United Airlines CEO is Reviving Air Travel w/ Customer-First Culture | Ep. 12 | The Inflection Point

Welcome to the Inflection Point. I'm Monica Langley and today my guest is Scott Kirby. Scott trained as a pilot at the US Air Force Academy.

I wanted to be a fighter pilot and then become an astronaut.

But rather than fly planes, he made a smooth landing into the C suite.

At 3:15 in the afternoon, a press release went out from Americans saying I was leaving. And at 3:16, a press release went out from United saying I was coming as the President.

And now he's the CEO of United. Scott, thank you so much for having us in your home here in Dallas today. It's great to be here.

Well, thanks for coming down and welcome to Texas.

You know, this show is called the Inflection Point. So my first question has to be, was there a moment in your life when everything changed?

There was for me. I was a cadet at the Air Force Academy, which I had wanted to do since I was as long as I could remember. I wanted to be a fighter pilot and then become an astronaut. And so I had my chance. I was flying out over the Gulf of Mexico in an F4 and we'd been doing aerobatics and I got to break the sound barrier.

And that's impressive.

It was fun. It was a great experience, like, most exciting thing ever. And then the pilot had me close my eyes after doing all the aerobatics and said, now just by feel, fly straight and level. And it turned out I was at a 30 degree left bank. And he had me take the airplane back to level and it felt like I was 30 degrees to the right. And he kind of laughed at me and he said, well, you're destined to be a cargo pilot, not a fighter pilot. And at that moment I decided, I'm sure you're right about the second part, that I'm not going to be a fighter pilot. But you're wrong about the first part because what this demonstrated was I was at best an average pilot. And I chose at that moment to take a different career path.

And you knew, I'm not going to be an average pilot. I want to do more with my life.

Absolutely.

Let's go back just a little bit. You grew up not far from here, right?

Yeah.

So what was it in your childhood that led you to want to be a pilot, to go to the Air Force Academy?

Yeah, I was. I've always been an avid reader. To this day, I still read about three hours a day on average.

That's shocking. First of all, you're a big time CEO.

Okay, it is. But by the time I was a freshman in high school and I was fascinated with World War II. I had read in my little small town library. I had read every book that they had on World War II. And somehow being interested in World War II is where I got my fascination with travel and with flying and wanting to be an airline pilot. Though ironically, the first time I ever got on an airplane, that was when I flew off to the Air Force Academy.

I grew up going to my library all the time, so unlike you, I was a big reader. But I did watch TV too. But did you watch any TV as a child?

Not much. My parents only allowed me to watch 30 minutes a week was the rule for. I didn't have cable TV until I got out of college. And actually I was at an event once and they were doing the 20 questions. I had gotten down to eventually figuring out that I was a 7 foot tall yellow bird, but I didn't know who it was. And they're finally, they said, we have to tell you, like, you obviously don't know what Big Bird is. And you had never seen Sesame Street.

Oh, my goodness. And that's like a part of America.

Yeah, I've never seen it.

Oh, my goodness. With all the job responsibility you have now as the CEO of United, you sleep eight and a half hours.

I do.

That's like shocking. And you work out every day, so you're a very disciplined dude.

Yeah, well, you know, I don't know that it's as much discipline as it is not wasting time on busy work.

Ah, love that.

Another one of my strange quirks that surprises people is I only allow myself to have an average of 4 hours of meetings scheduled per day, which gives you time to think.

So this is one of your meetings today?

Well, I make exceptions for whatever you'll have. Best ideas are almost always when you're not in a formal meeting trying to go through something, but when you just randomly.

So that's how you can do all that.

Yeah.

Okay, so you go to the Air Force Academy. You had your inflection point, but you clearly love aviation. So you found a way into this business.

Well, I did, but to some degree it was by accident. My graduate degree was in operations research, which is really math. And when I got. When I finished the degree and got out of the Air Force, I kind of. I came down to the two jobs that I chose between. One was to go to one of the quant groups on Wall Street.

That says something about your math skills, though, that you were considered for that.

I was good at math. Or to come to a subsidiary of American Airlines that did a lot of the mathematical models for scheduling and revenue management and things and did consulting work. And I really made the decision less about the jobs and more about, you know, I grew up kind of out in a small town, and I just.

And you don't want to be in New York.

I didn't want to be in a big city. I remember going to my interview there and, like, looking up and like, I don't know where the north is. I can't find the star, so I can't tell where the north star is. I kind of was. I just didn't like being in the big city.

So then you did go to America west, and you then were on the fast track there. It seems like you went into a new and more important role every couple years.

America west was this great small airline that fostered, you know, we had a CEO guy named Bill Franke who's now done very well in lots of other airlines.

Yeah.

But he fostered a culture where you were allowed to take chances. I remember when I went there, he interviewed me and said, why would you leave American Airlines? They're the best managed airline in the world. And I said, well, it's just so hard to change anything. If you want to do something, you got to spend six months proving you won't break it, which is impossible. And he said, well, at America west, everything is blanked up. So you can do anything you want, but if you screw it up, I'll fire you. And if you succeed, you'll get promoted.

Did you like that environment that you were either going to do really well and get promoted or bomb and be out?

I absolutely loved was great because you had the ability to try things. And I at least had perhaps false confidence, but I had confidence that they were going to be good decisions. It's actually one of my favorite stories. I had gotten into, literally into a screaming match with my boss at the time. And on a Friday afternoon that the assistants. One of the assistants came in and said, you guys have to stop screaming at each other because everyone on the floor can hear it. And I stormed out. And then I got a call that night from someone I didn't even know and said, bill wants to see you at the Frankian Company offices. And I can remember telling my wife, oh, my God, I'm going to get fired. So next morning, I put a suit on and showed up and. And came in and he said, well, we've decided to promote you. And, oh, by the way, the guy that's my boss has decided to leave.

So they actually. You made a winning argument. Probably.

I don't know for sure. I don't know for sure what happened, but that was the culture that he fostered. And then that small airline, you know, America west, which was, you know, a tiny airline in the US Ultimately acquired US Airways and then ultimately acquired American.

You were obviously integral to that and you became president of the biggest airline in the world.

Yeah.

So seismic event.

It was kind of crazy to go from little old America west to we were running the largest airline in the world.

So what did you feel at that moment? This is the big time. And you were like a leader in the consolidation of the airline industry?

Basically, I guess we did, but it just sort of felt natural. It didn't feel. Other people talk about it that way, but to us it just sort of felt. Destiny's too strong of a word, but almost just like a natural evolution. And it didn't seem surprising to us.

And when America west acquired USAir. Is that when you met Doug Parker?

Doug Parker was the chief financial officer. He came just a few months before I came to America west in 1995.

Wow. So you all have been working together. You all had been working together for.

So long, almost 20 years.

So. And you pulled off the biggest airline merger. You are flying high. Then let's step back. Everything falls apart in 2016. Yeah, tell us about that.

So, well, In May of 2016, I went to dinner with Doug asked me to go to dinner, which is a little unusual for us to just go to dinner together. We were friends and hung out. But he told me that at the last board meeting, they'd gone through a succession planning process and decided to make me CEO on a certain date as long as I was willing to stay. And here's the timeframe that I would be CEO.

You were being groomed to be the CEO of American?

Well, certainly what I thought.

Yeah. Okay.

And then three months later, he walked in on a Monday afternoon and had a little sheet of paper and he was kind of nervous, which was weird because we're good friends and know each other.

Vacation together with your family.

We. We had. And he kind of read a little script that said, you know, essentially I changed my mind and, you know, that's going to make. Or you and I can't work together. So it was the most shocking moment of my life. Basically. Wait, you're fired.

You're fired.

He didn't use those words, but that's what happened. I mean, literally, it was a 45 second conversation.

Oh, my God. After 20 years together.

Yeah. But, you know, so I left and called my wife on the way home, who. She was really mad. And then I called. I knew a board member at United Airlines. United Airlines had been going through. They had had a hostile investor group, and so they had a new kind of activist board. And, you know, by the next morning, I was talking to United Airlines about going there. And four weeks and a day later from that Monday, at 3:15 in the afternoon, a press release went out from Americans saying I was leaving. And at 3:16, a fresh release went out from United saying I was coming as the president. I joke with people. Most people take a little time off between jobs. I took 60 seconds, exactly. But it turned out to be, you know, it's obviously been good for me. I think it's been good for Doug and American as well. The good news is we've resurrected our relationship.

Okay.

And I learned a lot from it.

Let's talk about that. Because when you have a setback, it hurts.

Yeah.

What did you learn, though, during that setback?

What I learned was it's not enough to be right. You've got to get other people agreeing with you and ideally agreeing with you that it's their idea, that it's not even your idea, or you pushing an agenda or an idea to get other people to have the idea. And it takes a little longer. I think it made me a much better leader. But at its core, that's probably the thing that I learned the most, and I'd never had to do that before. And I doubt if I'd just, you know, become the CEO at American on my own. I would have ever figured that out.

I read that you said one of your favorite things is no excuses.

No excuse, ma'.

Am, so. And you. You live that way.

That's a lot. That's not just a business philosophy. That's a life philosophy. I think it's probably the best thing I learned at the Air Force Academy. It's so frustrating when you're cadet. You know, they'd come in and you'd be in trouble for something that you had nothing to do with and wasn't your fault, and you just wanted to say that. But once you learn to just say, no excuse, ma', am, what it teaches you is, like, sometimes bad stuff happens, and you can either whine about it and feel sorry for yourself or just get up and move on. And getting up and move on is a whole lot better.

So you've had an excellent landing at United. You got your redemption, and now you are the CEO Right at the beginning of the pandemic. But when you joined as the president, United was not in the best of shape. Their reputation was not as the friendliest of airlines.

Well, so when I got there, I always knew there was tons of potential. Everyone looked at United, the whole airline industry for years. These seven hubs in New York, Chicago, Los Angeles, DC, Houston, Denver, LA. Best hubs of anyone in the country. But chronically underperformed financially. And why. And so I always thought that there was the potential to get there to some degree. What had happened at United was they let Wall street dictate kind of the strategy. And as a lot of people say, Wall street tends to be short term focused. So from a strategic perspective, one of the things we did was start a growth plan. And the day we announced the growth plan back in 2017, I guess kind of a year after I'd been at year end of the tenure, you know, our Stock was down 12% that day, and people on Wall street screamed at us. But within three months, it was clear it was already working. But more importantly was the culture. People have been through a lot. You know, if you were a United employee, our average seniority is something like 26 years. People were here at 9, 11. And prior to that, you know, on top of the world, kind of one of the two best run airlines in the world, and you're on top of the game. Then you went through bankruptcies and losing pensions and like all this bad stuff is happening and that weighs on an organization. It started really with Oscar, of caring about people, and they'd never thought for years, for decades, that they'd had a management team that cared. And Oscar proved to people that he genuinely cared. And that's something. Then to build on that, you can start to change the customer service culture. Because if the people that are responsible for taking care of customers feel like they're on the same team and aren't proud of the company, then it's hard to get them motivated to do the right thing for the customers.

Yeah. And just a few months after you became president, There was the Dr. Dow incident when he was dragged off the airplane and it went viral.

The Dr. Dow incident, as terrible it was, was another one of those turning points for us at United Airlines. You know, we were our own worst enemy with policies that I started saying after that, you know, we shouldn't force our employees to defend the indefensible. The truth is we put people in positions that were impossible in that situation. You know, we, you know, it was a Chicago police officer that Dragged him off the airplane. But we put the Chicago police officer in the position of, you've got to get this guy off the airplane. What was he supposed to do? And that's the biggest change we've had. Like literally, as we went through the pandemic, We've had over 35 point improvement in net promoter score.

I know that the net promoter score is what we look at at our company. Everybody that's in a customer facing business wants to improve. And you've basically tripled yours or more since the pandemic. So you're making great progress. These are all good. But I have my own personal story. I just flew on United States. Okay, thank you. Okay. Yeah. And you know, I fly on United a lot. And I was walking into the plane and the pilot, he was so happy that I joked to my daughter, I said, do you think he's been drinking? We need to get a breathalyzer test.

He hasn't. No. No.

Okay, let me be clear. He had not been drinking. I landed safely. But Scott, what does that tell you? He was so happy and so full of joy.

Well, that's the difference maker. And it warms my heart to hear the story. We're not gonna always be perfect, but we're gonna keep trying to get better.

Okay, let's go to the harsh reality of COVID You're responsible as the CEO of United for not just your employees, but millions of passengers. And what you decide will have global impacts. What has been your decision making process during this past year?

We were the first airline to understand the severity and impact of COVID It really, it was, I can remember it the weekend, it was the last weekend in February. So a couple of weeks before it kind of became serious here in the country. But when it first showed up in Italy, and I can remember on that Sunday calling our executive team and saying, this is a global pandemic. People don't know it yet. It's just a matter of time before everyone else figures it out. We're going to start planning. And there was. On March 10th, there was a big investor conference at JP Morgan. And. And we were the last airline to present. And I listened to everyone else during the day. And then I got on and said, we're planning for revenue to be down 70%, which everyone else was planning for nothing. And everyone thought it was just crazy. Turned out revenue, by the way, was down 99%. So I wasn't severe enough.

So you realized that the pandemic was actually going to be a pandemic Early.

People often Ask me. I get the question. Like, what keeps you up at night? And I always joke, nothing. I sleep eight and a half hours. I know, Like, I never have sleepless nights. It was really kind of the only time in the last several decades that I've certainly had more than one sleepless night at the same time. And there's nothing that can prepare you for that.

What did you do? I mean, everybody else was, like, trying to shrink or reduce their fleet. Did you start doing that?

Yeah. So what we did was we did a huge reduction up front, but because we were expecting the crisis to play out pretty close to what it actually played out, it gave us the ability to think more calmly about what the recovery would look like. And we didn't ground a single aircraft fleet as a result of COVID because we, you know, in April of last year kind of said our view is human nature hasn't changed. Business travel is about human relationships. It is going to come. It may be a little different, but it's going to come back ultimately. And international travel is the same. It's not that people are going to say, once they've been vaccinated, I don't want to go to Paris. And so we were unique. We're the only airline that decided to not do that. And now, as the recovery happens, we're kind of. We are in a unique position to really be the flag carrier for the United States.

Okay, let's talk about something else that you're handling as the CEO of United. And it starts with your children. Yeah, seven.

Yeah.

You have seven kids.

I have a wonderful wife, clearly. Yeah.

Now, having seven children has made you think about the future and the planet they will inherit a little differently. And that is leading you to take some pretty dramatic steps at United, because the airline industry is known for using a lot of fuel. So what are you doing?

So climate change is something that I'm personally passionate about, care about. You're absolutely right. I wouldn't be able to look my seven children in the eye someday if I didn't at least try to do something about it. Especially because I'm one of the rare individuals that's in a position that I can do something about it.

Correct.

And so we've at United made what we call 100% green commitment, which is different than the net zero commitment that you hear from other companies. And in particular, it's different because we've made a commitment to get to 100% green without using traditional carbon offsets. And the problem with carbon offsets are most of the Projects aren't real. They're essentially all about planting trees. There is not enough room on the planet to plant 4,000 times as many trees. It just cannot be the solution. And it drives me crazy that essentially every corporation uses that because it's easy. That's the reason they do it. It's easy. That's a marketing message.

What is United doing? Like, electric planes?

Yeah. So there's three stools for our climate change goals. One is sustainable aviation fuel.

Okay.

And then the second one is technology. So we were the first airline to buy electric aircraft. Now, that's gonna be a little more of a niche because electric aircraft battery energy density is not high enough on batteries to fly big airplanes long distances. So these are gonna be short run, short hauled. And the third and most important one is carbon sequestration. This is taking carbon from some source, even directly out of the atmosphere, and pumping it underground where it can be stored for tens of millions of years. And we're a partner.

So even for your children's. Children's children.

Yeah.

One of the things that is clear from this chat with you is you are a competitor and you like to win. And the fact that your inflection point occurred in a cockpit when you realize, I'm not going to be an average pilot because I want to win, and I'm not going to be average at anything in my life. And it's clear you're out to win for United, and you're having a great track record there. But there's another place you love to win and that has been at the casinos by counting cards.

Yeah.

So is it really true that you've been banned by 100 casinos from Atlantic City to Las Vegas?

Oh, God. Every casino in the United States. And it was a long time ago.

So I don't even know how to do this. But is there a trick to learning to count cards?

What you do is the cards 3, 4, 5, 6 count as plus 1, and the big cards count as minus 1 and the side count as.

That's how you count.

So you say, here, I'm plus two.

Right.

That means it's good for the player. So now the odds. This would have meant for this single deck that in a normal game in Vegas, the odds are negative 0.26% to start the game. So what you do is, if I just saw those two cards thrown out of the deck, I would bet a lot now. And when the odds are in the house's favor, I'd bet a little bit of money. That's how card counting works.

Wow.

And so simple explanation of card counting. So we still have to do it. Well, now I mostly play poker.

Okay. It has been so fun talking to you and learning how to count card.

That's an interesting one to end on.

And learning about how you win at United. Thank you so much.

Thank you. It's great to see you. Thanks for coming in.

Thank you.