Andrew Nocella
Executive Vice President and Chief Commercial Officer at United Airlines
Thank you, Emily, and thank you all for joining us today. I want to start this morning by saying a huge thank you to the United team. Our mission is uniting people and connecting the world and the foundation of United success will always be the strength of our people.
In the first quarter of this year, our team members continued to go above and beyond to take care of our customers and each other in what was a really difficult industry operating environment. The United team is stronger than ever. Our customers are seeing it and I along with the entire leadership team are grateful to them.
Our United Next strategy is firmly on track and we're well on our way to our goal to build the biggest, best, the most profitable major airline in the history of the industry. Even during the early days of the pandemic, we were determined to do much more than just survive the pandemic and get back to normal. We've spent the last two years getting United ready -- Airlines ready for this moment. We finally reached the inflection point as we transition from pandemic to endemic. And demand is stronger than I've ever seen in my career and that's even before business travel fully recovers, though it continues to accelerate at a rapid pace and before international especially, Asia fully recovers. We expect that will lead to the best TRASM and highest quarterly revenue in our history in 2Q and despite the higher fuel prices, we're forecasting approximately a 10% operating margin this quarter.
The rapid acceleration we're seeing in business and long-haul as they move to catch up still strong domestic leisure demand gives us great confidence in the future outlook. But there are three reasons we believe investors should think that the hard work and strategic thinking, that were our focus during the pandemic, have United best positioned going forward.
The first, the United brand and customer preference. Throughout the pandemic, we've talked about our desire to decommoditize air travel and we've told you how stronger our NPS scores are. If I look back at history, what we're really doing is trying to replicate what Continental successfully accomplished back in the '90s and Delta did about 15 years ago. Those two airlines shifted to a strong customer focus and customers began to choose them because of their improved customer interactions and brands.
The result was rapid improvement in relative TRASM, which led to rapid improvement in cash flow and earnings, which led to significant stock price outperformance. For anyone paying attention, there have been hints that the same thing was happening at United throughout the pandemic as we led major carriers in TRASM, in seven out of the last eight quarters. But that really was the warm up. I recognize we still have a lot to prove and we must keep executing, but our TRASM outlook for 2Q is another strong indicator that customers are now choosing United, much like they began choosing Continental and Delta 30 and 15 years ago.
Second, CASM-ex. There's a lot of industry pressures on capacity and CASM-ex but I am confident that United has set up to outperform by a wide margin. We do have timing issues with 777s, Boeing delivery delays, and all the invas -- industry infrastructure required to bring capacity back reliably. And doing so reliably is our top focus. But ultimately, our gauge is going to grow approximately 30% by 2026 and that more than anything is going to drive the significant CASM-ex outperformance we expect at the same time imp -- improving the product for our customers.
Three, United is uniquely positioned to benefit from fading COVID headwinds. As Andrew will detail, business travel is rapidly returning but it's still not fully recovered and we expect United will benefit more than any other airline as that recovery continues. And international, especially Asia, is far from fully recovered. United is just more exposed to those sectors that we expect to have the most acceleration in the coming quarters.
If you're going to invest in airlines, I think any of those three reasons should move United to the top of your pecking order, but I'll give you one more, I think under-appreciated reason for why you should invest in airlines in the first place.
At United, we've talked in the past about the vastly improved supply-demand mix in the long-haul international markets but we've been worried about the domestic market. For reasons I'll describe and I think the domestic market is also going to be robust. I think every single person listening to this call that has a spreadsheet with a forecast of industry capacity in the years to come is wrong and probably wrong by a lot. The pilot shortage for the industry is real and most airlines are simply not going to be able to realize their capacity plans because there simply aren't enough pilots, at least not for the next 5 plus years.
Given the work that we've done on our brand and customer experience, United, of course, isn't having any problems hiring pilots. We are always top tier for pilot pay, have a ton of growth opportunities for pilots coming soon, and we have, by far, the largest number of higher-wide -- higher paying wide-body flights in position. But that's not all. United increasingly is where employees including airline pilots want to build a career. They see the lucrative financial opportunities that I just mentioned but they also recognize that United is an airline where they can be proud to work.
From running a consistently top-tier operation to exciting new investments in our customers experience, to supersonic aircraft orders, to being a force for good in the communities we serve, we're building an airline that leads and that is where the best in the industry want to build a long-term career. In fact, we now see a lot of pilots from other airlines applying to be pilots at United and that's new behavior.
While we are in a good position for the smaller and mid-tier airlines, there just aren't enough pilots to staff their growth aspirations. The other really large airlines will also probably be able to attract enough pilots, but for anyone else, I just don't think it's mathematically possible to meet the pilot demand for the capacity plans that are out there. You can already see the issues that are occurring at multiple smaller and mid-tier airlines over pilot shortages and looking forward, when United alone is ramping up to hire about 200 pilots per month, that situation is only going to get worse. This is not a temporary issue. Because of that, I now think the domestic TRASM environment is going to be much stronger in the years to come than we previously thought because supply is going to be constrained by lack of pilots.
You put all that together and we feel very bullish. The last two years have obviously taught us that macro events can quickly change our outlook. But our 2Q base expectation has us just 350 basis points shy of our 2019 adjusted operating margin. And we expect that our plans to bring the 777s back, continually to grad -- continue to gradually add back capacity, and grow gauge are going to drive CASM-ex down significantly from their still COVID-elevated level.
We're also confident that the robust business travel recovery still has a lot of room to run and we anticipate improvement in long-haul Asia that is not yet reflected in our revenue results. That means we're more confident than ever, that we'll meet or exceed our approximately 9% adjusted pre-tax margin target for next year, and particularly with our view of the supply dynamics in both domestic and international getting to at least our 14% target for 2026 seems pretty straightforward. I've been in this industry for a long time now. I've seen some ups and lots of big downs.
Looking back, there seems to be about once in a decade opportunity where the sentiment gets so bearish and the actual future outlook is so different from that sentiment that there is a significant outperformance for airline stocks for a few years. I think supply constraints, pilot being the biggest one, means this is that time again. And when that's happened in the past, the whole industry tends to do well but usually one or two airlines do much better than the rest of the pack. We've already listed the reasons above and I suppose I'm not entirely objective, but it sure seems like United is the bet you want to make in that environment.
Before I turn it over to Brett, I want to congratulate our CFO, Gerry Laderman on becoming a first time grandfather. I'm sure you'll hear the excitement in his voice later today. Well, maybe not, but I promise you, Gerry is really excited and congratulations on that cute baby grandson. Brett?
