The Reopening
Andrew Schwartz: You're listening to The Reopening, a podcast that asks, "How will America work through the COVID-19 pandemic? How will we innovate and how will it change our global economy?" Each week we invite top business leaders to share their insights on the road to economic revival here at home and around the world.
Scott Miller: Today, we are joined by Oscar Munoz, executive chairman of United Airlines. Oscar has served on United's board of directors since 2004 and was named chief executive officer in 2015. We will talk with Oscar about managing through the industry's sudden decline and gradual recovery, on the future of commercial aviation, and his unique perspective on race relations in America.
Andrew Schwartz: I'm Andrew Schwartz.
Scott Miller: And I'm Scott Miller.
Andrew Schwartz: And this is the Reopening.
Oscar Munoz, thank you so much for joining us. US airlines carry 3 million passengers last April. That's a staggering 96% decline from April in 2019. The transportation department said, today, Wednesday, June 10th, "Total airline passengers were the lowest since 1974, when the government began collecting monthly data." So your industry is really in a sea change here due to COVID-19. Can you tell us what's been going through your mind and the mind of your colleagues?
Oscar Munoz: I'm not sure I can share all of those thoughts, but-
Scott Miller: We'll keep the G rated ones. How's that?
Oscar Munoz: Right. I think this started early for us at United. We saw ... And I've dubbed this, we are probably the first industry to feel the effects of this virus and probably the last to feel the benefit of the recovery because back in early March, when we saw the outbreaks in both Korea and in Italy, what we saw immediately, and while we reported in a lot of my business to the White House was overnight, our load factors, our bookings dropped to almost zero the day after those outbreaks.
So all the flights that were headed to Italy after that day, all the people that were scheduled to fly, all of a sudden, everybody dropped off. So we saw that immediate impact and we quickly extrapolated that information to the US because it hadn't even come close to the US. But again, Italy's a little bit closer to home for us.
So, we began to anticipate the potential impact and immediately went into cost management, into managing our routes, to working on our aircraft as to how mitigate where it's flying. Then importantly, to get some liquidity knowing that this concept that we now use fairly frequently of cash burn was something we would have to manage. The initial thoughts were, "This could be very serious and let's start assessing this from a potential for the worst case and then hope for the best." So that was our initial thought.
Andrew Schwartz: I mean, but it is severe. Airlines carried 3 million in April. In 2019 in April, it was 76.1 million passengers, US carriers carried. So how do you think about your future?
Oscar Munoz: Well, this has unfortunately happened before, not to the magnitude that it's happened this, but put it in context, 9/11, which some of your listeners will remember, was a pretty significant event. We lost 40 to 50% of our revenue for about two, two and a half months. We lost nearly a hundred percent of our revenue for the last three or four months and as we see the uptick and you read and hear of a resurgence of air travel to some degree, we've gone at United from, sort of on a daily basis, roughly 600,000 customers, and we were at one point in time, carrying eight to 10,000 per day, just a few weeks ago. That's jumped up to 50. So the number of going from 10 to 50 is this wonderful, celebratory moment. But if you put that 50 in context with the 600, we are still a long way to go.
It is our belief that until the vaccine or therapeutics and other instruments that make us feel more comfortable and safe, it is important for us, how to address this, is to make you, the flying public, feel as safe as possible. We can talk about all the specifics of that, but you have to feel safe, and importantly, the rest of the world has to open up to some degree. I think we've used the example of Disney, right? People aren't going to travel to Orlando to go to Disney. Disney is not open. So I don't care how safe my aircraft is, right? The other part. So it's a holistic sort of world view of the economy that I urge a lot of our business leaders to think of because knowledge workers can stay home and work for a long period of time.
I and a lot of industry in America, right? You can't fly without us physically being at the airport to assist you along. So the way we see it, it'll be slow, it will be gradual, it'll start with leisure, it'll start with certain domestic markets. Inevitably it goes to global and the business customers are starting to sort of get a sense that they want to fly. So there's a survivability factor that just says, "How long can we hang on? How long can we continue to burn cash with relatively little revenue while still providing a safe and reliable service to you, the flying customer?"
Scott Miller: Yes. No longer so frequent. Let me tell you that. But I traveled on business for many years and the business traveler was, of course, core business for many airlines, including United. One of the things that many executives have learned in this period of office closures and stay at home orders is that there's pretty decent productivity from workers who don't commute to their offices or travel much. So we're doing this via electronic media now. What's your expectation for business travel as there are some things that you can do over Zoom, there's some things you can't. How does that look out into the future from your seat at United?
Oscar Munoz: It's easy to say, based upon our history, that this topic comes up all the time. 9/11, previous pandemics, there's always been, "Oh my God, the world's going to change. No one's going to work anywhere, but their home." Then inevitably we get back to that. The way I think about it is well, Zoom and Teams and all the other, WebEx, all the other vehicles that have proven to be important and productive because we need to, fundamentally as human beings, we firmly believe, and it's not an industry specific sort of feeling, human to human interactions and building relationships have always, have always happened on a one to one basis.
Oscar Munoz: So that travel will begin as it is safer to do so. So we've fundamentally [inaudible 00:07:19]. We are already beginning to see from our large corporate customers, the large consulting firms specifically, are already beginning to get back into the process of working because we've made clear again, that our planes are safe, our airports are getting safer. And again, there's something on the other end for them to do. So that in person interaction is something that's really, I think for most of us, part of our career and work life. I think that will resume, and it will resume in its own course, and we're not pushing them to do any earlier, but we do feel that we're returning.
Scott Miller: We are at our essence, we're social creatures. So my instincts are, you're absolutely right about that. Now I've always felt, when I was traveling a lot that the airplane was the cleanest place I encountered of the entire trip. I know you're taking extra steps to assure passengers that their health is cared for as well as their air safety. Can you talk about United's initiatives there?
Oscar Munoz: Yeah. I mean, to your point, it is critical that we make you feel, and we've always used that word feel in our customer service orientation, feel good about flying, and that it's safe and all that. So you've read about everybody wearing masks. At United, specifically, we do this hydrostatic cleaning that wipes down every single aircraft before anyone gets out there.
Importantly, air quality is a keeping. There is very few places on this planet that you can go to, that the air is pure and more sort of recycled and clean than inside an aircraft. These have great air filters. I think it's like 99.7% of the airborne particles that are removed. Then if you're wearing a mask on top of that, it's almost physically impossible to sort of quote catch anything with regards to the air, and we recycle that air every four to five minutes.
So again, there's not a place safer. All our service is being done in sort of a touchless way, airports are increasingly, we just announced our touchless kiosk for baggage. All of those different things are meant to ensure that the aircraft is indeed safe. So that's the efforts that we've been putting through.
Andrew Schwartz: Jim McNerney of Boeing told us the exact same thing about the purity of the air. I know that United has had groundbreaking partnerships with the Cleveland Clinic. Today you even announced that United will require passengers to affirm that they themselves are healthy before they fly United. That includes a checklist of, I think it's 14 different things that they'll have to do before they come on the airplane, including saying they don't have a cough, they don't have a fever, they haven't been exposed to anybody with COVID in the last 21 days, they haven't been diagnosed with COVID in the last 21 days. They'll have to wear face masks and so forth. How will you get us passengers to follow those rules?
Oscar Munoz: You know, that's ... I think the trick in our world has always been how to gently and in a hospitable way, in a warm way, get you to adhere to specific and proven safety practices. The tightening of a seatbelt is probably a good example. People don't like to do that. We make you do that. We make you do that gently, but we make you do that. So I think, again, this is term new normal, which we don't like. I think there'll be lots of things, there'll be temperature checks, there'll be those surveys. I think they're going to happen in many parts of our lives, not just at the airport, not just when you're going to this. I think it's going to happen in a long of period of time.
What I've seen as I've flown around, there's been 99% of the folks sort of acknowledge and adhere to the facts and think it's important for everyone. There's always going to be a few folks that don't want to do something. I've seen a little social pressure from other customers who just look at some woman just look at them, it's like, "Really? Are you really going to be a problem here because everybody's doing this."
So there's a level of humanity and caring for each other that we're going to count on, not as an airline, but as a nation and as a global state that we all got to take care of each other because for instance wearing a mask isn't about you, it's about protecting others from you. I think as people began to sort of understand that and move forward, but having said that. You know what, there's difference ... Every state is opening in different levels. We're seeing a resurgence of cases.
I fear that we are getting a little lax and accepting that this thing, you know we've had new things ... I mean, new cycle that it would catch our attention. This thing's still an issue, right? I mean, we're hearing about Maricopa County in Arizona, we're hearing about in Harris County, in Texas, States that opened up a bit early. I hope we don't have to get to a point where we have this resurgence in a significant way that gets us back and hunkered down. But all of those activities, all of noises, I think will people get people to understand that it's still critical to take care of yourself and to take care of others-
Scott Miller: It's really an important reminder that this is a novel virus. Okay? We don't know that much about it yet. We learn things every day and I think the science will ultimately get us where we need to get, but I've seen my neighbors work very hard to protect their other neighbors, as well as themselves. So I think your instincts are right there and we just have to be reminded in a way that this is really about doing the right thing for others. I, for years went to work, whether I felt good or not, I think differently about that now. I don't think I'd be around people if I weren't feeling well. So I think we're going to be changed for a while.
Oscar Munoz: You're absolutely right. You will see that for a bit of time. Importantly, there's a degree of this lack of awareness, this insidious nature of this virus that we don't know so much about. One of the concerns that at least I've spoken about a lot is that there's so much different information from so many different sources and there's different level of human risk awareness, right? Some are more risk averse. Some are like, "Hey, I'm fatalistic," and just, you have those opposites. We all read things that support, the old confirmation bias, where it's like, "I got this piece of paper. It says, you don't have to do this, and I'm not."
I fall into the same as all of us, I am a heart transplant patient. So my immune system is incredibly suppressed. There was early, early research that maybe that suppression and therefore stability of my immune system with the drugs that I take were actually sort of blockers and they didn't have good reception for this virus-
Scott Miller: It was protective in some way, yes.
Oscar Munoz: It's protective in some ways. So someone like me goes, "Yay." The inner part of me said, "Wait a sec." Sure enough, you wait a few weeks and there's more, in limited amounts. So it's just, I think all of us that are listening to this call, it is so critically important to get information, especially when it differs from your viewpoint. Listen to the other side, go look at the facts, the data, the figures, the map behind it, [Liam Ferguson 00:00:14:38], a historian, put together a document that just a few weeks ago where he took almost every subject matter on the virus and put all the different information, just the information. No dialogue, no necessarily any opinion.
It's like, "Here's how every country is doing. Here's how African-Americans versus Latinos versus whites." When you read through that, it's an exhaustive long read, but it forces you, and the one key thing that I took away from that, 63% of Republicans feel that the whole virus thing is exaggerated. These aren't political statements, by the way, this is just the facts, and an equal number of Democrats feel there's not enough is being done.
Of course, because of the places where we go for information tends to support both those views, we just get deeper and deeper entrenched. Now, it's impossible to both be exaggerated and not doing enough. Like we know that. So the truth is clearly in the middle somewhere. How do we, as individuals, get to that proof without sort of getting that confirmation bias away. So I urge all of us to get those facts because walking around with a definitive voice saying, "Well, you don't have to worry about it because of this."
Temperature checking on aircraft. Temperature check, is it a real designate? It makes people feel better. We should take people's temperature. A survey, well, what does it do? Whether people ... Well, it forces you to stop thinking and ask those questions and it's meaningful. So we'll continue to clean and do all the things that we need to do, knowing that people feel differently about it.
Andrew Schwartz: So Oscar, a lot of us who travel, you said it, it's about making people feel comfortable. I think a lot of us who have cooled down from traveling during COVID had been thinking, "Well, this is a chance for airlines to reimagine themselves and make it a much more pleasant experience for everybody who flies." That might include removing seats, or it may include making seats further apart, or it may include things that we haven't even thought about yet. Are you and your colleagues re-imagining air travel in a way that would distance people, that would make people feel more comfortable about flying, give people more incentive to get back on the planes?
Oscar Munoz: Well, the current incentive, by the way, if anybody's checked prices recently, especially upcoming in July, and you can kind of fly anywhere you want in the US for very little dollars.
Andrew Schwartz: Yeah. That's true.
Oscar Munoz: It's not a long term good economic model. So the important part of this, and it's always a treacherous point because it does come down to economics. We want to make you safe. We want to make sure you're safe and everywhere that we can, distancing, a touchless kiosk, a less human experience with the digital. We are exploring all those things. You'll see that increasingly. TSA is working on these things, thermal image, all sorts of different things that are going to make a process easier and not as touch with another human. So we'll do that. The fact of the matter is that when you're in an enclosed tube, it's called an aircraft, it is physically impossible to distance in that same manner, which is why we over index on the HEPA air filters, the hydrostatic cleaning, the gloves, the mask, and all that, which will continue. That's an important part of that.
The economics of removing seats or taking people out. It's just impossible to fly those aircraft with very few people. If we could do that, we would have done that for a long, long period of time. So the re-imagining, that internal part is more about safety and ensuring that you understand how safe it is. But as far as removing seats, it's an 11 foot across tube in an air haul. I mean, you can't get six feet. I mean, you can reduce the number of people that are on the flights, and we're trying to do that right now, but as demand continues, I think people are less and less risk.
My proof point for that is, at United, rather than blocking or removing middle seats or anything. We let you know when your flight that you're about to be on is more than 70% full. That's the demarcation point where there's probably some people sitting in the middle seats. If you are uncomfortable, we will rebook you onto another flight that's [inaudible 00:18:54] safe. But by the way, only 6% of our flights right now have over 70% of people. So a very small fraction of the flights are that full. We allow you to opt out and make another choice for another aircraft.
So the proof point is that only like close to 2% of the people since we started this a month ago, have opted out for that change. Air travel has and always will be a function of, "I need to get from here to there at this timeframe, and golly, you have a nice price on top of that, that's where I want to go." That's always been the fundamental sort of nature of our business, and it's being proven by the solution that we'd come up. So I think it's going to get safer, which is why we say, "Until a vaccine comes to play where people are just going to be feel safer, I think the aircraft interiors are going to stay roughly the same."
Scott Miller: Well there's an important element of what you're doing, is you're giving the consumer the choice. I mean, being told to do something versus having the choice is a huge difference in customer relations. So it sounds to me like you're on the right track.
Oscar Munoz: Well, it's again, choice to get you ... The question was about re-imagining thing, just taking seats out is not overly imaginative, and not economically viable. Allowing people to make choices and do the things that we're suggesting. Again, and this is all bridging the gap because I think once the vaccine comes in, you'll see that, and you see the flights going out. Some of the low cost airlines are flying completely full because they're offering really cheap seats. So again, this is not a crass commercial for us, or our capitalist view, it's fundamental human dynamics. I want to get from point A to point B at a cheap price, then I'm going to go. Back to that risk tolerance that people have [inaudible 00:20:38].
Andrew Schwartz: The government had to bail you guys out. With good reason, this is one of those catastrophic things that happened, act of God. You couldn't have been prepared for this. Nobody could have been prepared for this, but now people are saying, "Well maybe the government might have a role in how you do your business." Do you think the government is going to be involved in your business going forward?
Oscar Munoz: So a couple of things, excuse my defensiveness, as an individual and as an industry, the term bailout has a connotation where we were doing something wrong. The banking system, the automotive industry were bailed out. United had the strongest balance sheet it's had in its history, our trajectory and growth pattern, our stock had doubled over the course of the time that I've been CEO. All those, and the industry at large was in a great situation, our balance sheet had enough money to, in essence, manage through a black swan event like 9/11. That's how much money we had. This is exponentially worse.
So I think that's the point that we were able to prove as industry leaders with our governmental leaders that it wasn't a bailout we're in a central part of the economy and markets, it's how people get to work. In an essence, this thing was no fault of our own. So giving us a bridge, which is what was grant program was about, has allowed us some time to go out and gain our own liquidity. Of all the industry has been out trying to get their own debt.
There's a second wave of loans that can come from the government, which do come with some stipulations. But at this point in time, and I got to get Steven Mnuchin, our treasury secretary, a lot of credit for this, this hasn't been about, "Let's take over your business or let's manage your business." The government has to get a return on its investment with you, and they'll manage through that. I think both sides of the aisle put their stipulations on these things. But eminently, they're all manageable. We as an industry, and I can speak for all of us, are grateful that it's there. Again, the stipulations while impactful, they're not significant and nobody's talking about running the airlines.
Andrew Schwartz: Well that's good to know.
Scott Miller: Yeah, absolutely because we like you, the way you run it.
Andrew Schwartz: Yeah. We like the businessman to run their businesses, not the government to run their business.
Scott Miller: If you look at this one way, you were doing just fine until the government told you, you couldn't fly. So this all makes sense. Now, the government's still involved in a lot of the regulatory decisions about where you can fly and that's both the United States and internationally. What's the regulatory outlook look like as different places open at different times as there are different levels of requirements in all the places that you fly?
Oscar Munoz: Yeah. It's a great question. I think it's helpful to understand that. There's not much regulatory and sort of input with regards to that domestic flying. I think one of the stipulations of the CARES Act that we have to maintain service to all of the places that we flew, so we didn't cut anybody off, and we've been able to work through that just fine and DOT has been terrific at that.
The international space is what's a concern. There's just so many levels of complexity. If you think about some of our social media debates with the country of China and our country at the highest levels, it doesn't always make for good relations necessarily. So what we worry about as international travel opens is that, we begin to not have a patchwork of regulatory issue at every country we fly to. We need a bit of a harmonization and there's an international sort of unit called, IATA, I-A-T-A, which I'm part of, and we are trying to manage this on a worldwide basis.
How do we get every country to not have its own regulatory sort of concerns and issues? And how we can harmonize every one so that we indeed can begin to fly internationally because a lot of the restrictions are ... London, Heathrow is a perfect example. You've got a 14 day quarantine. Not a lot of people are going to go there and sit in a hotel for 14 days and do their business only to come back and be quarantined again.
So we are really pushing for a template of sorts that fits everybody's concerns, but it's going to be a while, right? Countries are opening up. Third world countries, right? I mean, they just don't have, from our perspective, anyway, the economic wherewithal to effectively whether longterm economic impacts of being shut down, so they're going to open up earlier than they should. What's the ramifications of that? So we don't want to get involved in forcing any conversation or any flights, but we are going to stipulate and work through hopefully a more harmonized approach to begin international flight.
Andrew Schwartz: I want to ask you something that I know is close to your heart and definitely close to mine and Scott's as well. You were one of the few Latin American CEOs, Latino CEOs. Last time I checked, there were four African American CEOs in the Fortune 500. We're having a massive discussion about race in America right now. How do you think we can get more diversity into corporate America at the highest levels?
Oscar Munoz: Oh gosh, that's such a loaded question, right? Because we've tried so much for so long. It's feeling like this is an inflection point in American history. That sounds like a really broad, dramatic statement. But as I see the hurt and the anger and the despair in the faces that we see on TV, the people that we know, it's just agonizing to see, and it really has bubbled to a point where it's been inspiring because it's nurtured some real meaningful debate, and more importantly, hopefully, it's going to foster change, real change. I know this is the words that everybody is seeing, but I am seeing more corporate leaders speak up, and the mantra, if you will, of this, is that this time it's different.
I sure hope to God, it is because it has to be, and our response as corporate leaders has to be as well different because the normal things that we've been doing, which are important, issues of diversity and resource groups and all the training and education and bias and everything we do, we've started to do this. But what started this particular event was clear, right? Minneapolis was clear, it was truly tragic, but African Americans in this country, don't just feel locked in by sort of this vicious cycle of criminal justice system that doesn't favor them. They also feel, and this is importantly where we as business leaders, they feel locked out of any opportunity to do anything. There's a virtuous cycle that comes from economic opportunity.
So in addition to the police reform, that I think it's going to take its toll, those of us who lead so many people and management with so many employees have to do something more. The way I think about it, and this is my opinion, and there's so many things, you've seen banks already come up with this sort of ... So many small businesses as in the minority are unbanked. So how do we allow capital for them to do something? And you're seeing that. The large banks have come out strong, they're going to not ... sort of allocate decent resources. But for all of us on this call, what is it that you individually can do? And so there's a couple of thoughts that at least I have.
One of these that I saw growing up in Southern California in East LA is, I remember as a young child, the ... I don't know the traditional pillars that pulled up and fortify communities, right? Whether it's the schools or libraries, or your church, your parks, your swimming pool. Over time, as I went back to the neighborhood to visit, I saw all of those decimated because we were building roads or there was a new condo complex, right? The bank community was coming in and building things and taking out all those resources where people have the ... So again, those pillars are gone. How do we reinforce? How do we give? How do we contribute? How do we assist people in our neighborhoods? And all of us live in neighborhoods where there are sections that have been decimated, those particular places, those pillars, as I call them, and how do we go and help in that regard, is one idea.
Then, and this is probably the strongest point for me, is we need, not the four or the one or two of Latin X people like me. We need our allies, and the women's movement has had this for a long time, and the importance of allies because a person of color, or a woman, or someone ... talking about a subject, there's still a large bit of the population that looks at someone and what they're saying and where they're from, and sort of nod their head, but to a degree say, "I'd expect to hear Oscar Munoz to say that." Well, dang it. I mean, we have to change that mindset and what I'm really enjoying, and liking in my world, and the people I interact with who know me, they're beginning to become allies, they're beginning to speak out in terms that are truly meaningful and understanding.
We've had this debate about black lives matter and then the counterpoint of all lives matter, the kneeling in the NFL. I think one of the more pointed moments was when a football player had mentioned something and got a lot of lash and a lot of concerns raised back to him. Overnight he changed his stance. He says, "I didn't understand how my statement, as honest, and not meaning to hurt anyone, as it was, once I understood why it harmed that community ..." I had no intention of harming that community-
Andrew Schwartz: Yeah, this is Drew Brees we're talking about.
Oscar Munoz: Yeah this is Drew Brees, right. Name's I can not mention or anything ... But that's a good example, and I know in my world and what I do with a lot of my friends that aren't of my persuasion and others, we try to sort of get at that education and listening. It's like, "Here's why saying something like that hurts. Here is what thinking that way it does," because it is different. We all can tell stories, and I could sit here and tell you for half an hour stories that have affected me over my growing up.
Now I bolted through it. I pulled myself through and made it work. People say to me, "Well, good for you. You did that." Well, it doesn't have to be that hard. When you have allies in the space that understand that and work with you, I can get it's really ... I've always said in my company, it's proof not promise. It's time for all of us listening on this call, business leaders, everything that we do in government, there's a concept of proof, now how can you help? Whether it's these pillars that I talked about, whether it's ... anything you can do, but certainly stopping for a second and truly understanding why certain things hurt someone.
It's a really deeply meaningful education. Then you can make your opinion from there. You know, listen, I'm not going to change people's mind necessarily, but boy, having an understanding and really, really ... I think a lot of the righteous anger that you see in this movement today stems from a deep, really deep suspicion that nothing's ever going to really change. That's what drives the emotion and people say, "Well, it was just this one thing." It isn't just this one thing. This has been going, for the African American community, centuries. For the Latino community, decades, and for ... everyone has been going through this. So it's an emotional point for all of us, but where we can really use help is strong allies that understand and push back and we can have a good debate, but this time is different and it's up to all of us to make it so.
Scott Miller: Look, I want to thank you for that comment because this has been a tough week for Americans kind of a tough couple of weeks for all of us. So looking at this [inaudible 00:32:51] and looking for something to do, and I'm grateful for you pointing the way of what I can do. So thank you. Thank you for that insight. It's one of the more hopeful things I've heard of in a little while. So thank you for that. Well, thank you for your time. You've been very generous with it.
Andrew Schwartz: Yes. Thank you, Oscar.
Scott Miller: I'm ready to get back on an airplane and meet people. So I'm glad you're still in the business.
Oscar Munoz: It really is an interesting environment out there. People are much more courteous and it's an interesting, somewhat surreal event in airports that are somewhat empty. But again, it'll come back like it always has. Our job is just to make you feel, and make sure it's safe and feels safe. Then we can get this country and this planet back up to where it used to be in so many ways, and this discord and race is yet another topic that gosh, if we could find a vaccine for that, right?
Andrew Schwartz: Boy, isn't that the truth. Well, thank you again, Oscar, this has been just an invaluable conversation. We really appreciate your time.
Oscar Munoz: Take care. All right.
Andrew Schwartz: Thanks for listening to the reopening. If you liked this episode, please write us a review and subscribe wherever you find your podcasts. You can also find other podcasts from the Center for Strategic and International Studies at csis.org/podcasts.