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United's Andrew Nocella discusses:
United Airlines during the past few months has been at the forefront of some industrywide changes spurred by the Covid-19 pandemic. They beat their competitors to the punch in announcing the end of most domestic change fees in late August—similar competitor announcements came within the next few days—and more recently were the first U.S. airline to announce a same-day passenger testing program, set to begin Oct. 15 for travel from San Francisco to Hawaii. United EVP and chief commercial officer Andrew Nocella recently spoke to BTN transportation editor Michael B. Baker about those changes, the carrier's plan to emerge post-pandemic and when United expects to see a meaningful rebound in corporate travel.
BTN: What's United's current outlook?
Andrew Nocella: We do think that normalcy returns after a vaccine is widely distributed and, of course, effective. We don't know exactly when that will be, but at United we're doing our best to prepare for that day. When demand comes back, we want to be there to connect people and unite the world immediately. We just reached a new deal with our pilots and, at least in the medium term, will have no pilot furloughs. That agreement is a foundational item for our potential ability to bounce back fully when demand is there. Airlines left and right are announcing retirements of their fleet, all around the globe. We at United have not done that. We shouldn't try to predict the virus. We own most of these airplanes and have parked a lot of aircraft in the desert, but they're ready to start flying for United again when our customers come back. We didn't want to predispose what our fleet would look like when we're in the middle of the pandemic. We'll make the judgment about what's in our fleet later, when we have data and information to make an educated guess.
BTN: Are you optimistic for more federal support after we cross the Oct. 1 limit of the first round?
Nocella: The first [Coronavirus Aid, Relief and Economic Security] Act and [Payroll Support] Program was foundational to keeping us all flying as an industry and was supported by both sides of the aisle. It was a home run for our business and for the country in keeping the airlines flying. We are fully supportive of another extension. Politics in Washington are complicated sometimes, but we think we have some broad support. It's possible it won't make the deadline and it happens after the deadline, but we'd love to keep everybody here at United and make sure that when we're ready to bounce back that we fully can without any type of hesitation.
BTN: What are you hearing from corporate customers regarding return to travel?
Nocella: I get the sense that they're looking to get back on the road, that travel policies are much more relaxed than they were earlier this summer. The reason to travel has not yet fully developed. When you think about going to visit a client somewhere, when they're not in their office, that travel becomes harder to do, or when you're not sure about the hotels and restaurants in the city that you're going to, that travel has been compromised. As we start to return to the office environment, which we expect based on the feedback we've gotten to start in January of next year, that business travel will start to develop with that return to the office from a domestic point of view. The key globally is going to be taking down the borders. The borders are raised around the world right now, and that really is restricting travel. Working on a testing environment, where you can get a rapid test prior to departure, is absolutely key. We had an announcement around our San Francisco test, we're so excited that United was able to lead on that effort. We are going to keep pushing the boundaries of that to make sure that we can see a quick return to global travel with the testing environment and, once there's a vaccine, for it to bounce back from there.
BTN: Are any business travel segments returning more quickly than others?
Nocella: We've noticed that small businesses are more anxious to get back in the air and conduct business than larger businesses. Hopefully that begins to change as people return to the office.
BTN: Are you still largely extending contracts, or has much been happening on the negotiating side?
Nocella: We want it to be up to the client. If they would like an extension, we're happy to do that. If they want to go to [request for proposal], we're happy to do that as well. We haven't taken apart our network. Our network continues to be grow. In the middle of the crisis, in fact, we announced a number of key new routes, and some were very corporate-client focused. Bangalore, India, was the No. 1 route request for United Airlines out of the Bay Area, and we were pleased to find an aircraft that could fly that route economically for us. We continue to have the greatest global network and to enhance it.
BTN: Do you expect any permanent changes to your corporate travel business?
Nocella: I'm a strong believer that things will return to the volumes of pre-Covid, and it's going to take us a few years to get there, but I wouldn't say the makeup of business travel pre-Covid is going to look like the makeup of business travel post-Covid. The number of people working remotely is clearly going up, and those folks will need to return to the office likely via air more often in the future, because when they chose to no longer live in the Bay Area and live a three-to-four-hour flight away, they'll be making more trips. We believe the volumes will come back. They have after every kind of economic crisis. We don't believe that Teams is a substitute for in-person meetings. But the makeup of business travel will just likely be different.
BTN: Regarding testing, is there support you can give corporate customers that might want to have their own testing program for traveling employees?
Nocella: We can provide advice, but most major corporations that are working on their return to travel are thinking about this. There is going to be an array of tests that are available for quick tests that you can do yourself or at the airport. At United, we're staying in close contact with all the manufacturers of these tests, and we want to make sure they are readily available, whether it be at the airport environment or your local pharmacy prior to taking your trip. Right now, the availability of these tests, particularly the rapid tests, is small. There was a press conference at the White House recently talking about the Abbott test, which is coming out in a widescale way soon. By the end of this year, and early next year, you will see widescale, and hopefully quick, testing available, and we would like to see it available at all of our gateway airports.
BTN: What feedback have you gotten regarding the elimination of domestic change fees?
Nocella: When we talked to our customers and our corporate clients over the last few years, the primary feedback of the difficult thing they had in their relationship with United was this particular thing. We are proud to be the first to get rid of it. There's a number of things we'll look back on Covid as providing the impetus to make some bigger strategic changes that set us up really well for the future, and this was a good example. Change fees, domestically and around the world, have been suspended anyway. It's feedback we've constantly gotten from our customers in the past. When we think about what our business looks like on the other side of this, we could not see change fees for our domestic itineraries being a part of that business. More people are booking United today because they do not have to worry about that particular issue.
BTN: What has customer response been to United's decision not to block middle seats on fuller flights?
Nocella: The science and safety of this is critical. We've spent a lot of time analyzing this and working with others in the space to make sure we make the right decision. We recognize that people would like to social distance. We recognized early in this crisis that when people were traveling, it was because they needed to travel. In April, May and June, our load factors were incredibly low. There was not sufficient demand to fill up the flights that we were flying. We put a number of procedures in place, including restricting sales on certain flights and selling our smallest [Boeing] 737 and Airbus, but we'd fly our medium to largest ones to make sure there was plenty of space onboard the aircraft when they got on board.
As we learned about the science, we also learned the airflow on the aircraft is unique. If you're going to be inside any type of structure, because the air comes from the top and goes to the bottom and the seatbacks are high, the amount of effective distance you have onboard the aircraft when you're wearing masks is incredible. We've morphed over time to, in the event that your flight is going to be full, we send you an email ahead of time saying, "Would you like to move to another flight or continue on this flight?"
In the early part of the crisis, we took affirmative actions to make sure the load factors remained low. In this part of the pandemic, we are just proactively communicating to our customer about the ability to rebook if you are uncomfortable about that, and we're communicating more about the unique airflow on aircraft and how that creates a safe environment when combined with masks. We survey our customers to make sure they think we're communicating well, and our scores have been great from that perspective.
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