The logic behind Scott Kirby’s long-odds bet on a United Airlines deal

“Every senior executive should have to go play high-stakes poker with their own money,” Scott Kirby says, explaining how a lifetime of gambling has informed how he balances risks and rewards. United Airlines’ card-counting CEO was a good enough blackjack player to get banned by casinos from Las Vegas to the Caribbean, and he still believes in a calculated bet.

“The biggest mistake that most people make in their career is never making a big mistake because they never take a chance,” he tells The CEO Signal. If you just wait for sure things, “you don’t ever make any big mistakes, but you never do anything big.”

Kirby placed one of the longest-odds wagers of his career earlier this year, when he approached American Airlines — and, reportedly, Delta Air Lines — about a possible merger. Combining two of the three largest US carriers would transform the country’s aviation industry to such an extent that many analysts predicted regulators would never clear such a deal. By one calculation, a combined United-American would account for 40% of US domestic flying capacity.

American publicly rejected United’s overture, and Kirby admits that “my push on consolidation” remains “hypothetical” without a willing merger partner. Even so, that is not deterring him from making the case that United should be allowed to get much, much larger.

The Chicago-based company has improved its hand in his six years as CEO, Kirby says, strengthening its reputation and profitability as its stock climbed out of an industry-wide pandemic nosedive. But he still sees gaps in its network that would be hard to fill without a deal, from New York to Miami, and parts of the world, like the Middle East and Asia, where its service lags the best local flag carriers.

Kirby’s not asking for the state subsidies that some of those rivals enjoy, he says, but he wants “the scale to compete” with all of them. “I’d like to create an airline that all US citizens are proud of, and think of as a flag carrier.”

He is “100% certain that [a United-American] merger would be good for customers,” rather than raising prices for passengers, he says, anticipating the first question antitrust regulators would pose about a combination that his target dismissed as “negative for competition and for consumers.”

He is not chasing a rumored consolation-prize bid for the smaller, more digestible JetBlue, he adds. “It’s really just as hard to integrate a small airline as it is a big airline. So if you’re going to go through that brain damage, my first choice is do something big.”

How to turn a commodity into a beloved brand

Kirby’s contention is that opposition to further consolidation in his industry is rooted in an outdated view that air travel is a commodity product, where customers only care about which carrier has the most convenient schedule and the lowest price. His strategy at United has been all about proving that an airline can be something more.

The secret fact about his role is that “being a CEO is a pretty easy job,” Kirby says. He is just one person, he explains, “but if I can lay out a vision that people believe in and a direction that they want to go, and I’ve got 120,000 people that want to go there with me, nothing could stop us.”

The vision he is now setting out for them is not just that United should be the world’s best airline, but that it should aspire to become “one of the most loved consumer brands around.” That is not easy in an industry where extreme weather and air traffic control delays often leave passengers grounded and frustrated, he notes, but it starts with creating an airline that employees can be proud of.

United’s decision to replace “crappy” in-flight WiFi with SpaceX’s Starlink satellite internet service, and use of AI to improve how it communicates with customers about delays, helps that goal, Kirby believes. One of the simplest ways leaders can improve employee morale is to focus on fixing such everyday frustrations and “eliminate their need to apologize for anything,” he says. “If you’re apologizing, you’re behind the eight ball.”

But persuading customers to pick an airline for reasons other than flight times and prices is also about what it chooses not to do. Airlines can’t change the fees they pay airports or the price they pay for fuel, he notes, so executives who see air travel as an undifferentiated commodity end up cutting other costs at the expense of the customer, he says. The way the numbers stack up in those circumstances, “all you can do is take the cheese off the pizza.”

Placing big bets while watching ‘the risk of ruin’

Kirby studied at the US Air Force Academy, where he initially hoped to be a fighter pilot, and the mathematical equations that underpinned his degrees in computer science and operations research still run through his analysis of United and its industry.

His wagers, in casinos and in the boardroom, have all been “positive expected value gambling,” underpinned by mathematical strategy, he says. That means he places bets only when he calculates that the odds are in his favor, and that he is constantly looking for ways to avoid losing everything if his luck turns.

Smart gamblers always calculate their “risk of ruin,” he notes, so they bet in a way that even an extended run of bad luck will not bankrupt them. In business, he says, that means always keeping other options open. CEOs should be willing to make big bets, but to keep “an off-ramp” to avoid putting the company at risk if it all goes wrong.

Kirby applied his theory most prominently in June 2021, when United placed the largest aircraft order in its history, even as its passenger numbers remained far below pre-pandemic levels. That decision wasn’t much of a gamble, he says now: He was confident travel demand would recover, and his rivals’ caution about expansion also offered “probably the best risk-reward [balance] that will ever exist in the history of the industry.”

When United’s directors pressed him on whether he was sure about committing to such a large order, he told them “Because everyone else is shrinking, we don’t actually have to be totally right. We just have to not be totally wrong.” Underscoring his confidence, he also told the board that if he turned out to have miscalculated, “you guys should fire me.”

CEOs need to do the right thing for the long term, he says, but they should also accept that if they turn out to be wrong, “you should lose your job over it.”

How a ‘math guy’ learned to look beyond the spreadsheets

For all of Kirby’s belief in his ability to weigh the odds, he has also learned that arithmetic alone does not make a CEO successful. Soon after he joined United as president a decade ago, the then-CEO Oscar Munoz warned him that employees “think you’re just this math guy that only cares about the number.”

The intervention caused Kirby to rethink how he communicated with staff. But it also encouraged his belief that executives should always look hardest at what is being fed into the equations that guide them.

“Spreadsheet conclusions are toxic,” he says. “The important thing to do when you’re looking at a spreadsheet analysis — or any kind of analysis — is to understand what the assumptions are and question the assumptions. That’s where the value is created.”

Kirby’s belief that a wide lens matters as much as a “mathematical mentality” drives his daily routine. He keeps meetings to no more than four hours a day and spends three hours reading, consuming the Wall Street Journal “cover to cover” and two books a week.

Reading “is the number one thing you can do to connect dots” in the CEO’s role, he says, adding that the stack of books he consumed on the history of Iran convinced him by mid-March that United should plan for an “indefinite” US-Israeli conflict with Tehran.

AI summaries of lengthy documents are also not for him. The facts that are likely to show him “where everyone else is wrong” are often hidden in the footnotes, he says, so “that’s where you create value.”

Kirby’s voracious reading habits don’t stop him getting eight and a half hours of sleep each night, or taking daily 15 to 20-minute naps. “If you’re spending your time looking at yesterday’s detailed metrics, you’re doing the wrong thing,” he explains. “My job is to be focused over the horizon, [on] what’s coming that no one else sees yet.”

The further you go in your career, and certainly by the time you become CEO, he says, “Your job is not to work hard, it’s to think hard.”