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CNBC Exclusive: CNBC Transcript: United Airlines President & CEO Oscar Munoz Speaks with CNBC's "Squawk Box" Today

WHEN: Today, Wednesday, July 19

WHERE: CNBC's "Squawk Box"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with United Airlines President & CEO Oscar Munoz on CNBC's "Squawk Box" (M-F, 6AM-9AM ET) today, Wednesday, July19th. Following is a link to the interview on CNBC.com: http://www.cnbc.com/video/2017/07/19/uniteds-oscar-munoz-its-a-new-era-in-regards-to-social-media.html

All references must besourced to CNBC.

LEBEAU: GOOD MORNING, ANDREW.LET ME BRING IN OSCAR MUNOZ, CEO OF UNITED AIRLINES THE MORNING AFTER YOURREPORT, BETTER THAN EXPECTED EARNINGS TOP AND BOTTOM LINE BEATING THE STREETBUT THE STOCK IS UNDER PRESSURE IN PART BECAUSE OF YOUR GUIDANCE FOR PASSENGERREVENUE FOR THE THIRD QUARTER. ANYWHERE FROM DOWN 1% TO UP 1% THATS WEAKER THANMANY PEOPLE WERE EXPECTING

MUNOZ: INTERESTING I THINKGOOD MORNING JUST TO START OFF WITH WE HAD AN OUTSTANDING QUARTER.

LEBEAU: YOU DID

MUNOZ: WE BEAT ESTIMATES.THIS IS PROBABLY OUR FIFTH QUARTER IN A ROW THAT THE MARGIN GAP BETWEEN US ANDTHE INDUSTRY HAS NARROWED AND OUR OPERATIONAL RESULTS IN THE QUARTER WEREOUTSTANDING, IN FACT LED THE NATION IN ARRIVAL, DEPARTURE AND COMPLETION AND WEFINISHED SECOND IN NBR SO WERE VERY HAPPY ABOUT THE SECOND QUARTER. WITHREGARDS TO THIRD QUARTER GUIDANCE I THINK UNITED IS FIRMLY, AND I MEAN FIRMLYON THE RIGHT PATH AND A QUARTER DOES NOT MAKE A LOT OF DIFFERENCE THE SIMPLEDIFFERENCE IS OTHERS HAVE GUIDED A LITTLE HIGHER. PART OF IT IS THAT THEYRECYCLING. SOME ISSUES, SOME NEGATIVE ISSUES FROM LAST YEAR. AND THEN ITS AFORECAST AND SO WELL SEE AS THE QUARTER DEVELOPS WE FEEL VERY, VERY STRONGLYABOUT OUR PATH

LEBEAU: THE OTHER METRICTHAT'S GETTING A LOT OF ATTENTION IS REVENUE ASIA PACIFIC AND IN PARTICULARCHINA DOWN 5.5%THAT IS SUCH A HUGE MARKET SO IMPORTANT TO UNITED, HAS BEEN FORMANY YEARS WHATS THE ISSUE THERE IS IT THE GROWTH OF YOUR COMPETITORS FROMCHINA THE CHINESE AIRLINES OR IS IT THE FACT THAT YOU HAVE THESE DEVELOPINGMARKETS WHICH ARE A LITTLE LUMPY IN TERMS OF DEVELOPING THAT REVENUE?

MUNOZ: ITS A COMBINATION OFALL OF THOSE THINGS SUCH A MASSIVE MARKET FROM A POPULATION PERSPECTIVE THATCONNECTING ALL THOSE CUSTOMERS FROM THE INLAND ASPECTS OF CHINA, AND TO THECOASTAL AREAS IS SOMETHING THAT A LOT OF AIRLINES ARE JUMPING IN SO WEVE GOT ALOT OF COMPETITION A LITTLE BIT OF SOFTENING OF THE ECONOMY THAT DRIVES AMERICANSTO CHINA. AND SO THE COMBINATION OF THAT, AND ONE OF OUR BIGGEST INTERNATIONALREGIONS FOR US IS CAUSING SOME OF OUR -- SOME OF OUR DEGRADATION.

LEBEAU: AND ONE LAST QUESTIONAND THEN THE STUDIO HAS ONE. IS THERE ANY INDICATION, BECAUSE INITIALLY THE INCIDENTWITH DR. DAO BEING REMOVED FROM THE AIRPLANE, THERE WAS A LOT OF SOCIAL MEDIABACKLASH, IF YOU WILL, IN ASIA. ANY INDICATION THAT THAT IMPACTED BOOKINGS,DEMAND, REVENUE AT ALL COMING OUT OF ASIA

MUNOZ: NO, LISTEN. THAT WAS ACONCERN AND I PERSONALLY TRAVELED OUT AND SAW SOME OF THE HIGHEST PEOPLE INGOVERNMENT IN BOTH CHINA AND JAPAN, JUST TO MAKE SURE, AND I HAVE TO TELL YOU,IN THE COURSE OF MY WEEK THERE, I DONT THINK I GOT ONE SINGLE QUESTION ON THEASPECT ITS ALL ABOUT GROWTH, SECONDARY CITIES, DEMAND AND CAPACITY AND BALANCESIN AIRPORT INFRASTRUCTURE AND GROWTH. SO IT WAS AN ALL-BUSINESS CONVERSATIONDESPITE THAT WERE VERY CONCERNED WITH THAT ISSUE AND MAKING SURE THAT, INDEED,THERES NO LINGERING ISSUES FROM THAT INCIDENT

LEBEAU: I KNOW THEYVE GOT AQUESTION BACK IN THE STUDIO

KERNEN: OKAY, GREAT, PHIL,THANK YOU. MR. MUNOZ ITS GREAT TO SEE YOU. YOU KNOW, WATCHING THE INDUSTRY, ITSNOT SPECIFIC TO ANY ONE AIRLINE. THESE THINGS THAT – THESE INTERACTIONS WITHTHE PUBLIC,WHICH ARE INEVITABLE YOURE RUNNING -- ITS A VERY DIFFICULT BUSINESSTO RUN WHERE EVERYBODYS HAPPY ALL THE TIME, WITH WEATHER, AND WITH MECHANICALISSUES, AND DEALING WITH THE PUBLIC. WE KNOW ABOUT THE PUBLIC SOMETIMES, YOUKNOW, THEYRE OBVIOUSLY NOT THE EASIEST THING TO DO. SO, IT JUST SEEMS LIKE ITSGOING TO HAPPEN FOREVER. AND THE MOST YOU CAN PROBABLY SAY IS TO ALL YOUREMPLOYEES, PLEASE BE NICE PLEASE BE NICE WHENEVER YOU CAN, PLEASE TREAT OTHERPEOPLE LIKE -- SO, WITH THAT OUT OF THE WAY, I DON'T KNOW HOW YOU -- THINGS AREALWAYS GOING TO HAPPEN BUT WHAT TAKES UP ALL OF YOUR TIME RIGHT NOW, EVERY DAYIN TERMS OF OPERATING THIS AIRLINE BETTER IS IT, YOU KNOW, YOU HAD A MERGER,YOU HAD TO PUT THE COMPUTER SYSTEMS TOGETHER, YOU HAD TO PUT EMPLOYEESTOGETHER. WHAT IS IT THAT UNITED IS WORKING ON EACH AND EVERY DAY THAT YOUSPEND LIKE 15 HOURS A DAY WORKING ON RIGHT NOW

MUNOZ: WELL, LISTEN, IAPPRECIATE THE EMPATHY WITH REGARDS TO THE CUSTOMER SERVICE ASPECT. ITS A NEWERA WITH REGARD TO SOCIAL MEDIA ITS JUST SOMETHING THAT WE HAVE TO ADAPT TO ANDACCEPT BUT OVERALL, OTHER THAN JUST BEING NICE, WE DO HAVE TO TRAIN AND DEVELOPAND NURTURE A MORE VALUES ORIENTED CUSTOMER SERVICE POLICY WHEN YOU ASK THESECOND QUESTION, WHERE I SPEND A LOT OF MY TIME, PART OF THIS BUSINESS, ITS SODYNAMIC AND COMPLEX AND LARGE THAT YOU REALLY DO HAVE TO DIVIDE AND CONQUER ANDWE BUILT A GREAT TEAM AT UNITED AND EVERYONE HAS THEIR LITTLE NICHE, AND FORME, RIGHT NOW, BETWEEN THE GOVERNMENTAL ISSUES, AND THE CUSTOMER SERVICEISSUES, I THINK THATS THE AREA THAT I SPENT MOST OF THE TIME WITH.

SORKIN: OSCAR, ONE OF THETHINGS THAT IM CURIOUS ABOUT IS GIVEN HOW PRICE SENSITIVE CUSTOMERS ARE, ANDWEVE NOW LOOKED AT THIS AND HAD ALL SORTS OF GUESTS ON THE SHOW TALKING ABOUTTHE PRICE SENSITIVITY, LITERALLY A DOLLAR OR TWO HERE AND THERE, WILL LITERALLYCHANGE THE DECISION OF A CUSTOMER, AND YET, THEN WE TALK ABOUT ANN COULTER, ANDHER SITUATION ON DELTA HOW DO YOU EVEN THINK ABOUT THAT I MEAN THE IDEA OF --THAT THE PRODUCT ITSELF IS NOT, THESE DAYS, UNFORTUNATELY, WHAT THE CUSTOMER ISAFTER? THAT ITS STILL SUCH A PRICE ISSUE.

MUNOZ: YEAH, I THINK ONE OFTHE THINGS THAT, AT LEAST I FOUND OUT OVER – AND MANY HAVE IN THE INDUSTRY – ISTHAT OF ALL THE CUSTOMER SERVICE DESIRES, AND NEEDS, PRICE IS ONE OF THEM. ANDIN THE LAST 30 TO 40 YEARS, ABSOLUTELY – I MEAN PRICE ON AN ABSOLUTE BASIS ISACTUALLY DECREASED. SO WHAT CUSTOMERS IN THE AIRLINE INDUSTRY HAVE GOTTEN OVERTHE PAST FEW DECADES IS PRICE REDUCTION. AND THAT IS THE PRIMARY DRIVER. AFTERTHAT YOU GET INTO RELIABILITY, GET ME THE HECK WHERE I WANT TO GO AND THEN WEHAVE TO WORK AND PART OF OUR CUSTOMER SERVICE TRAINING IS AROUND FLEXIBILITYAND INFORMATION. WE HAVE SUCH RIGID RULES SOMETIMES THAT THEY DON'T HAVE TO BERULES. THEY CAN BE POLICIES AND PROCEDURES THAT CAN BE ADAPTED FOR THE MOMENT.AND INFORMATION – WHEN THINGS DO GO WRONG, AS YOU MENTIONED, IT'S SO IMPORTANTTHAT WE TELL CUSTOMERS WHAT'S GOING ON AS BEST AS WE CAN. AND WE'RE TRYING TODO THAT. WE DON'T OFTEN KNOW OURSELVES, FOR SO MANY DIFFERENT FACTORS, BUTRELIABILITY, FLEXIBILITY, AND INFORMATION ARE THE THREE CRITICAL CUSTOMERSERVICE ORIENTATIONS. AND, OF COURSE, PROVIDING THE RIGHT PRICE POINTS SOPEOPLE WILL FLY BECAUSE THE ELASTICITY IN THIS INDUSTRY IS CRAZY.

SORKIN: IS THERE ANOTHERAIRLINE THAT YOU THINK DOES IT WELL RIGHT NOW?

MUNOZ: YOU KNOW, I THINK INGENERAL, THE INDUSTRY AS A WHOLE, THE LEGACY CARRIERS IN PARTICULAR, AND SOMEOF THE SMALLER PLAYERS DOMESTICALLY, AND SOMETIMES ABROAD, I THINK THE INDUSTRYAS A WHOLE HAS MADE A HUGE IMPROVEMENT BOTH IN DYNAMIC PRICING, GIVINGCUSTOMERS CHOICE, CUSTOMER SERVICE ORIENTATION, RELIABILITY, FLEXIBILITY, ANDINFORMATION IS WHAT WE'RE ALL WORKING ON.

MELISSA LEE: HEY OSCAR, IN –

LEBEAU: OSCAR, I'M CURIOUSABOUT THE – OH, GO AHEAD. GO AHEAD MELISSA.

LEE: SORRY ABOUT THAT, PHIL.I JUST WANT TO ASK OSCAR ABOUT ASIA PACIFIC AND SPECIFICALLY, CHINA. YOU KNOW,PHIL HAD HIGHLIGHTED THAT THERE'S SUCH GREAT COMPETITION. AND YOU KNOW, I GO TOCHINA FAIRLY OFTEN AND I FLY OVER ON CATHAY WITHIN CHINA, I TAKE CHINA EASTERNAIRLINES. IS THERE A LEVEL PLAYING FIELD WHEN IT COMES TO COMPETING IN CHINAAGAINST THESE DOMESTIC CARRIERS?

MUNOZ: YOU KNOW WHAT, IT'S ABIG MARKET WITH LOTS OF ENTRANTS. VIS-A-VIS SOME OTHER PLACES IN THE WORLDWHERE WE FACE A VERY UNBALANCED LEVEL OF COMPETITION, CHINA WOULD NOT BE MYFIRST CONCERN IN THAT REGARD.

LEBEAU: OSCAR, ONE LASTQUESTION. AND IT IS WITH REGARD TO THE DENIED BOARDINGS. YOU'RE TRYING A NEWPOLICY AS A PILOT PROGRAM – AND I DON'T THINK YOU'VE ACTUALLY KICKED IT OFF EXCEPTFOR IN A FEW FLIGHTS HERE – BUT YOU'VE NOTICED THAT YOU'VE CUT DENIED BOARDINGSIN JUNE. WITH THIS NEW POLICY, IS THIS ESSENTIALLY A WAY FOR YOU GUYS TO SAY,IN ADVANCE, LET'S NIP IT IN THE BUD BEFORE IT EVEN –

MUNOZ: EXACTLY. FROM DAY ONE,I'VE SAID WE HAVE TO DEAL WITH THE ROOT CAUSE OF ISSUES. AND OUR INVOLUNTARYDENIED BOARDINGS ARE DOWN 88% IN THE COURSE OF THE LAST COUPLE OF MONTHS. SO,WE'RE VERY HAPPY WITH THAT. BUT WE'RE ROLLING OUT UP TO TEN THINGS THAT WE TALKED ABOUT THAT WE WOULD DO ESSENTIALLY NINE OF THEM ARE COMPLETEDWITH THE TENTH ANY DAY NOW. AND SO WE'RE VERY HAPPY ABOUT ALL THE DEVELOPMENTS.AND AS WE'VE ALWAYS SAID THAT WAS THE FIRST CHAPTER. WE'VE GOT ANOTHER SET OFTEN OR SO THAT WE'LL ANNOUNCE SHORTLY AGAIN, AROUND THE AREA OF FLEXIBILITY TOMAKE OUR CUSTOMERS LIFE EVEN EASIER.

LEBEAU: DO YOU FIND THATTHERE ARE MORE PASSENGERS WHO WANT THAT? WHO WILL SAY, "LOOK, IF YOU LET MEKNOW IN ADVANCE, I'M WILLING TO EITHER MAKE CHANGES IN MY PLANS OR SAY SUREI'LL PONY UP SOME EXTRA MONEY," ET CETERA?

MUNOZ: THE REVERSE AUCTIONASPECT OF THAT IS IT. THAT'S THE LAST REMAINING PART OF IT THAT WILL BE ROLLINGOUT FAIRLY SOON. BUT WE DO. AND WE FOUND THAT AND OTHER AIRLINES HAVE TRIED ITAS WELL AND I THINK IT WORKS.

LEBEAU: OSCAR, ONE LASTQUESTION. JOE, GO AHEAD.

KERNEN: I DONT LIKE – I NEVERTHOUGHT I'D JOIN A CLUB THAT WOULD HAVE ME, BUT I DO GO IN THE UNITED CLUB,OSCAR. IS IT DONE AT NEWARK? WHEN IT'S CLOSED, IT'S LIKE FOR REMODELING. SO,I'M EXPECTING BIG THINGS LIKE ALL-DAY BREAKFAST OR SOMETHING. I'M NOT SURE WHATYOU WANT TO INSTITUTE.

MUNOZ: WELL, THANK YOU. I'MNOT SURE ABOUT ALL-DAY BREAKFAST. NO LISTEN, WE ARE RENOVATING OUR CLUBS ACROSSTHE SYSTEM. IN NEW YORK, SPECIFICALLY, WE'LL HAVE A NEW POLARIS LOUNGE IN THEFIRST QUARTER OF NEXT YEAR. ACROSS THE SYSTEM, WE HAVE TO RENOVATE.UNFORTUNATELY, WHEN WE'RE DOING THE RENOVATION IT IS A LITTLE BIT DISRUPTIVE TOOUR CUSTOMERS. SO BEAR WITH US, BE PATIENT. AND YES, YOU CAN EXPECT THE BESTOUT OF US BECAUSE THAT'S WHAT YOU GET.

SORKIN: OSCAR BEFORE YOU GO,JUST WANT TO ASK YOU ONE QUESTION ABOUT THE TSA. WE RECENTLY HEARD THAT THEFEDS ARE NOT GOING TO HAVE AN EXTENDED LAPTOP BAN, BUT THEY'RE GOING TO MAKE ITA LITTLE MORE COMPLICATED WHEN YOU DO GO INTO THE AIRPORT. HOW DO YOU THINKABOUT THAT? HOW MUCH COMMUNICATION DO YOU HAVE WITH THE TSA? AND WHAT DO YOUADVOCATE FOR?

MUNOZ: WELL YOU KNOW, WEWORKED WITH TSA FOR SOME TIME WITH REGARDS TO COLLABORATION AND COMMUNICATION,AND NOW WITH HOME SECURITY WITH REGARDS TO THE INITIATIVES THEY'RE THINKINGABOUT. WE WILL COMPLY WITH IT, WITH EVERYTHING THAT'S OUT THERE. THERE ARE SOMESTATIONS THAT WILL BE A LITTLE SLOWER BECAUSE OF EQUIPMENT AVAILABILITY. BUT ITHINK AT THE END OF THE DAY, WE NEED TO COMMUNICATE TO CUSTOMERS IF, INDEED,THERE'S GOING TO BE AN AREA WHERE IT MIGHT EXPECT A LITTLE BIT MORE OF A DELAY.SO ESPECIALLY WITH THE BIG TRAVEL SEASON HERE IN SUMMER OUT TO EUROPE, WE'LLMAKE SURE WE'LL LET CUSTOMERS KNOW IF THEY NEED TO GET THERE JUST A LITTLEEARLIER ON THE RETURN.

LEBEAU: AND OSCAR, FOLLOWINGUP ON THAT, WE KNOW THAT AMERICAN HAS MADE A DEAL WITH ANALOGIC TO BUY SOME OFTHESE 3-D SCANNING MACHINES, PUT THEM IN SOME OF THEIR HUBS. ARE YOU IN THEPROCESS OF CONSIDERING THAT, WHETHER ITS WITH ANALOGIC OR ONE OF THE OTHERTECHNOLOGY COMPANIES SAYING, "SURE, WE'LL PONY UP AND BUY SOME OF THESEMACHINES," TO HELP THE TSA ROLL OUT THESE MORE ADVANCED SECURITY PROCEDURES?

MUNOZ: AND THAT'S WHAT THECOLLABORATION PROCESS IS – SO THE ANSWER IS YES. CLEARLY, WE WILL WORK WITHWHATEVER SUPPLIERS ARE AVAILABLE TO US. AGAIN AT THE END OF THE DAY ITS ABOUTTHE CUSTOMER AND ALL THESE DIRECTIVES AND ISSUES ARE REAL TO A DEGREE, AND WEHAVE TO MAKE LIFE FOR OUR CUSTOMERS A LITTLE EASIER. SO, WE'LL INVEST IN THERIGHT THINGS AND COLLABORATION WITH TSA AND HOMELAND SECURITY.

LEBEAU: OSCAR MUNOZ, CEO OFUNITED AIRLINES JOINING US EXCLUSIVELY ON "SQUAWK." AND BY THE WAYJOE, IT SAYS ON THE SCREEN UP THERE, JOE'S FLYING OUT NEXT WEEK DONT HELP HIMOUT. JUST SO YOU KNOW.

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