Q&A

Charlie Rose Talks to United Airlines CEO Jeff Smisek


“Twenty percent of your airfare in the U.S. is taxes. We’re not even permitted to disclose the taxes”

Photograph by Brian Cahn/Zuma Press

“Twenty percent of your airfare in the U.S. is taxes. We’re not even permitted to disclose the taxes”

You got in early on Boeing’s Dreamliner. How confident are you in the 787?
We have 65 on order. We have six flying. We just took in the seventh. We’re very confident in the plane. It’s had its issues as it was introduced. But the airplane itself is terrific. It’s pressurized to 6,000 feet: more oxygen, more humid air, big windows. If it weren’t safe, we wouldn’t fly it. Our customer metrics, when people fly the 787, are higher than any other equipment type that we fly. From the operator’s perspective, it’s 20 percent more fuel-efficient than the aircraft it replaces, which is material because jet fuel’s our single-largest cost, higher than our people, than our equipment. And beyond our control.
 
What changes would you like to see in U.S. policy on air travel, on your industry?
I don’t think our government really has much of a policy about air travel. I would compare the policies of United Arab Emirates, which has done a terrific job recognizing the value of transportation, of travel. They’re quite supportive. And by support, I don’t mean subsidies. I mean understanding the value and the jobs this industry drives. In the U.S., theoretically having been deregulated, we’re heavily regulated. I don’t mean safety regulations, which are very important. Twenty percent of your airfare in the U.S. is taxes. We’re not even permitted to disclose the taxes because the government, I think, is ashamed of the level and amount of regulation.
 
Are all these mergers good for the airline industry?
Consolidation’s been very good for the airline industry because we have gotten ourselves in a position where we can actually have the returns to make the investments that we didn’t do for so many years. We underinvested in this business. We’ve got a hundred brand-new wide bodies coming to United (UAL). We just placed an order with Boeing (BA) for 150 brand-new narrow bodies. We have 7,100 flatbed seats across the system, more than any U.S. carrier. We’re putting satellite-based global Wi-Fi on our entire fleet. That costs a lot of money. And to do that, you’ve got to make money to be able to make those sorts of investments.
 
Have the unions cooperated during the merger?
On some things, yes; on some things, no. There’s always going to be some tension getting to a contract. There’s a certain Kabuki. Ultimately, I don’t think unions get in the way of being a successful business.
 
You’ve said you want employees to think of United as a business, not as an airline. Why?
Historically, the people who’ve run airlines haven’t run them well. We’ve been expert at destroying other people’s money. We’re now in a position—through consolidation, through capacity discipline—to provide more stable careers. We had serial bankruptcies with furloughs. People didn’t know whether they’d have a job between today and tomorrow. We have an opportunity now not only to provide secure jobs—and they’re high-paying jobs—but to make the money we need to invest in the products our customers want.
 
From the front lines of selling a service, how does the economic picture look to you?
My view is the U.S. economy is skating sideways. We don’t see any significant improvement. We don’t see any significant deceleration. It’s just kind of plunking along.
 
Is it hard to know what’s happening in this big merged company you run?
You cannot manage an airline from a corner office in Willis Tower. That doesn’t work. You’ve got to manage by walking around. This a dirt-under-your-fingernails business. We’ve got 5,500 flights a day. It’s a ballet, and it’s all got to go off well. It’s very visible when it doesn’t go well, so you’ve got to get out and around.

Watch Charlie Rose on Bloomberg TV weeknights at 8 p.m. and 10 p.m. ET.

Emmy Award-winning journalist Charlie Rose is the host of Charlie Rose, the nightly PBS program.

Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • UAL
    (United Continental Holdings Inc)
    • $49.02 USD
    • -0.52
    • -1.06%
  • BA
    (Boeing Co/The)
    • $127.9 USD
    • 0.58
    • 0.45%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus