United’s Take On Turning Garbage Into Aviation Fuel

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Lauren Riley, United Airlines Chief Sustainability Officer, joins Helene Becker, Cowen’s Airlines, Airfreight, & Aircraft Leasing analyst to discuss the steps United is taking to get to net-zero carbon emissions by 2050, including developing sustainable aviation fuels and using electric vehicles at airports. Press play to listen to the podcast.

Transcript

Speaker 1:

Welcome to Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.

Helane Becker:

Good afternoon, it’s Helane Becker, Cowen’s senior airline and aircraft leasing analyst. In this afternoon we’re talking with Lauren Riley, United Airlines’ chief sustainability officer. United is our 2022 best idea, but one of the areas that impress us about United is their commitment to sustainability. Thank you very much for being here today to talk about environmental and sustainability issues. The industry is very focused on that and we know that, and I think it’s interesting because airlines have obviously committed …

              Maybe it’s not obvious to everybody, but they have committed to being carbon neutral by 2050, and United has really taken the lead in this area with investments in sustainable aviation fuel, carbon recapture, electric vertical takeoff and landing aircraft and other. Let’s talk about this and why it’s important to United. First, Lauren, talk about why investors and why customers should care about this, and really why should our customers care about this?

Lauren Riley:

Yeah. Well, first of all, thanks for having me, Helane. I think it’s just so remarkable to me that this dialogue between a sustainability leader and an investor leader, it’s happening now, and this didn’t even happen yet two years ago. It’s really fun for me to just see how the discussion around commitments to doing the right thing by way of the climate and our contribution to climate change has really expanded quite significantly to all of these new stakeholder groups, including the investor community and the financial markets and such. I celebrate that. I think it’s so awesome. I’m thrilled to be here. I’m happy to talk about this.

              It’s a critical issue that a variety of folks are new to the table in earnest trying to figure out what the heck’s going on. United, we’ve been on this journey for, gosh, I don’t know, well over a decade now, trying to figure out those solutions that allow us to truly remove the emissions from flying. We made a pledge about a year and a half ago now to 100% green. The reason we call our net zero pledge, 100% green is effectively our declaration of going net zero by 2050. But what’s unique about it, Helane, is that we are the only airline in the world that has declared that our path to decarbonization will not include traditional carbon offsets, and that’s what makes us unique and distinct from all the other airlines.

              What’s important about that and truly it takes a moment to really understand the principled approach we took to making this goal, our goal, is that we recognize, as a hard to abate industry, that we have a heck of a lot of work to do to find those solutions and then scale them to the level that can actually allow us to decarbonize aviation, and to get distracted by looking at other near term easier solutions, such as carbon offsets, to us was a bit disingenuous because we frankly just need to roll up our sleeves, figure out what the problem, how to solve the problem permanently and invest in those solutions.

              This is really our commitment to staying laser focused on identifying those alternatives to how we fly today that permanently, permanently reduce the emissions from flying, and that’s really where we are. Our investor community has gotten quite loud in the last year and a half, two years about wanting to understand what are the climate impacts to your business? How’s that going to affect your operations? What does that look like on your balance sheet? Those conversations didn’t happen before. Our customers have been really amazing advocates for change, and I’ll just tell a real quick story here because this just still blows my mind today.

              When the pandemic hit and we essentially just stopped flying overnight, it was pretty bizarre, but we had to get a little bit scrappy during that time about how we continued in our ambition to address climate change. We didn’t have the money. In fact, we owe a bunch of money back to the government, to really invest in some of these solutions that are quite costly right now. I give complete credit to our corporate customers because they’re the ones that raised their hand and said, “We cannot afford to stop. We have to look at finding those solutions and investing in them.”

              They partnered with United and we stood up a brand new program last year, where in collaboration with our corporate customers, they helped us fund investment in sustainable aviation fuels, which is a solution I’m sure we’ll talk about quite a bit. But without them, I’m not sure how far we could have gotten on our own, given our financial circumstance. There is a ton of passion and desire to truly do the right thing and in partnership across the whole value chain, from our investor community all the way through to our customers, and it’s really been quite a journey.

Helane Becker:

Were you surprised, Lauren, that when the government agreed to give the industry financial aid, and I don’t want to call it a bailout because that’s really undisingenuous, it was really a full employment program for the airline industry, administered by the airlines but funded by the government? Were you surprised that they didn’t include some green aspect to it? Because as you may know, in Europe, some of the governments required that their airlines either replace aging aircraft, which they were intending to do anyway, or make other commitments to carbon, either neutrality or reduction. Were you surprised the government here didn’t do the same thing?

Lauren Riley:

Well, what I can say is that I don’t know, and this is just my point of view, that the pandemic and recovering travel and keeping our folks employed in communities on their feet was necessarily the right time and place to tackle everything. I do think we have seen continued an increased ambition across all of aviation despite the pandemic, which suggests that perhaps it wasn’t even a necessary suggestion or inclusion. I’m really pleased with how far aviation has continued to commit and we’re continuing to collaborate with one another to progress our climate change agendas, because we do recognize that we are an emitter.

              We are hard to abate, which means we don’t necessarily have the solution commercially available, certainly not at scale, for us to shift over, unlike, for example, ground vehicles with the conversion to electric vehicles. We’re a little bit behind the curve, but we’re working really hard with fuel suppliers, with technology innovators, with the government, with our friends on Wall Street and elsewhere to try to figure this out and do it as quickly as we possibly can.

Helane Becker:

Just some things so think about on fuel. United uses, what? About four or five billion gallons of jet fuel annually. I think pre-pandemic, it was closer to six, and now it’s probably closer to five. But when you think about your commitments to buying SAF, I think, I calculated, you’ll use something like 35 or 40 billion gallons of jet fuel this decade. But your commitment to buying SAF is something on the order of 100 million, and if even that much, and it’s a fraction.

              I guess to your point, it’s not scalable yet. How do we get there? How do we get from where we are, where SAF is what? $10 a gallon or something, to being more competitive with jet fuel? Although, I guess, in the spot market, jet fuel with crack spreads included as something like $6 a gallon right now. Maybe we’re well on our way, right? To being a little more-

Lauren Riley:

I appreciated that.

Helane Becker:

… competitive. But how do we scale it? How do you get companies like Jivo and Nesty to scale?

Lauren Riley:

Well, that is the million dollar question, and it’s such a fantastic one. Let’s level set here. SAF in the US is about two to four times the cost of conventional jet. Absolutely, there’s a green premium. SAF in European markets, where there are mandates coming online, it’s a bit more expensive. They’re seeing that some of the pricing of the limited supply of SAF is going up because the requirement to actually purchase a certain percentage of supply. United, as I mentioned, we have been investing in sustainable aviation fuel and testing it for more than a decade. We flew the first commercial flight in the United States back in 2009.

              In 2015, we made the largest investment in a sustainable aviation fuel producer, Fulcrum BioEnergy. $30 million to produce jet fuel out of municipal solid waste. We have the largest offtake agreement of any airline in the world. Last year, we announced an offtake fuel purchase of 1.5 billion gallons from Alder Fuels, which is a new startup. We invested in with Honeywell UOP. Together, as of the end of last year, United had about twice the amount of publicly announced commitments for sustainable aviation fuel purchases of any other airline in the world. But yet to your point, which is very, very appropriate, it was well less than 1% of our total fuel supply that we were able to consume in 2019 and all the way to present time.

              There simply is not enough supply. It is truly a challenge of scale, scale scale. Then the other dimension is speed. We have to do this fast. We really have to get this online quickly. So far, the field production that we have seen come online has largely been these real gritty mom and pop startups that are really passionate innovators, and we give them a tremendous amount of credit for all the hard work that they’ve put into demonstrating these solutions are viable. What we need now is really the scale of infrastructure. We need access to the pipes to pipe it into the airports. We need access to the big production facilities and the fueling infrastructure.

              All of that fundamentally sits on a disconnect where we just don’t have, today, the right policy incentives that are triggering the production of sustainable aviation fuel over other fuels. What’s not necessarily well understood, and it should be appreciated very much, is that today to create sustainable aviation fuel, you essentially take the same pathway, by and large, as you do to create renewable diesel fuel for ground transport. But as a fuel producer, you can make more money when you sell into the renewable diesel market. There are more tax credits, there’s a bigger market, there’s more folks buying.

              SAF is a bit niche. I appreciate that, which is why United has been the lead airline really trying to advocate for tax credits that at least level the playing field with renewable diesel. Then future state, we’re going to need some kind of tax policy that enables fast investment in the production side. How do we get more production online faster? We’re hopeful. It seems to be an area where policy makers, at least here in the US, they see and understand the value of investing in some of these tax credits to support sustainable aviation fuels. I’m optimistic, but we haven’t quite gotten across that finish line yet. So until then, I’m just going to hold my breath.

Helane Becker:

I think you guys are also a leader in using electric vehicles. I feel like your California operation is pretty forward relative to others and even relative to the rest of the network.

Lauren Riley:

Well, indeed, I think all operations in California are quite progressive. There are a lot of very forward leaning climate laws in the State of California, and I give them a ton of credit for coming up with new policy frameworks that really help incentivize the marketplace for lower carbon alternatives, like low carbon fuel standard for fuels. Our fleet for our ground service equipment overall is about … I think it’s about 32% electric and that’s inclusive of every vehicle that we have on the ground.

              Some of these GSE equipment pieces don’t have electric alternatives right now because they’re just so unique and distinct, and there’s few of those sold. We’re really working hard to increase that number. We’re working hard with our airport authority partners to make sure that the electrical infrastructure required at the airports is there as we begin to bring additional electric vehicles online so that we can charge them up and get them into operation immediately.

Helane Becker:

This speaks to a slightly different issue, but the lack of … Some of your regional providers have a lack of pilots. It causes a reduction in flying from smaller airports and makes people have to drive to bigger airports. Is a solution more seats per departure and fewer departures per day, or does that affect the service pattern the airline would want to offer its customers?

Lauren Riley:

What I do know is that we are absolutely committed to servicing our customers where they want to fly. I’m going to leave it to our network operations and airport operations teams to figure out how to make that happen most effectively. But I suspect that there’s a good number of incredibly smart people that are trying to figure that out right now and perhaps more seats, and up ganging in some of those approaches. That should be in scope.

Helane Becker:

Fair enough. The other thing is single use plastics. You guys had made a lot of strides in this area. I fly a lot internationally. Pre-pandemic, I flew even more. I was going back and forth to London at least eight times a year, and always United because of where I live and where I work. It’s just the most convenient airline for me. But now it’s mixed. My Polaris kit bag last week was the blue bag and it wasn’t in plastic, but things inside were in plastic. That’s business class.

              On the way over to London, I got a bottle of plastic water or plastic bottle of water, and coming back from Dublin, I did not. But anytime I asked for water, they ran it over. I don’t know. Domestically, I was going back and forth to Florida for a while and then I stopped, but I would get a little baggy of food of snacks. What’s with plastics? What’s going on there? It’s part of your sustainability thing.

Lauren Riley:

Well, no pun intended, but it’s a bit of a mixed bag. It’s all over the place, and frankly, for good reason, If you come down at the end of the day and say, “Reduce our greenhouse gas emissions or prioritize public health amidst a pandemic,” we’re going to prioritize public health. I think we have been completely thrown a left curve that I hope we never ever, ever experience again, knock on wood. But it really caused us to temporarily make sure that we are looking at means that promote hygiene, promote confidence of flyers, and then really enable us to service well.

              The little snack baggies I think are adorable, but a little excessive right now, and the intent originally is that they allowed fast service to everyone in their seats, so you minimize contact. That was critically important when we didn’t know much about the pandemic and the virus itself. Now we’re in a very different place. It is time and we are looking at what is our onboard experience from start to finish, both service and product? We are looking at what do our cabins look and feel like?

              As part of our United next strategy, we’re looking to retrofit some aircraft to enable, for example, everyone who goes on board to have their carry-on put above them and de-stress that experience. I think from sustainability all the way through to every other dimension of the customer experience, we are looking now again at all of it. It’s time to do it now, whereas this time, 12 to 18 months ago, it might not have been appropriate because there was just such trepidation in travel in general.

Helane Becker:

Got it. What about repurposing seat coverings, old seats and employee uniforms? Do you guys do that too?

Lauren Riley:

We have. That’s so fun in the beginning of the pandemic, we actually took … Gosh, it was uniforms. It was below the wing uniforms that had never been worn and we repurposed them into face masks because you couldn’t get face masks early on. Now, we quickly realized that that material maybe was not super conducive to breathing well, but there was a demand for a solution and we had product, and yes, we needed to reuse that. We have recycled our seat cushions. We’ve recycled uniforms. We’ve repurposed them into creating bags and computer covers and you name it in the upcycling worlds.

              We’re going to continue to go through changes of uniform, and as I mentioned, the interior of the cabins, and we’ll be continuing to look at those options as we move forward. We’re real proud of our partnerships that we have with some of the nonprofits that are capable of helping us divert waste to landfill. That’s really important. A lot of these materials end up as insulation in buildings and houses, and it’s fantastic materials for insulation.

              If there’s a better home than the landfill, we are absolutely committed to that. The one other plug I will make though is that some of these materials are actually really great feed stock for jet fuel. One of the investments we made, as I mentioned in Fulcrum BioEnergy, they actually take trash out of your trash can, and they convert it into a low-carbon sustainable aviation fuel. Having access to those plastics and to some of that cushion material that’s in the seat actually creates a much better end product for sustainable aviation fuel.

Helane Becker:

That’s exciting. That’s really exciting because to the extent you can avoid the landfill that are getting filled up anyway. That would be huge from a sustainability-

Lauren Riley:

Exactly.

Helane Becker:

From an SAF perspective, right?

Lauren Riley:

Absolutely.

Helane Becker:

A little shifting gears. Scott talked about carbon recapture versus carbon offsets, and I think he was the one, and I’ve stolen this line from him because I think he was the one who said there isn’t enough land to plant the trees that would be necessary to offset the carbon emissions. Right? I know I’ve stolen that before, but he is more eloquent than I am. Talk about carbon recapture. How does the technology work and why should we care about it?

Lauren Riley:

Yeah. Well, here’s the thing. Carbon offsets essentially are a transaction that happens when a company like United funds planting of trees, and the trees, as they grow, they capture CO2 out of the atmosphere and they store it within the construct of the tree. United, subsequently because we paid for that tree to be planted, we get to claim the reduction from that tree. Now, there’s a net benefit to society. The carbon offsets work. They do work. But it does feel a little inauthentic to us to claim victory in an industry like ours that has so much work to do to find permanent solutions to reducing our emissions, to say that by planting that tree, we’ve checked the box in our climate stewardship.

              That’s not okay to us. For us, we really need order of magnitudes bigger than that. We need solutions that actually do permanently sequester because with trees, the minute you drop them down, that CO2 is back into the atmosphere. Carbon capture and carbon removal are actually a grip of technologies that are really quite interesting. There are some that capture carbon dioxide off of the industrial stack at a factory, so it’s highly concentrated. There are others like the one that Oxy Low Carbon Ventures and 1PointFive, we collaborate with them. They have a direct air capture technology, and what that does is it’s basically like an industrial sized air purifier, if you will.

              It pulls CO2 out of the atmosphere using these really large industrial sized fans, and it sticks that CO2 underground where it stays for thousands of years. It’s in a geologic formation under there and it can’t get out. That’s a way for us to actually have confidence in the permanence of that sequestration. One of those plants, at full scale, has the capacity to remove as much CO2 from the atmosphere as 40 million trees. When you think about impact and you think about significance of reduction, it really is material when you start looking at some of these technologies. Now. I will say it’s early stage with them and it’s a bit expensive, but all of that will come down as economies of scale over time.

              The other benefit for United, which is really what we’re looking at here, is carbon capture and utilization, which means capturing that CO2, whether it’s on the industrial stack at a point source or it’s through these industrial fans with direct air capture, being able to capture that CO2 out of the atmosphere and repurposing it into low-carbon or no-carbon jet fuel of the future. If you were to ask me today, “How are you going to be flying in 20 years?” I will bet that we will have some portion of our flights powered by fuels that actually capture CO2 out of the atmosphere, turn that into a jet fuel, comes out our tailpipe and we capture it right back again. It’s this really nice closed loop cycle where we’re not contributing anything more on using that jet fuel.

Helane Becker:

That’s exciting, but you’d have to do it in a manner that didn’t add weight to the aircraft. Right?

Lauren Riley:

Well, we’d have to do it in a manner where the amount of CO2 that goes into the fuel is less than the amount that is combusted at the end. It’s a net negative.

Helane Becker:

Right, exactly. It’s a push-pull, isn’t it? You’re doing as much as you can and you’re finding partners who can fill the niches that you need to get to where you want to be. But what about the engine manufacturers and the airframe manufacturers? What’s their responsibility to the industry also to help you get over the finish line and to reduce emissions? It can’t be done by yourself.

Lauren Riley:

No, and it’s not. I give a ton of credit to our airframe and engine colleagues because they too have been laser focused on figuring out how do we optimize what we have, and then also, how do we think about net new? Every airplane that we retire and replace is 15% to 20% more efficient in terms of emissions, and that’s quite significant when you retire one out and replace it. We’re seeing Boeing is laser focused on commercializing SAF. Airbus has been very clear about its ambition around hydrogen-powered aircraft and looking at that as an alternative for the future.

              Rolls-Royce and GE have been really pushing into demonstrating the capability of flying on 100% SAF because today we’re only allowed to use 50% sustainable fuels and 50% conventional. That’s what the safety standard says. They’re proving that that’s arbitrary. We don’t need that threshold anymore. We can fly 100%. Then there’s new market entrance. We invested in a company called ZeroAvia. ZeroAvia is really fun because what they do is they allow us to take some of our narrow body airplanes, which are flying in the sky for 30 years, and we can actually retrofit their engines.

              We take off the conventional engine and we put in one that is a hydrogen-electric hybrid. Battery powered, basically, engine. That flies in the sky and it’s low carbon. We’re able to keep our existing assets, our airframes, but actually just change out that engine. We’re going to start seeing a lot more of these innovations to come, and all of this is completely in partnership across the whole value chain.

Helane Becker:

That is exciting. I like that ZeroAvia. They seem to be leading edge of that technology, because I want to shift gears and talk about Boom and eVTOLs. Maybe before we go there, just you started to talk about aircraft efficiency because you’ve got a big order book. I don’t know if you can answer this question. If not, I understand, and how you think about that in the face of higher interest rates or I guess that’s probably jury’s purview.

Lauren Riley:

I’m going to defer to our CFO on that one.

Helane Becker:

Fair enough. Fair enough. But on eVTOLs and Boom. Let’s talk about those guys for a minute, because I don’t understand the appeal of eVTOL. On the one hand, I get it. It’s a ground replacement company more than it is in aircraft, right? It’s not designed to take 150 people from LA to San Fran or from Chicago to New York. It’s taking four people out of a car and putting them in basically an electric helicopter, for lack of a better descriptor, and get them to the airport. How does that help you meet your goals?

Lauren Riley:

Well, here’s what I’ll say, and I so appreciate this question because it’s really important to think about the two dimensions of it. First, we will begin … We will continue to see innovations occurring in aviation. We should. We should celebrate that. We want that. We need to start looking at opportunities to extend the customer experience into spaces we haven’t been such as supersonic or electric vertical takeoff and landing. That is going to happen by virtue of the industry. It’s an industry of innovators. My responsibilities, United’s commitment is to make sure that we’re doing it sustainably, to make sure that when those innovations are coming to market and there’s an opportunity for us to embrace maybe a different service to our customers, that we’re doing it with our commitment to the climate and reducing our impact on climate change.

              That’s at the forefront. What’s really exciting about our investment in Archer is that I believe it’s a four seater vertical takeoff and landing. Think Downtown Hollywood to LAX. It would take you that far, and the intention is that it would cost roughly the same as an UberX. You bypass all the traffic, but you get there for about the same cost and hit to your wallet. But it’s carbon-free. It is a lithium ion battery that is charging that vertical takeoff and landing. That’s really exciting to us. It reminds me when I was growing up, I read this book, Chitty Chitty Bang Bang. I don’t know if you ever read that book, but yeah. That’s the vision I get in my head for some reason.

              Now, supersonic is exciting because that’s really about time. How much time can you save? What is the speed in which you can travel to these destinations? Yes, it does consume a fair amount of fuel, but it is designed … The aircraft itself and its engines are designed to really work on 100% sustainable aviation fuel. The challenge isn’t necessarily can supersonic fly on SAF? The challenge is will we have enough SAF to put on the supersonic in time? That’s why we’re working really hard with our friends and government and policy makers to make sure that we have a foundation of policy incentives that enable a lot more supply to come on quickly because we’re looking not just at our main line and our regional aircraft, but we’re also looking at supersonics of the future and whatever is next to come.

Helane Becker:

Right. Well, I also imagine that from a supersonic perspective, if it takes three hours to go from San Francisco to Tokyo instead of 12 hours or 10 hours, that could potentially be a huge savings, especially if you can move the same number of people as you would move on one of your 787s or 777s.

Lauren Riley:

Yeah. I don’t know the seat configurations off the top of my head, and neither do I know the economics, but I do know that we could get more flights up using supersonic on those routes for sure.

Helane Becker:

Okay. What else should we know about your sustainability commitments and anything else we should know about what we’re [inaudible 00:30:59]

Lauren Riley:

Yeah. Two comments, and they’re both about goals. I get a lot of questions about 2050 is so far away. Can’t you do something right now? I appreciate the spirit of that question. I appreciate the desire to want to move fast. I hope that’s come across crystal clear that we are there to … We have to accelerate this transition. Absolutely. We have a goal that, by 2035, we will reduce the carbon intensity of flying across all United flights 50% compared to 2019, our last year of typical flying. What’s important about that is that it allows us to recognize that we are rebounding from the pandemic and we’re growing.

              We are anticipating growth across the United flights, but we’re going to do it responsibly by cutting the amount of carbon associated with each seat mile traveled by half. That goal aligns with the goals of the Paris Agreements. When you think about science-based targets, when you think about being rooted in aligning to the global goals of net zero by 2050, that’s where we are and that is absolutely our commitment. The other point I’d like to make is that folks sometimes say, “Okay, what’s your 2023-2024 greenhouse gas emissions goals?”

              You’re not going to get one, and the reason I share that is because it’s almost inappropriate to have that goal so near term because we really do need the time for some of these solutions to mature and really scale. If you think about year-over-year progress, you then will encourage an airline like United to make different business decisions that allow us to reduce next year, and that’s really where the solution of offsets and some of these other immediate term solutions come into play. Rather, we are taking our dollars and our time and our position in the marketplace to really invest in those solutions that are not going to mature for another three, four, five years.

              What my expectation is that, in the next two to three years, things will be somewhat status quo. That’s completely appropriate because in the next five years or so, we’re going to see this step decrease in emissions associated with some of these solutions really coming online in a material capacity. That’s what we want to see because those reductions are absolutely permanent and they will not be coming back into our operations. While I applaud quick fast now, we want to see progress now, we want to see goals now, in industries like ours where really the technology is nascent, we do need to make sure that we’re focusing on the right benchmarks and the right kind of objectives to support the right kind of long-term transition.

              I think that’s unusual because most other industries do have solutions they can pick up and use today. Unfortunately, we’re not one of them. We’re building that momentum now and it’s going to take a little bit of time. That understanding of the nuance of this industry is really quite important when it comes to measuring progress. We get a lot of criticism about not moving fast enough in our industry, and I totally respect that and understand, but I also counsel back that at this point in time, we are at the right place supporting the right solutions, and in a couple years times, we’re going to see some of those solutions really mature and we’ll have a really impactful reduction in our missions.

Helane Becker:

It’s hard maybe for people to understand you can’t flip a switch, right? You can’t flip a switch and go from here to there overnight. That’s just not how it works. To your point, the investments that are required are enormous in the billions if not trillions of dollars, and it needs to be funded somehow and the money has to come from somewhere and government incentives, which you mentioned early on in our conversation, are important. The push-pull we talked about, airlines pushing and pulling manufacturers to help out and think about it, and they’re doing the same thing.

              I think one of the things that’s definitely occurred is this … I don’t know if you feel it too, but this whole discussion has moved forward even through the pandemic, at a point in time where historically a goal like this might have fallen by the wayside given the urgency of the issue surrounding the pandemic that, to your earlier point, going from 2.5-ish million passengers a day to under 100,000 in April of 2020 for a couple of … for about a week, before we started to see some growth. Yeah, I don’t know how you think about that, but-

Lauren Riley:

No, I agree entirely. The pandemic caused a degree of disruption that I don’t know without it we would see the kind of innovations that we’re seeing and the kind of values-based intentions that we’re seeing. Today United is launching this Good Leads The Way ad campaign, and this is really a campaign around who we are coming out of the pandemic. What does it mean to us to be part of United? I’m thrilled that, not just sustainability, but diversity and inclusion and opportunity and ambition and all of that is just who we are. Despite the tragedy that was the COVID pandemic and how it ravaged the different communities, it actually was a bit of a silver lining for our industry because we were forced to hit stop, and we took that moment, thank goodness, to reflect on what does it mean to emerge from this as a better airline? That’s where we are today, and I couldn’t be more excited about that.

Helane Becker:

Well, let’s talk about inclusion and diversity in the couple of minutes we have left, because the airline industry is very diverse, in general. At the airport, you see a lot of gate agents, you see a lot of ticket agents, you see a lot of flight attendants, even, who are I would say diverse. But once you get into middle management and then you get into the C-suite, obviously there’s not a lot of that. It’s improving. The CEO of Cape Air is a female, which is exciting. But in some ways we’ve taken a step back.

              I’ve been doing this for, I admit to more than 35 and less than 40 years, and we had more female executives in the 1980s when I was starting out than we do now. I know you guys have taken a lead in this area as well, especially when Oscar was in charge. I think Scott’s kept that momentum. But what’s management doing to bring juniors along to get them ready? Just all diversity, not only women, not only gender diversity, I guess I should say, but racial diversity as well?

Lauren Riley:

I could not be more proud of United for its commitment to diversity, equity and inclusion. Just like sustainability, it’s one of those core values that emerged from our downtime, I’ll call it, with the pandemic, to really being a centralizing North Star focus of what does it mean to work for United? We are very committed to diversity, equity and inclusion, and this is one of those other examples, just like sustainability, where actions speak louder than words. We have an executive council that is all of our executive team that focuses on diversity, and our president, Brett Hart, is responsible for chairing that.

              We have a council called the We Stand United Council, which is comprised of leaders and officers across the business that help set goals and strategy for each of the different business units to embrace diversity, equity and inclusion. We have a whole host of business resource groups for employees that associate with different ethnicities or dispositions as they choose, whether it’s multicultural or multigenerational, or if it’s veterans, for example. It’s all over the place to really help create a workforce environment that allows you to see yourself in others.

              We really pride ourselves on wanting to have the same diversity as you see out in the marketplace because we fly everywhere and we’re in every community and we want to celebrate that and that should be core to who we are. What’s most remarkable is, just this year, we opened the doors to Aviate Academy, which is out in Arizona. It’s a pilot training program that we actually have, we own at United, and we set the goal that 50%, at least 50% of those that come through the door to be trained as pilots will either be people of color or women.

              This was really important because what we’re seeing right now is not only are there major barriers to entry to become a pilot in this industry because it costs a good amount of money, but we’re seeing potentially a labor shortage of pilots across the industry, and we really want to provide both opportunity for folks anywhere that have a passion for flying, but maybe not access to it, as well as an opportunity for them to have careers that carry their families. These are really good jobs and they can actually sustain communities wherever you fly.

              That’s really important to us. We went a little bit beyond just saying it’s important to us, and we actually established a flight school. It’s really exciting. We had our first class go through more than 50% where women and people of color were expecting to train 5,000 pilots all the way through 2030, and we’ll continue to go beyond that. That’s just one of those examples, just like our investment in these alternative fuels to address climate issues, that we are serious and we’re rolling up our sleeves and we’re actually putting solutions into play that can address the problems that we talk about.

Helane Becker:

It’s expensive to be a pilot, really. It’s expensive, and part of it … Now, this decade, we have quite a lot of pilots retiring. We had estimated the industry would need to hire at least eight or 10,000 pilots this year, and I know your CEO commented recently that the industry actually has to hire closer to 13,000, and we only turn out about five. It’ll be interesting to see, don’t you think, what Congress decides to do about this, given that there’s a shortage of pilots, airlines are having to cut the amount of flying they’re doing. I think United itself at one point said they were short.

              They had 100 aircraft on the ground parked, and I assume those are mostly regional aircraft because they don’t have enough pilots. That’s about 1,000 pilots short, because it’s on a smaller aircraft. It’s about 10 pilots per plane. Airfares have only one thing to do and that’s go up. If Congress doesn’t like that as a plan, they have to really think about student loans. Is that an option? Do you think Congress would make student loans available? I don’t know if you can answer this question, but could it make student loans available to people trying to get a pilot license?

Lauren Riley:

Well, I will say one of the areas that we looked at with our Aviate Academy is financing the cost of the program, and we do that. We offer that, for sure, because we recognize that if you can’t pay for your education to get through the door, you’re not going to get through that door. I don’t know. I think what’s good about the recognition is that the dialogue is happening now in advance of a true catastrophe in terms of labor shortage, and I’m confident that there will be solutions. There’ll probably be a whole suite of solutions that emerge from policy makers as well as the enterprise itself, like United, that are really looking to solve the problem.

Helane Becker:

That’s awesome. Well, Lauren, is there anything we should talk about that we didn’t talk about? I feel like we did a lot of wide ranging conversation, but is there anything I missed?

Lauren Riley:

I don’t think so. You were pretty thorough in your questions and where the conversation went. But truly, I cannot say enough how excited it is to me that you are interested, the industry represent, our financial partners, the investor community cares because this is such an interesting evolution that we’re going through. It’s really important to have that point of view. What’s fabulous to me is that we have the solutions. We just don’t have the marketplace. Who better to help us build a marketplace, right? Than our friends in the financial markets themselves. I look forward to a lot more collaboration. I look forward to a lot more of these discussions. I’m really optimistic about the future of flying. I think it’s going to be clean and green and beautiful, and we get to celebrate this planet and not doubt that, and that’s really United’s commitment here.

Helane Becker:

That’s awesome. Well, I know I enjoy flying United, for sure.

Lauren Riley:

[inaudible 00:44:46]

Helane Becker:

Now, if we can just get the government to stop pre-departure testing, we’d see another leg up in demand. Travel is fraught enough without adding that extra layer of uncertainty.

Lauren Riley:

I agree. [inaudible 00:45:02]

Helane Becker:

All right. Well, thank you very much for your time this afternoon. I really appreciate it.

Lauren Riley:

It’s been my pleasure.

Speaker 1:

Thanks for joining us. Stay tuned for the next episode of Cowen Insights.


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