United Airlines Q4 2024 Earnings Report

United Airlines EPS Results

• Actual EPS: $3.26
• Consensus EPS: $2.96
• Beat/Miss: Beat by +$0.30
• One Year Ago EPS: $2.00

United Airlines Revenue Results

• Actual Revenue: $14.70 billion
• Expected Revenue: $14.40 billion
• Beat/Miss: Beat by +$295.70 million
• YoY Revenue Growth: +7.80%

United Airlines Announcement Details

• Quarter: Q4 2024
• Date: 1/21/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, January 22, 2025
• Conference Call Time: 10:30AM ET

United Airlines (NASDAQ:UAL) is a leading airline holding company with a rich history and a prominent position in the aviation industry. Originally founded in 1926 as UAL, Inc., the company has evolved through various mergers and acquisitions to become its current entity. United Airlines Holdings owns and operates United Airlines, Inc., one of the world's largest and most well-known airlines.

United Airlines Holdings is committed to connecting people and uniting the world through its air transportation services. The company's mission is to provide customers with safe, reliable, and efficient air travel while delivering exceptional customer service and a seamless travel experience.

The company primarily focuses on offering passenger air travel services, cargo transportation, and related services. United Airlines operates an extensive network of domestic and international flights, serving various destinations across the globe.

The leadership team at United Airlines Holdings is led by Chief Executive Officer and Director J. Scott Kirby, who brings a wealth of experience and expertise to the company. Mr. Kirby has been crucial in steering the company's growth and strategic direction. Each management team member possesses a diverse professional background and has contributed significantly to the company's success.

Over the past few years, United Airlines Holdings has demonstrated remarkable financial performance. The company's revenue has experienced substantial growth, reaching nearly $50 billion in the most recent fiscal year, reflecting its robust revenue generation capabilities. United Airlines Holdings reported impressive earnings per share in the most recent fiscal year, demonstrating the company's profitability and ability to generate earnings for its shareholders.

The company's profit margins have also remained healthy, with net margins at around 4% and pretax margins at about 5%. These metrics showcase United Airlines Holdings' efficiency in managing costs and optimizing operations. It is important to note that the aviation industry can be highly volatile, and factors such as fuel prices, geopolitical events, and global economic conditions can significantly impact the company's financial performance and stock price.

United Airlines Holdings' stock performance has experienced fluctuations in response to factors like the pandemic-era travel bans, recent company news, and events. External factors such as changes in fuel prices, travel demand, regulatory environment, and geopolitical developments can influence the company's share price. Investors and analysts closely track the company's financial reports and key performance indicators to gauge the overall health of the company and make informed investment decisions.

United Airlines Holdings operates in the highly competitive air transportation industry, a dynamic sector that continually adapts to market dynamics, consumer preferences, and regulatory requirements. This ever-changing landscape challenges airlines, including United Airlines Holdings, as they strive to stay ahead of the curve. United Airlines Holdings faces formidable competition from a wide range of domestic and international airlines in this fiercely competitive industry. Rival carriers vie for market share, seeking to attract passengers with competitive pricing, innovative services, and enhanced customer experiences.

United Airlines Holdings leverages several distinct advantages contributing to its strong competitive positioning. One such advantage is its extensive route network spanning key global destinations. This vast network allows the airline to serve diverse markets and connect travelers to various regions worldwide. Additionally, United Airlines Holdings' membership in the Star Alliance, a global airline alliance, further enhances its competitive edge. This alliance opens doors to new markets, facilitates seamless travel itineraries, and fosters potential partnerships with other member airlines.

United Airlines Holdings enjoys a loyal customer base cultivated through its commitment to high-quality service, safety, and customer satisfaction. The airline's focus on enhancing the travel experience has earned it the loyalty of frequent flyers and business travelers who value reliability, convenience, and personalized services.

To sustain its growth and capitalize on emerging opportunities, United Airlines Holdings actively explores several avenues for expansion. The company seeks to expand its route network, identifying underserved markets and strategic destinations for future growth. The airline aims to cater to evolving travel demands and attract a broader customer base by connecting new cities and regions.

Customer experience remains a top priority for United Airlines Holdings, prompting the company to invest in innovative technologies and services. By leveraging digital solutions, personalized amenities, and streamlined processes, the airline aims to elevate the travel experience for its passengers. Moreover, the company's focus on sustainable aviation practices aligns with the growing global emphasis on environmental responsibility. United Airlines Holdings invests in fuel-efficient aircraft, sustainable fuel sources, and emission reduction initiatives, positioning itself as a leader in responsible aviation.

Despite its successes, United Airlines Holdings faces an array of risks and challenges, requiring strategic risk management and adaptability. External factors, such as economic downturns, can influence travel demand and disrupt revenue streams. Fluctuating fuel prices are a perennial challenge for airlines, impacting operating costs and profitability. Natural disasters and geopolitical tensions can create uncertainties, affecting the company's operations and financial performance.

Furthermore, the airline industry's sensitivity to changes in consumer behavior and travel preferences warrants vigilance. Evolving consumer trends, such as increased demand for sustainable travel and contactless services, necessitate continuous innovation and responsiveness to meet customer expectations.

United Airlines Q4 2024 Earnings Call Transcript

Key Takeaways

• United delivered a record pre-tax margin of 9.7% in Q4 and full-year EPS of $10.61, reflecting strong execution of its United Next plan and resulting in $713 million in profit sharing.
• Operationally, the airline served a record 174 million customers last year, achieved #1 on-time departure performance at all seven hubs and reduced crew-related cancellations by 82%, despite 66% of delays still driven by ATC constraints.
• Revenue trends accelerated in Q4: TRASM rose 1.6% on higher capacity, Pacific PRASM swung to +4.1%, Atlantic PRASM was +7.1%, cargo revenues jumped 30%, and business and premium traffic remained robust.
• For 2025, United expects ~18% EPS growth at the midpoint, Q1 EPS of $0.75–$1.25, ~$3.4 billion in free cash flow, and continued network investments including Starlink high-speed Wi-Fi and app enhancements.
• Fleet plans include 71 narrowbody and 10 widebody deliveries next year, CapEx below $7 billion, $17.4 billion in liquidity, and a target to reduce net leverage below 2x while maintaining an opportunistic share buyback program.

Presentation

[Operator]

Good morning, and welcome to United Airlines Holdings Earnings Conference Call for the 4th Quarter and Full Year 2024. My name is Regina, and I will be your conference facilitator today. Following the initial remarks from management, we will open the lines for questions. This call is being recorded and is copyrighted. Please note that no portion of the call may be recorded, transcribed or rebroadcast without the company's permission.

[Operator]

Your participation implies your consent to our recording of this call. If you do not agree with these terms, simply drop off the line. I will now turn the presentation over to your host for today's call, Christina Edwards, Managing Director of Investor Relations. Please go ahead.

[Kristina Edwards, Managing Director - Investor Relations at United Airlines]

Thank you, Regina. Good morning and welcome to United's 4th quarter and full year 2024 earnings conference call. Yesterday, we issued our earnings release, which is available on our website at ir.united.com. Information in yesterday's release and the remarks made during this conference call may contain forward looking statements, which represent the company's current expectations, which are based upon information currently available to the company. A number of factors could cause actual results to differ materially from our current expectations.

[Kristina Edwards, Managing Director - Investor Relations at United Airlines]

Please refer to our earnings release, Form 10 ks and 10 Q and other reports filed with the SEC by United Airlines Holdings and United Airlines for a more thorough description of these factors. Unless otherwise noted, we will be discussing our financial metrics on a non GAAP basis on this call. Please refer to the related definitions and reconciliations in our press release. For a reconciliation of these non GAAP measures to the most direct fully comparable GAAP measures, please refer to the tables at the end of our earnings release. Joining us today on the call to discuss our results and outlook are Chief Executive Officer, Scott Kerberty President, Brett Hart Executive Vice President and Chief Commercial Officer, Andrew Fella and Executive Vice President and Chief Financial Officer, Mike Luskinen.

[Kristina Edwards, Managing Director - Investor Relations at United Airlines]

In addition, we have other members of the executive team on the line available for Q and A. And now I'd like to turn the call over to Scott.

[Scott Kirby, CEO at United Airlines]

Thanks, Christina, and thanks to everyone for joining us today. I want to begin by saying that our thoughts are with those affected by the wildfires in the Los Angeles area. We've been in close touch with our employees and communities in the area to offer them support. We'll continue to monitor the situation to see if there are more ways that we can help. Turning to earnings.

[Scott Kirby, CEO at United Airlines]

2024 was another solid proof point on our way to double digit margins. By the fall of 2020, several months after COVID struck, we at United had a clear vision of how our airline and the industry were going to evolve. 2024 seems to have been the year that we gained broad recognition from others that the vision is playing out as we expected. Our outlook has always been based on a realistic view of how the economics of the industry were going to change and how those changes had the potential to drive structural, permanent and irreversible changes in the entire industry. Our 2024 plan developed from what that vision and our results were the culmination of years of thoughtful planning, bold action and strategic investments.

[Scott Kirby, CEO at United Airlines]

I'd like to thank our employees for these stellar results and I'm proud to say that we'll be paying out $713,000,000 in profit sharing this year. In 2024, United continued to make progress with our UnitedLex plan and once again delivered earnings within our original range. Our investments over the last several years have further differentiated United from the rest of the industry and led to strong customer preference for the United brand. But the bigger point here is that the changes led to this moment are structural and durable. Cost convergence, which we first talked publicly about on this call in Houston 2 years ago, combined with effective revenue diversity at United for the first time ever and industry leading product and service causing customers to choose United are just irreversible structural changes that have created a competitive moat for United.

[Scott Kirby, CEO at United Airlines]

Answering an analyst question 2 quarters ago, I talked about how this feels very much like 2012 to 2014. But today, I'll add that there are 2 additional tailwinds this time around. The international environment, which Andrew will discuss in more detail, is going to be far stronger for longer because of the structural supply constraints that are going to last at least for the rest of this decade. Wide body supply, both airframes and engines, is even more challenged than narrow bodies. And second, domestically, the seeds of the 2012 to 2014 era's demise were being sown at the time with 15% to 20% growth from the ULCCs.

[Scott Kirby, CEO at United Airlines]

It's very hard to see that happening again. Importantly, all of this means that the industry is evolving into an equilibrium where each airline driven by economic necessity will be primarily focused on flying where they have a competitive advantage. Different airlines have different competitive strengths and weaknesses in the post COVID era. Cost convergence has been the most impactful at the big high cost airports in the country. The cost per passenger in the 3 New York City airports is $48 compared to the average ULCC fare of $67 in those 3 airports.

[Scott Kirby, CEO at United Airlines]

When an airline is spending 72% of their fare on airport costs, it's hard for me to imagine that they could ever be profitable in those airports. At the same time, LCCs do have an advantage and will always be able to be more profitable than United in point to point low cost airports. It really is a transformed industry and United more than anyone is leading the way. We have 7 great hubs. We are well ahead of the curve in investing for the future and we're focusing all of our efforts in growth in our hubs where we have the competitive advantage.

[Scott Kirby, CEO at United Airlines]

The combined virtues of our size and our innovative culture make us a competitive juggernaut. We know who we are. We know our strength. We also know our weaknesses. And we're going to focus on our strength and nothing else.

[Scott Kirby, CEO at United Airlines]

But we won't rest on our laurels and we'll never be complacent or satisfied with our results. We'll continue to be an airline where good leads the way by focusing on ways to even better airline for our customers. Starlink is one of the most obvious high profile investments for customers, but it's really just the visible tip of the iceberg. Our digital team is expanding our best in the world technology by making further improvements to make the airline even more transparent and easy to do business with. And our ops team is focused on changing the unchangeable and trying to solve problems that no other airline in the world has ever even tried to fix.

[Scott Kirby, CEO at United Airlines]

And we'll continue to invest in a brand that inspires pride in employees and customers alike. This year, we expect to grow our EPS by approximately 18% at the midpoint and we'll deliver strong free cash flow while continuing to invest in the future. That includes signing industry leading contracts with our United team, which is made up of the best aviation professionals in the world. We are the best airline in the history of aviation and we're going to continue to raise that bar. That's been and will continue to be increasingly good for our employees, customers and our shareholders.

[Scott Kirby, CEO at United Airlines]

And with that, I'll turn it over to Brett.

[Brett Hart, President at United Airlines]

Thank you, Scott, and good morning. 2024 was an exceptional year for United. The investments we've made to improve our operational reliability and resilience have driven top tier results. We served a record nearly 174,000,000 customers last year and finished the year first in on time departures at all 7 of our hubs. We had the busiest December in our history, flying on average 511,000 people a day.

[Brett Hart, President at United Airlines]

And when so many of our customers were counting on us to get them home safely for the holidays, we closed out the month of December ranked number 1 in on time departures. I want to thank the incredible professionals at United who worked through the holidays and through tough weather to deliver for our customers. Thanks to enhanced processes for recovering crews during our regular operation events, we achieved an 82% reduction in crew related cancellations compared to 2 prior years. Additionally, we continued refining our aircraft turn process, focusing on key components such as aircraft cleaner time and boarding efficiency, driving improved turnaround speed and overall operational performance. In 2024, we had the company's best post pandemic turn execution, reducing cancellations and improving efficiency, both meaningfully cut costs and results in a much better experience for our customers.

[Brett Hart, President at United Airlines]

Despite that progress, staffing at the FAA remains a challenge for the airline industry and most importantly, the traveling public. In 2024, even on clear Blue Sky days, 66% of United's delays were driven by ATC challenges in technology and staffing. We remain engaged with leaders in Washington and in both parties to get the FAA the resources they need, and we'll look for opportunities to work with the new Congress and new administration to achieve that goal. Over the last several years, our culture of innovation has fueled countless advancements in technology and empower our employees and improve customers' experiences. In just the last several months, our team has developed new capabilities for our award winning app, like integrating Apple AirTag data to help us reunite customers with their bags and allowing customers to select seat preferences, so they can get moved to the seat they prefer automatically as soon as it becomes available.

[Brett Hart, President at United Airlines]

Translating our entire app into Spanish drove usage even higher and now nearly 90% of customers engage with our digital channels on the day they travel. In 2024, these and other app enhancements enabled half of our customers who experienced a cancellation to utilize a self-service or automated method to get back on their way, a 28% increase year over year. Our industry leading app has led to happier customers who have more control over their travels and employees who have more time to help customers who most need it. At United, we're proud of this culture of innovation because it's central to our effort to differentiate our good leads away brand and give our customers even more reasons to choose United. With that, I'll hand it over to Andrew to review our strong revenue performance in 2024 and discuss our expectations for revenue environment in 2025.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Thanks, Brett. The 4th quarter revenue environment materially improved as the capacity backdrop for the industry became more constructive. United's Q4 TRASM increased 1.6% year over year on a 6.2% increase in capacity. The Sunday after Thanksgiving was our best revenue day in history, shattering the former record by 25%. United's domestic capacity increased 7.8% in Q4 with RASM down 1.9%.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

We project domestic RASM will turn solidly positive in Q1. The domestic pricing environment is improving as underperforming airlines remove unprofitable capacity at an increase in rate and business traffic growth accelerates. Industry fare sales are less prevalent with lower discount rates as airlines are prioritizing profitability. All United hubs were profitable in Q4 and for the last 12 months with only a 7 point pretax margin difference between the best and the worst performing hub, the narrowest spread we've recorded in a quarter since 2016. Our network health is very strong with room for margin expansion as we continue our United Next plan.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

After years of waiting, we're also finally starting to gain a critical mass of larger narrow body aircraft, which allows us to execute on our plans to increase gauge. United's international capacity was clearly the star of the quarter in terms of RASM growth relative to Q3. As a result, international margins continue to outpace domestic margins in 2024. United's plan during the pandemic was to double down on international flying and it's proven to be the right move. Q4 Pacific capacity moderated and China headwind slowed versus Q3 resulted in PRASM flipping from down 15.7 percent to up 4.1%.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Pacific PRASM was up high single digits for the last 2 thirds of the quarter versus last year. United has profitably digested a 31% increase in Pacific capacity in 2024, and we have now fully reinstated our pre pandemic capacity levels across the region with margins that are now above system averages. In the past, the Pacific margins routinely lagged. We plan to moderate our Pacific growth as we head into the first half of twenty twenty five, letting capacity added in 2024 mature. During 2025, we are excited to launch a new initiative to operate 737s on a small number of Narita feed flights to destinations in Asia that do not support nonstop service to the U.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

S. We anticipate this unique initiative made possible by our Guam base will extend our lead as the largest transpac carrier, build an unmatchable network scope. We're going to redeploy underperforming assets and efficiently grow load factors from Japan to the U. S. Where local origin demand still is not fully recovered from the pandemic.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

2024 was also a great year for United's Atlantic network and Q4 was no exception with PRASM up 7.1% on flat capacity. We entered 2024 pausing capacity growth for the year in the Atlantic after rapid growth in the region post pandemic. Our plan for 2024 worked extremely well. All months in Q4 are PRASM positive year over year with December RASM up double digits. United is the largest U.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

S. Carrier flying over the Atlantic by ASMs. And in 2025, we plan to have low to minimal capacity growth in Q1 to support continued PRASM strength. From what we see today, we expect Q1 to be our best Atlantic Financial result in the company's Q1 histories. Latin America trailed the other regions throughout 2024.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

However, it's important to note that United continued to operate profitably in the region despite these challenges. PRASM was up slightly in Q4 and the outlook for early 2025 is positive. Overall, the momentum for international flying in the Q4 was exceptionally strong. We believe the panderecera global long haul reset, along with a sluggish delivery rate of new wide body jets sets up the industry really well for years to come in international flying. Cargo also had a very strong showing in 2024.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Cargo revenues for the year were up nearly 17% and up almost 30% in Q4 versus last year. It was a very good quarter and year for Cargo. The business traffic recovery was a nice tailwind in Q4. Results in Q4 and our outlook for Q1 clearly showed this strength in higher yield corporate traffic volumes. Flown business revenue grew 16% in Q4 year over year.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

We expect that trend to continue in Q1, which is a tailwind for our business focused network. Contracted business sales in the quarter for all future travel were up 14% year over year. Premium passenger revenues increased 10% year over year and premium cabin unit revenues were positive, both trends that persisted throughout the year. We see no change in consumer behavior seeking out increased premium experiences, but we also remain committed to our most basic products. In Q4, basic economy passengers increased 21% year over year and now represent 15% of domestic passengers, up 2 points versus 2023.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Loyalty revenues grew at a healthy pace at 12% in 2024. Co brand spend was up 9% with 1,000,000 new card acquisitions. Turning to the product. We reached a milestone of deployment of our signature interior with nearly 50% of the fleet work complete as of year end 2024. With installation work moving quickly now, we expect to be at 70% by the end of 2025.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Across the entire United network, we expect to have 150,000 seatback screens full of rich content available to all of our passengers with a better ability to personalize everyone's experience by the end of 2025. As you can see from our Q1 outlook, we continue to make progress on improving the financial performance of that quarter. Changes to our capacity deployment across hubs, days of week and time of day have been very effective. Return to more corporate traffic and the desirability of Southern European vacation in the winter is also a tailwind. As we announced a few weeks ago, we're tracking ahead of our schedule on Starlink installation, which we think will be a material advantage versus slower 4 ks Wi Fi services offered by other U.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

S. Carriers. United's StarLink plan is yet one more action to elevate our product, creating a brand customers choose more and more often. We will share more on product innovation, merchandising and capacity optimization in the coming year further in our lead. We will also talk about how we believe STARLINK will unlock a host of new digital benefits for our customers and shareholders.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

We believe that creating more choice, more segmentation and enhancing our products is the winning formula. Merchandising, selling and managing the complexity of these multiple experiences is our proven expertise. With that, I want to say thanks to the entire United team for an amazing 2024 and I'll hand it off to Mike to talk about our financial results. Mike?

[Mike Leskinen, EVP & CFO at United Airlines]

Thanks, Andrew. We delivered record 4th quarter earnings with earnings per share of 3 point 26 dollars ahead of expectations and a 4th quarter pre tax margin of 9.7 percent, up 3.5 points year over year. These strong 4th quarter results brought our full year earnings per share to $10.61 above the midpoint of our initial guidance range of $9 to $11 Much of this success is due to the strong revenue performance that Andrew just discussed. But the foundation of our success is a strong operation and I'm incredibly grateful for the tremendous efforts of our operations team this quarter. Our hubs are in some of the most congested airspace in the world and still we delivered industry leading operational performance during the quarter.

[Mike Leskinen, EVP & CFO at United Airlines]

Importantly, an operation that runs on time and with few cancellations is also a more cost efficient operation. Finally, I'd like to celebrate our stock performance over the last 12 months. In 2024, we were the 4th best performing stock in the S and P 500. I've long believed in the potential for a stock to rerate given the structural improvements in our business. It's nice that the market is beginning to recognize the shareholder value we've delivered.

[Mike Leskinen, EVP & CFO at United Airlines]

For the Q1 of 2025, we expect earnings per share of $0.75 to $1.25 and approximately $400,000,000 improvement from the Q1 of last year at the midpoint, implying an approximately 3.5 point improvement in pre tax margin. The commercial team has done a great job of continuing to shape the network to match demand in what has historically been our seasonally weakest quarter. Further building off Q1 momentum, we expect full year 2025 earnings per share to be between $11.50 $13.50 At the midpoint, this represents 18% growth in earnings per share versus 2024. We expect a similar pace of earnings growth is sustainable as we march toward low double digit pre tax margin. We have decommoditized air travel.

[Mike Leskinen, EVP & CFO at United Airlines]

Our operation is strong and the United Next plan continues to deliver both higher and more sustainable profits. Airlines with less competitive offerings are cutting money losing routes and frequencies. The industry setup has never been better and we believe United is uniquely positioned to succeed. On costs, CASM ex was up 5% on 6.2% capacity growth versus the Q4 of last year. As we look ahead to 2025, we are focused on driving efficiency improvements throughout the business, while also improving the experience for our customers and enabling our employees to be more effective at their jobs.

[Mike Leskinen, EVP & CFO at United Airlines]

For the year, we continue to expect 2 to 3 points of CASMex pressure from our labor agreements not yet signed. Shifting

[Mike Leskinen, EVP & CFO at United Airlines]

gears

[Mike Leskinen, EVP & CFO at United Airlines]

to the fleet. In the Q4, we took delivery of 5 Boeing MAX Aircraft, 14 Airbus A321neo Aircraft and 3 Boeing 787s. In 2025, we are planning to take delivery of 71 narrowbody aircraft and 10 widebody aircraft. Recall, we had been planning for approximately 100 narrowbody aircraft deliveries in 2025, but due to the OEM production delays, we are planning for less, which leads to our expected full year CapEx spend to be below $7,000,000,000 That's below the low end of our $7,000,000,000 to $9,000,000,000 multi year guidance. Turning to the balance sheet.

[Mike Leskinen, EVP & CFO at United Airlines]

We ended the year with $17,400,000,000 in liquidity, including our undrawn revolver. We generated $3,400,000,000 of free cash flow. In 2024, we paid down $7,400,000,000 of debt, dollars 3,600,000,000 of which we voluntarily prepaid. We've now prepaid or refinanced our remaining high cost COVID error debt, bringing our total cost of debt down to 4.6%. Our net leverage was 2.4 times at year end, an improvement as we make progress to our long term net leverage target of less than 2 times.

[Mike Leskinen, EVP & CFO at United Airlines]

On the buyback, in the quarter, we repurchased $81,000,000 worth of shares, leaving over $1,400,000,000 left in the authorization. We remain firm believers that United stock is undervalued as we continue to grow earnings and margins year after year with further room for multiple expansion. Finally, I want to reiterate the consistent and growing free cash flow generation remains a top priority. And in 2025, we are targeting free cash flow around the $3,400,000,000 we delivered in 2024. The future at United Airlines has never looked brighter and I'm excited as we continue to build upon our competitive advantages in 2025 and beyond.

[Mike Leskinen, EVP & CFO at United Airlines]

Now back to Christina to start the Q and A.

[Kristina Edwards, Managing Director - Investor Relations at United Airlines]

Thank you, Mike. We will now take questions from the analyst community. Please limit yourself to one question and if needed, one follow-up question. Regina, please describe the procedure to ask a question.

[Operator]

Thank you. Our first question comes from the line of David Vernon with Bernstein. Please go ahead.

[David Vernon, Vice President and Senior Analyst at Bernstein]

Hey, good morning guys and thanks for taking the question. So Mike, maybe could you talk a little bit about how much of the trend improvement you're seeing in 1Q and how that extends kind of into the full year guide? I'm trying to get a sense for whether the range that you're putting out there for us for the year contemplates things continuing to get better from where we are today or kind of just a reflection of where we are today?

[Mike Leskinen, EVP & CFO at United Airlines]

Hey, thanks David. I love the question. We've had a long standing policy of setting guidance with a no excuses philosophy and that has served us well. We delivered over 3 points of margin expansion in Q4 and I expect to deliver 3 points to 4 points of margin expansion again in Q1. We'll continue to build a single act of God into our longer term guidance so that we deliver even in imperfect conditions.

[Mike Leskinen, EVP & CFO at United Airlines]

That's kind of a hallmark of our guidance strategy. It's pretty easy, however, for us to sit here and think there's opportunity in the back half of the year and then we could do even better than our full year guide.

[David Vernon, Vice President and Senior Analyst at Bernstein]

All

[David Vernon, Vice President and Senior Analyst at Bernstein]

right. Thanks for that. And then, just to be clear about the guidance range as well, that includes the incorporation of some potential flange in the deal in the course of the year, correct?

[Mike Leskinen, EVP & CFO at United Airlines]

Yes, it does and it always does.

[David Vernon, Vice President and Senior Analyst at Bernstein]

All right. Thanks very much for the time guys.

[Operator]

Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Please go ahead.

[Sheila Kahyaoglu, Aerospace & Defense and Airlines Equity Research at Jefferies Financial Group]

Good morning. Congrats team on great results. So, Mike, maybe this one's for you since you entered your script with the stock is undervalued, but bought back only $81,000,000 in Q4. So great free cash flow in 2024, dollars 3,400,000,000 The guide is for 20% earnings growth and CapEx is up less than expected. So it would suggest free cash flow north of $2,500,000,000 to $3,000,000,000 in $25,000,000 How are you thinking about your deployment priorities towards your leverage targets with the voluntary prepayments as well versus share repurchases?

[Mike Leskinen, EVP & CFO at United Airlines]

Thanks, Sheila. And let me remind everyone that over the last 4 years, we've also invested $32,000,000,000 in our business and our people, which has been central to our success. The strong performance in our valuation, it was a steep increase just as soon as we announced the share buyback authorization late last year. And so this Q1 out of the gate regarding the buyback, we started conservatively. It seems like a reasonable approach.

[Mike Leskinen, EVP & CFO at United Airlines]

Right now we have to balance our improvement in our balance sheet and repurchasing shares. And so I think that was the right approach. We're really pleased to see the stock moving so strongly. We were number 4 out of the S and P 500 last year. I mentioned that in my script.

[Mike Leskinen, EVP & CFO at United Airlines]

And you'll continue to see an opportunistic repurchase of shares as we move forward through 2025. I'll remind you that we've got $1,400,000,000 in authorization, expect continued multiple expansion. We're going to be really, really deliberate about that. I'll also add that the deleveraging, that we this journey that we're on, we expect to reach below 2 times net leverage during this calendar year.

[Sheila Kahyaoglu, Aerospace & Defense and Airlines Equity Research at Jefferies Financial Group]

Great. Thank you.

[Operator]

Our next question comes from the line of Connor Cunningham with Melius Research. Please go ahead.

[Conor Cunningham, Director - Travel & Transports Analyst at Melius Research LLC]

Hi, everyone. Thank you. On basic economy, can you talk a little bit about,

[Conor Cunningham, Director - Travel & Transports Analyst at Melius Research LLC]

I mean, in the script you talked about how the industry is discounting a lot less and there's obviously a big move in premium from the low cost guys. Can you just talk about how you're going to deploy basic economy? Is there an evolution in how that changes? It just seems like there's going to be the barbell approach that you had this last couple of years before the industry really structurally changes, maybe that evolves on how you deploy the basic economy side of the equation overall? Thank you.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Thanks, Connor. It's Andrew. I would say as we look out into the 12 months, we don't intend to change that, that we're incredibly happy with the effectiveness of basic economy, particularly as we grow our gauge as a competitive tool. It's done exactly what we wanted it to do. And it does seem to me the more of it we do, actually the better off we are.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Obviously, there are points. We are clearly balancing multiple product types in our quiver here and many of it premium, but also basic. And we truly believe that a broad spectrum of choice for consumers and being able to offer the lowest possible fare to flying United where you get a signature interior, seat back entertainment, free Wi Fi is the win in recipe and we're not going to change that recipe as we go through 2025.

[Conor Cunningham, Director - Travel & Transports Analyst at Melius Research LLC]

Okay. And then maybe big picture, your relative margin performance obviously speaks to your willingness to adapt to the environment overall. But the United Next Day, we talked a ton about up gauging and obviously there's been a lot of delivery delays and so on. So I'm just trying to understand on your conviction level around the up gauging strategy. Do you have a lot of that baked into 2025?

[Conor Cunningham, Director - Travel & Transports Analyst at Melius Research LLC]

It just seems like there's still multiple margin points that you have from these uniquely United opportunities that you have going forward. Just any thoughts there? Thank you.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Yes. Look, I think gauge is it's not a secret weapon, but gauge is I think really important to us. For 2025, gauge is not moving a lot. The delivery delays have been extensive and our ability to put RJs back to full utilization proved to be the right decision for 2025. What I can say is as we look out through the end of the decade, I believe we have the highest gauge possibilities, which is going to be great for the business, great for our unit costs and great for our customers because these new aircraft have incredibly high NPS scores as we bring them online.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

So we think there's an incredible amount of runway related to gauge. We obviously operate in hubs that are gigantic from local population base, but they're also now some gigantic from a connectivity base, allowing us to use these larger gauge aircraft. We're behind on this. I think this summer we had 12 A321s that see 200 people. Next summer we have I think in the mid-40s.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

And that's probably still 150 aircraft behind our nearest competitor. And as we said over and over again, the large gauge narrow body aircraft are the highest margin aircraft line in the country. And that is going to be a meaningful tailwind to United's margin acceleration as we head into 20262027. So 2025 is a bit of a pause year, but we look forward to getting back on the Gauge bandwagon in 2026 and beyond.

[Mike Leskinen, EVP & CFO at United Airlines]

Brandon, this is Mike.

[Mike Leskinen, EVP & CFO at United Airlines]

I just want to add an extra point there. As we look into 2026 and 2027, as Andrew said, the gauge really starts to accelerate. And so it becomes an idiosyncratic CASM ex benefit for United in 2026 and it really starts to kick in, in 2027. So you're not seeing the benefit of that in any of our guidance for this calendar year, but you will see it in coming years.

[Conor Cunningham, Director - Travel & Transports Analyst at Melius Research LLC]

Great. Thank you.

[Operator]

Our next question comes from the line of Brandon Oglenski with Barclays. Please go ahead.

[Brandon Oglenski, Director & Senior Equity Analyst at Barclays]

Hey, congratulations team on what was a great year and obviously a good outlook here. And Mike, maybe just following up on that, I presume with that comment about Gauge looking out years ahead, that's including some expectation that MAX 10 is in the mix?

[Mike Leskinen, EVP & CFO at United Airlines]

We are becoming more hopeful that the MAX-ten will be an important gauge for United. We like the MAX-nine. The MAX-nine is a great aircraft, but we are with Boeing starting to make some real progress in improving their business. We're becoming more bullish on

[Mike Leskinen, EVP & CFO at United Airlines]

the MAX 10. That's correct.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

I'll just add whether it's the MAX 9 or 10, our gauge is going to increase a lot. So the 10 would be great, but I'm counting on the 9 and the A321 to do what I described a few minutes ago. If we have the 10 available to us, that only helps it even further.

[Brandon Oglenski, Director & Senior Equity Analyst at Barclays]

Well, and Andrew, maybe for my follow-up, on those lines, your domestic capacity growth is a little bit elevated here. What are the priorities in the network as you look in 2025 domestically, especially with those constraints on Gauge? And it looks like the solidly positive PRASM comment on domestic is pretty bullish for 1Q. So can you elaborate on those?

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Sure. We've been working really hard, particularly for off peak months and quarters like Q1 to readjust how we deploy our capacity, whether it be by day a week or hub. And I think it's been incredibly effective and you see that in the guidance along with the fact that business traffic is coming back. So we're pretty optimistic that this is moving in the right direction and we can really close margin gaps by making the off peak periods better. As we think about 2025, and I've said this in the past and I'll say it again, we're really focused on building connectivity in our bank structures, particularly in Chicago, Houston and Denver, where our hubs are fantastic, but they lack the same level of connectivity that we see at some of our larger OA competitor hubs.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

And So we're going to be able to close that gap materially in 2025, which I think is going to be really good for our relative RASM results as we go forward. So that will be our focus in 2025 at this point.

[Brandon Oglenski, Director & Senior Equity Analyst at Barclays]

Thank you.

[Operator]

Your next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.

[Ravi Shanker, Managing Director at Morgan Stanley]

Great. Thanks. Good morning, everyone. Just a question on StarLink. Obviously, you guys mentioned that a couple of times in your prepared remarks.

[Ravi Shanker, Managing Director at Morgan Stanley]

Any thoughts on kind of ruling that out? How much of a differentiator do you think that will be? What the initial performance has been like and maybe how we can monetize that?

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Sure. It's an excellent question. And I have to say, this is one of the things we are absolutely most excited about at United. We did a ton of research on this product and all the alternative products and feel 100% convinced that this is going to be a game changer, fast and free Wi Fi available to our customers, including the ability to game to have games on the on your personal device is going to be amazing. But look, I think the big question here is with Connective and our ability to grow MileagePlus.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

And you're going to see us, I think, unleash a lot of really unique things on this front. And in particular, I think we see an opportunity maybe where others don't. And I think that comes from a number of factors that are probably unique to United. One is we have advanced screens on the vast majority of our fleet. We need advanced screens to be able to personalize service and deliver content in the way that we're going to be doing in the future, which we can obviously make service for our customers better, travel with less friction, but also monetize some media sales.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

2nd, with StarLink Connectivity, which we'll have, which I don't think any of our major competitors will have, it allows us to do that in a way that really older WiFi services could not do. And then you combine that with the size of MileagePlus, the legacy program size, and I think our innovative spirit here at United, it is a very good recipe. I think we need to prove out this as we go forward. But we're very excited to do this. We're very excited that it's United being unique on this front.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

And we hope to show you in the coming quarters years what can be made possible with these investments.

[Ravi Shanker, Managing Director at Morgan Stanley]

That's really helpful. Thank you. Maybe for a follow-up, obviously lots of momentum with the story, stocks doing great, everything is going to set up pretty well. Can it possibly be greater? You guys hinted last year at potential creative options with the loyalty program.

[Ravi Shanker, Managing Director at Morgan Stanley]

Obviously, it's been a long time since you gave us United Next and a lot has changed with the world since. Any thoughts on hosting that Investor Day potentially at some point this year? Or kind of how do you think about giving us updates on some of those big picture items?

[Mike Leskinen, EVP & CFO at United Airlines]

Hey, Ravi, thanks for the question. And we still we continue to see tremendous value in the loyalty program, but we're going to start to disclose data on that when it makes sense for the business. We're still discussing the timing of an Investor Day. However, we've been really effective giving our message to all of you during these earnings calls and investor conferences. Unlike other airlines, our investor calls are much closer to many Investor Days.

[Mike Leskinen, EVP & CFO at United Airlines]

We give you a long term guidance. We're giving you a lot more free cash flow commentary as well. We manage our earnings calls like we manage our business with a focus on the long term and today's call is a good example of that. So stay tuned, Investor Day is an important tool, but no update on precise timing today.

[Ravi Shanker, Managing Director at Morgan Stanley]

Understood. Thanks Mike.

[Operator]

Our next question comes from the line of Jamie Baker with JPMorgan. Please go ahead.

[James Baker, Managing Director & Investment Specialist at JP Morgan]

Hey, good morning everybody. So Andrew, in the past, I think it was last summer, you talked about that life cycle for discounted airlines. Obviously, since that time, we've seen a bankruptcy, domestic capacity has tightened. We're seeing discounters experiment with new Lopez. Do your original comments still stand?

[James Baker, Managing Director & Investment Specialist at JP Morgan]

Or has there been enough evolution in that particular business model that maybe the outlook from United's perspective is a little bit brighter than what you articulated last year? Any thoughts on that?

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Look, I think it's largely still stands. I think as Scott said earlier, we each have our expertise as what we're great at and what we're less great at maybe. At United, we think we were great at a lot of things, but there's a few things we don't do and we don't intend to do. But we manage the complexity of many product types from basic to premium and I think do very well in the premium space. And it's because of generations of investment that came before me and the management team here in the room today.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

And you just can't snap your fingers and make those generational investments overnight. So I'm a bit surprised by the amount of change, but the effectiveness of that change remains to be seen. The effectiveness of what we've been putting into place for years now has been proven. We're going to do more of it in 2025. So I think that life cycle I went through still holds.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

And I don't expect that we're going to see airlines compete at the level of United in terms of this broad range of products and experiences anytime soon.

[James Baker, Managing Director & Investment Specialist at JP Morgan]

Thank you for that. And then quickly for Scott, it was several years ago, I think it was at a conference that I asked you, if you could clear up one analyst or investor misperception, what would it be? And I don't remember your exact words, but basically you said that you'd confront the idea that all capacity is created equal and all capacity is equally bad. You and Mike spend a lot of time in front of clients. I know I have my opinions on this, but where do you think you are in terms of addressing that capacity topic?

[James Baker, Managing Director & Investment Specialist at JP Morgan]

And would your answer be the same if I had simply asked the question the second time? Thanks.

[Scott Kirby, CEO at United Airlines]

Well, I don't know if the answer would have been the same, but it's a good answer regardless. And I think the way to say that is all capacity is definitely not created equal. And if you look even if you look if you just at total industry capacity in the Q4 or in the Q1, you'd probably reach a different conclusion than if you disaggregate it by who is doing the growing. The difference is an airline like United, Delta is the same. We tend to add service at route frequency because that's good for customers.

[Scott Kirby, CEO at United Airlines]

We don't chase load factor. We've been running lower load factors. We maintain pricing integrity. And because we don't chase load factor and are willing to run lower loads, if that's appropriate, it just has a much less negative impact on industry RASM than growth from some carriers who manage only load factor. And so I think not all growth is anywhere close to created equal.

[Scott Kirby, CEO at United Airlines]

And the impact you are seeing that in the results today. The results in the Q4 and the Q1 proved that, that thesis was correct. I also think that it's going to continue for years to come, which could be a longer discussion, but it's going to continue for years to come.

[James Baker, Managing Director & Investment Specialist at JP Morgan]

All right. Good stuff. Thanks, Scott. Appreciate it.

[Operator]

Our next question comes from the line of Andrew Didora with Bank of America. Please go ahead.

[Andrew Didora, Senior Equity Research Analyst at Bank of America Merrill Lynch]

Hi, good morning, everyone. Maybe coming back to loyalty a little bit. Scott, Andrew, with revenues up kind of double digits in 4Q and you continue to invest a few $1,000,000,000 each year into your product, whether that be StarLink, Connective, lounges, etcetera. That's more than most airlines spend in total per year. So maybe can you help frame the growth opportunity over the next few years as these investments come online?

[Andrew Didora, Senior Equity Research Analyst at Bank of America Merrill Lynch]

And maybe speak to how you think these changes the value proposition for a traveler and drive them into the loyalty program over time? Any thoughts there would be appreciated. Thanks.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Look, I talked about it a few minutes ago, but we are the whole MileagePlus Connective Foundation is incredibly strong. And I couldn't be more bullish on the opportunity. It does require some investment and some technology and we're well on our way. But look, we did I think 12% growth last year in loyalty revenue, and that was pretty amazing. I think hopefully we'll show that we lead the industry with that number.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

And our goal for this year is more than that in percentage terms. And so we believe this is an accelerating momentum at this point. We need to prove it as we head into 2025 and beyond. But Connected Media in particular, like our media sales, we intend to double them next year and double them again the following year. And so it's a lot of opportunity.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

It's a lot of work. We have a brand new team on board to help us execute on that. And as we do all that and personalize the service more and more, I just think we make MileagePlus even that much more attractive to our customer base. We have a flywheel effect with more credit cards that are issued. I think we did about $1,000,000 last year.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

We'll do more this year. So it's just going exceedingly well and I think there's a lot more to come. And we look forward to at the appropriate time disclosing more and more. But look, it's an interesting story. I gave you many of the unique things that I think are in our quiver related to this.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

And we intend to fully exploit that to the best of our ability while delivering, I think, a more personalized experience for our customers, which we think will reduce friction in air travel a lot, particularly when you're onboard the aircraft. So there's a lot more to say on how we're going to use these screens and how we're going to deliver great service to our customers and we're going to do that in the due course.

[Andrew Didora, Senior Equity Research Analyst at Bank of America Merrill Lynch]

Great. Thank you.

[Mike Leskinen, EVP & CFO at United Airlines]

I'm going to pile on that real quickly. Just the quality of the earnings from MileagePlus, not only are they growing rapidly, but the stability of those earnings at high margin business, as we grow that business, I do think it's important that you all think about, that differentiated stability and it's something we're going to work hard to highlight in our disclosures as time goes on. Thanks for the question.

[Operator]

Our next question comes from the line of Duane Pfennigwerth with Evercore ISI. Please go ahead.

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

Hey, thanks. Just on seasonality of margins, maybe you can remind us about some of the network changes you've made over the years. Historically, we didn't really think of the Q1 as a breakout quarter for relative margins for United. So what changes have you made? Is it geographies?

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

Is it how you're flying? What's changed versus maybe pre COVID?

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Well, look, I would say it's a lot of things and definitely how we fly is pretty meaningful to that. But look, first of all, I think you have a brand that is rising across the board as we invest in multiple products and multiple experiences and we're just an airline people are choosing more and more often. So like that's just foundational. And I think we're really proud of that. Now in the nuts and bolts, yes, the schedule has changed a lot.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

We're very, very careful in particular how we work with utilization. Just adding flights for the sake of ASMs, we improved that last year in Q1, was not a great idea from the industry perspective and we didn't do it. And we're not doing it this year. In fact, our utilization rate for this year is actually probably lower than last year at the current rate. So we're being very careful on how we deploy capacity and I think we're the best in the business at it.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

But that goes not only within the quarter, but it's by day a week, it's by hub and it's by aircraft type and all those changes including more sunshine capacity I think have been really important. And then the last thing, Q1 was always a strength point for corporate traffic that didn't exist during the pandemic or right after the pandemic. And what we see today is corporate traffic coming back very strongly in Q1, which I think will be uniquely beneficial to the business centric airlines, which obviously United is one of them. So that's really important. And then the last thing that I think is maybe underappreciated is the fact that Europe is becoming more of a year round destination.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

And so Europe always did not so great, is the polite way to say it, particularly from January 15 through mid March. And now we're seeing a totally different result where people are willing to go on a Southern European vacation. And so that's just great. And that really helps de seasonalize Europe. At the same time that our connectivity with our Lufthansa hubs builds back to normal.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

At the same time, the business traffic builds back to London Heathrow. And you put all those factors together, a lot of them created by United through schedule changes, some of them created by industry dynamics and we're de seasonalizing Q1 and make it look a lot better. That was our goal a number of years ago and we're really proud to say we've come a long way. We have a long way to go still, but we've come a long way.

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

That's really helpful, Andrew. Thank you. And then just on the path to double digit margins and which implies a bit of improvement relative to pre COVID. You touched on in your prepared remarks. Is this really about structurally higher margins in international and maybe holding serve on domestic?

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

Or do you see it more balanced? Again, not necessarily a 2025 answer, but over the next few years. Thanks for taking the questions.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Well, I'll start off as I said in my opening, international margins are higher, but we think they have we stated have room to expand, particularly by making the off peak periods better. So we'll remain excited about that, but there is an opportunity on international. There's also a bigger opportunity on domestic as our mid continent hubs in particular reach that critical mass of connectivity and gauge that we're seeking. We're still a bit off from where we want to be engaged. As we said, this year is a bit of a gauge pause year.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

But starting in 2026 and beyond, we're going to really focus on Gauge, which is incredibly efficient. It's going to unlock the connectivity in our hubs even further. And so I'm actually more optimistic that margin growth in the domestic system given all the structural changes we're putting in place and what's happening around us by our competitors has an incredible amount of upside and we can start to close the gap with international. But I have to say international strength is just unbelievably strong right now. And I well, we'll close the gap.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

I don't think or we'll close some of the gap. I don't think we'll close all of the gap from the way I look at it at this point. So international is going to continue to lead the way, I think, for the coming years. And as we said at the beginning, there's just a significant supply constraint when it comes to wide body aircraft and wide body engines that we think confidently last through the end of the decade at this point.

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

Thank you.

[Operator]

Our next question comes from the line of Scott Group with Wolfe Research. Please go ahead.

[Scott Group, Managing Director at Wolfe Research]

Hey, thanks. Good morning. Scott, in one of the earlier questions, you said that you think the current industry backdrop has years to go. I guess, what gives you the confidence in the duration part of this story? I guess, what's the risk in your mind that is domestic pricing turns positive and others start maybe making a little bit more money that they start chasing it and adding capacity again?

[Scott Kirby, CEO at United Airlines]

Well, the short answer is just math. And this has been driven by economic reality. I said in my prepared remarks, I gave some stats on the expense of flying at big airports in New York. Like that doesn't mean things won't get a little more positive and people will try to put some more capacity back 1 or 2 quarters. But it I just don't see how it's possible to be a low cost carrier and fly profitably to New York airports or Chicago or Los Angeles or San Francisco.

[Scott Kirby, CEO at United Airlines]

Like the business model just doesn't work because the governments in those entities have priced low cost carriers out of the market. And it's just math. Like every airline that has low margins that don't look like Delta and United has unprofitable capacity. And the only way to solve that is to not fly it. That doesn't mean they'll do it overnight.

[Scott Kirby, CEO at United Airlines]

There will be some ups and downs along the way. There'll be ego involved in that. But ultimately, it is math and it is going to come out because it cannot be profitable.

[Scott Group, Managing Director at Wolfe Research]

Okay. And then maybe just, Mike, a numbers question. 1Q clearly has RASM outperforming CASM. Does the guidance contemplate that you have a positive spread all year? Or is there something unique about the 1Q strength?

[Scott Group, Managing Director at Wolfe Research]

And I know you talked about 2 to 3 points from labor. Anything else on the cost side you want to add some color on? Thank you.

[Mike Leskinen, EVP & CFO at United Airlines]

Thanks, Scott. Let me try to be clear about it. For the full year, we expect RASM to exceed CASM. We expect continued margin expansion. I expect continued margin expansion into 2026 as well.

[Mike Leskinen, EVP & CFO at United Airlines]

Regarding costs, I think about costs in 3 buckets. I think about industry wide inflationary pressures whether that be labor, whether that be airport costs, whether that be food costs, fuel costs. Those costs are going to be passed through to the consumer 100%. It's frustrating that those inflationary costs have been persistent. We need to make sure that we do at least as well as the industry regarding those that number one bucket of costs.

[Mike Leskinen, EVP & CFO at United Airlines]

But those costs should not interfere with our long term profitability. The second bucket I'll break into 2 categories an A and a B. And that is what can we do as an airline to drive efficiency into the operation. Gauge at United is the largest measure of efficiency that'll really kick in. And as I said earlier in 2026 and 2027, but we're doing lots more with our app.

[Mike Leskinen, EVP & CFO at United Airlines]

We've got the best digital technology team in the business to drive efficiency. We're doing great job with tech ops and the operation driving efficiency and we feel we'll do better than average in that category. There is a 2B though and that is driving efficiency by flying more in red eye situations, flying more during the off peak And some of our competitors are doing that. We feel that that is and I think our results prove that flying in that way to drive utilization, it does drive down CASM, but it is it does not maximize profits. So you will not see United Airlines driving efficiency in that way.

[Mike Leskinen, EVP & CFO at United Airlines]

And then the 3rd bucket is one that United has been on a mission for several years and that is investing in the product and service to differentiate to decommoditize the business. And it is clearer than it has ever been that that decommoditization of the product is driving higher margins and I think more stability to this business. So you'll see continued investment by United that will drive CASM, but we think it will also expand margins.

[Scott Group, Managing Director at Wolfe Research]

Thank you guys.

[Operator]

Our next question comes from the line of Tom Fitzgerald with TD Cowen. Please go ahead.

[Thomas Fitzgerald, Senior Hotels And Online Travel Analyst at TD Cowen]

Thanks so much for the time and congrats on the great results. There was a line in the press release that caught my eye on utilizing GenAI to expedite customer search. And I'm wondering if you could update us on other areas you're already deploying GenAI in the business or thinking about it and how you're thinking about the impact whether on the revenue side or in the operations?

[Scott Kirby, CEO at United Airlines]

We do have the leading digital team in the business. You can see it in the app. You can see it in all kinds of places. And we have been, I think, done a yeoman's effort, but really using Jinai in all kinds of ways that maybe not be as sexy as some of the big high profile announces, but a whole lot more impactful for the airline and operation. You talked about some of them.

[Scott Kirby, CEO at United Airlines]

One of the things that I'm most proud of is how much better we are than any airline in history has ever been at communicating with customers when there are delays to this choice and explaining it in terms that they understand. And We're getting better and better. I think we're in the first inning of that. We're the only ones on the field. No one else is even trying to do it.

[Scott Kirby, CEO at United Airlines]

But Gen AI has been an important unlock in that. All kinds of other to me one of the interesting applications, we have these old labor contracts that go back decades and they've got all these provisions that have built up over decades. And we have people that have 25, 30 years of experience trying to interpret what the labor contracts mean when pilot or flight attendant or someone calls in with some unusual situation and some of the provisions are hard to know and always hard to figure out. Literally a team of people that tried to interpret and get those right and they didn't always know. Amazingly, generally I can read the contract and give you a really good answer of what the output is.

[Scott Kirby, CEO at United Airlines]

That's just a small example. But really what that means to me is our team, it's down in the entire organization. This isn't like some one cool sexy project that we talk about on an earnings call or some other forum, but really throughout the organization, embedded in the organization is part of what's driving us to be, without question, the leading technology innovator of any airline around the world.

[Thomas Fitzgerald, Senior Hotels And Online Travel Analyst at TD Cowen]

Thanks so much. That's really helpful color. And then just as a follow-up, Andrew, you talked about adding Sunshine capacity being part of the success in improving 1Q. And I'm just curious how you're thinking about Florida and the broader domestic network. And if there's if opportunities present themselves to maybe get larger in that region, whether it's Focus City or possibly a new hub, just love to hear your thoughts there.

[Thomas Fitzgerald, Senior Hotels And Online Travel Analyst at TD Cowen]

Thanks again for the time.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

We take your question. We have 7 great hubs. And for all my years here, we've been focused on making those hubs as great as they can be. And I don't think we're anywhere close to that. And you can look at our relative market shares and our hubs relative to other hub competitors around the country.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

And you can see our shares are still low. And I think as our brand rises, people want to fly us more and our gauge is going to increase. So we continue to be very focused on our hubs. That's not to say that it won't always be that way. But for now and for the foreseeable future, our opportunities in our hubs, there's a lot of growth and that's how we're going to grow earnings and grow our margins as Mike talked about earlier.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

But we will continue to build on what is a very successful Florida franchise. I think it's done incredibly well and we're tilting a higher percent of our capacity into it. But at least in the short term, there's no plans for a hub in the Southeastern Florida.

[Operator]

Our next question will come from the line of Catherine O'Brien with Goldman Sachs. Please go ahead.

[Catherine O'Brien, Analyst at Goldman Sachs]

Good morning, everyone. Thanks for the time. Mike, one for you. While respecting you don't give a CASM guide, you've already given us your high level thoughts on the different buckets of costs we should be thinking about over the next couple of years. Just was hoping to get some more color on the puts and takes for 2025.

[Catherine O'Brien, Analyst at Goldman Sachs]

If you don't have a ratified flight attendant contract, for instance, how does that impact the timing of that 2 to 3 points of labor head when you've spoken to? And anything else potentially lumpy we should be aware of quarter to quarter?

[Mike Leskinen, EVP & CFO at United Airlines]

Hi, Katy. Thanks for the question. And let me try to expand around the edges. Talked about 2 to 3 points of labor headwind that we expect in 2025. That anticipates a labor deal with the flight attendants, the timing of which we aren't going to discuss today.

[Mike Leskinen, EVP & CFO at United Airlines]

But it expects that if that timing were to push to the right, there would be less of a headwind. If it pushes to the left, pushes earlier, then we'd have a little bit more of a headwind. I would say we have 0.5 point to 1 point of pressure from investments that are driving even more revenue into the business. And so I feel really good about that as well. It does seem like the inflationary pressures overall at the industry level have started to have peaked and have started to abate.

[Mike Leskinen, EVP & CFO at United Airlines]

But, as we sit here, I think that they persist longer than we might have thought 6 or 12 months ago. So hopefully that helps.

[Catherine O'Brien, Analyst at Goldman Sachs]

Yes, it does. Thanks. And Andrew, maybe one for you as well. You talked about managing the complexity of more products and more choices being an area of expertise for the team. Can you help us think through where the opportunities are to lean into this more going forward?

[Catherine O'Brien, Analyst at Goldman Sachs]

Is this adding more cabins? Is this adding more varied soft products to your existing cabin, something else that we haven't even maybe thought of yet? Anything there would be super helpful. Thanks.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

Well, that's a really good question and I'm not going to answer it today. I'm going to say that

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

other than say, as I

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

said in my opening script, I think product choice has won the day. And it's kind of ironic because if you go back a few years ago, there are people saying the opposite, which I never ever understood. The product choice is one today. We think we have some innovative ideas to expand on all that, including the merchandise and the product choice as we go forward. And when I convinced Mike to do an Investor Day, hopefully we'll talk about that more.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

That was a joke obviously. But the point of all that is, we're not going to give it away today, but we are working on a bunch of innovative things that I think are going to be very exciting for our customers. So there's a lot more to come. There's a lot more investment occurring. We wish we could announce it today and bring it to the marketplace even sooner.

[Andrew Nocella, Executive VP & Chief Commercial Officer at United Airlines]

But these things take time. And I said earlier, I think United has a multi generational lead. And we've been working over the last few years to make sure that lead expands and accelerates as we head into the latter part of this decade. So there's quite a bit more to announce, but just not today.

[Catherine O'Brien, Analyst at Goldman Sachs]

Great. So we look forward to it.

[Catherine O'Brien, Analyst at Goldman Sachs]

Thanks for the time.

[Operator]

We will now switch to the media portion of the call. Our first question will come from the line of Mary Schindelstin with Bloomberg News. Please go ahead.

[Mary Schlangenstein, Correspondent Covering Airlines at Bloomberg News]

Hi, thanks. Good morning. The Trump administration has ordered the DOT and the FAA to rescind their DEI policies and review the job performance of individuals in critical safety positions. I'm wondering if you are concerned that that may cause some churn of employees and increase the problems that already exist with ATC and the staffing issues? And then secondly, I wanted to ask if United is considering resending its own DEI policies?

[Scott Kirby, CEO at United Airlines]

So I'll answer for United and let DOT answer for themselves. Although we're we feel good about the DOT and the administration and the impact that they will have on the air traffic controls. I think there's a ton of upside there. But at United, we have always have today and we'll continue to hire based on merit. But we're in the fortunate position that we're a very high quality employer and we make efforts to cast a wide net for people coming into United.

[Scott Kirby, CEO at United Airlines]

In fact, last year, we had over 600,000 applications for fewer than 10,000 positions. And because of that, we can be incredibly selective about who we take. We do hire on merit. We can hire the absolute best of the best and have a naturally diverse workforce. So at United, we can do both.

[Scott Kirby, CEO at United Airlines]

And the proof is in the results. We are performing better coming out of the COVID for the last few years than any other airline in the world. And our workforce having a diverse but also very best people is a huge part of the reason why we are the best airline in the world.

[Mary Schlangenstein, Correspondent Covering Airlines at Bloomberg News]

And why do you say

[Mary Schlangenstein, Correspondent Covering Airlines at Bloomberg News]

that there's a ton of upside with the new administration FAA and DOT?

[Scott Kirby, CEO at United Airlines]

Well, last year, even on clear blue sky days, 68% of our delays were because of air traffic control restrictions on the airspace. That impacted millions of customers. And it is just basic blocking and tackling. And when I talked to the President, he knows a lot about airplanes. He knows a lot about the airspace.

[Scott Kirby, CEO at United Airlines]

He is focused even at his level on fixing it. Incoming Secretary Duffy, I spoke to this weekend, also focused on fixing it. And I think that they will do the basic blocking and tackling, get the FAA the right resources, the right technology to run effectively. And there is like everything else combined is not as big for airline customers as running the FAA effectively and efficiently. That is bigger than everything else combined.

[Scott Kirby, CEO at United Airlines]

And I think we're going to be off to the races on that.

[Operator]

Our next question will come from the line of Rajesh Singh with Reuters. Please go ahead.

[Rajesh Singh, U.S. Aviation Correspondent at Reuters]

Hi, thanks for taking my question. I have a 2 part question. Scott, some people are calling it the new golden age of U. S. Airlines because of the capacity discipline as well as improved pricing.

[Rajesh Singh, U.S. Aviation Correspondent at Reuters]

Do you subscribe to this view? And second, do you see any risk for the industry due to the increasing increased macro uncertainty, not just from the demand perspective because of high inflation and interest rates, but also from supply perspective because of trade and tariffs? Thank you.

[Scott Kirby, CEO at United Airlines]

So I think this is the golden age for airline customers. The particularly at an airline like United, the amount we've invested in the product and the service, the loyalty program, the amount of customers who are brand loyal to United today, I think is bigger than it's ever been in history. The wide array of products from premium all the way down to basic economy. And so I think it's the golden age of customers. And because customers like that and because customers choose United Airlines, they make it really good for United Airlines as well.

[Scott Kirby, CEO at United Airlines]

That is a symbiotic relationship. On the question about supply chain, we're early into the Trump administration. So we'll see what happens with tariffs and such. But just like my comments about what's going to happen at the FAA, I have a lot of confidence in this administration that they're focused on doing things that unlock American innovation and entrepreneurialism and that create remove regulatory burdens and expand the economy. And so I think my base case is that the net net of that is going to be a strong robust economy and strong robust demand for United Airlines.

[Operator]

And I will now turn the call back over to Christina Edwards for closing remarks.

[Kristina Edwards, Managing Director - Investor Relations at United Airlines]

Thanks for joining the call today. Please contact Investor and Media Relations if you have any further questions, and we look forward to talking to you next quarter. Stay warm.

[Operator]

Thank you, ladies and gentlemen. This concludes today's conference and you may now disconnect.

Participants

Executives

• Kristina Edwards, Managing Director - Investor Relations
• Scott Kirby, CEO
• Brett Hart, President
• Andrew Nocella, Executive VP & Chief Commercial Officer
• Mike Leskinen, EVP & CFO

Analysts

• David Vernon, Vice President and Senior Analyst at Bernstein
• Sheila Kahyaoglu, Aerospace & Defense and Airlines Equity Research at Jefferies Financial Group
• Conor Cunningham, Director - Travel & Transports Analyst at Melius Research LLC
• Brandon Oglenski, Director & Senior Equity Analyst at Barclays
• Ravi Shanker, Managing Director at Morgan Stanley
• James Baker, Managing Director & Investment Specialist at JP Morgan
• Andrew Didora, Senior Equity Research Analyst at Bank of America Merrill Lynch
• Duane Pfennigwerth, Senior Managing Director at Evercore ISI
• Scott Group, Managing Director at Wolfe Research
• Thomas Fitzgerald, Senior Hotels And Online Travel Analyst at TD Cowen
• Catherine O'Brien, Analyst at Goldman Sachs
• Mary Schlangenstein, Correspondent Covering Airlines at Bloomberg News
• Rajesh Singh, U.S. Aviation Correspondent at Reuters