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The airline CEO putting Starlink on every plane · Cheeky Pint

• Scott Kirby I'm talking to people like, "I'm switching to flying a regional flight because it's got Starlink." I was like, "Holy." Free was never the value proposition. Fast is the value proposition, and there's only one option for fast. It's Starlink. That is the only option. John Collison Scott Kirby took over United Airlines in May 2020 at the height of the pandemic. Refusing to play defense, he's made massive bets on fleet expansion, premium seats, and Starlink Wi-Fi, creating differentiation in the hugely competitive airline market. John Collison You did a big fleet order during COVID that looked risky. Was it risky? Scott Kirby I didn't think it was. Back during COVID, every single expert in the world said travel demand is going to be down by 50% forever. That's what everyone said. One other point, you should ignore the experts outside of two sigma. In the tails, the experts are terrible. I just thought they were all wrong. I thought COVID's going to be deep and last a long time, and then travel demand will recover. Everyone else around the globe was shrinking, so we did the exact opposite. Scott Kirby Literally, every global long-haul airline in the world, except for United, permanently retired part of their wide-body fleets. We looked at that and said, "We think the premise is wrong, and it's just a huge opportunity to do the opposite," do the biggest aircraft order in history, which we did. I remember telling our board when they asked, they said the same thing: "This seems like a really big risk. Everyone else is shrinking, and you're going to do the biggest—" John Collison How big was the order? Scott Kirby 200 wide-bodies, and then we did another several hundred narrow-bodies. John Collison Pretty big. Scott Kirby Those are airplanes that list for… We get a big discount, but they list for $400 million. John Collison Sure. Scott Kirby I told our board, "This is one of those cases because everyone else is shrinking, we don't have to be right. We just have to be not totally wrong." It's just one of those situations where the odds are so stacked in your favor. People out here in Silicon Valley do this stuff all the time where... Figure out something that you have a different view than everyone else and go big on it. If it works, the returns are huge, and the downsides are smaller. Ben Thompson There's been this cycle with large capital purchases. It's actually also a tech story that's relevant with memory. Samsung came to dominate memory by systematically investing into every downturn because it's very cyclical. Obviously, it's hugely beneficial today. The flip side of that is everyone wants to invest when it's at its peak. Have we gone full circle? Scott Kirby You want to invest when everyone else... When things are down, and not invest when things are up. For us, and probably for memory, it's a little harder too because our assets are so long-life. For us, our assets are 30-year. I guess for a chip factory, it's less because the technology moves away, but it's 30-year life. We're going to go through several recessions, and we're going to go through several ups and downs. It's a little harder to do that, but you get better terms, you get better deals. We got really good pricing, for example, during— John Collison You're the only person ordering airplanes. Scott Kirby Because we were the only one in the world. We re-launched the market. For Boeing, they could go to other customers and say, "Look, United believes. You should, too." John Collison I remember... It's very striking. I remember that period of people over-extrapolating COVID. The tech version of that was companies deciding that they're going to be fully remote forever, and a lot of companies decided that, and then were like, "Wait a second. No, that's not right." Why were people so wrong on the travel side of things? Scott Kirby There are two things that are human nature that are mistakes. One is to extrapolate the current into the future. Assume that everything that's happening today is going to continue into the future. Two, trusting people on surveys. Surveys are the absolute worst way to figure out what's going to happen in the future. Because the reason travel experts thought travel… They did surveys, and people were terrified. Everyone's dying. You ask them, "Are you going to travel internationally again?" "No!" That was true what they thought at the time. But once it was over, of course, they were going to go back to traveling again. Scott Kirby By the way, I said this earlier. Experts live in the world of two standard deviations. They force-fit everything into the things that they've already seen. When things happen outside two standard deviations, when the tails happen, which is where you create all the value… John Collison It's famously in finance, the frequency of six-sigma events is… Scott Kirby That's where I first started. VaR, Value at Risk, is the dumbest model in history. It's stupid. Things that shouldn't happen in the history of the universe happened once every five years. Because it's a dumb, dumb, fundamentally flawed mathematical model that assumes everything is normally distributed. It's not. It's just the perfect... Scott Kirby I had a debate when I was getting my master's degree back in the '90s. This was about Black-Scholes. They're such a dumb model for valuing options because it assumes a normal distribution. The world is not normally distributed. The tails are much fatter in everything that matters. Anyway, that applies to everything but especially in a crisis. John Collison Black-Scholes has a lot of 'assume a spherical cow' assumptions baked into it. Okay, I love hearing you talk about the over-fixation on surveys. The travel industry, the airline industry, loves surveys. United probably surveys people up the wazoo. Definitely at Stripe, we find we need to deprogram people a bit because in tech, people love running things via metrics, and you can outsource your thinking to the dashboards and metrics. We're trying to encourage people to… Yes. Your opinions should survive contact with reality, but the metrics are not going to tell you what to do. Scott Kirby We use survey… I like surveys for how did people feel about stuff we've already done. I ignore surveys for what are we going to do in the future. John Collison Apple famously does not do a lot of focus group testing on their products. They just build the products they want to build. Scott Kirby That's the way... Stuff that we're doing right now. Today, we rolled out a Starlink tracker. I didn't ask anyone about that. I sit on an airplane and talk to customers, and I know they're going to think that's cool. And they do think it's cool. John Collison When you're getting to the second thing, which is people try to over-measure tiny steps, and it's just like, "Do the Starlink tracker. If it's that useful, whatever, makes this better." Scott Kirby Especially in a world of AI, you can do so much so fast. It's really powerful. I have a different view of what we're probably talking about, but I at least have a different view of where the value is going to be created in AI. But you can just try so much so fast. And some of it doesn't work and people don't care. I don't need to do it. It takes more time to do a survey or a focus group than just do it. See if they like it. And if they don't, stop. And if they do, do more of it. Ben Thompson How important is your ability to do these sorts of experimentation? We talked eight months ago, redoing your whole tech stack so you could put these things on top of it. Scott Kirby I've always been a big believer in technology. I have a computer science degree. John Collison You're one of us. Scott Kirby Yeah. But eight months ago when I talked to you, I not yet had my AI epiphany. But, I've always wanted to get on modern platforms. During COVID, another thing we did, in the middle of COVID, said, "When everyone else is cutting back at airlines, cutting everything, we're going to double down on technology investment." We started a several-hundred-million-dollar project to get not just on the cloud, but get everything off of mainframes, to build databases that are modern, that we can access the data just to really modernize our tech stack. Scott Kirby There was no ROI. There was no payback, which is why companies don't do it. It's really hard to do the ROI on something like that. But what it does is it enables you to move fast and do things. We're doing stuff that other airlines, frankly, can't do because they don't have the right tech stack, and we can do them easy and do them fast. We started that in 2020 in an anticipatory way, and it's really paying off today. Scott Kirby My AI epiphany that I think has happened within the last eight months is I don't think AI, summarizing documents and all that crap, I think it's ridiculous. "Summarize my day." I can read my calendar. I don't need to summarize my day. The power of programming. I hired a tutor and took three 1-hour sessions. If you want me to tell you the stuff I did. Ben Thompson No, we want to see the vibe-coded app. Not out right now. Scott Kirby I'll just tell you what the first thing I did was. I've always been into gambling... For better or worse, which helps you make big bets on aircrafts, for example. After three 1-hour sessions, completely by myself, got up on a Saturday morning, went down to the home gym, worked out, took my laptop down there. It took about 2.5 hours of run time, but I did a full workout. It takes time to run. Ben Thompson I do the exact same set-up at my gym. I actually have an iPad with the keyboard there. In between sets, I'm just typing prompts, and it's like running. It's perfect. Scott Kirby That's what I did. On my own, in two and a half hours, created a web page that had drop-down menus for what sport do you want, what dates do you want, what kind of bets do you want, so four or five drop-downs. Then it would go off four sportsbooks, Kalshi being one of them, not actually a sportsbook, but four sportsbooks. It would pull up all the odds, and you could just decide what you wanted to bet and put the dollar amount in. And then it would go to whichever sportsbook had the best odds and make the bet on my behalf. Ben Thompson You're aggregating the sportsbooks. Don't tell them; they're blocking you pretty soon. Scott Kirby I could do it with three hours of tutoring on my own, could write a program to do that, was an epiphany for me. I think I called them on that Saturday, our team, and like, "We're all in on this." Ben Thompson On that point, though, he did tell me when I asked him about it, they had this huge switchover coming the following week, and it went off without a hitch. I remember because I was actually flying the next day. You had warned me about it. Scott Kirby That one, what we do for those is, I think I told you... Just in case, we canceled several hundred flights on that day. Just in case something goes wrong, we're not putting customers... That was a switch from one of our biggest, most critical mainframe systems that's tied into everything. We felt really good about it. We thought... But those things are so big and complicated, turning off a legacy mainframe system and turning on the new system. It did go off without a hitch, but we'd cancel several hundred… We just don't schedule flights during that window so that in case something goes wrong, we're not putting customers in harm's way. John Collison How much of the airline issues have been a story of outsourcing? You look at... Sometimes what's needed is some good de-vendorization and bring the tech in-house. You look at why Tesla was so successful. They realized that software is important to cars, and the wing mirror and the wing mirror adjuster is made by the sub-vendor that does that, and so you can't centrally control it, and you just need to own the tech stack. Have you guys been bringing more in-house? Scott Kirby We are. John Collison Which subsystems in particular? Scott Kirby We're bringing much more in-house. We have more in-house, I think, than any airline in the world. We're the only airline in the world that owns our own reservation system. Everyone else has outsourced Sabre and Apollo. John Collison You worked at Sabre, right? Scott Kirby I did. It wasn't Sabre then. It was called American Airlines Decision Technologies. But, that's a mainframe system. Because we own our… We locked into it. A legacy decision that we own our own mainframe. And because we owned it... Copa uses it too, Copa Airlines in Panama uses it because they're a partner with us. We're the only two airlines in the world that use it. Eventually, it was EDS owned it, and then someone else. They didn't want to keep supporting it, so we had to. We lucked into it, but we had to support it on our own. But it's been huge. Now we're taking over all kinds of other parts of the tech stack. Partly because we do things... It's so much more complicated at United than it is at most airlines around the world. Ben Thompson Is that just because of the size or what? Scott Kirby The size and complexity is just much higher. But I'll give you another example of one that we're taking over that I got so frustrated about. The seat-back entertainment screens. I didn't actually realize it until I started complaining about the maps. The maps are terrible. The map... I just want a map to show up. I'm into maps. Go where I'm going; I can zoom in, zoom out if I want. The stupid map switches to the globe. I know approximately where I am on the globe. I don't need to see the damn globe. John Collison By the time you find the information you're looking for, it switches screens. Ben Thompson What I want though is because you already know who I am, you log in, my name's there, put in my birthday or whatever. I do nothing but have the map on the whole time. I want to have my map preferences. Every time we go— Scott Kirby That's so true. Ben Thompson "Oh, this is amazing." Scott Kirby We're taking over the map software from Panasonic. They're taking over the whole software. There's all kinds of stuff. One is we're going to know Ben likes the map. It's just going to come up. You can get to other stuff. It's just going to pop up with the map on the screen. Another one, these are little things... But it comes from this book, Unreasonable Hospitality. One of the things about that book... That I took away from that book is try to create memories for people. To me, this is another example of a cool thing, which is when you're hitting your two million mile mark, the screen is going to pop up with a little thing in the bottom and say, "Congratulations, Will." It basically is going to do a countdown, like— Ben Thompson Oh, that's great. Scott Kirby 1, 9, 9, 9, 9. 12. 13. And then, like, celebration. Ben Thompson The last 10, it should take over the whole cabin— Scott Kirby The flight attendants are going to know exactly when you hit two million, we're over the country. It's a little thing, but it's cool. We could have never done that unless we took over the software. John Collison These surprise-and-delight product touches are quite important. Scott Kirby That's another one, the AI. It makes it possible to do things like that that wouldn't have been possible... To know who you are, know what you want to drink. Do you want a gin and tonic? Ben Thompson I want your excellent wine selection. Scott Kirby Do you want your Guinness? Well, I don't think we have Guinness on the airplanes. John Collison We'll work on that. Ben Thompson I have a question on this surprise-and-delight thing, because that is a great thing. You show up, and United delivers something I didn't expect. The question is: How do you handle that becoming a feature? I was traveling this summer, and my flight was delayed out of Madison due to a maintenance issue. But I'm like, "It's going to be super tight in Denver, but ConnectionSaver is going to save me." The gates were next to each other. I was totally relaxed about it. Ben Thompson Then I get there, and the flight had already closed. I walked to the gate. They closed it early. They had taken off. I'm like, "If American Airlines does that, I don't care. It's my expectation." I was crushed because... I'd already internalized it as, "You do this amazing thing." You're such a large airline... It's hard to get into that. Scott Kirby We have to get really good at communicating on it. A couple of things. First, on something like that, we have to get really good at communicating. The seat-back screens now are going to be helpful, too. We're going to tell you that. We're going to put it on the screen. The seat-back screen today is completely divorced from the app. Tomorrow, once we take it over, they're going to be the same. And so, we're not going to just have to text you about your… We're going to text you and tell you exactly where it is. If something changes, what probably happened on that flight is it got delayed by air traffic control, and we didn't have time to hold for it. Ben Thompson Oh no, it was one of those things where I knew... I understand the complexity of airlines. It was just I was looking at myself like, "Why am I disappointed here?" I'm like, "Oh, because —" Scott Kirby No, you should be disappointed... Because what we should do is communicate with you really well on that. Another cool thing that I hope we're going to have rolled out, actually. We're going to roll it out pretty soon. I've told them I want it done by Christmas for Christmas travel because there's weather at Christmas, is normally, if there's a weather delay coming on one of your flights, all airlines, including United, send you a text that says: "Oh, there may be weather in Denver tomorrow." Great. What are you supposed to do? Ben Thompson What can I do about that? Scott Kirby Cross your fingers? John Collison Yes, it's December in Denver. I'm aware. Ben Thompson Give you a little shot of anxiety before your trip. Scott Kirby What we're doing today, it already has started, is when we say that, we say, "Here's other options for flights that you can just switch to. You can stand by for this one if you want, or there's seats available on this one." What we're going to do is send you the screen. On the screen is going to say, "Your flight to Denver... We estimate it has a 41% chance of being impacted by weather. If you switch to the earlier flight, it's only a 12%. The later flight is a 3%," so that you can have some intelligence about making decisions. But the point on how do we... Keep wowing customers is a really important one. Scott Kirby Two years ago at the end-of-the-year officer meeting, I told our officers that their job is: "Wow." They all looked at me like, "What the hell does that mean?" Our job is to do things that a customer gets—they're a frequent flyer—gets on the airplane and says, "Wow, I've never seen that before." By the way, we get credit for that one time. Ben Thompson I know. That's the challenge. Scott Kirby Then we owe them another "wow." They should put that in the bank and we should owe them. It's a culture that means you can't ever rest. You can't be complacent. What are you doing that's new, that's cool? Because I want every cool thing that we do, a customer to take that for granted. You should take it for granted. We do something to surprise you in the future. That's cultural to try to tell you. John Collison Ben has a theory that I like, which is that all of the top global airlines lists are just totally missing the point. It's like... People talk about benchmaxxing in AI where people are optimizing for the wrong things. All the top global airlines, which feature heavily, the Asian and Gulf airlines, do so because they have really nice meals and very well-coiffed flight attendants and all these things. Whereas what you actually care about is the airline having really good tech. You have things like ConnectionSaver where it can rebook you if you— Scott Kirby I'm 100% with you. I think those airlines do a good job. I say schedule is the number one reason people pick an airline. But, everything else matters for brand-loyal customers. It's service, product, reliability, and technology. The Asian and Middle East carriers do better than the US airlines on product for sure, and probably service too. I think we do a really good job, but they have different cultures for service, so they do better on that. But I think technology is the differentiator. Scott Kirby United, that's why I now believe that United in totality is the best airline in the world, and it's because of technology. It's exponentially getting better. Things like being able to do this for customers when there's a delay and tell them what's going on. We started it this summer. AI allows us to institutionalize this. But if you're going to have a delay, like sending customers weather radar maps. In Chicago, there was a day where the weather was over the horizon, but you had to fly. It was sunny at the airport, but you had to fly through this line of thunderstorms, and so the routes were closed. You couldn't— Ben Thompson We were like, "Why? It looks fine outside. What's the problem?" Scott Kirby We sent half the people the normal weather delay, which they think you're lying... Because it's sunny outside. You must be lying to me. We sent half a picture with the radar map, and you have to fly through this line of thunderstorms, and the routes are closed because of outside. The people with a 1-hour delay, I think the numbers were negative 60 NPS on the normal way of sending it, plus 60 when we send a picture of the map. A 120-point difference. Ben Thompson It wasn't just that they weren't mad. They were actually happy. They're like, "Thank you for everything." Scott Kirby It was better than an on-time flight. People can handle… They understand they don't want to do something that's unsafe, but they don't like uncertainty. John Collison It sounds like a lot of what you're describing is expectation management and communication. Ben Thompson Yes, 100%. John Collison It being a key part of the experience, because this is high stakes for people. Scott Kirby I would leave the expectation management out of it. It's communication. People should expect that we're going to get them— Ben Thompson I think it's expectations management. John Collison Why isn't it expectations management? Scott Kirby Because I don't want to use it as an excuse. It's like, "Oh, sometimes weather happens, so you should expect it." Our job is to try to… It does, but our job is trying to figure out the way to make it the best possible for you. I'll give you another example for weather. Now, this one, we're going to have to get the FAA to help us, but we started running simulations with AI for Denver in the summer. In Denver, there's a lot of pop-up thunderstorms that happen around the airport. John Collison Denver is really your bête noire. Scott Kirby Well, no, it's actually easier than the others. Newark is the hardest. Ben Thompson My two options for connecting are Chicago and Denver. It's just a roll of the dice. Scott Kirby This will help Denver especially. Because Denver... Winter storms are actually pretty easy. You know what's happening. Pop-up thunderstorms are what's hard. The reason is, because if a lightning strikes within three miles of the airport, the ramp closes for 30 minutes, people are not going to be outside. Which, one, is dumb. If a storm is moving from the east to the west... Or from the west to the east, which is what happens, from the west to the east. And it happens west of the airport, you should probably close it. But if a storm is moving west to east, and it happens three miles east of the airport, you don't need to close it. Scott Kirby Anyway, using AI, so what will happen is there'll be a forecast in the afternoon for there's going to be thunderstorms. The FAA just takes the worst case. We don't know where the thunderstorm will be. They limit all the corner posts... And they just pull down the amount of traffic that's going through the airport proactively. Take the worst case. But when you look at the data, well, sometimes the weather is to the southeast, sometimes it's… But in most cases, you can use different arrival routes and departure routes, but you can keep the airport running. Ben Thompson Because there is nothing around Denver Airport, so you have lots of space to work— Scott Kirby Yeah, and you can keep the airport running. We can probably reduce 50%–75% of the weather-impacted delays in Denver in the summer by using this technology. It's just transformational for customers. That's my point about expectation management. Instead of just saying, "Oh, weather." Like my previous employer, I told the operations team, "Anyone that says the word weather in my presence is going to get fired, because I do not want to use weather as an excuse." I know weather happens, I know we're going to be safe, we're never going to do anything that's unsafe, and weather does happen. But our job is to figure out how to minimize the impact of weather, and you can't use weather as an excuse. Scott Kirby That's my expectations management point. I want to have our culture be, "We find ways to overcome the challenges." Instead of trying to manage your expectations, we try to set high expectations and try to meet them. But we do communicate with you. Ben Thompson What do you see as the biggest limiter of your business? Is it airport capacity? Is it airplanes? Scott Kirby No, it's air traffic control. It's by far air traffic control. Air traffic control is 90% of the issue. John Collison How do we finally… This is the great white whale, air traffic control modernization. Is there a path to… It's a complex technical project, it's a complex social and political project. Can it be done? Scott Kirby It can be done. Look, the president is supportive. He's the most pro-aviation... He knows about aviation, he likes talking about it. We have support from him. Secretary Duffy is great. I could text him right now and get a response. Unless he's in a meeting, unless he's standing up speaking or something, I would get a response within 30 seconds. Bryan Bedford is the best FAA administrator we've ever had. But it's the government. Scott Kirby It's just so hard for the government to do it. Just take the appropriations process. These are the kinds of capital projects that are five to 10 years to get done. They do an annual appropriations project. They start at the beginning of the year. It's often delayed because of the government shutdown stuff. They may be starting two months into the fiscal year before the budget gets approved. Then they take three months to ramp up to start. Then they work for four months. Then they take the last three months to shut the project down, because they don't have authorization past 12 months. It is absurd. John Collison Could the airlines fund it to get around the— Scott Kirby If they would let us. It's super politically controversial to privatize the FAA and air traffic control. But it's the kind of thing that private enterprise, I think, could get done in two to three years. John Collison But you wouldn't need to privatize it. You could just have a user fee system where your— Scott Kirby It's a user fee system today. The real issue is, there are several political groups that are opposed to it. The biggest being private jets, who today... Airlines pay 100% of the fees. The FAA is airline-funded. We pay 100%, and essentially it's free, 99%. Essentially, it's free to fly private jets. They're a really powerful lobby, and I think that's probably the biggest impediment to modernizing the FAA. But the problem is, anything that's done through the government, it's like you go, and… The government is just not efficient at that stuff. It is the best FAA, best DOT we've ever had. But the conversations they have on Capitol Hill is, "Well, how many jobs are you going to put in my district?" Scott Kirby Think about air traffic control. Air traffic controllers don't need to be at airports. They mostly sit in basements, look at screens... They can be in a centralized facility anywhere in the country. Instead, there's an air traffic control facility in every single district... For political reasons. It makes it incredibly inefficient. One wire gets cut, and if you got one big facility, you get a backup. John Collison As we saw. Scott Kirby You have 450 of them. Things happen all the time. It just makes the system inefficient. I'm not actually advocating for privatizing the FAA, because it's so politically toxic. But we're doing more than we've ever done, but it's going to be hard for government to ever be leading-edge on this. John Collison What will happen? Because already certain areas, capacity-wise, are creaking at the seams... And air capacity grows 5% a year. We have an unstoppable force and an immovable object. Scott Kirby There's going to be limited… There's going to be fewer flights. It's already happened in New York. The FAA has put limits on the number of flights in New York. It happened this summer in Chicago. It's going to happen more and more places. John Collison That's what we saw in San Francisco. Scott Kirby We hit the limit of what the FAA can manage, and then that becomes the limit. That's the limiter. There's more space in the sky, but you've got to have a different air traffic control system and process. And they're trying to modernize it. They are making good… I'm not trying to be totally negative. I'm not being negative. They're making more progress than has ever been made in my career, but they're never going to get to the… If the people at Stripe were allowed to run it, they'd really increase. John Collison More progress would happen. Scott Kirby A lot more progress would happen. If we were allowed to run it, more progress would happen because we're not constrained by politics. They're constrained by politics. John Collison Scott has spoken about how some flights take longer today than they did 50 years ago, despite planes flying a lot faster, all because of a bottleneck with air traffic control. Stripe Economics recently looked at a similar paradox with AI. One study found that while AI can save workers 1.5 hours a week, those savings actually had little relationship with actual work output. It turns out making individual parts of the system faster doesn't always make the whole system more productive. If you're interested in these kind of topics, and you want to read more about AI and productivity or other research about the Internet economy, go to stripeconomics.com. Ben Thompson You said something at the Crain's Business lunch in Chicago in August. You've had this battle royale with American Airlines. Very pertinent to me, since I fly to Chicago the most, where it would actually be better for consumers if United was the dominant airline at Chicago. Scott Kirby I wouldn't use the word dominant, but— Ben Thompson If you were the largest airline, had infinite capacity to expand. How is that? Is that just another articulation of the premium strategy— Scott Kirby No— Ben Thompson Because more routes is a benefit outside of cost? Scott Kirby It's understanding of how networks work. The real reason for that, is there's a limited number of flights at Chicago. If you're going to add one flight to Milwaukee from Chicago, that means you can't fly… It's not the shortest, but it's short. You can't add somewhere else. For a hub to work, you have lots of what's called catchment-area flying. United flies, I think, eight times a day from Chicago to Milwaukee on small airplanes. Not carrying... People aren't going from Milwaukee to Chicago and getting off the airplane. They're connecting on to other destinations. And that's really important. Scott Kirby We have several hundred of those catchment-area flights for connecting customers within a few hundred miles of Chicago. American has totally duplicative services on that. Those do nothing for the city of Chicago. They help support each of our two hubs. But by the way, the same exists in Atlanta and Dallas. Atlanta and Dallas are much smaller cities than Chicago. But they have more international service and more passengers. Every metric you look at, they're bigger, and they drive more economic activity for Atlanta and for Dallas. Single-hub airports drive more economic activity. And this is the reason: because they don't have to waste several hundred of their flight possibilities on catchment area. They have half as many. Ben Thompson Between you and American, there's like 16 flights a day. Scott Kirby They have half as many catchment... So what happens is instead of having 16 flights a day to Milwaukee, you have eight flights a day to Milwaukee on bigger airplanes, by the way, so you carry the same number of passengers, and you add an extra flight to Paris, and an extra flight to Tokyo. You get more long-haul flying out of it. I'm 100% sure, Chicago should be the biggest airport in the world. It's not. It's because of this. I'm 100% sure it's better for the city of Chicago. I think it's going to get you… I mean, American's going to lose probably a billion and a half in Chicago this year. I think it'll eventually get there. Ben Thompson How much is your… You famously were from American, were passed over, came to United. How much is your competitive position versus American will drive some of your comments, versus your past will drive those comments? When are you going to actually start taking real aim at Delta? That's the question we're looking for. Scott Kirby Everyone thinks that it's personal for me. I get it. Ben Thompson Maybe a little bit. Scott Kirby But it really isn't. In Chicago, they're a big… It's been a competitive battle there. But look at our market share gains. In our market share gains in Chicago, we went from having lower market share than American to basically having double the revenue share. Those are unprecedented share shifts. The market share shift that we've had against Southwest in Denver is even bigger. The market share shift we've had against Southwest and Alaska combined here in the Bay Area is even bigger. It hasn't been directed at them. But with respect to Delta, I think that what's happening right now with Starlink is the biggest push. Ben Thompson That's what we want to get to. Is Ed going to lose his job because he didn't get Starlink? Scott Kirby He's not going to lose his job over it. By the way, I have a lot of respect for Delta... I took inspiration for it. They were the first airline to start down this, building a brand loyalty. I don't call it premium, because I want to invest nose to tail for a customer. Starlink applies to everyone. It's not a premium product, it's for everyone on the airplane. But, they've done a lot of really good things. I think Starlink, behind the schedule, is the most important thing for customers to choose an airline now. Today, we're at 48% of our flights are on Starlink. In the next week, it's going to be up to 50. Ben Thompson Way fewer than your seat miles, though. Why did you start on the little planes, and not do the big ones first? Scott Kirby Because they were certified. This is the FAA process. You have to get the other airplanes certified. We've been getting them all certified. We're doing about three airplanes a day. In fact, it's going to go up by two points in a week and a half. Ben Thompson To this Asian airline point, you have a joint venture with ANA. Most people I know who fly over the Pacific would often choose the ANA flights. Now going forward, of course, they're going to choose the United flights because it's got Starlink. Scott Kirby Customers are going to try United because of Starlink. Then they're going to realize the technology, in particular, is better than anything they've seen everywhere else in the world. We're going to get customers that have been loyal to other airlines that try us for Starlink and stay because the technology is better. John Collison With Starlink, we now have this moment where this real differentiation between airlines that previously were closer, the differentiation has gapped out. The fact that every airline has not chosen Starlink suggests to me that the economic deal for an airline was not like an obviously, "Oh, yeah, we must do this." There was a case you could have made to not do it because some airlines did not do it. Can you talk us through how you made the decision to do it? How painful was the decision? Scott Kirby It wasn't painful. I thought it would be a big deal to customers, and so wanted to do it. Economics were... Yes, it's more expensive, but it's a whole lot better. You often get what you pay for, and that's true in this case. Mostly at airlines, you look at this like these things are incremental. It really takes time to put them on. The easiest way to put it on is to do it in a heavy check. You got an airplane that's going to be down. You strip the airplane down. And while you're working on it, you already got the airplane down, put Starlink on. That's how we started. Scott Kirby We were only going to do 65% of our fleet because planes were retiring. Once we put it on the first aircraft, we realized all these anecdotes. I'm talking to people like, "I'm switching to flying a regional flight because it's got Starlink." I was like, "Holy cow." Ben Thompson I was booking a flight this week, and I was just thinking through it. I had to book around the Brewers game. Whereas if I had known for certainty that my flight was going to have a Starlink, I would have booked it during the game. There's such a huge gap between maybe there's Starlink— Scott Kirby Congratulations, by the way. Ben Thompson Not yet. We're not talking about it right now. Maybe there's Starlink, versus there is definitely Starlink. It feels to me like you actually haven't reaped any of the benefits yet, because certainty is going to make a huge difference. Scott Kirby I think you're right. I think we've got some. But getting to 50% matters... But you're right. We run a tracker today that gives you a bunch more data. We're going to put in the app sometime soon the probability that there'll be Starlink on your flight. At least you know the probability... For flights, and it'll be different. Today, if you're flying on a MAX 8, it might be 25%. But if you're booking for Christmas, it's 36% because we know how many we plan to have done. We're going to have that. We also are going to have a bunch of premier markets that we're going to get to 100%. Our first hub, I'm not going to tell you the date yet, the first hub that's going to be 100% Starlink is Los Angeles. Sometime in the first half of next year, if you're in LA— Ben Thompson Is that because that's the most competitive hub? Scott Kirby It's a competitive hub, but... It's also the kind of aircraft that fly there. Our only aircraft that are still a challenge, we have to get Boeing over the finish line on some of the certification work on the 787s. We will get there, but if you've got a market like San Francisco that has a lot of 787s, it's just going to take longer because... Boeing is slower. John Collison Was the CapEx or OpEx more painful in the economic model as you looked at it? Scott Kirby The numbers weren't that big. John Collison Oh, really? But then why is Delta's strategy rational, or do you think it's completely mistaken? Scott Kirby It was a mistake. I think at all airlines, even the ones that... If you watch the other airlines that picked it after United had done it, they're stepping into it gradually. That's just the way we've always done it in airlines. Everything is slow. Do an aircraft remodification. It takes eight years. That's the way we've done it. I think it's just the way everyone has done it. If you're thinking that this is an eight-year project, okay, I'm a year behind on starting, but that's not that big of a deal. United will be at 12%. We'll be a year behind. It's not going to be enough to matter. In a traditional way of looking at it, it can feel rational. I don't think people... We even didn't appreciate how big it was. I thought it was big, then we put the pedal to the metal, and SpaceX supported us. Ben Thompson Is this going to be the biggest differentiator of all time? Scott Kirby I think it is. I think it's the biggest competitive advantage. And it's temporary. Everybody eventually is going to have high-speed, low Earth orbit. It's going to be a must-have. But we are going to have a few years of being the only airline that has it at scale. That's our mission is, we're going to convince customers that United is the best airline. We're going to get customers to switch their loyalty to United. Get our credit card, switch their loyalty to United. Not because of Starlink, they're going to try us for Starlink, and they're going to stay because all the other technology, and everything else is better. The technology in particular is so much better than technology at... And it's accelerating. Because we've got the right tech stack. Our gap is getting wider and wider with our technology every day. John Collison You have a two to three year window to woo customers. Scott Kirby Exactly. That's exactly right. John Collison What do you think of Elon's strategy of requiring airlines to make it free? Scott Kirby We were going to make it free anyway. Free was going to be... Although in fairness, free is not the value proposition. Fast is the value proposition. The truth is, I've flown all three of my big competitors who have it free on the legacy systems, and it's terrible. I have flown them each two or three times in the last year. It's terrible because there's not enough… It's physics. There's not enough bandwidth to make it free. Ben Thompson I was sad when they started making it free. Because I'm like, "This is going to make my experience worse." Scott Kirby It makes it unusable for almost everyone. Free was never the value proposition. Fast is the value proposition. And there's only one option for fast. It's Starlink, that is the only option. You could call the other fast and free, but it's not. It's like dial-up internet. It's slower dial-up internet. Ben Thompson You mentioned that in the long run, everyone will have Starlink. The technology stack is— Scott Kirby Or maybe Amazon, but they'll have low Earth orbit. Ben Thompson How do you think about in the long run where a reason people prefer, say, the Asian airlines versus the American airlines is they feel like the soft bits are better? Do you need to circle back around to that in the long run? Scott Kirby I want us to be the best at everything... And acknowledge that Asian and Middle East carriers are really good at service and product. Now, it does help that they're quasi-state entities and subsidized. We can't do it and lose money. If you get ahead, you start to have exponential benefits, you can go faster and do more things. Scott Kirby I think being in the lead and never being complacent, we're going to have to keep reinventing things and doing stuff to make it great for customers. I think we'll have a big lead. When you have a big lead, we'll have the resources to invest. Everyone else is mired in these hitting the Wall Street number for next quarter. And the only way to do that is to cut your investments. They get mired in the short-termism, and they don't invest. Our constraint on investing in technology is how much can we manage? It is not money. John Collison You've talked about airlines being run by operations people where, taking cheese out of the pizza is the only move. What has given you more social permission with your investors, with your board, to do things like the bigger aircraft order during COVID? We're going to do Starlink. It feels like you have taken bigger swings. Is that just you've seen the future better, or do you somehow have more permission to take big swings? Scott Kirby I think we're better at seeing the future. I don't know if we talked about it here, but I think reading as much as I do. We talked about the two… I think people that do that, connect dots, can see the things in the tails better than others. They can spot the opportunity where other people don't. I have a great board who's been supportive. I spend a ton of time communicating with the board and keeping them involved. We talk about what's going on. I have a lot of support from them for doing that. From the external perspective, Wall Street almost always hates the big things we do, and I don't care. John Collison What are some big things they've hated? Scott Kirby The aircraft investment. They don't say, "Don't invest in technology," but they want your CASM-X, which is your cost per available seat mile, to be the only... We can't control, like, airport fees are going up. Union contracts are what they are. The only way you can cut the budget is to not invest for the future. We're going to invest for the future. Scott Kirby In the long run, it works out. I'll hear other CEOs complain about, "Oh, Wall Street is short-term." What I say to them is: "Yes, they are. Stop complaining about it. That is what it is. But what you should do is invest for the long term and do the right thing. But by the way, if it doesn't work, you ought to lose your job, and you ought to be comfortable with that. You get paid a lot of money. Make the big bet. If it works, great. Shareholders will like it. But if it doesn't work, you deserve to be fired. If you're not willing to take that risk, then stop complaining about it." Ben Thompson Yes. More gamblers as CEOs. Scott Kirby More gamblers. Ben Thompson Everyone in tech loves, or I think a lot of people in tech love airlines. It's super interesting but the actual job, how many employees does United have? Scott Kirby 120,000. Ben Thompson 120,000, with a wide range of skills and abilities. Some are on the ramp. Some are doing route planning. How do you, in all this experience, what is the key to managing that and getting people excited? You're dealing with unions, all these sorts of things. Scott Kirby I think being the CEO of almost any company, but certainly for me, is really 99% one thing: create the right culture. I was in LA yesterday, and I told the whole team what I just told you guys. The first hub that's going to get all Starlink, you're going to get a lot of people that are coming across the terminal, which is where Delta is, across the roadway there to United. They're going to try us that are loyal to another very good airline. Your mission is make sure they know United is the best airline in Los Angeles. They're all like, "Yeah, we're going to do it." Ben Thompson People want to win. It's fun. Scott Kirby People want to win. It's fun. John Collison I want to come back to Wall Street. You talked about investor perception. Historically, airlines were the... Canonical example of a bad business. The famous Buffett line of a farsighted capitalist would have shot down Orville at Kitty Hawk. The fact that airlines had cumulatively lost money until 1992. I think the entire industry since Kitty Hawk had lost money on an aggregate basis. That is no longer true. It seems to have really changed. Now, airlines are more robustly profitable. I think Berkshire owned at least some airline stocks for a while recently. Has the structure changed? Presumably, you think yes. What has changed such that airlines are no longer the poster child for— Scott Kirby Well, yes and no. Yeah, it had gotten better, but you look at what's happening in the last 12 months, and things have gone back... This year, six of 10 US airlines are going to lose money. And much of it's structural. I talked about American earlier. American lose a billion and a half... They're probably going to lose about a billion and a half in Chicago this year. The golden rule of airlines is you can't fly places that lose money. Scott Kirby Any business, if something loses money and it's structural, you have to stop losing money. It's not unique to that airline. Basically, almost every airline country has a place where they lose a bunch of money around the globe. Some of the losses are like... Lots of places, the airlines have more than negative 100% margins. Which sometimes people think is like, mathematically, impossible because its revenue... It's possible. Yet they still fly it. Scott Kirby Ego is still big. Ego is the reason those things, I think, have happened in the past. Ego still exists. But the structure of the industry that's different today is there are basically two winning airlines in the US: United and Delta. We've created brand loyalty. Customers fly us not just because of the schedule, which is the commodity part of the business, but because of all the other stuff we've talked about today. Even now with oil prices for us are up $8 billion this year. Our best year in history made $5 billion. We're not going to make as much this year as last, but we're solidly profitable. It's just a completely different picture. John Collison But hang on. You think we're still in the Juan Trippe era of aviation where it's not being run by bean counters at every airline, and they're making... Incoherent, irrational decisions based on ego? Scott Kirby It's probably not quite the Juan Trippe, but there's still a lot of ego that's happening where people are adding routes. I started as a route planner. I could look at like, you're going to lose. That's going to be a negative 40% margin, between negative 30 and negative 50. Ben Thompson How are you guys thinking about routes? You've added a bunch... You just added an announcement last week of all these new cities that I've never seen before. Scott Kirby Yeah, 10 new international destinations. That's very cool. John Collison How do you make the decisions? When you launch Nuuk in Greenland, is that you have a vibe that it could work? Is it actually very... Is it card counting or poker? Scott Kirby That one, it's different. It's hiring great people. Because I would have never picked Nuuk or known Nuuk. We got a guy named Patrick Quayle and a great team that are really creative. And they go look for things that are different and outside the norm. Not in the data. We talked about data earlier. That aren't in the data because no one's ever done it, so there's no data to support it. Nuuk has been really, really good as an example. John Collison Really? Scott Kirby Yeah, people love it. It's a great place to go. We've added… Across the Atlantic, by next summer, we'll have 53 destinations. We had 23 destinations 10 years ago. When I got to United, we'll have 53 next summer. We've only had two that didn't work. But we're also disciplined about it. When they don't work, we stop. That's the great deal, our assets are fungible. Bergen, Norway didn't work. I think Norway's awesome. Ben Thompson Bergen is incredible. Scott Kirby I think it should have worked, but it didn't. We tried it, and it lost a little bit of money. It was not that much. It lost a little, and we just stopped. That's the great thing. We can try stuff and stop. John Collison The fellow, Patrick Quay— Scott Kirby Patrick Quayle. John Collison Yeah, Patrick Quayle. How does he make the decision that Nuuk is a go? Scott Kirby He has all kinds... They're staying really connected to what's happening in the world. Another example, I forget the names of these cities. But we added a couple of cities in Spain and Portugal... That I've never even heard of. And I don't remember them now—the names—that are part of pilgrimage trips. People... Catholic... They fly to one, and they walk to the pilgrimage to the other, a couple of hundred miles apart, and then they fly out of the other city. Ben Thompson You have to add both of them at the same time. Scott Kirby We've added... Anyway, he went and somehow read about pilgrimages. He went and got some data, how many people do it. Then he went and found data that said, "Oh, I can see all these broken itineraries that somebody flew us into one of the cities, and they flew another airline out of the other city." We added them, and they went gang busters. He, this year, took a trip to Uzbekistan and Kazakhstan. We can't fly there today because we can't fly over Russia. But he's there like— John Collison This could work. Scott Kirby This could work down the road. He's doing stuff like that, and his team is great. He'd be more interesting maybe for one of your podcasts in the future than me. John Collison Yeah, I'm very interested. Greenland, by the way, is fascinating. I love it. It's a country of 50,000 people, and they're just going gang busters building airports. Scott Kirby It's the only way to get there, to places. John Collison Yes, but sure, it's the only way to get there. An international airport in Nuuk maybe makes sense. They just replaced it, and that's the new route that you guys have. But they're replacing the airport in Narsarsuaq. There's already a perfectly good airport there, and they're building a new airport there in the south, full jet-capable international airport. They love these capital projects for a country of 50,000 people. Ben Thompson Nothing else to spend their money on, I guess. Scott Kirby But it's such a cool, no pun intended, place to go. It can drive the economy, 50,000 people, having people come in. John Collison Sure. Scott Kirby It can drive the economy. John Collison I want to talk about the tech for a second. Scott Kirby Yeah. John Collison How should we feel about the last few decades of the actual airframe advances, where everyone likes to talk about the 737 first flew in 1967, it flew at Mach 0.78, and the 737 MAX today flies at Mach 0.78-ish. Now... It does burn 50% less fuel, the latest version, so that's a significant improvement. It is 30 to 40 times safer, so that's a significant improvement. But at the same time, people feel like, again, it's one of these examples people trot out of stasis. How do you feel about the rate of technological improvements in airframes? Scott Kirby It's maddening that we haven't done more. In fact, this book, where is it? Scott Kirby Impossible Factory. John Collison It's a Skunk Works book. I want to read this. I had not known there's a new Skunk Works book. Scott Kirby The Clarence "Kelly" Johnson. Developing the SR-71, the U-2 in a couple of years from start to finish. I think the fundamental problem is Boeing and Airbus have a global duopoly, and they have quietly, not officially agreed, but they have quietly agreed: "Neither one of us will invest in new airframes." They're pacing the frontier. If you don't have an option... We need a third aircraft manufacturer, to be blunt. John Collison Okay, so you think there's basically a breakdown of competition? Scott Kirby Yeah, so neither one of them, their investors don't want them to invest, and so they just won't do it. I've been begging them both for 20-something years to build a 757 replacement... Begging them, and they just won't do it. Ben Thompson I am on a 757, actually, to Chicago, I'm a little nervous about it. A great plane. The takeoff's amazing. Scott Kirby Yeah, it's a cool airplane. It's a cool airplane. John Collison Speed is obviously one thing, and obviously, you guys are working with Boom. But speed is also hard, and it requires much more fuel. Other than speed, what improvements would you like to see? Scott Kirby Well, a couple. The next generation, I think, of airframes, you could build on the current airframes. I think the biggest thing is probably going to be blended wing bodies. Think of the B-2 bomber. It's a much more efficient airframe for flying, and so turning that… We're an investor in a company called JetZero, who's trying— Ben Thompson Is that an airport challenge though too— Scott Kirby Creates airport challenges. It's bigger, so airport space. But that's really a gate challenge. You got to re-gate. I think that's an example of something. Engine technology, I think, can advance as well. Another cool thing, by the way, we're starting the Relax Row, later this year or next year. Which is in coach, you can put three seats, and a bed comes out, and you can lay down on them. We have little United stuffies, airplane stuffies. I've already got some for my kids. My kids love them, but that's another cool— Ben Thompson But is that an example of basically a lot of the economic outcomes that you're looking for? I pushed you on this with the premium question. Scott Kirby Yeah. Ben Thompson How can you take a large, fixed-capital product and basically deliver infinite numbers of strata of pricing? Scott Kirby Yes and no. I think of this as… I don't think of it that way. I think we are trying to build a brand. We're trying to build a great brand. Something like, Relax Row, I think, will be profitable. But it's going to not even be around in our financials. But it's cool and it's good to do stuff that's cool. Good for families. I also said earlier, I have seven kids. And I think of air travel through the lens of a parent traveling alone with a couple of young kids. How do we make it easy for them? If we can make it easy for them, we're going to make it great for everyone. Scott Kirby Relax Row is perfectly consistent with making it easy. Starlink is great for them. It was seat-back entertainment. I love walking through our airplanes with seat-back entertainment, which a lot of airlines went away from. You'll see kids watching, and parents just totally relaxed because their kids are watching Bluey. Ben Thompson I heard you could now watch Cheeky Pint on there. John Collison You can now watch Cheeky Pint on the inflight entertainment. Scott Kirby That's cool. John Collison It's pretty cool. People are probably watching this. Scott Kirby Maybe I'll watch this. John Collison Exactly. You can just put it on there. When you're saying things like the Relax Row, social media has almost changed airline marketing, where there could be things that are maybe not the biggest from a ticket booking perspective, but if it gets people broadly excited about United, that is valuable. Scott Kirby I look at... We're trying to build a brand. All the Starlink stuff that's happening. John Collison Sure. You're feeding it. That's your buy farm. Scott Kirby I feel bad for Ed. Just kind of. But I love it for us. Actually, we had a big push that was coming. Ben Thompson I was going to ask about it. How did you decide to run those ads, right? Because you only have 50%, are you ready to do this? Scott Kirby We were waiting to actually… We're going to cross the 50% threshold next Friday. We were waiting until then to really push. We're going to do it anyway, but that was a moment to like… Our team is great. Maggie Schmerin, who's our VP, runs that. It's awesome, and she did. One of the things… this is another advice to companies that she tells me. She did it without… She didn't ask me. She knew she didn't ask me. No approvals. She's awesome. I trust her. That creates speed. Scott Kirby Most companies, especially big traditional companies, have 16 layers of approvals. You can't do stuff fast or creative or fun or interesting because it just gets watered down. She just went out and did it, knew that she had support from everyone at the company to go do it. And did it. I was at a CVS board meeting because I'm on the board of CVS Health. And I started reading about it: "Well, this is pretty cool." People are asking. Actually, I didn't read it. People were asking me like, "This is cool." Like, "Oh, what did we do? That's cool." John Collison As we think about the airline business in the United States... Pre-1978, everything was very heavily regulated. United flew on routes approved by the government with fares set by the government. I think people don't realize when they look at those old-timey '60s photos of someone coming along with a lobster cart, and everything's so brilliant. It's because at that time, airlines could not compete on price and therefore competed on perks. We're much better off these days when you actually have a real market and real price competition. John Collison One of the places where we have less of a free market in air travel is the slot system. There, we have very limited number of slots in airports. I actually don't fully understand how slots are granted, but do we have a breakdown of competition in certain airports because you have this wacky slots system? Scott Kirby Yeah, but I think it's at the margins. What's bad for customers is scheduling more flights than an airport can handle. That's what's really bad for customers. Ben Thompson Well, didn't that happen in Chicago though? Scott Kirby It did. Maybe it was going to happen. It happened in Newark, historically. We finally got it, effectively slot control at the airport. It's now the most reliable. John Collison Oh, you wanted slot control because it's bad for customers? Scott Kirby It's horrible for customers. I begged the FAA, and we finally did it. Ben Thompson But that's the contrast, right? In Chicago, you're making this move. This wacky law. Every year, they re, sort of— John Collison What's the wacky law? Ben Thompson Every year, they take a number of flights previously and reallocate the gates. But it's a weird thing. It takes a while to move the gates. It's this weird time delay that's introduced into it. Scott Kirby It created a bad outcome. It's part of how American got to lose a billion and a half because what happened in Chicago, American wasn't paying attention and lost six gates to us. John Collison They weren't paying attention? It's like forgetting to renew the internet domain. It's like they just— Ben Thompson By the time they were doing all those, United added on so many flights. Scott Kirby We hadn't done anything. We went back to our normal pre-COVID schedule. John Collison Yes. Scott Kirby American was focused on the Sun Belt, and they talked about it publicly. Phoenix, Dallas, Miami. More demand, leisure demand. That's what they were focused on. They just didn't add back their schedules. And we didn't do anything special. But because they did it, they lost gates to us. You have to have slots... Because that's the only way to manage a limited resource. They're mostly grandfathered, which is probably fair. If you're British Airways, and you've invested billions of dollars in London to build facilities and stuff, and then they say, "Oh, we're going to take them away and give them to someone else." John Collison But there's a balance here. You both want people to earn a return, and you want Schumpeterian destruction where British Airways should only be allowed to recoup so much investment, right? Scott Kirby Yeah, I think the better answer is to change air traffic control and create more slots. That's how you… You can create more slots with better air traffic control. And then you can allocate those in whatever way you see fit. But the other thing that's happened at all these big airports that have slot controls is the government entities that run the airport have made the cost so prohibitive that no low-cost carriers can afford to fly there. Scott Kirby The New York airports are now $52 per passenger to fly at the New York airports. Spirit Airlines, before they liquidated, average fare was $58. You didn't have to be a rocket scientist to figure out if you're paying $52 out of $58 before you buy your fuel, before you buy your airplanes, before you pay your employees, before you do maintenance, that just mathematically doesn't work. The airport authorities... The big airports in the country are up something like 70% of the expenses since pre-COVID to today. They've just priced low-cost carriers out of the market. Ben Thompson Well, did you price low-cost carriers out of the market? Scott Kirby We didn't price them out. Ben Thompson You had the basic level, and you had this much more fine-grained cutting up of the seats. Scott Kirby The low-cost carrier business model was predicated on having a price advantage. Being able to charge a lower price. We created basic economy where we could profit. And we up-gauged airplanes, so we could profitably be competitive on price most of the time. If we're competitive on price, there's no reason... My joke was: "People may make the mistake of flying Spirit once, but they're not going to do it twice." John Collison Why did Spirit go bust? Scott Kirby Because they weren't charging as much as their costs. They were not able to charge enough— John Collison That's what I'm trying to ask— Scott Kirby It's pretty simple. It was simple. They weren't able to charge enough. Look, what's happening— John Collison It was because of cost inflation, basically. Scott Kirby Cost inflation, but there's a whole bunch of things. Fundamentally, what I think has happened to the low-cost carriers... There's really one still low-cost carrier, successful airline in the world. It's Ryanair. John Collison I was going to ask. Scott Kirby The fundamental premise of a low-cost carrier is to fly to low-cost airports. Southwest, when they started flying here, they flew to Oakland, not San Francisco. San Francisco is too expensive. In LA, they didn't fly to LAX. They flew to Burbank and Ontario. LAX is too expensive. Ryanair still does it. Ryanair doesn't fly to Heathrow. They don't fly to Charles de Gaulle. They fly to secondary airports, because they're low-cost. Ben Thompson All these companies' eyes get too big for their— Scott Kirby In the US, every single one of them abandoned that. John Collison Is it an ego? Scott Kirby Then they went to fly into… I don't know why. Ben Thompson They run out of customers, right? Scott Kirby Yeah, and they went into Chicago and Newark and San Francisco. Back to the New York... You can't charge 58 bucks when you're paying the airport authority 52. You just can't. John Collison Is it a chasing growth story? I'm always very impressed by In-N-Out as a business because they don't chase growth. They famously do everything within one day's drive of the refrigeration centers... Distribution centers. And so they're only in the California West Coast type area. They don't feel the desire to go crazy on the menu: "We have the salad this, and we have whatever that." I see they keep the menu very narrow. I feel like maybe if they're a public company, they were trying to chase growth, and we're going to expand this way. And they just do the same thing exceptionally well with a cost advantage. John Collison Is the problem that as public companies, maybe, or as just short-term oriented companies, they had this good thing flying to Oakland and flying to the secondary airports, and for whatever reason, they just got distracted from it? Scott Kirby Yeah, I would actually say a little different than just chasing growth. I would say, know who you are, know what your strengths are, and stick to your knitting. Scott Kirby Companies are not good at trying to be something they're not. In the past, this predated me, but all the big airlines, American, Delta, Northwest, Continental, tried to go compete with Southwest by creating airlines within an airline that were going to try to out-Southwest Southwest. In Europe, they still do it. In Asia, they still do it. They try to out-low-cost carry low-cost carry. And they're terrible at it! Every single one of them has been. Nobody does it well. Scott Kirby By the way, Southwest has now tried to be like us. They're not going to be very good at that either. You got to stick to the things that you're good at. We aren't going to ever go try to compete with Allegiant Air and be Allegiant Air because we'd be terrible. They're better at Allegiant. Scott Kirby If they try to compete with us— John Collison The low-cost model works, but you have to understand. Scott Kirby You got to stick to it. You got to accept that there's limitations. "I'm not going to be as big as United Airlines. I'm not going to fly to Chicago O'Hare." I have a great… Allegiant is an example. Allegiant Air, you know, it mostly flies to Vegas. They fly from small cities. They've done a great... They're one of the four airlines that is going to be profitable this year. John Collison What else have you learned from Ryanair? Scott Kirby The guy's entertaining. Michael O'Leary is entertaining. John Collison We'd like to get him in the pub here. Scott Kirby You had him here? John Collison No, I would like to. Scott Kirby You'll get a few more swear words than you get him out of me. John Collison He knows his business exceptionally well. He's a very impressive CEO. They're also In-N-Out. They have avoided distraction. Scott Kirby He's disciplined. John Collison They always get asked about transatlantic. Scott Kirby Discipline is probably a better way. John Collison It doesn't work because you don't get the low-cost advantage when you can't get the number of turns high enough. They get asked about Wi-Fi on the planes, and it's like, "Guys, the flights are short. Just look at your phone for an hour or something. You don't need it on an hour-long flight." Scott Kirby He's disciplined. That's a better way of saying it. Getting outside, you have to be disciplined to be successful. Companies get stars in their eyes, and they're not disciplined. John Collison What's the version of discipline for you? Because it's easy, like United, you guys are a huge global airline. You fly big aircraft, you fly small aircraft, you fly internationally, you fly domestically. It would be easy to want to do everything where it's like, "We're cost-competitive, but we have a great wine list." What is your version of staying disciplined? Scott Kirby In the airline business, discipline is really about where you fly. The foundation, our product starts with the route network— Ben Thompson You fly routes that make money— Scott Kirby And fly places that make money. Every time I go— Ben Thompson Does that mean where you're less point-to-point in domestics? Scott Kirby We don't fly point-to-point. I hear it all the time. In LA yesterday, when I do stuff in San Francisco tomorrow with employees, they're always asking, wanting to fly new routes and point-to-point routes. It won't work for us. John Collison We're an airline that flies to our hubs. Scott Kirby We fly to our hubs. That's our strength and a whole bunch of reasons that works. We're not going to go try to fly point-to-point routes. John Collison If you're not first, you're last. Scott Kirby If you're not first, you're last. That's true in the airline business. It's by market. It's not overall. People in Dallas ask me, "Why do you not fly here?" Because we'd lose. American has too much network depth. When they fly from Dallas to Los Angeles, 75% of the people on the airplane are connecting from other destinations. If we're just flying Dallas and LA, we can't compete because we don't have any connections. We're competing for 25% of the market. It doesn't work. John Collison Does that then mean the little decisions you make are, "Okay, should we fly from, is it Newark to Greenland?" That's a little decision. The big decision is: "Are we going to launch a beachhead and take a new hub?" How frequently do you make those decisions? Scott Kirby Rarely. Ben Thompson Is the last big hub up, Denver, when you grew it hugely? Scott Kirby But this was an existing hub that we chose to grow. In my 30-year career, I've closed three hubs and never opened a new one. It's a hard decision to do. It's very rare that that's… Lots of examples in the airline industry of that not working, and almost none of that working in the post-deregulation era. John Collison Do you think it's basically impossible to launch a new hub these days? Building a new airport, it just hasn't happened in the last 50 years. Scott Kirby Yes, is the short answer. Take the Southeast. It's the one part of the country where we're number three because Delta has a hub in Atlanta, American has a hub in Charlotte. I'd like us to be bigger in the Southeast, and it doesn't matter to customers, but there's just simply no airport that's big enough where we can be competitive. We would need to have 600 flights a day to be competitive with American and Delta. The biggest city that would work, that's a big enough city, maybe is Raleigh-Durham. But the airport's not big enough. There aren't enough gates. There aren't enough runways. You couldn't have 600 flights a day. Try to do something just because it's a cool vision, we don't do. We're disciplined. John Collison But this would be a big enough deal for a region that could you work with Raleigh-Durham to expand the airport? Scott Kirby Expanding airports in this country is like... A decade-long process. John Collison Yeah, more. That's optimistic, probably. Okay, so you think it's just— Scott Kirby It's just… John Collison Okay, so discipline for you— Scott Kirby It's possible someday we'll at least experiment with going into a big city that's not really a hub for anyone. Delta has done some of that. It's been, I think, break-evenish, but they've not lost money. Ben Thompson You did, though. This is not a hub at all, but way back in the day, you used to have a hub in Narita. You've added a few connecting flights. There's one from Hong Kong to Thailand and to Vietnam— Scott Kirby Ulaanbaatar— Ben Thompson And you're flying to Kaohsiung from Narita now. Is that just more on the margins sort of things? Scott Kirby It's on the margins, but there are places like in Tokyo, we have connectivity with our partner. A lot of the people that… Like Ulaanbaatar, we realized that something like 12% of the people that were flying us into Tokyo were ultimately trying to get to Ulaanbaatar, and it was really hard. ANA didn't fly there. Ben Thompson That is a mess. Wait, I don't believe that— John Collison What's going on here— Ben Thompson That number is way too high. Scott Kirby It was the summer, but it was a high percentage of people. John Collison For vacation? Scott Kirby Yeah. John Collison Am I missing something? I haven't been to Ulaanbaatar. Am I missing anything? Scott Kirby I haven't been there either. My mom went. My mom travels a lot. She uses my flight benefits and travels a lot. She's just awesome. But... We've seen that data and we added the flight. Now a lot of the people that fly us into Tokyo connect on to Ulaanbaatar. It was a particular flight that it was 12% at one time a day, at that time of day. But then we also have all the ANA connections. They weren't flying. Scott Kirby Kaohsiung is the same thing. For us— Ben Thompson Why to Sapporo? It's going to be fun. Scott Kirby Sapporo is booking really well. It's going to be… John Collison Is that for skiing? Scott Kirby Skiing. Ben Thompson Yeah. Scott Kirby But Japan has become like... The hottest destination— John Collison For the tech people here in San Francisco. Scott Kirby People just love it. Even in Dallas, people love Japan. I have all kinds of friends that, "We went to Japan for spring break," and they love the food, the people are great. They just love it. John Collison What I'm taking away from this is that route selection makes or breaks airlines. Scott Kirby Yes. John Collison It broke Spirit or the low-cost carriers. It broke American in this fracas you guys had. Scott Kirby Well, they haven't accepted that it broke them, but it did. John Collison Then similarly, success means a disciplined route expansion strategy that understands your strengths. Scott Kirby Look, that's pretty insightful. I tell new CEOs, which many of them call, talk to me. I don't think any of them have taken my advice yet, but I tell them, "The one thing I'll tell you, start with the route network is the foundation. If that's broken, it doesn't matter how good you do everything else. If you have bad routes that lose money, you cannot make the airline work. It is impossible." You're going to hear, if you look through the route P&L, which you should do, you're going to see a bunch of negative flying. When you ask people about it, they're going to say it's strategic. John Collison They're going to have convincing excuses. Scott Kirby They're going to call it strategic. If you hear the word strategic flying, you don't need to know what hub it is, you don't need to know what route it is, you should cancel it. You have to stop flying. Anything that... If you default to it loses money, but it's strategic, you have to cancel it. And they don't do it. John Collison What are the lies people tell themselves to convince themselves to stay running a route? What does it mean to be strategic? Ben Thompson Corporate customers, something like that. Scott Kirby Yeah, or credit cards. If we're not big in this city, then we just won't get the credit card— Ben Thompson Is that the biggest tail risk if credit cards ever go away? Scott Kirby No, it's not nearly as big as people think. John Collison The perception amongst the— Scott Kirby Yeah, the perception is big because people look at… They can see the amount of revenue that we get, and they say, "Oh, almost all your net profit is coming from credit cards." Well, yeah, but there's a cost. We carry over 50,000 people a day. 50,000 people today will fly free on United Airlines by using their credit card miles. Nobody counts the cost. John Collison Oh, you're saying they just can't do an accurate contribution profit calculation? Scott Kirby Yes. All that we disclose is the revenue. Everyone's like, "Oh, look at the revenue." Fifty thousand people a day are flying for free. There's a cost of carrying 50,000 people. John Collison Okay, so the whole Twitter meme of airlines are a credit card business with airplanes attached, it's just they're holding the financial statement upside down. Scott Kirby They're ignoring half. They're looking at the revenue side and ignoring the cost. Ignoring the cost side. It's important. It's good, but— John Collison But it's blown way out of proportion. Scott Kirby But it's blown way out of proportion— Ben Thompson How do you think about changes in the frequent flyer program? You just went to, I think, $32,000 or whatever you call it—points—which... I appreciate getting rid of the segment one because I never qualified on that one, so I appreciate the simplification. But, is that a— John Collison You in general just seem to want to keep the riffraff out, like with the Wi-Fi, with the… Ben Thompson It's a real challenge here. John Collison They want the cutoff to be right below Ben. Scott Kirby Yeah. That's exactly right. Ben Thompson I applaud these changes. I looked back on my past few years. I've always well-exceeded 32,000, so it's no problem for me. I want emptier lounges, so it's all good. What's the calculation in that? Delta obviously has gotten a lot of grief from my frequent flyers in the changes they made. Yours seemed to go fairly well. What do you think that was? Scott Kirby I don't think about it through the lens of the frequent flyer program. I think about how do we grow brand loyalty. The frequent flyer program is one of those things. Really, if we're doing something that's going to detract from brand loyalty, there's got to be a good reason to do it. Clubs are… How many people are a Global Services member? People love being Global Services, but we limit it. It's exclusive. Ben Thompson There was one year I thought I was going to make it. January passed and it never came. It was very sad. Scott Kirby Clubs are another example. This is another thing. During COVID, I'm pretty sure we're the only airline that did this, we doubled down on club investment. We've doubled our square footage of club space from pre-COVID to more than doubled it. And it's going to grow by another 50%. It was the one time in history... If you close a club, it's complicated. But close a club, it makes customers mad in the short term. You have to do it sometimes to expand it. But COVID was the one time in history, we had to spend money, but we had no customers. We could get away with doing it, we could do it faster. Expanding club space is what we have a bit. We're going to do more of that. Those are the kinds of things that we're more focused on. Any changes to the frequent flyer program are about trying to build loyalty. Ben Thompson That is just, "We could deliver a better experience if there's fewer people." Scott Kirby Well, sometimes it's that. I guess there's only a certain number. We're putting more first-class seats on, but at any given time, we only have so many first-class seats on airplanes. We're calibrating the program to make it valuable for loyal customers. John Collison You run the Star Alliance board? Scott Kirby Not anymore. John Collison Oh, you used to. What's that like? Because it's an interesting construct, right? It's one of these businesses where the airline business is one of these businesses where these are kind of competitors, but you do run some overlapping routes, but it's better to work together, but then you got to pick who you work together with. How much are you picking based on the vibe of the other CEO versus it's strategic? How much does that change? Scott Kirby We're all locked into alliances now. It's hard to switch. The real value for customers is being able to connect on to places that we don't fly to. When we fly, we fly into Frankfurt and Munich, and I think we have four times as many flights into Frankfurt and Munich as American and Delta combined. But it's because we have a partnership with Lufthansa. I think 60% of the people on our Frankfurt and Munich flights are connecting beyond Munich. They're going to Kazakhstan and all kinds of places that we don't fly to. That's the value for customers. Scott Kirby The downside is the experience doesn't feel the same as on United. That's what we've been working to do. We've made a lot of progress. A few years ago, actually, I finally asked and asked and asked other airlines about this, and I finally said, "If you don't have seat assignments available for our customers, we're going to turn off our partnership with you." That got everyone to do it. We've been begging them to do it for years, but it just wasn't a priority for them. Other stuff wasn't their priority. We finally had to say, "We're going to cut you off unless you do it." Scott Kirby My focus on our partnerships has been, how do we make the customer... If a United customer is flying on any of our partners, how do we make it feel to them like it is still United Airlines? I think the other airlines ought to be doing this— Ben Thompson Is that the nature of the partnership? You provide the most customers, and so that ultimately gives you the control— Scott Kirby Yeah, we're by far the biggest and the access to have the big hubs. Lufthansa is second. Across the Pacific, ANA is big. There's just several big partners. But some of the others are like, one of my favorite airlines is Croatia. I love the people. They're small touring airplanes. One, I love Croatia. It's a great country. Super fun. People are awesome. I like the CEO. I like the culture. I like the people. It doesn't drive a ton of economic value, but when we try to do new stuff, if we're going to do new technology stuff, they're one of the smallest. They raise their hand every time. So, I appreciate that. Ben Thompson Your career is very much defined by consolidation and doing stuff together. You've been talking about, "Oh, we should just buy American Airlines or whatever it might be." Is there any limit in your belief in the power of consolidation and doing a better consumer experience? Scott Kirby I was going to start with, thank you for adding it, my belief is delivering a better consumer experience works. We're not in a commodity business. Maybe not true in steel because it's a commodity. But, in non-commodity businesses, doing things that are good for your customers is the winning formula. John Collison The consolidation that—I actually hadn't thought about this. The consolidation dynamic that you're referencing is that ultimately, eliminating duplicative flights in a capacity-constrained airport, which is all the major ones, means that you can have more selection as a— Scott Kirby That's the Chicago example. John Collison But it's not just that. Scott Kirby It's not just that. The American rationale is, I would like to create an airline that Americans, broadly, are proud of. That they think of as the flag carrier of the United States. If you go to Dubai, people are proud of Emirates. They may complain about stuff, but they're proud of Emirates. They recognize that Dubai, the wealthy city-state, exists because of Emirates. They're hand-in-hand. Singapore, same thing. Singapore is not without Singapore Airlines. I would like to create the same thing. Scott Kirby We also have a massive trade deficit with international airlines. It's two-thirds of the long-haul seats into the US are from our competitors, even though only 40% of the customers are coming from overseas... Because they're all state-subsidized. There's a bunch of reasons for it. I'm not complaining about those. But I would like to create an airline that can compete head-to-head with those airlines. By the way, that doesn't create as many good jobs in the US. It's a whole bunch of reasons. I would create a great airline in the US that can really compete head-to-head with state-subsidized entities around the globe. Not just in totality, but on every factor. John Collison Anything we haven't covered? Ben Thompson He does have seven kids. He goes to soccer games, reads a lot of books, and apparently runs a global airline. How do you pull that off? Scott Kirby I'm very efficient with time management. Ben Thompson Was this a post-kid thing? Scott Kirby No, I've always been. Ben Thompson Oh, you've always been? Okay— Scott Kirby I got a bunch of weird quirks, if you want to ask, but my wife can tell you that are time efficiency. John Collison Please tell us the weird quirks. You can't set that up and then not share it. Scott Kirby The one that people find the most amusing, I think, is 90% of the time you use a fork, I use a spoon. By the way, I use a serving spoon. Ben Thompson Completely agree. Spoons are the most underrated— Scott Kirby Because it's so much more efficient. Eating a salad— John Collison The lettuce will fall off, no? Scott Kirby No...I cut it up. Then you can mix it all up, too. Ben Thompson It's tastier because you get all the little bits and pieces on the spoon. I'm completely with you. Scott Kirby I watch my wife here, she's mad at me. She stabs a tomato and eats a tomato. Then she stabs a piece of lettuce and eats a piece of lettuce. Mine's all mixed up. It does taste good. And, it's faster. A salad, which has little nuts and cheese crumbles and stuff, you eat it with a fork. All that's left, all that good stuff falls off and is left on the tray plate. John Collison I presume your wife loves you salad-splaining her like this and telling her how to do it. Scott Kirby No, she gets super annoyed with me. But the bigger things are, I only have 2–3 hours of meetings a day. I limit myself to 2–3 hours, and I don't waste time. In particular, I'm not on social media. I do write my own stuff for LinkedIn and Instagram, but I don't even know how to log on. I watch other people on TikTok or YouTube and like, "Oh, my God, what are you doing? It's such a time waste." I don't watch TV, really. I don't waste time. Ben Thompson That watching TV is a huge one. Scott Kirby If you don't waste time, you got time for a whole bunch of other stuff. John Collison You have the sleep one, right? Scott Kirby I sleep 8 and a half hours a night. Last night, I slept over nine. John Collison I do find the short-sleeping contest in American business a very funny one because it's like very proven, deleterious cognitive effects. Scott Kirby Yeah, and you can watch people in meetings that don't get enough sleep, and they're not technically asleep, but their brains are turned off. You can just see... They're zoned out. I've always slept a lot. One of the other things I used to do is count cards. And I particularly realized that... When I'd go to Vegas to count cards I would only sleep like three hours a night because I just wanted to maximize my time at the table. I realized that when I got tired— John Collison You lost count? Scott Kirby Well, I was having to go back and check. I was like, normally, I could just glance at a table, I'd done it so much, you'd see it. I was having to realize... I'm probably making mistakes. Ben Thompson I'm maximizing time and losing money. Scott Kirby When I get tired, I need to… I stopped doing that. I started just going to bed, getting back to my 8.5-hour sleep. Ben Thompson Are you still allowed back to Vegas, or are you blocked? Scott Kirby I'm allowed to go, but I'm not allowed to play blackjack. I went back for the Super Bowl when it was in Vegas, and I'd gotten a credit line set up to play poker. I sat down at the poker tables, had to give them my ID, so they came back. A manager came over. It was like 15 years ago that I got barred at the Bellagio last time. The manager comes over, and he's like, "Mr. Kirby, you're welcome to play any game in the casino, but just so you know, still no blackjack." I wasn't planning to, but okay. Ben Thompson It's like when you get a little bit older, and you buy some booze, and they check your ID. "Oh, they check your ID?" That's like the platinum version of it. Scott Kirby That's true. That's true. John Collison With card counting these days in Vegas— Scott Kirby It's impossible today. John Collison Are they blocking it with the multiple decks and shuffling frequently? Scott Kirby Well, they also changed the rules. The rules, it's like 6/5 blackjack. The math is impossible— John Collison They've just subtly changed the odds. Scott Kirby They've changed the odds. Ben Thompson I don't think it's very subtle. Scott Kirby Apparently, people still do it. John Collison All righty. Scott Kirby All right. This has been fun. John Collison This was awesome. Scott Kirby I enjoyed it. John Collison Thank you. Scott Kirby Thanks, John. Ben, good to see you again. Ben Thompson Thank you.