairman captain Todd Insler told TPG. “It’s not Scott alone. If there’s one thing I credit Oscar for: he built a really good team”.
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“Five years ago, I set out to change United Airlines. In the end, United changed me, forever and for the better. Leading this company as CEO has been the honor and privilege of my professional life. Yet, today, the title I take the greatest pride in was simply counting myself as a member of your team and family.” – Oscar Munoz, CEO Thank you, Oscar, for your passion and perseverance over the last five years. We look forward to your continued leadership as Chairman of the Board and welcoming Scott Kirby as our new CEO later this week. We remain #UnitedTogether as we care for each other and serve our customers. ????
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