United Airlines CEO Scott Kirby delivered an optimistic message to employees amid concerns over a recent slowdown in demand, assuring them that the airline's long-term growth goals are still in place.
Kirby acknowledged the brief decline in travel, especially government-related travel, in a video address to staff members, but he was confident that United's strategic investments will allow it to weather the storm and keep up its growth track, according to aviation website "Live and Let's Fly."
Slowdown in demand confirmed
"And it is true that we have seen a slowdown in demand in the last couple months. That’s particularly concentrated in the government demand and in government markets, but we have seen a slowdown in demand." Kirby said in the message, which was viewed by the website.
He emphasized that the slowdown was not an isolated incident but part of broader economic trends.
Despite these challenges, Kirby stressed that United would not resort to the usual cost-cutting measures like furloughs or fleet reductions, even in the event of an economic downturn.
No cost-cutting measures planned
"In the past here at United, when something like that happened, that meant there was a standard playbook that United would go to. Shrinking, furloughs, cutting marketing, cutting investment. What I really want to tell you today is we’re not doing any of that this time around," he said.
Kirby pointed out that the airline had been preparing for this moment since the pandemic, when it prioritized investments aimed at avoiding future furloughs.
"We were going do everything possible to set the company up to never again have another furlough, and I believe we have now done that."
To further reassure employees, Kirby emphasized that United would continue with its growth strategy, including taking delivery of new aircraft, hiring new employees, and investing in customer experience improvements, according to the website. This includes investments in technologies like Starlink, enhanced in-flight entertainment, and expanded airport lounges.
"We're going to continue to take delivery of airplanes. Not only are we not going to furlough, we're going to continue all the hiring and all the classes that are scheduled. We're going to continue to invest in the product, including Starlink, and more clubs, more in-flight-entertainment on the airplane." Kirby said.
Economic uncertainty raises concerns
Even if Kirby is confident, there are still questions regarding whether his perspective is practical given the state of the economy.
Certain markets have seen a decline in demand for travel, especially among government contractors and business travelers, as a result of the recent unpredictability in Washington, including tariffs and the political landscape.
At a recent industry conference, Kirby noted that United had seen a decline in government travel, which constitutes about 2% of its business, according to CNBC.
Additionally, workers' travel, including consultants and contractors, has been affected by broader economic trends, contributing to the overall slowdown.
"We've seen some bleed over into the domestic leisure market," he added, acknowledging that the effects of the slowdown were not confined to one sector.
As part of its response, United is speeding up the retirement of 21 aircraft, which would lower the maintenance expenses related to older aircraft.
But in spite of these actions, Kirby was optimistic that United was well-positioned to bounce back from any setback stronger than before.
Some have questioned if United's confidence would continue to pay off in light of the current market turbulence.
For instance, American Airlines warned of lower-than-expected demand in both local and foreign markets when it recently revised its first-quarter earnings forecast.
Delta Air Lines also lowered its quarterly estimates, pointing to a drop in corporate and consumer confidence brought on by the unpredictability of the world economy.
