United Airlines CEO Goes Full Musk
Why the latest publicity stunt by United has plenty of potential to backfire
During the first dot-com boom, staid executives of traditional companies (you know: the sort that make profits) were furious about being sidelined in the mass media by much younger and brasher entrepreneurs who (on paper, at least) were suddenly worth more than the GDP of many small countries. Jack Welsch of GE famously told his minions to “get us some moolah” by acquiring a few dot-com properties that surely would boost GE into the stratosphere of inflated valuations. No CEO of a major US corporation willingly cedes the limelight, especially when their next bonus largely depends on perception rather than performance.
We all know what happened next: GE’s dot-com acquisitions wasted a great deal of shareholder equity and Welsch’s successor was left with a company that under the covers was in far worse shape than investors realized.
Fast-forward twenty years. The newly appointed CEO of United Airlines, which like all the majors has been devastated by the world’s rush to embrace coronapanic, is looking to establish himself firmly on the covers of Forbes, Inc., Fortune, and other top business magazines. The problem: how to shine when your company is on the ropes and reliant on billions of dollars of taxpayers’ money? Talking about modest increases in per-seat yield won’t cut it. Just as Welsch and his contemporaries thought they could steal a lesson or two from the Internet entrepreneurs, so United’s new CEO Scott Kirby believes he can take a lesson from the USA’s current King of Hucksterism: Elon Musk.
No one seems to mind that Musk has a long, long record of massively over-promising and woefully under-delivering. So long as Musk shows up for his regular TED talks, even the SEC will give him a free pass for behavior that would put others in jail. Tesla is, laughably, valued at more than the world’s largest and most profitable automobile companies despite producing a tiny fraction of their volume and relying entirely for its meager profits on the sale of carbon credits — a stratagem that is evaporating with every passing month as more companies pile into that particular boondoggle.
As Musk’s most recent publicity venture backfired spectacularly when he was forced to acknowledge that his (probably illegal) boosterism of Bitcoin was an atrocious business decision, Kirby can’t jump on the cryptocurrency-blockchain bubble because it’s rapidly losing all appeal to everyone except the poor deluded souls who can’t see beyond the latest soundbite or Internet meme.
So what’s the newly appointed CEO got to do in order to raise his profile?
The Emirates ploy is off the table too. While their Residence offering (a luxury suite in the sky for only $40,000 round trip) garnered a lot of welcome publicity, it didn’t generate much in the way of revenues because for that price it’s far nicer to charter an executive jet. So United can’t spend a few hundred million equipping a few of their long-haul aircraft with onboard showers and comfy beds, because everyone knows that game is a losing proposition. And besides, how credible would that be anyway, when everyone also knows that United’s hard product isn’t very impressive compared to the offerings of equivalently-priced seats on other airlines?
So that leaves one option only: the vision thing.
Hence the recent announcement, made with a suitable degree of fanfare, that United will fly fifteen supersonic passenger jets between selected destinations by 2029.
Pretty cool, right? We’ve got tech-whiz vision, we’ve got a nod to “saving the planet” by claiming the aircraft will fly exclusively on biofuels, and we’ve got a delivery date far enough into the future that most people will learn to accept a perpetual date-slippage. So far, all straight out of the Musk playbook.
It’s churlish to point out that the company United has chosen has never actually made a supersonic aircraft and that all their projections are off a PowerPoint presentation that a ten-year-old could have thrown together during a sugar rush. It’s equally churlish to point out that the contracted company itself hedges its statements, saying only that it “hopes” it can develop technologies to reduce sonic boom so as to enable at least partial overland routes, albeit at reduced speeds. And United itself claims the seats will be both affordable and profitable — a trick the Anglo-French Concorde achieved only in its final few years thanks to a great deal of financial accounting tricks.
So we have to ask: what are the real-world chances of a small company that’s never manufactured anything at scale and which has zero experience of designing supersonic aircraft, being able to to design, engineer, and manufacture even one prototype within the next few years? Better still, what’s the probability of this company being able to produce fifteen such aircraft, all ready to carry passengers, within eight short years? Oh, wait: within five short years, because the FAA will need to certify the aircraft and that process will take at least an additional three years, not to mention the time required to train and certify at least thirty different flight crews on type.
Boeing, a massive company with nearly a century of experience designing, engineering, and manufacturing aircraft at scale, managed to go from initial concept to flight-capable prototype within a mere seven years, by using tried-and-proven techniques and core technologies. Boom, the company selected by United Airlines to perform miracles, has none of these advantages.
Why didn’t United team up with Boeing, its long-time favored supplier of aircraft and which has been studying commercial supersonic flight possibilities for several decades? Presumably because Boeing continues to conclude that there’s no prospect of commercial success in sight and doesn’t want to risk further damage to its already-shaky reputation by seeming to support an idea that is little more than a publicity stunt.
So as the United announcement has as much probability of fruition as Donald Trump learning to speak French (or even English, coherently…) it’s clear the announcement is intended entirely to boost the status of United’s new CEO. We can therefore make one prediction with reasonable confidence: we’ll see him on a TED talk in the not-so-distant future.