United Airlines CFO: Q1 Results Tracking High End of Guidance on Strong Demand, Loyalty Gains at Barclays Conf.

Key Points

• United says first-quarter results are tracking to the high end of guidance as "tremendous demand strength," record operational metrics and rising net promoter scores lift revenue and direct bookings via united.com and the app.
• Demand and profitability are strongest in premium cabins and international routes, with domestic main cabin performance improving and corporate and leisure travel both contributing to broad-based strength.
• Management targets double-digit pre-tax margins driven by brand loyalty, balance-sheet improvement and higher free-cash conversion, but near-term international growth faces constraints from Boeing 787 delivery delays and grounded Pratt-powered 777s.

United Airlines NASDAQ: UAL Chief Financial Officer Mike Leskinen told investors at the Barclays 43rd Annual Industrial Select Conference that first-quarter results were tracking toward the high end of the company’s earnings guidance range, citing strong demand and continued progress on operational reliability, customer satisfaction, and brand loyalty initiatives.

Speaking in a question-and-answer session led by Barclays analyst Brandon Oglenski, Leskinen said the airline was seeing “tremendous demand strength” and described a continued shift in consumer behavior toward brand loyalty and product segmentation. He added that United was seeing increasing preference from customers booking directly through united.com and the United app.

First-quarter trends: demand strength and operational performance

Leskinen said United’s year-to-date operational metrics were at record levels for the company despite disruptions from Winter Storm Fern. He cited “the number one A0, the number one D0, and the number one A14” performance United has ever had year to date, alongside rising net promoter scores (NPS).

He also pointed to revenue strength in Chicago O’Hare, saying United had delivered “mid-single-digit RASM in the first two weeks of February in O’Hare,” while acknowledging investor concerns about competitive “skirmishes” in certain markets.

When asked what was driving quarter-to-date outperformance, Leskinen emphasized demand and customer preference, saying United was benefiting from consumers increasingly valuing the airline’s product and experience and choosing to book directly with the carrier.

Premium and international demand leading, with main cabin improving

On booking trends, Leskinen said United’s “strongest demand” and “strongest profitability remains in the premium cabins and international.” He added that domestic main cabin performance has also improved, describing it as “better,” while noting that international and premium have strengthened “from more profitable levels.”

Asked whether demand was skewing toward corporate or leisure, Leskinen said corporate demand “feels pretty strong,” but overall strength was “broad-based right now.” He suggested spring break demand was supportive of the company’s first-quarter trajectory toward the higher end of guidance.

Strategy focus: brand loyalty, stability, and margins

Leskinen framed brand loyalty as central to both profit growth and reduced earnings volatility. He described a “brand loyal customer” as someone who books directly on United’s platforms, values United Clubs, and has a preference for United as long as the airline remains schedule- and price-competitive. He likened the airline industry’s shift toward loyalty-driven profitability to similar trends in hotels and cruising, arguing it can support both differentiated profits and greater stability.

He said United also aims to reduce volatility through financial strategy, reiterating a focus on improving the balance sheet and advancing toward an investment-grade profile. Leskinen said the company was taking out both financial leverage and operating leverage and argued investors had already seen “muted volatility” in United’s earnings profile.

On long-term profitability, Leskinen said United’s target is “double-digit” pre-tax margins and that he has “clear visibility” to achieving that level. He said the company’s margin path is supported by internal initiatives at United and could later be aided by an industry-wide improvement if low-margin carriers become more rational in their capacity and pricing decisions. He described that broader shift as “economic gravity” and said it could create a “step function improvement” in industry profitability that would also benefit United.

Network, fleet, and product initiatives

On network priorities, Leskinen said United is continuing to grow its mid-continent hubs through upgauging and connectivity, while indicating that peak growth in that connectivity has largely been achieved. He also stressed that United would flex capacity up or down to maximize profits, saying decisions would be driven by margins rather than a set capacity growth target.

Leskinen said the Boeing 737 MAX 9 is “a great aircraft” and that the MAX 10 would be “incrementally better” for United, but emphasized that the company’s path to double-digit pre-tax margins is “not predicated” on the MAX 10.

He also discussed constraints affecting international growth. Leskinen said United was seeing “incremental delay” on Boeing 787 deliveries, calling it frustrating but saying he remained confident Boeing would resolve the issues. In addition, he said United has “a few 777s that are Pratt-powered” for which the company does not have engine parts, and those aircraft will be grounded in the summer, putting pressure on international ambitions in the short term. He said that issue should be resolved in 2027 and noted it is a broader industry challenge.

On onboard connectivity, Leskinen said United expects to have a “significant amount of mainline aircraft” equipped with Starlink by the end of this year, with the rollout “substantially complete” by the end of 2027.

Leskinen also said United plans to announce improvements to its loyalty ecosystem and teased additional product details tied to an upcoming media day in March, declining to provide specifics during the conference. He suggested loyalty changes could accelerate co-brand card acquisitions, which he said have not yet caught up with growth in the brand loyal customer base.

Costs, labor, and technology (including AI)

On inflation, Leskinen said cost pressures in aerospace and the airline industry have been running hotter than the broader economy since the pandemic and that he does not expect that to end. He said United expects to perform better than the industry over time on CASM-ex and noted the company “fully expect[s] to have labor deals done this year” and “fully expect[s] to have to pay that bill,” adding that labor costs are embedded in United’s EPS guidance.

He called airport costs structurally inflationary, while saying investments in “really nice airports” are part of the brand differentiation strategy. On maintenance, Leskinen said United is making progress improving efficiency and securing competitive spare-parts contracts, which he said could “moderate” maintenance cost trends in coming years, though he did not provide details.

On artificial intelligence, Leskinen said United is using AI-related tools to help customer service representatives access information faster, support preemptive and predictive maintenance, and improve technician productivity through technology such as iPads. He said AI could also help automate parts of ground handling and support cost trends, though he does not yet see it as “transformational.” In response to a question about top-line benefits, he said he does not see AI as a major revenue management “needle mover” at this time. He highlighted irregular operations recovery as a key area where technology can help, pointing to Winter Storm Fern as an example where technology aided United’s recovery efforts.

Leskinen also noted progress in finance modernization, including filing the company’s 10-K “a week earlier than we historically have,” which he attributed to improved finance tools.

Chicago competition and capital priorities

Asked about competition in Chicago, Leskinen said United is focused on protecting gate positions and believes its product, schedule, connectivity, and clubs differentiate the airline. He characterized the competitive capacity increases as having a “modest impact” on profitability and said United “is making money in Chicago,” adding that the competitor adding capacity is not profitable in the market. He said he was not overly concerned about broader spillover from the situation.

On free cash flow, Leskinen said double-digit pre-tax margins should support both earnings growth and potential multiple expansion, alongside “higher free cash conversion.” He reiterated prior commentary that free cash conversion could be “around 50%” during the current growth phase because much of the company’s capital spending is growth rather than replacement, moving toward “75%” later in the decade as capital needs shift toward maintenance. He said best-in-class companies often have free cash conversion closer to 100%, but he was “not ready to promise that yet.”

About United Airlines NASDAQ: UAL

United Airlines Holdings, Inc operates United Airlines, a major U.S. full-service passenger carrier providing scheduled air transportation for passengers and cargo. The company offers a comprehensive route network that covers domestic markets across the United States as well as extensive international service to Europe, Asia, Latin America, and the Pacific. United operates a mixed fleet of narrow- and wide-body aircraft on point-to-point and hub-and-spoke routes, and supports corporate and leisure travel through offerings such as premium cabins, basic economy, and ancillary services including baggage, seat selection and in-flight amenities.

In addition to passenger operations, United provides cargo services through United Cargo, handling freight, mail and specialized shipments.

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