United CEO throws cold water on industry's growth plans

U.S. airlines will continue to fall short of their capacity goals this year, and discount carriers will have a particularly difficult time meeting objectives, United Airlines CEO Scott Kirby said Wednesday.

“We believe that the industry’s capacity aspirations for 2023 and beyond are simply unachievable,” Kirby said during United’s Q4 earnings call on Wednesday. 

The United CEO also said that operational collapses, like the one experienced by Southwest over the holidays, will continue until airlines are intellectually honest about structural changes that have simply made operations less efficient than they were before the pandemic. 

“The system can’t handle the volume today, much less anticipated growth,” he said. 

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According to Cirium schedule data, U.S airlines on a whole plan to fly 2.6% more seats during the first half of this year than they did in during the first half of 2019. The scheduled domestic seat count is up 10.3% compared to the first six months of last year. 

Strategies, however, differ sharply by airline. Each of the Big 3 network airlines (United, Delta and American), as well as Alaska and Hawaiian, still expect to fly fewer seats and flights than 2019, while JetBlue is scheduled to fly fewer flights, even though its seat count will be up. 

United is scheduled to offer 16.7% fewer flights than 2019, though only 0.9% fewer seats. 

Conversely, Southwest has 2.4% more flights scheduled than 2019 and 7.2% more scheduled seats. Increases are much larger at Frontier, Spirit and Allegiant, with Frontier leading the way with a 34.5% larger flight schedule than 2019 and 39.1% more seats.  

Kirby argued that airlines simply can’t run as lean of an operation as they did in 2019, and that external constraints will continue to limit growth below the rate carriers would like to achieve. 

He estimated that U.S. carriers will need to hire 10,000 pilots to meet their goals, but there’s only 6,600 new pilots available. Aircraft delivery delays and other supply chain limitations will also constrain growth. 

In the meantime, he said, airlines need more staff per flight hour than pre-pandemic. He noted that sick calls at United were up 19% in 2022 compared to 2019. Outdated FAA air traffic control technology is also slowing the national airspace system, which has forced United to increase scheduled flight times by 4% to 5%.

On a whole, said Kirby, United requires 10% more pilots per flight now than it needed in 2019. 

Kirby argued that United, Delta and American are best positioned to grow despite existing challenges. The Big 3 network airlines plus JetBlue, he said, have more modern IT systems than the other U.S. carriers. And the network airlines have the most to offer pilot candidates. 

Still, Kirby said the keys to running a stable operation are reduced aircraft utilization and more slack built into schedules. He doesn’t think these are temporary measures. 

“Our industry has been changed profoundly by the pandemic, and you can’t run the airline like its 2019 or it will fail,” Kirby said. 

United reported full-year 2022 net income of $737 million, marking its first profitable year since 2019. The carrier’s $45 billion in revenue was a record, exceeding 2019 by 3.9%. Operating costs were $42.6 billion, 9.4% higher than 2019. 

United earns $843 million in 2022

For the fourth quarter, United reported net income of $843 million while enjoying an operating margin of 11.1%.

Revenue for the quarter was $12.4 billion, up 12.8% from 2019 and topping analyst expectations by $170 million, according to the investment website Seeking Alpha. 

The carrier reported operating expenses of $11 billion, up 9.9% from 2019, due in large part to higher jet fuel prices.

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