United Airlines Q1 2025 Earnings Report

United Airlines EPS Results

• Actual EPS: $0.91
• Consensus EPS: $0.75
• Beat/Miss: Beat by +$0.16
• One Year Ago EPS: N/A

United Airlines Revenue Results

• Actual Revenue: $13.21 billion
• Expected Revenue: $13.47 billion
• Beat/Miss: Missed by -$252.17 million
• YoY Revenue Growth: N/A

United Airlines Announcement Details

• Quarter: Q1 2025
• Date: 4/15/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, April 16, 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 Q1 2025 Earnings Call Transcript

Key Takeaways

• United delivered its highest first-quarter pretax margin since COVID and expects to be one of two airlines profitable in Q1, reaffirming full-year 2025 EPS guidance of $11.50–$13.50 in a base case and $7–$9 in a recession scenario.
• The airline credits its resilience to winning “brand loyal customers,” leading market share in 6 of 7 hubs, and is continuing to invest in new lounges, the Starlink Wi-Fi rollout, and app enhancements despite weaker demand.
• Q1 revenue rose 5.4% to a record $13.2 billion with TRASM up 0.5%; premium cabin unit revenues grew mid-single digits (Polaris +8%, Premium Plus +5%) while domestic main cabin RASM fell 5%, prompting cuts to off-peak capacity.
• Rigorous cost management drove CASM-ex up only 0.3% in Q1, aided by lower fuel costs, with plans to reduce U.S. domestic capacity by 2–4% in coming quarters and accelerate retirement of 21 older aircraft.
• Liquidity reached $18.3 billion, net leverage improved to 2.0×, and the airline repurchased 5.6 million shares year-to-date at an average $80, maintaining free cash flow generation near $3 billion as a top priority.

Presentation

[Operator]

Good morning, and welcome to United Airlines Holdings Earnings Conference Call for the First Quarter of twenty twenty five. My name is Sarah, 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, Sarah. Good morning, everyone, and welcome to United's first quarter twenty twenty five 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 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. Number of factors could cause actual results to differ materially from our current expectations.

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

Please

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

refer

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

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 directly comparable GAAP measures, please refer to the tables at the end of our earnings release. Joining us on the call today to discuss our results and outlook are our Chief Executive Officer, Scott Kirby President, Bret Hart Executive Vice President and Chief Commercial Officer, Andrew Nocella and Executive Vice President and Chief Financial Officer, Mike Leskinen.

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

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

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

the call over to Scott.

[Scott Kirby, CEO at United Airlines]

Thanks, Christina, and good morning, everyone. The first quarter of twenty twenty five was sure eventful. It's clear that the softer macroeconomic environment is driving both volatility in the market and softer demand for travel. But for United specifically, two big picture themes have been confirmed.

[Scott Kirby, CEO at United Airlines]

First, United's performance is strong even in this weak environment because we've won the battle for brand loyal customers. And second, because we've won those brand loyal customers, our earnings and financial metrics are demonstrating resilience that United's never had before. The strains on the macro economy have impacted demand, but even in that strained environment, United just had the highest first quarter pretax margin since COVID began and we expect to be one of only two airlines that are profitable in the first quarter. And our resilience is further demonstrated by the fact that if the environment remains relatively weaker, but stable, we can stay within our full year guidance range. However, we read the same headlines as you and so we think that there's a reasonable chance that bookings could weaken from here.

[Scott Kirby, CEO at United Airlines]

But even if we're in that recessionary environment, we still expect to earn $7 to $9 per share for the full year 2025. When I say that there's been a structural permanent irreversible change, what I mean is that United has won brand loyal customers and they are sticky lifelong customers. We are now the brand loyal leader by a wide margin in six of our seven hubs and tied with one other airline in Los Angeles. In most spokes around the country, we're the leader or one of the leaders of brand loyal customers. Andrew will share some facts on customers that live in the Bay Area, Denver and Chicago in his remarks.

[Scott Kirby, CEO at United Airlines]

But it is those gains that are allowing us to be resilient even in this weaker economic environment. To be clear, even though those customers are sticky and we believe those market share gains are permanent, we're capitalizing on our momentum and doing more to attract even more brand loyal customers. We're building huge new clubs in Houston and San Francisco and about to open an additional new club in Denver. We're installing the fastest Wi Fi in the world on our planes with Starlink and they'll start flying next month. We're adding new features to the most powerful travel app in the world every couple of weeks and our operation is reliable and resilient as ever.

[Scott Kirby, CEO at United Airlines]

This weakening environment doesn't have us reconsidering these investments. In fact, we're leaning into them because they're at the center of our biggest competitive advantage, winning brand loyal customers. And a huge thank you to our employees for their incredible service that makes this win possible. Periods of economic softening are part of the business cycle. So the question for United is what should we do now that we see economic softness?

[Scott Kirby, CEO at United Airlines]

Tactically, we're being very diligent about expenses and removing capacity, particularly off peak utilization flying, and Andrew and Mike will talk about those in a few minutes. And strategically, our priority is pretty simple and it hasn't changed. Win the brand loyal customers because that gives us the best margins in good times and that lead can grow even larger during lean times. The reason is that for any given customer living in any given city, you're not the brand loyal airline, you're the spill airline. The only way a spill airline gets passengers is through lower prices.

[Scott Kirby, CEO at United Airlines]

When times are good, that strategy can work okay. But when times get tougher, the brand loyal airline like United has more seats to sell, which we do sell at lower prices, but that disproportionately impacts all the Spirit carriers that we compete with. Some of the recent guidance updates from other airlines are a stark reminder of this point. For some historical perspective, Southwest historically was the airline with the highest percentage of brand loyal customers. For most of its history, Southwest was focused on smaller secondary cities where they had by far the best schedule for customers.

[Scott Kirby, CEO at United Airlines]

They also had a huge customer advantage as the only airline that didn't have change fees or back fees. That meant that a high percentage of their customers were brand loyal to Southwest. At its core, that's why Southwest historically was the highest margin airline in good times and why they always outperformed by an even wider margin when times got tough. But as they've moved into big high cost hubs of other airlines, both of those advantages are gone. And now United and one other airline are the brand loyal customer leaders.

[Scott Kirby, CEO at United Airlines]

It's always dangerous to say that it's different this time. And in fact, we're saying exactly the opposite. It's going to be exactly the same this time. History is just repeating. The only thing that changed is that United is now one of the two brands leading brand loyal airlines.

[Scott Kirby, CEO at United Airlines]

So to conclude, United NEXT is the right strategy. It's well executed by our people and it's producing strong resilient results in good times and even more impressively in tough times. United has never been in a stronger competitive position. Customers are benefiting, our employees are benefiting and our shareholders will also benefit in the value that's being created. Brett, over to you.

[Brett Hart, President at United Airlines]

Thank you, Scott, and good morning. Despite a challenging macro environment, 2025 is off to a solid start. We operate in a dynamic and evolving landscape. Global trade policies, including tariffs are shaping that landscape. And as Scott mentioned, broader economic uncertainties remain top of mind.

[Brett Hart, President at United Airlines]

We are closely monitoring the potential impact on the prices we would pay for aircraft. As a reminder, Boeing accounts for the majority of our future total order book and most of our Airbus 321neos are produced in Alabama. As such, we don't currently anticipate a meaningful direct impact from tariffs relating to aircraft purchases. Turning to our performance this quarter, We are seeing the results of our continued investments in operational excellence and we are delivering an exceptional customer experience. These achievements are a testament to the commitment and excellence of our employees.

[Brett Hart, President at United Airlines]

None of it would be possible without you. Thank you. In Q1, not only did we serve more customers than ever in our first quarter for United, but we also finished number one in on time departures among our U. S. Large peers when including customers who were helped with ConnectionSaver.

[Brett Hart, President at United Airlines]

We achieved our highest NPS scores and our best on time arrival score since the pandemic, as well as the second lowest first quarter seat cancellation rate in company history. We accomplished all of this with safety at the forefront. United is committed to getting every customer to their destination safely and on time. We continue to invest in enhanced pilot training and safety technology making it easier for our employees to report safety concerns. Our United team is engaged across the industry and with government to ensure the safety of our aviation system.

[Brett Hart, President at United Airlines]

In the first quarter, we reached two major milestones on the accelerated rollout of StarLink technology across our fleet, completing our first StarLink installation on a United Express aircraft and securing FAA certification to begin operations on the Embraer one hundred seventy five fleet. We're on track for our first Starlink enabled regional flight later this spring with our entire two cabin regional fleet expected to be retrofitted by year end. We continue to expect the first mainline aircraft with Starlink to take flight before the end of twenty twenty five. We believe Starlink will revolutionize the in flight experience for our customers and United is leading the way for the future of Wi Fi for the airline industry. With that, I will hand it over to Andrew to discuss the revenue environment.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Thanks, Brett. United's top line Q1 revenue increased 5.4% to a company record $13,200,000,000 TRASM for the quarter was up zero five percent. We've been hard at work adjusting how we fly in the historically weaker United Q1 period and our efforts paid off with a material year over year improvement in our margin. Demand trends did turn down as we exited January, resulting in lower revenue production than we had originally forecasted for Q1. Domestic main cabin RASMs were down 5% year over year and represent the bulk of the gap between our Q1 revenue expectations and actual results.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

As we would expect in times of economic weakness, we saw the weakness magnified on off peak flights. For example, the revenue gap on domestic flights departing prior to 7AM or after 8PM outside of the golden hours is usually 30% lower. But in Q1, that gap expanded to 40% lower. That's why we are canceling more off peak flying and lower utilization going forward. Weakness in the main cabin was somewhat offset by premium performance.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Overall premium cabin unit revenues were up mid single digits in Q1. International Polaris RASMs were up 8% and international premium plus RASMs were up over 5%. Domestic premium seat RASMs were flat. Our long term strategies to build premium capacity and customer choice were very helpful given main cabin demand trends in Q1. Business traffic trends we saw late in Q4 and early twenty twenty five moderated later in the quarter.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Loan business revenue grew 7% in Q1 year over year versus 15% in Q4. Contracted business sales for all future travel are currently up low single digits year over year, which has moderated from the up double digits at the start of the year. Loyalty revenue remained strong and grew 9% to $1,500,000,000 in the quarter. Co brand spend was also strong, up 9%. Co brand spending growth in early April remained consistent with March performance.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Q2 customer demand is not what we were planning just a few months ago, but we continue to expect our top line revenue growth for Q2 to be positive. We have adjusted RM strategies going forward to accommodate more lower yield in passengers, a necessary reaction to the current environment. These the effect of these RM changes is that we will still less traffic to our competitors, but we will run with lower yields. Since making this RM change about six weeks ago, bookings have stabilized, and we are currently booked ahead of last year at this same point in time by one point. We at United have a high number of brand loyal customers, and our focus on our seven hubs put us puts us in a position where we are not a spilled carrier.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

We determine how much traffic we spill to other carriers based on the amount of capacity we offer and the yield we're willing to accept. To give you a few examples, in Chicago during Q4 twenty twenty four, we expanded our passenger share lead of local origin traffic to 22 points ahead of our next largest competitor. In 2019, that lead was only six points and in 2015, we actually had a negative gap. From Denver, we've increased our gap ahead of our largest competitor in that market to 10 points for Denver based passengers. United also gained 2.1 points of market share in late twenty twenty four in the Bay Area.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

United will operate our narrow body aircraft with 2% less utilization in the coming quarters effectively lowering our domestic capacity by two points. In the last few weeks, we have reduced domestic capacity for the summer in our sell in schedule by three points with one more point to be removed shortly. Among our primary competitors, we operate the highest percentage of our domestic departures in the golden hours between 7AM and 8PM. We usually have the lowest overall aircraft utilization. And lower utilization is usually considered a negative in our industry, but for United it has been one key to our relative success.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Fourth quarter domestic schedules are still being developed and we will look to see if more significant changes are needed. The international environment is also strong for United and we believe it looks good for Q2 as of now. The makeup of our international traffic skews heavily towards U. S. Point of origin business.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

While most of our international travel demand is U. S.-based, we are seeing modest declines in non U. S. Origin passenger volumes. For the second quarter, international passengers originated in Europe are currently booked 6% lower than last year.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Canadian origin passenger volumes are slightly worse down 9% year over year. For United, U. S. Origin demand has more than compensated for these reductions. As we think about the impact of potential recessions could have on business traffic, it is important to note that relative to pre pandemic, our revenue makeup is less reliant on this revenue source.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Business revenue now makes up eight points less of our passenger revenue and contributes 4.4 points less to our load factor. So far, we've seen no deterioration in high end consumers' willingness to purchase a premium experience. We attribute this to the fact that the economic uncertainty has a larger impact on more budget minded discretionary travelers than those seeking a premium experience. Q2 booked premium PRASM to date have remained solidly positive for international flights and flattish for domestic flights. United has a consistent strategy for the last nine years to win brand loyal customers and that has been happening.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

This is important for investors who want confidence that United's margin outperformance really can be structural, permanent and irreversible. With that, I want to say thanks to the entire United team and I'll hand it off to Mike to talk about our financial results.

[Michael Leskinen, Executive VP & CFO at United Airlines]

Thanks, Andrew. For the

[Michael Leskinen, Executive VP & CFO at United Airlines]

first quarter, we delivered earnings per share of $0.91 ahead of expectations and within our guidance. Our pretax margin was 3%, up 3.6 points year over year and the strongest first quarter we've had in the last five years. We expect these results to lead the industry and further demonstrate the success of our United Next plan. As Andrew just described, at the February, we saw a steep drop in U. S.

[Michael Leskinen, Executive VP & CFO at United Airlines]

Government and government adjacent travel. We guide, however, with a no excuses philosophy. So seeing the pressure on revenue, we doubled down on managing costs to ensure we would deliver within the first quarter EPS guidance range. Those efforts along with favorable timing of a few maintenance events led to our first quarter CASM ex result of up only 0.3% year over year. These actions combined with lower fuel costs enable us to deliver on our guidance.

[Michael Leskinen, Executive VP & CFO at United Airlines]

I'm proud of the team for their hard work in making sure we delivered on our first quarter financial commitments. Looking to the second quarter, we expect earnings per share to be between $3.25 and $4.25 We are acutely focused on booking trends and the potential impact of tariffs, and we are closely monitoring the situation. And it is a risk. But to date, our bookings have stabilized. Looking out to the third quarter and beyond, we've already taken action to pull down our less profitable flying, including Redeye flying, capacity in U.

[Michael Leskinen, Executive VP & CFO at United Airlines]

S. Government traffic heavy routes and transborder flying, aided by accelerating the retirement of 21 aircraft. We were the first airline to recognize slowing demand from U. S. Government spending and to take appropriate action.

[Michael Leskinen, Executive VP & CFO at United Airlines]

We expect our domestic capacity come down four points from our original plan starting in the third quarter. There's a tremendous amount of uncertainty in that economy right now and we've already seen a reduction in demand and correspondingly in revenue. But we've seen stability at that lower demand level in the last six weeks. And the silver lining is, we also expect a significant reduction in our fuel cost. If demand remains stable for the balance of the year, that combination of revenue decline and fuel cost reduction along with the fact that we built a significant contingency into our initial guide leaves me cautiously optimistic that we can still deliver full year earnings per share within our guidance range of $11.5 to $13.5 While we've seen stability in demand for the past six weeks, we also recognize that there's a real risk of The U.

[Michael Leskinen, Executive VP & CFO at United Airlines]

S. Economy going into a recession. If we enter a recession, we are modeling an additional five point reduction in total revenue for the remainder of the year on average per quarter. In that scenario, we would make an additional downward adjustment to capacity and we have not assumed any further relief in fuel price even though that might happen. Even in that world, we expect our full year earnings per share to be between $7 and $9 While that is not what our expectations were at the start of the year, that scenario would be the first time United would have remained solidly profitable through recession.

[Michael Leskinen, Executive VP & CFO at United Airlines]

We believe it would justify significant multiple expansion as we will have proven our financial resiliency, our greatly improved competitive position and the durability of a decommoditized business powered by brand loyal customers. Turning to the balance sheet. We ended the first quarter with $18,300,000,000 in liquidity, including our undrawn revolver. We generated over $2,000,000,000 of free cash flow and paid down $1,000,000,000 of debt. In fact, over the last twelve months, we've generated over $5,000,000,000 in free cash flow, representing approximately 130% of our net income.

[Michael Leskinen, Executive VP & CFO at United Airlines]

At our current equity valuation, that represents an over 20% free cash flow yield. Our net leverage was reduced to two point zero times from 2.2 times at the end of twenty twenty four, marking continued progress as we work towards our long term net leverage target of less than two times. Recognizing our progress, Fitch upgraded United to BB with a positive outlook, with a change to a positive outlook from Moody's as well. On the buyback, as of April 10, we've repurchased approximately 5,600,000.0 shares in 2025 at an average price of $80 History has taught us that even industry leaders are prone to steep market overcorrections in times like this, and we've built our buyback strategy around being opportunistic. We believe this is precisely the right time to repurchase our shares at our current depressed valuation with approximately $1,000,000,000 left in authorization.

[Michael Leskinen, Executive VP & CFO at United Airlines]

Regardless of the economic path ahead, we expect our financial results to be resilient. We believe that the long term earnings power of our company hasn't changed and frankly it's possible that some of the weaker airlines may be forced to curtail money losing capacity sooner than they otherwise might have. Therefore, our view of the intrinsic value of our shares also hasn't changed. In fact, as I mentioned earlier, we believe our multiple should expand as we prove that our business is stronger and more resilient even in a time of economic stress. For as long as our share price remains depressed, we plan to continue to utilize a meaningful portion of free cash flow to repurchase shares at what we believe are discounted prices.

[Michael Leskinen, Executive VP & CFO at United Airlines]

As I've mentioned in the last several quarters, free cash flow generation remains a top priority. While demand has softened, we continue to expect to generate full year free cash flow approaching $3,000,000,000 in a base case and positive free cash flow even in a downside recession scenario. To close, United's competitive position in the industry is only strengthening. We're focused on leaning into our network strengths, continuing to win brand loyal customers and delivering on our financial commitments. Now back to Christina to start the Q and A.

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

Thank you, Mike. We will not take questions from the analyst community. Please limit yourself to one question and if needed one follow-up question. Sarah, please describe the procedure to ask a question.

[Operator]

Thank you. The question and answer session will be conducted electronically. Your first question comes from Jamie Baker of JPMorgan. Your line is open.

[Jamie Baker, Analyst at JP Morgan]

Hey, good morning everybody. So first one probably for Scott or Mike. Presumably this past January you had an internal forecast for 2026 earnings. If we embrace something closer to the recessionary scenario that you just laid out, what would your internal 2026 forecast be higher, lower or the same today?

[Scott Kirby, CEO at United Airlines]

Hey, Jamie. Thanks for that question. I think it's insightful and maybe the most important question we talk about today.

[Jamie Baker, Analyst at JP Morgan]

Thank you. We can end the call after my question.

[Scott Kirby, CEO at United Airlines]

There you go. Going to slightly modify your timing from 2026 to say the twelve months once we're sorted to a normalized back to growth economy. I happen to think that will be for 2026, but sort of depends on the macro environment. But in the twelve months where we're back to a normal macro economy, the short answer is yes, our margins will be higher. I would go but I would go back to what we've been telling you really for the last five years.

[Scott Kirby, CEO at United Airlines]

And it started with one, we were going to decommoditize and build United into a brand loyal airlines. That's been a part of the United Next strategy. It's been a part of the entire strategy coming out of COVID. Second was cost convergence was going to be a fundamental structural change for the industry. Third is revenue diversity.

[Scott Kirby, CEO at United Airlines]

We see that we talked about international today, but we haven't talked about loyalty yet, but loyalty strong like across the board that's been another structural change. Part of this too has also part of the revenue diversity has been solving finally solving the puzzle on the price sensitive travel and we have done that with basic economy and engage. And so all the things that we've talked about for the last five years, led to us on the last call talking about comparative advantage and saying that we thought the world was going to the airline world was going to evolve to a place where airlines flew primarily in places where they had competitive advantages and, you know, the kind of capacity wars that have happened in the past would become a thing of the past because all of the trends we talked about just had separated the gap between the brand loyal airlines and everyone else. And so what this stressful environment is going to do is it is going to accelerate what was going to happen anyway of airlines focusing in markets where they have comparative advantage. And that means that looking forward there's going to be less unprofitable flying in the industry, which means less total flying than was going to happen and that is just going to happen sooner.

[Scott Kirby, CEO at United Airlines]

That means that I am confident that United Airlines is going to have higher margins than we would have had this taken longer to occur. And in fact, I will go one step further and say that when we get to the twelve months sort of post this economic period, not only are we going have higher margins, I believe they will be solidly double digit margins.

[Jamie Baker, Analyst at JP Morgan]

Okay. Thank you for that. And then, Mike, I know you touched on this in your prepared remarks, but your premium high margin competitor refuses to buy back stock until they meet their leverage targets. You were obviously pretty active last quarter or through April 10. I'd love to believe it's because you like our down thirty and thirty analysis.

[Jamie Baker, Analyst at JP Morgan]

But in all seriousness, our question on this topic is why? Is it simply a function of cash flowing around burning a hole in your pocket given the delivery delays? I guess what Mark Streeter and I are trying to reconcile is your own goal to derisk the balance sheet and achieve IG ratings against some pretty material repurchases through April 10. Any additional color?

[Michael Leskinen, Executive VP & CFO at United Airlines]

Thanks Jamie. I love the question. Look, when we think about buyback versus deleveraging, we are trying to optimize our overall cost of capital. And therefore, as our stock price declines and the gap between our market price and our view of intrinsic value of the shares as that widens, it is more opportunistic to buy back shares. And so that's what you have seen.

[Michael Leskinen, Executive VP & CFO at United Airlines]

You've seen an acceleration of buyback as the share price was lower. Now we are very, very disciplined around making sure we have guardrails around that. And we need to continue to deleverage. I'm very prominent about talking about getting our leverage our net leverage below two times. It's very important to us to continue to march towards investment grade.

[Michael Leskinen, Executive VP & CFO at United Airlines]

It is very important to us that the buyback is funded by free cash flow and that we do not drift into a debt funded buyback. So all with all of those constraints, we feel confident about the future and excited about frankly an opportunity to purchase shares at these low prices.

[Jamie Baker, Analyst at JP Morgan]

Scott and Mike, thank you very much. Appreciate it.

[Operator]

The next question comes from Andrew Didora with Bank of America. Your line is open.

[Andrew Didora, Analyst at Bank of America]

Hi, good morning everyone. Mike, you mentioned the cost performance in your prepared remarks, really impressive here in 1Q. I would imagine it's hard to do much better than that going forward. Is that the right way to think about it? And can you maybe speak to additional cost levers you have if the revenue environment starts to move towards your recession scenario?

[Michael Leskinen, Executive VP & CFO at United Airlines]

Thanks, Andrew, for the question. We're very proud of our cost performance in the first quarter. But before I talk about the first quarter, let me talk about our focus on building a cost efficient culture here at United. We are being intentional about spending in areas that improve the customer experience, but we also know that there are a lot of areas to be more efficient as an airline. These opportunities are wide ranging, including, for example, improving our procurement organization and taking advantage of technology and data.

[Michael Leskinen, Executive VP & CFO at United Airlines]

And we've always said that running a reliable operation is the best path to a low cost operation. Most importantly, running a reliable operation is the best way we can win brand loyal customers. So we feel great about it. I do think, we've had some costs that we don't think. We've had some maintenance costs that drifted from 1Q into 2Q.

[Michael Leskinen, Executive VP & CFO at United Airlines]

And so I'd expect 1Q CASM X to be the best performance of the year. But as we sit here, I expect meaningfully better CASM X for the full year than I would have thought just in January. So we're going to continue to work hard to find more areas for efficiency, but we made a lot

[Michael Leskinen, Executive VP & CFO at United Airlines]

of progress in the first quarter.

[Andrew Didora, Analyst at Bank of America]

Got it. Understood. And then just my second question. Just wanted to get your thoughts on the four on the five points of lower revenue production in a recessionary scenario. I guess why is that the right number to anchor to?

[Andrew Didora, Analyst at Bank of America]

And I guess what's embedded from an industry perspective to get to the $7 to $9 in EPS? Thank you.

[Michael Leskinen, Executive VP & CFO at United Airlines]

It's a great question. Maybe Andrew will want to jump on at the end. But from a high level, what you've seen from what we expected in January to what we expect in the base case now, you've seen an about five point reduction in revenue from what we thought just a few months ago. And then the recession scenario would be an additional five point reduction, starting whenever we enter into that reception, so sometime in the third quarter most likely. So if you if you add those together, which would be the appropriately appropriate way to think about it, it would be a 10 reduction from the run rate we would have expected.

[Michael Leskinen, Executive VP & CFO at United Airlines]

Now how long we persist at that low level, you're going to have to make

[Michael Leskinen, Executive VP & CFO at United Airlines]

your

[Michael Leskinen, Executive VP & CFO at United Airlines]

own assumptions around. And listen, we're not we don't have a crystal ball on how deeper recession might be. But that's our expectation of what a normal recession might look like. We've given you the tools if you want to create a different scenario than that. But that would be our expectation of a downside case, and we wanted to be transparent with you all around the assumptions.

[Andrew Didora, Analyst at Bank of America]

Great. Thank you very much.

[Michael Leskinen, Executive VP & CFO at United Airlines]

Hey, I want to clarify that the 10 reduction, it kicks in, in April for our recession scenario.

[Operator]

The next question comes from Connor Cunningham of Melius Research. Your line is open.

[Conor Cunningham, Analyst at Melius Research LLC]

Hi, everyone. Thank you. Appreciate the details on the spill traffic comment. I wanted to kind of start there. You know, can you I just would've this just seems like a time in which you would, like, look to stamp out all the spill traffic carriers from your hub markets in general.

[Conor Cunningham, Analyst at Melius Research LLC]

So I just thought that that was the the whole entire point of basic economy in general. So can you just talk about how you continue to move down the path of eliminating spilled traffic in general? Thank you.

[Scott Kirby, CEO at United Airlines]

So we're just trying to build a great airline for United Airlines customers. That's all we're doing. And, like, truthfully, our plan hasn't changed in five years. We make tactical adjustments like we did this time to pull out utilization flying. Everyone else does what they do.

[Scott Kirby, CEO at United Airlines]

I think it puts immense pressure on them. When United gets great, that the contrast between United Airlines and everyone else gets wider and more evident. But it's not us consciously trying to stamp out or do anything like that. We're trying to create the best airline in history United Airlines customers, and that creates a big gap to everyone else. And it's up to them to do something else.

[Scott Kirby, CEO at United Airlines]

And if they don't, well, we'll see. But we're just trying to do a great thing for United Airlines customers.

[Conor Cunningham, Analyst at Melius Research LLC]

Okay. That that's helpful. And, you're probably not gonna like this question, but I've been getting it kind of on repeat. If you if you just look at the first half implied performance on EPS and then you look at what you're baking in on the second half to get to the $11.50 dollars range, it basically implies that you're going to be doing better on a year over year perspective versus 2024. So I'm just trying to understand what's driving that that that improvement if we're bouncing along the bottom in the current recession not recession, the current environment in general.

[Conor Cunningham, Analyst at Melius Research LLC]

So just what additional levers do you have that you feel more comfortable now? Maybe it's premium, maybe it's loyalty, Mike, you seem to sound better on cost. Just any thoughts there in general would be helpful. Thank you.

[Michael Leskinen, Executive VP & CFO at United Airlines]

Yes. Look, the first point I'd make is that the full year guidance in the 11.5 to $13.5 scenario counts on current booking trends holding steady. It accounts for the fact that we burned up all the contingency that we put into that full year guide. It assumes we have continued excellent cost management, but we don't uncover anything new. And it assumes that second half fuel is about $0.20 lower than first half fuel.

[Michael Leskinen, Executive VP & CFO at United Airlines]

And then finally, it accounts for some profit maximizing capacity cuts. And so that's how we're thinking about getting to the full year guide of eleven fifty to thirteen fifty. And then we've been very clear about the downside case as well. I think that answers your question. If it doesn't, maybe clarifying.

[Michael Leskinen, Executive VP & CFO at United Airlines]

I'll I'll keep going.

[Conor Cunningham, Analyst at Melius Research LLC]

No. You're you're good. I appreciate it. Thank you.

[Scott Kirby, CEO at United Airlines]

And by the way, that that's that was a totally fair question. We've asked ourselves that question.

[Conor Cunningham, Analyst at Melius Research LLC]

And Well, asked all the good ones.

[Scott Kirby, CEO at United Airlines]

Yeah. But but the but the point is I mean, I think the bigger point is we build we typically build a lot of contingency into guide and our eleven fifty to thirteen fifty doesn't really have contingency left. Our quarterly guide still does. And I'll just make a bigger point on this which is a cultural point. We expected more questions about doing two guys since no one's ever done that.

[Scott Kirby, CEO at United Airlines]

We haven't really gotten them. But I told our whole team and I'll tell our investors as well. Part of that is also when you run when you run the company with a no excuses philosophy, which is what we have. We are going to do everything possible no matter what happens to get to our numbers. And it is true that the environment has gotten a lot harder and achieving our full year, we still have, you know but we didn't think we had a real shot at getting it.

[Scott Kirby, CEO at United Airlines]

We wouldn't say it. But we do have a real shot. Bookings need to stabilize. We gotta work hard. We gotta do everything right to get there now, but we still have a real shot.

[Scott Kirby, CEO at United Airlines]

And, you know, we the most sure way to lose is throw in the towel. And at United Airlines, we no matter what the economic environment is, are gonna bust our asses to get there. And we will not miss it because we didn't try. And that's the culture and that's the philosophy and our results no matter what are gonna be better because we manage that way than if we didn't.

[Michael Leskinen, Executive VP & CFO at United Airlines]

Yeah. I wanna emphasize one point Scott made, make sure it's clear to everyone. The full year guide no longer has a contingency in it. We burned that. But the second quarter guide with a dollar range, we normally have a $0.50 range.

[Michael Leskinen, Executive VP & CFO at United Airlines]

We do have contingency in that figure. And so look, as we enter as we end the as we move towards the end of the second quarter, if we're coming in towards the high end of that, I feel better about the $11.50 to $13.50. And if we're coming near near the low end of that range, I feel like we're marching towards a recession scenario.

[Conor Cunningham, Analyst at Melius Research LLC]

Appreciate it. Thank you.

[Operator]

The next question comes from Dave Vernon with Bernstein. Your line is open.

[David Vernon, Analyst at Bernstein]

Hey, good morning and thanks for taking the question. So Scott, this is a relatively unique sort of time for the industry in that you and your other sort of brand loyal airline are working with a pretty significant margin advantage relative to some of the lower cost and spill airlines that are out there. How do you think about balancing the use of that margin advantage, right? Are you thinking about using that margin to take share right now? Or are you thinking about trying to protect that margin?

[David Vernon, Analyst at Bernstein]

When you're trying to build a better United Airlines, how do you think about that tension between having an opportunity to maybe take even more share in a market like Denver versus trying to maintain the margin?

[Scott Kirby, CEO at United Airlines]

I don't think there is a tension. And in fact, I'll go back to one point which I tried to make at the beginning. But the brand loyal airline has always won. The brand loyal airline in The United States has always had the top margins. And the brand loyal airline has always outperformed in recession.

[Scott Kirby, CEO at United Airlines]

All this changes who the brand loyal airlines are. Really is back to like our plan hasn't changed really in any material way at all over the last five years. We have higher confidence in it. We thought we would win brand loyalty here. We thought we would start to outperform the rest of the industry.

[Scott Kirby, CEO at United Airlines]

We thought that whenever the inevitable business cycle turned, would outperform during that cycle and all that's happening. So we feel good about that. But we're not doing anything specific. We've had a number of markets. People ask questions about specific markets, Andrew could tell you, where we've had competitors do big changes up, some big changes down, some big changes up.

[Scott Kirby, CEO at United Airlines]

And frankly, our capacity and our plans haven't changed at all, in those places. We're in the enviable position of we can just play the united game because we've got the brand loyal customers. We can just keep playing running our plays and it works. We don't really need to I mean, I still pay attention. I still read everyone's scripts and pay attention to what they're doing.

[Scott Kirby, CEO at United Airlines]

But we don't really need to focus on what they're doing or respond to it It doesn't have that much impact on us. We've created the leading airline for brand loyal customers and that was the winning strategy and we've executed it and now we're just finishing the game.

[David Vernon, Analyst at Bernstein]

And and I guess as you as you think about that that that that building the brand loyal customer, right, obviously, you know, segmenting the cabin, adding in things like like like faster speed WiFi, adding in clubs, right, it does seem like the industry as a whole is moving in that direction. How do you think about maintaining that that that that brand loyalty leadership, over a multiyear period if we're seeing, you know, some of the other airlines also kind

[David Vernon, Analyst at Bernstein]

of investing in some of

[David Vernon, Analyst at Bernstein]

the same capabilities? It just come down to execution, or is there something further in the in the in the outlook that you're looking at in terms of trying to maintain that leadership position with with brand loyal customers?

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

I'll try to take that. Look. I think, you know, we are charged with continuously trying to, climb higher, to innovate more, and to go faster. That's definitely the culture that we have at United. And, you know, quite frankly, there's a lot of things in the hopper that we haven't announced that are yet to come.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

But we are, again, in this enviable position where the United Next plan is working. Our capacity has come online at a much better rate than anybody else's. And that's a really strong foundation that allows us to continue to invest in the customer. And you're going to see more and more of that over the next eighteen months. We have a bunch of announcements that are planned, and that's going to allow us to continue the segmentation, revenue choice, customer choice path.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

The only other thing I'll add is the investments we've made, we've made over a really long period of time. Like, it takes years to build these clubs. It takes years to refit the aircraft with the appropriate LOPAs to invest in the WiFi technology. And while it's, I guess, a bit flatter in that others are trying to copy us, they they are generations behind in my opinion and will will never catch us, and we will continue to run as fast or faster to ensure that doesn't happen.

[David Vernon, Analyst at Bernstein]

All right. Thanks again for the time guys.

[Operator]

The next question comes from Catherine O'Brien with Goldman Sachs. Your line is open.

[Catherine O'Brien, Analyst at Goldman Sachs]

Hey, good morning everyone. Thanks so much for the time. So you've already given us a lot of detail on your full year guide, but maybe just one more on the different levers if you'll allow it. I thought it was really helpful to frame the revenue downside in the base recessionary case. But can you give us any high level thoughts on how much the single active God buffer, lower non fuel costs and lower fuel each helped offset revenue lower by five points than your January expectations, the base case such that you're able to keep that original EPS range?

[Michael Leskinen, Executive VP & CFO at United Airlines]

I'll give you a directional, feedback on that, Katie. Fuel has been the biggest tailwind as you would expect. It's a big reason why I think fuel hedging doesn't make sense in this industry. As revenue declines, almost always fuel does as well. So that was the largest.

[Michael Leskinen, Executive VP & CFO at United Airlines]

The second impact second largest impact was the work we've done on cost management. So that was a big driver. We've got plans, multiyear plans to hit some of these cost targets, but we definitely pulled some of that forward. Related to those cost savings, the decision to early retire 21 aircraft, that naturally allows us to bring down maintenance expense. And so, that would be the third bucket is the decision around capacity made early enough allows us to also save maintenance expense.

[Michael Leskinen, Executive VP & CFO at United Airlines]

So I put it in that range or in that ordering fuel and then cost management and then the capacity decision.

[Catherine O'Brien, Analyst at Goldman Sachs]

Very helpful. Thanks, Mike. Maybe one one for Andrew, a little bit of a shorter term question. Can you speak to how you see each entity performing in the second quarter? You know, should we expect RASM deceleration across each geography or are there some of the international markets holding in better?

[Catherine O'Brien, Analyst at Goldman Sachs]

Any color would be helpful. Thanks.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Sure, Katie. I think we had a really very good strong international, and I think we'll have the same in q two, but the the year over year RASM won't be the same. But at this point, I do expect international RASMs to be positive, across every single international entity, by the way, with The Pacific probably being the strongest Atlantic and Latin trail in that. So clearly, the bulk of the issue we're seeing today is demand for domestic flights, particularly in the main cabin, and that's where the challenge will be in Q2 as it was in Q1. And it's going to be clearly a negative RASM environment for domestic in Q2 based on everything we see right now.

[Catherine O'Brien, Analyst at Goldman Sachs]

Thanks a for the time.

[Operator]

The next question comes from Tom Fitzgerald of TD Cowen. Your line is open.

[Thomas Fitzgerald, Analyst at TD Cowen]

Hi, thanks for the time and congrats on the results.

[Thomas Fitzgerald, Analyst at TD Cowen]

I'd love to just hear your perspective higher level and longer term on the broader international market, given you're the flight carrier and your franchise and some of the growth you have with your Freedom flying out of Hong Kong. Just given that it just seems like there's a heightened risk of more geopolitical tensions, love to hear how you're thinking about that.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Sure. You know, I I I think, international, you know, for as long as I've been at United has been, you know, the stronger entity. And we've worked really hard and continue to work hard to make sure that domestic catches up, but international continues to accelerate. And the more we do, the better it all gets. Like, there there's this, you know, s curve curve type effect.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

And the world is getting smaller. Things that we did not think were possible five years ago are possible today. And I think the same will be true in five years, and as you look at that. And so, we are continuing to look at a broad range of opportunities outside The United States. We think it is a more lucrative environment as we go through this cycle.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Clearly, there'll be ups and downs just like there are in any marketplace and things will move around and we'll move our aircraft appropriately. But we remain really bullish on the international environment. The results in Q1 were I think outstanding. Our margins across every single entity were up mid to high single digits in Q1. Really great performance.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

We'll see where that lands in Q2, but Q2, the international outperformed again. It has for years. We believe it will going forward. We have an order book to support that growth and we'll continue to watch it. That being said, we also have a lot of older seven six sevens and triple sevens that we can, you know, potentially retire if things do change.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

But at this point, we're leaning into it because it is working.

[Scott Kirby, CEO at United Airlines]

And I would add I would add structurally. The further you look out on the timeline, I think the more there are two structural supply constraints that are gonna cause the international to outperform more and more over time. Number one is aircraft. You know, all the aircraft that got retired in COVID combined with the supply chain challenges, not just at the manufacturers, but much deeper in the supply chain, whether it's engines or BFE or kind of across the board. There are going to be supply chain big supply chain challenges for wide body internationals, I think for the rest of my career.

[Scott Kirby, CEO at United Airlines]

And then secondly is airport constraints. Like, you know, I can't tell you how hard it was for us to get slots in Manila to fly to Manila. And international markets are far more constrained from a capacity perspective at the airports. And so if I had to make a bet look. I'm not I'd actually make the bet the short term too just because I see the data.

[Scott Kirby, CEO at United Airlines]

But if I had to make a bet on a year from now, I'd have less confidence. But if I had to make a bet five, ten longer term, then I'd put all my checks on international because the supply constraints are real and are significant.

[Thomas Fitzgerald, Analyst at TD Cowen]

That's really helpful. Thanks so much. And then just as a follow-up, I'd love to just think about the rollout for StarLink on the mainline fleet, what the cadence like that could look like? And then how you're contemplating potential share gains as that product comes out in the market? I think that seems like a really positive, idiosyncratic lever that you guys have next year.

[Thomas Fitzgerald, Analyst at TD Cowen]

Thanks again for the time.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Yeah. I we are very excited about Starlink and what it enables, for our customers, what it enables for Connective and MileagePlus as well. We we shouldn't forget that, because these things are all kinda linked together. You know, we we've made a lot of different investments whether it be Starlink, food, Seeds, you name it. And all those things together are kind of leading us to where we are today, on the brand loyalty side.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

And I think it's been incredibly effective. And so we're super proud of that investment and there I think there's more more to come on that front.

[Operator]

The next question comes from Sheila Kahyaoglu with Jefferies. Your line is open.

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

Good morning, guys, and a great quarter just relative to the environment. So maybe if I could ask about international, it's clearly strong. But I think in the prepared remarks, there were comments around international non U. S. Origin volumes down Europe down 6%, Canada down nine offset by the increase in U.

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

S. Originated international traffic. So maybe if you could talk about that dynamic and is there a share gain opportunity as you expand internationally and convert customers in those markets? And on the Pacific strength, if you could touch upon different markets there.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Sure. Well, we wanted to give that data because I think as most people know, there was some erroneous data about transborder traffic and some outrageous number, which was completely false that was put out there. So we wanted to put out the numbers that, yes, we are seeing a modest decline in foreign origin business. But our U. S.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Origin point of sale is over, I think a little over 80% to begin with. And so the 20% is seeing a modest decline and we're able to easily refill those seats with US origin point demand. So that's as a result of all that, our international looks fine. In in terms of, you know, overseas, particularly The Pacific, that that entity is kinda leading the way, clearly did in q one. Across the board, we see strength, just about everywhere in The Pacific, But Japan is really phenomenally strong right now for us and our partner ANA.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

So I think that is noteworthy. The South Pacific is having a very good year. And really across the board, The Pacific looks really good. The Atlantic, I think also looks really good. Germany had a very good quarter in Q1.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

We'll see where that is in Q2. And Southern Europe, is just, you know, increasingly a desirable vacation spot for US consumers, and and in fact, for US consumers to go on off peak period. So overall, look, you know, I I think the international environment would be even stronger if we hadn't had that deterioration in the origin business from overseas or The US consumer is even stronger and a stronger economic outlook. But the international entity looks, I I think, really good. It is a strong source of profits for United, and we're very bullish about the short term and long term outlook.

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

And maybe one for Mike. On

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

the $7

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

to $9 scenario in a recession, how do we think about your operating margins and free cash flow in that scenario?

[Michael Leskinen, Executive VP & CFO at United Airlines]

At $7 to $9 I mean, the operating margin is just some math. We can help you with that offline around free cash that ends up being would expect that to be near breakeven, but still positive free cash in the 7 to 9 range. We would have some there's some movement in CapEx, but probably not this calendar year.

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

Okay. Thank you.

[Operator]

The next question comes from Tom Wadewitz with UBS. Your line is open.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Yes, good morning. Thanks for the chance to ask question here. I wanted to ask you a little bit about some of the cost assumptions and maybe how the pace of union agreements tends to work during an economic downturn. I'm thinking of the flight attendants in particular, but do you think progress tends to be slower if you're in a recession or things are a lot weaker? Or do you kind of think the same assumptions in terms of your cost profile on timing of when you might get a union agreement?

[Scott Kirby, CEO at United Airlines]

Our people are doing a great job. You can see it in our resilient results. When I say we want brand loyal customers, we talk about the hard product. The biggest thing we do is how our people care and take care of customers. There's nothing as powerful as walking onto an airplane.

[Scott Kirby, CEO at United Airlines]

There's two flight attendants in the galley who are smiling, who are happy, who are positive, who you can tell are happy and positive. There's nothing as impactful as a captain coming out of the cockpit and talking to the customers standing there. And they're doing a great job and we're winning even in a recession. So they're gonna get good industry leading contracts and they deserve it. And this recessionary environment, even if it happens, isn't gonna change that.

[Scott Kirby, CEO at United Airlines]

And and we're getting close, particularly on flight attendants. So fingers crossed that we're we're near the goal line.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Okay. So that doesn't affect your view on on timing. What I guess for the the second question, so, you know, I think you said, well, we don't assume the cycle is different, or, you we assume things are different, but clearly United's position is different. You identified that really clearly with the commentary on the market share in the hub. Do you think that maybe the consumer is different as well, maybe more of the spend is with high end consumers that would maybe support resilience on international?

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Or how do you think about that? I guess I'm just trying to think of in a recession wouldn't naturally international flying come down? I mean, you haven't seen that yet. I just wanna see if you have any other comments to to offer on that. It's just like consumer mix different, international is more resilient, this time around even if you go in a recession.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Thank you.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Yeah. International has definitely been more resilient, but I I do think, you know, there are different types of consumers, and and each of those consumer types feels a different level of pressure, in the situation that the country faces right now. And clearly, the discretionary consumer faces more pressure, and that that customer was probably less likely to take that vacation to Rome or Tokyo to begin with. So the high end consumer, which I think, you know, from a look at wealth over the, you know, few years, yeah, the the market's down in recent months.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

But, the high end consumer, the more wealthy consumer, the one that takes the global vacations, the one that wants to sit in a premium, feet seems to be less impacted so far. And I think that's really good for our business and it's consistent with our brand and winning these customers to begin with.

[Michael Leskinen, Executive VP & CFO at United Airlines]

Hey, Tom. This is Mike. I want to add to that. I think there's also been a real mix shift at United. I think probably the industry level with a real mix shift, in our premium cabins.

[Michael Leskinen, Executive VP & CFO at United Airlines]

We have less corporate and we have we have more premium leisure. And I believe that piece of our business is showing some great resilience as well. So a lot of secular trends are accruing to our benefit.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Great. Thanks for the insight.

[Operator]

The next question comes from Duane Pfennigwerth with Evercore ISI. Your line is open.

[Duane Pfennigwerth, Analyst at Evercore]

Hey, thanks. Good morning. I have a book club question for you. You really piqued our interest with a recent book recommendation, capital returns. The book covers a lot of ground and we won't do it justice here, but it focuses on supply analysis.

[Duane Pfennigwerth, Analyst at Evercore]

And the authors advocate for buying equities in sectors when industry returns are low and capacity is exiting. It also makes the point that lower asset growth firms, lower CapEx firms tend to outperform higher asset growth firms over the long run. With that long winded intro, Scott, what were the highlights from your perspective? And maybe for Mike and Andrew, how would this book influence your thinking about growth and capital allocation?

[Scott Kirby, CEO at United Airlines]

Well, I'm glad that you read my book recommendations. I have another one that I'm not through reading yet. I actually forget the title. It's by Brian Greene. Anyone who's interested in physics, it's spectacular.

[Duane Pfennigwerth, Analyst at Evercore]

Look forward

[Duane Pfennigwerth, Analyst at Evercore]

to it.

[Scott Kirby, CEO at United Airlines]

On understanding the search for a unified theory. And it's really good. But capital returns is good also. And, you know, there's a lot of good lessons in there of how to think about it.

[Scott Kirby, CEO at United Airlines]

One for me is, you know, which probably appeals to the way I think, but is to be willing to think against the consensus. You know, when everyone else is buying airplanes, it's probably the wrong time to buy airplanes. We did we did do it at the right time, you know, in COVID when everyone else thought the world was coming to an end and air travel would never recover. You just heard and I think I think about supply, like, way more than I think about the demand environment. Demand environment is going to go up, demand environment is going to go down.

[Scott Kirby, CEO at United Airlines]

Over time, demand is going to grow a little faster than GDP for air travel and there's going be short term variations like there are right now. I don't stress about those. I follow what's happening with supply. I think this is going to lead to better supply changes. And also even my answer on the international question, like, I feel so bold up about international, not just not because it's booked well right now, like something could change in the short term, but because I look out a few years and the supply environment is going to be constrained internationally.

[Scott Kirby, CEO at United Airlines]

And that is the place you wanna go. You know, I'm way I've been way more frustrated that Boeing didn't get us all of our seven eighty sevens than that they didn't get us all of our seven thirty sevens because we were the only ones in the world that wanted to make that bet, and we made that bet. And it's paying off, but it could have paid off even bigger. But, you know, anyway, it's a great book. Everyone should read it.

[Scott Kirby, CEO at United Airlines]

It's first time I've given a homework assignment to the team, but the finance and network team, I got them all copies. It's hard to get, by the way, because it's not in print. But Aaron got them all copies, and you know, some of the lessons I learned. Mike?

[Michael Leskinen, Executive VP & CFO at United Airlines]

Duane, I'll

[Michael Leskinen, Executive VP & CFO at United Airlines]

make two points that I thought the book emphasized. Number one, CapEx. We need to be thoughtful and disciplined around the investments we make in aircraft. They're thirty year investments to make sure that our expected return through cycle, return on invested capital is above our cost

[Michael Leskinen, Executive VP & CFO at United Airlines]

of

[Michael Leskinen, Executive VP & CFO at United Airlines]

capital. Given the constraints to supply that we've been harping on, we feel very strongly about that. We've got some older aircraft, in fact, that if we could get additional deliveries, the return profile of replacing some of those older aircraft is quite strong, nicely exceeding our cost of capital. But the point of the book is we need to maintain discipline. And we need to be willing to think differently and turn right when the market turns left vice versa.

[Michael Leskinen, Executive VP & CFO at United Airlines]

The second point that the book emphasized that I've been passionate about since I left the buy side is that buybacks should be opportunistic. If at some point we don't feel like it should be opportunistic, we can pivot to a dividend. But, buybacks when the shares are on sale because the market is panicked, we should be willing to step in. Within the constraints of managing our balance sheet to drive towards investment grade, we should be willing to step in in a more heavy handed way. And, when the shares close in on intrinsic value, we should just turn it off completely and allow our balance sheet to improve more rapidly.

[Michael Leskinen, Executive VP & CFO at United Airlines]

Those would be the two points.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

I'll only add the relative point that I thought was most interesting to book was the supply side forecast. And in this case, you know, I'll just reiterate what Scott said that the international airports around the globe and the big airports in The United States are really not building runways and we're not building gates. But as GDP grows, we're building demand. And so I can remain very bullish in the big cities that we have our hubs in here in this country and the big cities we fly to around the globe where it's becoming increasingly difficult, if not impossible, to be able to expand schedules.

[Duane Pfennigwerth, Analyst at Evercore]

Appreciate the thoughts. Thank you.

[Operator]

The next question comes from Mike Linenberg with Deutsche Bank. Your line is open.

[Michael Linenberg, Analyst at Deutsche Bank]

Hey, my question is going to be a little bit more low brow. Just touch basic economy here. I think last quarter you gave us a number, maybe it was about 15% of volume. When we look at the year over year increase in basic economy revenue relative to your total revenue, it's almost outpacing a two to one. Where is that percentage today?

[Michael Linenberg, Analyst at Deutsche Bank]

And is that just largely a function of the upgauging in NeXT? Or are you starting to see maybe more intense we compete competing at the lower part of the fare structure and that's driving a higher volume?

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Look, I expect in Q2 you're going to see us be more competitive at the lower end of the fare structure creating higher volume. It was less true in Q1.

[Michael Linenberg, Analyst at Deutsche Bank]

Okay.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Because the decline in demand happened so quickly, at, you know, mid February and March. And so we we didn't have an opportunity to really react quick enough to to fill up the seats in our domestic load factor fell by I think 3.3 points. So in q two, you're going to see us, we'll probably still run a small load factor deficit year over year domestically, but it's probably in the order of one point. And it'll be because we've opened up the inventory system to take more basic, more lower yielding customers, And we will simply spill less to the spill airlines as a result, when we do that. But I think you'll see it expand in Q2.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

And it'll go up and down based on market conditions, but we'll decide how much low end traffic we want to spill and when we want

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

to spill it.

[Michael Linenberg, Analyst at Deutsche Bank]

Great. And Andrew, since I have you, just this Real ID deadline, May 7, I mean, you're the most international of any of the carriers, so passports among your customers shouldn't be an issue. But what sort of impact do we have? I mean, I don't think it impacts your cash since you sold a ticket, but are you going to get a bunch of cancellations where all of a sudden there's some revenue recognition because people show up and they don't have ID? Any thoughts on that?

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Look, I I think there's a lot going on there and I, you know, I kinda hope that date gets extended once again and I'll hope the same thing when it happens again. We're working through this with the government and I think we'll have more to say on it. But, hopefully, everybody's prepared and they got the real ID passport or their passport card. There's multiple ways to get through TSA security obviously. But this is something we are aware of and we continue to talk to the government about it.

[Michael Linenberg, Analyst at Deutsche Bank]

Great. Thank you.

[Operator]

The next question comes from Brandon Oglenski with Barclays. Your line is open.

[Brandon Oglenski, Analyst at Barclays Capital]

Hi, good morning and thanks for taking my questions. So can you guys dig into how you're defining brand Because I think this is a pretty important concept. And Scott, I think in your prepared remarks or maybe it was Andrew, you talked about like share of local customers. Is that a way we could start to measure it from the outside looking in?

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Absolutely. It's it's all of the above. So there there's a number of ways to do it. But, our total market share, and you look at every single one of our hub cities, our market share is up in every single city we fly to. If you look at the origin market share, which is something I highly recommend that you do, and I gave some numbers today for Chicago, for example, where our origin share is better than our total share.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

In other words, the loyalty of local customers here in Chicago has shifted to United. We've got those customers a co brand credit card as well to make sure they're incredibly sticky, and they stay with United indefinitely. That that was our plan all along. We think it's working, and we'll do the same. The other measurement we look at is, you know, share amongst the big global travel agencies.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Those tend to be higher yielding customers, traveling often for business and our share in that category continues to go up. And there's probably a bunch of other ways you can do it, but it shows up in our regular, revenue premium to the industry and it shows up in our market share. It shows up all over the place. But most importantly, it shows up into our margin and the relative gap we have to our customers or to our competitors. And I think you'll see that, our margin gap probably increased to others in Q1, did not decrease.

[Brandon Oglenski, Analyst at Barclays Capital]

Well, I appreciate that, Andrew.

[Brandon Oglenski, Analyst at Barclays Capital]

And I guess, can you put

[Brandon Oglenski, Analyst at Barclays Capital]

that in the context of how prudent it is right now growing domestic capacity in the high single digit level? Because I think that's what your 2Q and summer schedules are showing right now. And especially just given that we saw such a drastic change in unit revenues, we thought 1Q would be positive and it's up down, I think, 3% or 4% domestically. So is it the right opportunity to be taking a lot of share right now? Or I guess maybe if I rephrase the question, is the focus really just on incremental gaining that share today and worry about the margins later?

[Brandon Oglenski, Analyst at Barclays Capital]

Or is there more of a focus on margins? And again, is it prudent to be growing that much domestically?

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Well, think it's false to think that we don't focus on both. We are always focused on our margin. But I think we've shown over eight years now that we have a proven track record on our capacity decisions. And all of those decisions have been undeniably good for United. We look back at our absolute and relative performance this Q1 and believe that our choice of growing, which we did focus on peak time of day flying proved right and created our margins that you saw.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

We were the first to announce a change to our fleet a few weeks back at the JPMorgan Conference, and we've unloaded a bunch of capacity as a result of that. So we were gonna fly higher than the number that we're gonna fly. We believe the capacity plan we have now for the spring and summer is the best plan for United. And, you know, we also understand that things change. And as usual, we'll stay on top of these things.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

And we remain open to making changes, in September and beyond. But at this point, we think we have the right plan. We're not flying you know, we're not going to fly unproductive capacity, but we are also going to balance market share and financial returns. We've given you the EPS guidance. We've given you two guides.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

And I think we're really focused, as Scott said, on a no excuse culture on delivering on our guide.

[Brandon Oglenski, Analyst at Barclays Capital]

Thank you, Andrew.

[Operator]

The next question comes from Ravi Shanker with Morgan Stanley. Your line is open.

[Ravi Shanker, Analyst at Morgan Stanley]

Great. Thanks. Good morning, guys. So just a follow-up on the multiple scenarios here, but from a loyalty and co brand standpoint, how do you think that evolves if we do get probably the first broad based consumer recession we've had since 02/2008? Obviously, the whole industry and loyalty and co brand have changed a lot since.

[Ravi Shanker, Analyst at Morgan Stanley]

Does it stay as resilient as it was during the pandemic? Or do you think it's greater risk?

[Michael Leskinen, Executive VP & CFO at United Airlines]

Hey, Ravi, I love that question. The loyalty business and the stream of revenue and profits from that business was resilient through the COVID pandemic. Everything we see in the data shows great resilience right now. If anything, we expect to see secular growth continue through even an economic weak spot. So as we sensitize the model and scenarios, upsides and downsides, that's a piece that is kind of

[Michael Leskinen, Executive VP & CFO at United Airlines]

a rock in all scenarios.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

I'll just add that, you know, we've said this word a lot today, the brand loyal customers makes the difference here. So as we build the premier members of the program, as we increase the penetration rate of those holding credit cards, this cycle just builds on itself like a flywheel. And we're really, really focused on this business and making sure it does that. And as a result, I think it's getting stronger and will be more resilient in a downturn than it was even in the pandemic.

[Ravi Shanker, Analyst at Morgan Stanley]

Understood. That's really helpful. And maybe a quick follow-up for you, Mike. Just wanted to confirm that your fuel price assumptions between your two full year guide scenarios are not different? And if so, do you think there's potential for more fuel price tailwind in the recession scenario?

[Michael Leskinen, Executive VP & CFO at United Airlines]

Yeah, Robbie, think it's a good point. And if revenue falls off as much as we anticipate in the downside scenario and the recession scenario, there's a solid case to be made that we would see further decline in fuel. That is an assumption you can make. And so we're being very clear and transparent on the assumptions we made and that is that we don't get an additional offset from fuel.

[Ravi Shanker, Analyst at Morgan Stanley]

Understood. Thank you.

[Operator]

We will now switch to the media portion of the call. Your first question comes from Mary Schlagelski with Bloomberg News. Your line is open.

[Mary Schlangenstein, Correspondent Covering Airlines at Bloomberg News]

Thank you. Hey Scott, I wanted to ask you with China saying that they're going to halt Boeing deliveries and we've got an aircraft engine and parts supplier that says there'll be scrapping shipments that are subject to tariffs. Building that on top of the current supply chain issues, is there kind of a crisis developing in the overall aerospace industry? And if so, what are your main concerns there?

[Scott Kirby, CEO at United Airlines]

I think it's way too early to be panicking and declaring a crisis. You know, aerospace, is probably the number one example of a successful high-tech manufacture manufacturing export powerhouse industry in The United States. And we're still in the early, you know, the opening game of how all this tariff is gonna settle out. And I suspect by the time we get to the end game, you know, aerospace is gonna be recognized as a clear winning proposition for The United States and things are going to work out. My recommendation to everyone would just be take a breath and let's wait a little while before you start making panicky moves.

[Mary Schlangenstein, Correspondent Covering Airlines at Bloomberg News]

Okay.

[Mary Schlangenstein, Correspondent Covering Airlines at Bloomberg News]

And you said at the start of

[Mary Schlangenstein, Correspondent Covering Airlines at Bloomberg News]

the call that most of your deliveries are coming from Boeing. But if you, face the prospect of having to take an Airbus play plane and pay the tariffs on it, will you do that?

[Scott Kirby, CEO at United Airlines]

Well,

[Scott Kirby, CEO at United Airlines]

we're in a we're in a different position than others. We're mostly Airbus or Boeing aircraft as Brett said. We're Boeing's second largest customer behind only the US government. Most of our Airbus deliveries are coming from Alabama. So it's a pretty minor issue for us.

[Scott Kirby, CEO at United Airlines]

And in fact, I look at it as an opportunity. We we had senior leadership of Airbus who's in here with us yesterday, as an opportunity to actually strengthen the partnership there. You know, to their credit, Airbus is having to import some parts. They build the airplane in Alabama, some of the parts come from elsewhere so far. They have been tariff you know, they have had to pay the tariffs on those airplanes, and they've been a good partner, you know, and just dealing with that right now.

[Scott Kirby, CEO at United Airlines]

I think we all think let's go back to let's take a breath and we'll we'll work these things out. But we view this as as an opportunity to kind of work with Airbus. Again, we have much less exposure, so it's easier for us to work with them. We're not going to we don't need to make any definitive statements about what we will or won't do at this moment in time. We're going to see a few more cards before we start doing that.

[Mary Schlangenstein, Correspondent Covering Airlines at Bloomberg News]

Great. Thank you very much.

[Operator]

The next question comes from John Platz of Cranes Chicago Business. Your line is open.

[John Pletz, Reporter at Crain's Chicago Business]

Good morning.

[Scott Kirby, CEO at United Airlines]

Good morning.

[John Pletz, Reporter at Crain's Chicago Business]

Guys mentioned in the press release this morning about adding additional gates at O'Hare. Can you talk a little bit about how that fits into both the overall strategy for United as well as what it means for the expansion underway at O'Hare?

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Sure. It's, Andrew. I'll give it a try. You're correct. We're going to gain six gates, later this year.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

We're very excited, to do that. Our current facilities are very full, and, we know people want We know they want to fly in peak periods. And so these six gates will allow us to continue to execute on the United Next growth plan. We're really proud we won the gates, through this process.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

We've been very consistent in our strategy here in Chicago. And as a result of that, we've got the six gates and we're going to continue to grow. We think the economics of the hub look really darn good right now. And we're excited about what the future holds in Chicago for United.

[John Pletz, Reporter at Crain's Chicago Business]

Recession have any impact on that, on the growth?

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

It could potentially. But at this point, we're operating a record schedule out of Chicago this summer. We plan to do that. We're not changing our plan. And our plan is really very consistent with what we devised six months ago before we started the year.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

But this period shall pass and we'll get back to doing what we need to do in Chicago and we remain really confident.

[John Pletz, Reporter at Crain's Chicago Business]

Okay. Thanks.

[Operator]

This concludes the question and answer session. 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 or Media Relations if you have any further questions, and we look forward to talking to you next quarter. Happy spring.

[Operator]

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

Participants

Executives

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

Analysts

• Jamie Baker, Analyst at JP Morgan
• Andrew Didora, Analyst at Bank of America
• Conor Cunningham, Analyst at Melius Research LLC
• David Vernon, Analyst at Bernstein
• Catherine O'Brien, Analyst at Goldman Sachs
• Thomas Fitzgerald, Analyst at TD Cowen
• Sheila Kahyaoglu, Aerospace & Defense and Airlines Equity Research at Jefferies Financial Group
• Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC
• Duane Pfennigwerth, Analyst at Evercore
• Michael Linenberg, Analyst at Deutsche Bank
• Brandon Oglenski, Analyst at Barclays Capital
• Ravi Shanker, Analyst at Morgan Stanley
• Mary Schlangenstein, Correspondent Covering Airlines at Bloomberg News
• John Pletz, Reporter at Crain's Chicago Business