United Airlines Holdings, Inc. (NASDAQ:UAL) Q1 2025 Earnings Call Transcript

United Airlines Holdings, Inc. (NASDAQ:UAL) Q1 2025 Earnings Call Transcript April 16, 2025

Operator: Good morning, and welcome to United Airlines Holdings’ earnings conference call for the first quarter of 2025. 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. 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, Kristina Edwards, Managing Director of Investor Relations. Please go ahead.

Kristina Edwards: Thank you, Sarah. Good morning, everyone, and welcome to United Airlines Holdings’ first quarter 2025 earnings conference call. Yesterday, we issued our earnings release, which is available on our website at ir.united.com. Information in yesterday’s release and the remarks made during this conference call may contain forward-looking statements, which represent the company’s current expectations based upon information currently available. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release, Form 10-Ks and 10-Q, and other reports filed with the SEC by United Airlines Holdings and United Airlines for a more thorough description of these factors.

Unless otherwise noted, we will be discussing our financial metrics on a non-GAAP basis on this call. Please refer to the related definitions and reconciliations in our press release. For a reconciliation of these non-GAAP measures to the most 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 Brett Hart, Executive Vice President and Chief Commercial Officer Andrew Nocella, and Executive Vice President and Chief Financial Officer Mike Leskinen. In addition, we have other members of the executive team online available for the Q&A. And now, I’d like to turn the call over to Scott.

Scott Kirby: Thanks, Kristina, and good morning, everyone. The first quarter of 2025 was sure that it’s clear a 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. First, United’s performance is strong even in this weak environment because we’ve won the battle for brand loyal customers. 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 margins since COVID began. 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, so we think that there’s a reasonable chance that bookings could weaken from here. 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, and 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. And most folks around the country were 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. 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 are capitalizing on our momentum and doing more to attract even more brand loyal customers. Building huge new clubs in Houston and San Francisco, about to open an additional new club in Denver. 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. Our operation is reliable and resilient as ever.

The weakening environment doesn’t have us reconsidering these investments. In fact, we’re leaning into this 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 one possible. Periods of economic softening are part of the business cycle. So the question for you, I guess, is what should we do now that we see economic softness? 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, if you’re not the brand loyal airline, you’re the spill airline. The only way a spill airline gets passengers is through lower prices. 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 spill 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 focused on smaller secondary cities where they had by far the best schedule for customers.

They also had a huge customer advantage as the only airline that didn’t have change fees or bag 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’s loyal customer leaders. 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.

To conclude, UnitedNext is the right strategy. It’s been 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 from the value that’s being created. Brett, over to you.

Brett Hart: 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. 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 A321neos 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. None of it would be possible without you. Thank you. In Q1, not only did we serve more customers than ever in the first quarter for United, but we also finished number one in on-time departures among our US large peers when including customers who were helped with ConnectionSaver. 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. 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 175 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 2025. 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: Thanks, Brett. United’s top line Q1 revenue increased 5.4% to a company record $13.2 billion. TRASM for the quarter was up 0.5%. We’ve been hard at work adjusting how we fly in the historically weaker 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. 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 7 AM or after 8 PM outside of the golden hours is usually 30% lower, but in Q1, that gap expanded to 40% lower.

So that’s why we are canceling more off-peak flying and lower utilization going forward. The weakness in the main cabin was somewhat offset by premium performance. 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 2025 moderated later in the quarter. 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 $1.5 billion in the quarter. Co-brand spend was also strong, up 9%. Co-brand spending growth in early April remains consistent with March performance. 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-yielding passengers, a necessary reaction to the current environment. The effect of these RM changes is that we will spill 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 puts us in a position where we are not a spill carrier. 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 2024, 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 ten points for Denver-based passengers. United also gained 2.1 points in market share in late 2024 in the Bay Area. 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 7 AM and 8 PM. 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. 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 US point of origin business.

While most of our international travel demand is US-based, we are seeing modest declines in non-US origin passenger volumes. For the second quarter, international passengers originated in Europe are currently booked 6% lower than last year. Canadian origin passenger volumes are slightly worse, down 9% year-over-year. For United, US origin demand has more than compensated for these reductions. As we think about the impact 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. 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 PRASMs to date have remained solidly positive for international flights and flattish for domestic flights. United has had a consistent strategy for the last nine years to win brand loyal customers, and that has been happening. 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.

Mike Leskinen: Thanks, Andrew. For the first quarter, we delivered earnings per share of $0.91, ahead of expectations and within our guidance. Our pre-tax margin was 3.3%, 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 start of February, we saw a steep drop in US 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 a first quarter CASM X result of up only 0.3% year-over-year.

These actions, combined with lower fuel costs, enabled us to deliver on our guidance. 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 today, 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 US 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 US government spending and to take appropriate action.

We expect our domestic capacity to come down four points from our original plan starting in the third quarter. There’s a tremendous amount of uncertainty in the 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 $11.50 to $13.50. While we’ve seen stability in demand for the past six weeks, we also recognize that there’s a real risk of the US 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 a 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 a recession. 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 $18.3 billion in liquidity, including our undrawn revolver. We generated over $2 billion of free cash flow and paid down $1 billion of debt. In fact, over the last twelve months, we’ve generated over $5 billion in free cash flow, representing approximately 130% of our net income. At our current equity valuation, that represents an over 20% free cash flow yield. Our net leverage was reduced to 2.0 times from 2.2 times at the end of 2024, 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 BBB with a positive outlook, with a change to a positive outlook from Moody’s as well. On the buyback, as of April 10th, we’ve repurchased approximately 5.6 million 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 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 billion left in authorization. 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 multiples 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. As I’ve mentioned 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 billion 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 Kristina to start the Q&A.

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

Operator: Thank you. The question and answer session will be conducted electronically. Please hold for a moment while we assemble our queue. Your first question comes from Jamie Baker of JPMorgan. Your line is open.

Q&A Session

Jamie Baker: Oh, 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, would your 2026 forecast be higher, lower, or the same today?

Scott Kirby: Hey, Jamie. Thanks for that question. I think it’s insightful and maybe the most important question we talked about today. So thank you. We can end the call after my question. Yeah. There you go. Going for doughnut. I’m gonna 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’ll be for 2026. But it sort of depends on the macro environment. But in the twelve months, we’re back to a normal macro economy. The short answer is yes. Our margins would be higher. And I would go but I would go back to what we’ve been telling you really for the last five years. And it started with one, we were going to decommoditize and build United into a brand loyal airline.

That’s been a part of the UnitedX 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. You know, we see that, you know, we talked about international today, but we haven’t talked about loyalty yet. But loyalty is strong, like, across the board. That’s been another structural change. Part of this too is also part of the revenue diversity has been solving finally solving the puzzle on the price-sensitive travel, and we have done that with, basically, economy engage. And so all the things that we’ve talked about for the last five years left you as on the last call talking about comparative advantage. And saying that we thought the world was going to the airline world is gonna 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 gonna 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 what’s gonna happen and that is just going to happen sooner. That means that I am confident that United Airlines is going to have higher margins. Than we would have and 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 gonna have higher margins I’ve believed they will be solidly double-digit margins.

Jamie Baker: Okay. Thank you for that. And then, you know, Mike, I know you touched on this in your prepared remarks, but, you know, your premium high-margin competitor refuses to buy back stock until they meet their leverage targets. You were obviously pretty active last quarter or, you know, through April 10th. You know, I’d love to believe it’s because you like our down thirty and thirty analysis, but in all seriousness, you know, our question on this topic is why? Is it simply a function of, you know, cash lying around, burning a hole in your pocket, giving the delivery delays? I guess what Mark Streeter and I are trying to reconcile is your own goal to de-risk the balance sheet and achieve IG ratings, again, some pretty material repurchases through April 10th. Any additional color?

Mike Leskinen: Thanks, Jamie. I love the question. Look. When we think about buybacks 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 widens, it is more opportunistic to buy back shares. And so that’s what you have seen. You’ve seen an acceleration of the buyback as the share price was lower. Now we are very, very 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. 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 are excited about, frankly, an opportunity to purchase shares at these low prices.

Jamie Baker: 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: Hi. Good morning, everyone. Mike, you know, you mentioned the cost performance in your prepared remarks, really impressive here in 1Q. You know, 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?

Mike Leskinen: 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-effective 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. 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 to 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. 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 gonna continue to work hard to find more areas for efficiency. But we made a lot of progress in the first quarter.

Andrew Didora: 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. Guess, why is that the right number to anchor to? And I guess, what’s embedded from an industry perspective to get to the seven to nine dollars in EPS? Thank you.

Mike Leskinen: It’s a great question. And I’ll maybe Andrew will wanna 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 add those together, which would be the appropriate way to think about it, it would be a ten-point reduction from the run rate we would have expected. Now how long we persist at that low level, you’re gonna have to make your own assumptions around. And listen.

We’re not we don’t have a crystal ball on how deep a recession might be. But that’s our expectation of what a normal recession might look like. We’ve given you the tools if you wanna create a different scenario than that, but that would be our expectation of a downside case, and we wanted to be assumptions.

Andrew Didora: Great. Thank you very much.

Mike Leskinen: Hey. I wanna clarify that the ten-point reduction, it kicks in in April for our recession scenario.

Operator: The next question comes from Conor Cunningham of Melius Research. Your line is open.

Conor Cunningham: Hi, everyone. Thank you. Appreciate the details on the spill traffic comment. I wanted to kinda start there. You know, can you I just would have this just seems like a time in which you would look to stamp out all the spill traffic carriers from your hub markets in general. So I just thought that that was the whole entire point of kind of base economy in general. So can you just talk about how you can, you know, continue to move down the path of eliminating spill traffic in general? Thank you.

Scott Kirby: 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 point. Everyone else does what they do. I think it puts a mix of pressure on them. When United gets great, the contrast between United Airlines and everyone else gets wider and more evident. But it’s not us consciously trying to stand out or do anything like that. We’re trying to create the best airline in history for United Airlines customers. And that creates a big gap to everyone else. It’s up to them to do something else. And if they don’t, then well, we’ll see. But we’re just trying to do a great thing for United customers.

Conor Cunningham: Okay. That’s helpful. And, you’re probably not like this question, but I’ve been getting it kind of on repeat. 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, you know, the eleven fifty dollar range, it basically implies that you’re gonna be doing better on a year-over-year perspective versus 2024. So I’m just trying to understand what’s driving that improving if we’re bouncing along the bottom in the current recession not recession, the current environment in general. So just what additional levers do you have that you feel more comfortable now? Maybe it’s premium, maybe it’s loyalty. Might have seemed to sound better on cost. Just any thoughts there in general would be helpful. Thank you.

Mike Leskinen: Yeah. Look, the first point I’d make is that the full-year guidance in the eleven fifty to thirteen fifty 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 twenty cents lower than first-half fuel. 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 clarify, I’ll keep going.

Conor Cunningham: No. You’re good. I appreciate it. Thank you.

Scott Kirby: And by the way, that’s not that was a totally fair question. We’ve asked ourselves that question. And Well, Jamie asked all the good ones. Yeah. But the point is I mean, I think the bigger point is, we build we typically build a lot of contingency into guides. 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 guides since no one’s ever done that. 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 an when you run the company with a no excuses philosophy, which is what we have.

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

Than if we didn’t.

Mike Leskinen: 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’ve burned that. But the second-quarter guide with a dollar range, we normally have a fifty-cent range. 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, we’re coming in towards the high end of that. I feel better about the eleven fifty to thirteen fifteen. If we’re coming near the low end of that range, I feel like we’re marching towards a recession scenario.

Conor Cunningham: Appreciate it. Thank you.

Operator: The next question comes from David Vernon with Bernstein. Your line is open.

David Vernon: Hey, good morning and thanks for taking the question. So, Scott, you know, this is a relatively unique sort of time for the industry and that, you know, 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? Are you thinking about using that margin to take share right now, or are you thinking about trying to protect that margin? 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 more market like Denver versus trying to maintain the margin?

Scott Kirby: I don’t think there is a tension. And in fact, I’ll go back to one point which I’m trying to make it to 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. All this changes who the brand loyal airlines are. And, you know, it 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. We thought that whenever the inevitable business cycle turned, we would outperform during that cycle and all that happening.

So we feel good about that. But we’re not doing anything specific. You know, we’ve had a number of markets. People ask questions about specific markets, Andrew can tell you, where we’ve had competitors do big changes up, some big changes down, some big changes up. And I can frankly, our capacity and our plans haven’t changed at all. 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 could 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. 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 it was the winning strategy, and we’ve executed it. And now we’re just finishing the game.

David Vernon: And I guess as you think about that building the brand loyal customer, right, obviously, you know, segmenting the cabin, adding in things like faster speed Wi-Fi, 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 brand loyalty leadership over a multiyear period if we’re seeing, you know, some of the other airlines also kind of investing in some of the same capabilities. It’s just come down to execution, or is there something further in the outlook that you’re looking at in terms of trying to maintain that leadership position with brand loyal customers?

Andrew Nocella: 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 we haven’t announced that are yet to come. But we are, again, in this enviable position where the United 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 gonna see more and more of that over the next eighteen months. We have a bunch of announcements that are planned. And that’s gonna allow us to continue the segmentation revenue choice, customer choice path.

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 Lopez. To invest in the Wi-Fi technology. And while it’s, I guess, a bit flattering that others are trying to copy us, they are generations behind in my opinion. And will never catch us, and we will continue to run as fast or faster to ensure that doesn’t happen.

David Vernon: Alright. 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: Hey. Good morning, everyone. Thanks so much for the time. 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. You know, I thought it was really helpful to frame the revenue downside in the base case versus the recessionary case. But can you give us any high-level thoughts on how much, you know, single act of God buffer lower nonfuel cost, and lower fuel each helped offset, you know, revenue lower by five points than your January expectations, the base case such that you’re able to keep that original EPS range?

Mike Leskinen: I’ll give you directional feedback on actually 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 those as well. So that was the largest. 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 targets, but we definitely pulled some of that forward. Related to those cost savings, the decision to early retire twenty-one aircraft that naturally allows us to bring down maintenance expense. And so that’d be the third bucket is the decision around capacity made early enough allows us to also save maintenance expense. So I put it in that range or in that ordering. Fuel and then cost management, and then the capacity decision.

Catherine O’Brien: Really helpful. Thanks, Mike. Maybe 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 there’s some of the international markets holding in better? Any color would be helpful. Thanks.

Andrew Nocella: Sure, Katie. You know, I think we had a really very good strong Q1 for international, and I think we’ll have the same in Q2, but 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, you know, it’s gonna be clearly a negative RASM environment for domestic in Q2 based on everything we see right now.

Catherine O’Brien: Thanks for the time.

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

Tom Fitzgerald: Hi. Thanks for the time and congrats on the results. I’d love to just hear your perspective higher level and longer term on the broader international market given that you’re the fly 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, I’d love to hear how you’re thinking about that.

Andrew Nocella: Sure. You know, 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’s this, you know, S-curve type effect. 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. Clearly, there’ll be, you know, ups and downs just like there are in any market 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. You know, 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, you know, an order book to support that growth, and we’ll continue to watch it. That being said, we also have a lot of older 767s and 777s. That we can, you know, potentially retire if things do change. But at this point, we’re leaning into it because it is working.

Scott Kirby: And I’ll add structurally. The further you look out, on the timeline, 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 international. I think, for the rest of my career. And then secondly is airport because, 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, like, I’m not I’d actually make the bet the short term too just because I see the data. 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 chips on international because the supply constraints are real and are significant.

Tom Fitzgerald: That’s really helpful. Thanks so much. And then just as a follow-up, I’d love to think about the role of 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 it’s simply a really positive idiosyncratic that you guys have next year. Thanks again for the

Andrew Nocella: Yeah. We are very excited about Starlink and what it enables for our customers for Connective and MileagePlus as well. We shouldn’t forget that. These things are all kinda linked together. You know, we’ve made a lot of different investments, whether it be Starlink, food, seeds, you name it. And all those things together are kinda leading us to where we are today. On the brand loyalty side, 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: Good morning, guys, and 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-US origin volumes down Europe down six, Canada down nine. Offset by the increase in US 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 markets there.

Andrew Nocella: 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 out the numbers. Yeah. Yeah. We are seeing a modest decline in foreign origin business, but, you know, our US origin point sale is, I think, a little over eighty percent. To begin with. And so the twenty percent is seeing a modest decline, and we’re able to easily refill those seats with US origin point demand. So that as a result of all that, our international looks fine. In terms of, you know, overseas, specifically the Pacific, that entity is kinda leading the way. Clearly did in Q1.

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. 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. We’ll see where that is in Q2. And Southern Europe is just, you know, increasingly a desirable vacation spot for US consumers. And in fact, for US consumers to go on off-peak periods. So overall, look, you know, 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 stronger economic outlook.

But the international entity looks, I think, really good. It is a strong source of profit for United. And we’re very bullish about the short-term and long-term outlook.

Sheila Kahyaoglu: And maybe one for Mike. On the seven to nine dollar scenario in a recession, how do we think about your operating margins and free cash flow in that scenario?

Mike Leskinen: At seventy-nine dollars, I mean, the operating margin is just some math. Can help you with that offline around free cash that ends up being we would expect that to be near breakeven, but still positive free cash in the seven to nine range. We would have some there’s some movement in CapEx, but probably not this calendar year.

Operator: Okay. Thank you. The next question comes from Tom Wadewitz with UBS. Your line is open.

Tom Wadewitz: Yeah. Good morning. Thanks for the chance to ask a 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. You know, I’m thinking of the flight attendants in particular, but do you think, you know, progress tends to be slower if you’re in a recession or things are a lot weaker? Or do you kinda think, you know, the same assumptions in terms of your cost profile on timing of when you might get a union agreement?

Scott Kirby: You know, our people are doing a great job. You can see it in our resilient results. When I say we’ve won brand loyal customers, we about the hard product. The biggest thing we do is our people care and take care of customers. There’s nothing as powerful as walking onto an airplane. 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. Nothing as impactful as, you know, a captain coming out of the cockpit and talking to the customers and 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. In this recessionary environment even if it happens. Isn’t gonna change that. And we’re getting close. Attendance, so fingers crossed that we’re near the goal line.

Tom Wadewitz: Okay. So that doesn’t affect your view on timing. What I guess for the second question, so, you know, I think you said, well, we don’t assume the cycle is different or, you know, we don’t 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 the spend is with high-end consumers that would maybe support resilience on international? 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. You just wanna see if you have any other comments to offer on that. It’s just like consumer mix different, international is more resilient. This time around. Even if you go on a recession. Thank you.

Andrew Nocella: Yeah. International has definitely been more resilient, but I do think, you know, there are different types of consumers 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 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 well, you know, a few years, yeah, the market down in recent months, but the high-end consumer, the more wealthy consumer one that takes the global vacations, the one that wants to sit in a premium seat, seems to be less impacted so far and I think that’s really good for our business and is consistent with our brand and one of these customers to begin with.

Mike Leskinen: Hey, Tom. This is Mike. I wanna add to that. I think there’s also been a real mix shift at United. I think probably the industry level with a real mixed shift. In our premium cabins, we have less corporate, and 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: Great. Thanks for the insight.

Operator: The next question comes from Duane Fenigwerth with Evercore ISI. Your line is open.

Duane Fenigwerth: 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. 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. So with that long-winded intro, Scott, what were the highlights from your perspective and maybe from Mike and Andrew how would this book influence your thinking about growth and capital allocation?

Scott Kirby: Well, I’m glad that you read my book recommendation. I have another one I’m not so reading yet. I actually forget the title. It’s by Brian Green. Anyone’s interested in physics. It’s spectacular.

Duane Fenigwerth: Look forward to it.

Scott Kirby: On understanding the search for a unified theory. And it’s really good. But capital returns is good also. And I think there’s a lot of good lessons in there of how to think about it. One for me is, you know, probably appeals 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 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 I think about the demand environment. Demand environment’s gonna go up. Demand environment’s gonna go down. Over time, demand is gonna grow a little faster than GDP.

Air travel, and there’s gonna 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 gonna lead to better supply. Changes. And also even my answer on the international question, like, 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. 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 787s than if they didn’t get us all of our 737s. 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. First time I’ve given a homework assignment to the team, but the finance and network team got them all copied. It’s hard to get, by the way, not in print. But Aaron got them all copies. And, you know, that’s some of the lessons I learned. Mike?

Mike Leskinen: Duane, I’ll 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 of 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, you know, turn right when the market turns left and vice versa.

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. Those would be the two points.

Andrew Nocella: I’ll only add the relative point that I thought was most interesting to focus on supply side forecast. And in this case, I, you know, I’ll just read a Scott said that the international airports around the globe and the big airports in the United States were really not building runways and we’re not building gates. But as GDP grows, we’re building demand. And so I just I could remain very bullish the big cities that we have our hubs in here in this country and the big cities we fly to around the globe. It’s becoming increasingly difficult, if not impossible, to be able to expand schedules.

Duane Fenigwerth: Appreciate the thoughts. Thank you.

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

Mike Linenberg: Oh, hey. My question is gonna 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 fifteen percent of volume. When we look at, you know, 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? And is that just largely a function of the up gauging in next, or are you starting to see, you know, maybe more intense competitive, you know, competing at the lower part of the fair structure that’s driving a higher volume?

Andrew Nocella: Look. I expect in Q2, you’re gonna see us be more competitive at the lower end of the fair structure creating higher volume. It was less true in Q1. Okay. Just the decline in demand happened so quickly at, you know, mid-February and March. So we didn’t have an opportunity to really react quick enough to fill up the seats in our domestic load factor fell by, I think, three point three points. So in Q2, you’re gonna see us we’ll probably still run a small load factor deficit year-over-year domestically. But 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. And it’ll go up and down based on market condition. But we’ll decide how much low-end traffic we wanna spill and when we wanna spill it.

Mike Linenberg: Great. And, Andrew, since I have you, just this Real ID deadline, May seventh, I mean, you’re the most international of any of the carriers, so passport’s 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 the ticket. But are you gonna 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: Look. I think there is a lot going on there, and I know, I kinda hope that date gets extended once again, and I’ll hope the same thing when it happens again. But 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 or their passport or their passport card. 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.

Mike Linenberg: Great. Thank you.

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

Brandon Oglenski: Hi. Good morning, and thanks for taking my questions. So you guys dig into how you’re defining brand loyal customers? 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: Actually, it’s all of the above. So there’s a number of ways to do it, but our total market share 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. 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 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 among the big global travel agencies.

Those tend to be higher-yielding customers traveling often for business. And our share in that category continues to go up. You know, 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 in 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: Well, I appreciate that, Andrew. And I guess you put that into 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, you know, we thought 1Q would be positive and ended up down, I think, three percent or four percent. 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? Or is there more of a focus on margins? And again, is it prudent to be growing that much domestically?

Andrew Nocella: Well, I 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. You know, 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 client proved right. And created, you know, our margins that you saw. 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 block. We believe the fast food 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, 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 gonna fly unproductive capacity. But we are also gonna balance market share and financial returns. We’ve given you, you know, the EPS guidance. We’ve given you two guides. I think we’re really focused, as Scott said, on a no excuse culture on delivering on our guide.

Brandon Oglenski: Thank you, Andrew.

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

Ravi Shanker: Great. Thanks. Good morning, guys. So just to 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, you know, probably the first broad-based consumer recession we’ve had since 2008? Obviously, the whole industry and loyalty and corporate have changed a lot since. It stays as resilient as it was during the pandemic, or do you think it has greater risk?

Mike Leskinen: 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 a rock in all scenarios.

Andrew Nocella: I’ll just add that, you know, and we said this word a lot today. The brand loyal customers make 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: Understood. That’s pretty 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, we’re gonna be using this potential for more fuel price tailwind in the recession scenario?

Mike Leskinen: Yeah. Ravi, I think it’s a good point. And if revenue falls off as much as we 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 into dish offset from fuel.

Ravi Shanker: Understood. Thank you.

Operator: We will now switch to the media portion of the call. Please ensure you are not on speakerphone and that your phone is not on mute when called upon. Please hold for a moment while we assemble our queue. Your first question comes from Mary Schlangenstein with Bloomberg News. Your line is open.

Mary Schlangenstein: 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 they’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: 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 manufacturer 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, you know, things are gonna work out. So my recommendation to everyone would just be to take a breath. And let’s wait a little while before you start making panicky moves.

Mary Schlangenstein: Okay. And you said at the start of the call that most of your deliveries are coming from Boeing. But if you face the prospect of having to take an Airbus plane and pay the tariffs on it, will you do that?

Scott Kirby: Well, 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. And in fact, I look at it as an opportunity we had the 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 to build the airplane in Alabama so the parts come from elsewhere so far. Have been, you know, they have had to pay the tariffs on those airplanes. They’ve been a good partner, you know, and just dealing with that right now.

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

Mary Schlangenstein: Great. Thank you very much.

Operator: The next question comes from John Fletch of Crane’s Chicago Business. Your line is open.

John Fletch: Morning. You 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: Sure. It’s Andrew. I’ll give it a try. You’re correct. We’re gonna gain six gates later this year. We’re very excited to do that. Our current facilities are very full, and we know people want to fly. We know they wanna fly in peak periods. And so these six gates will allow us to continue to execute on the United Next growth plan. You know, we’re really proud we won the gates through this process. 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 gonna 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 Fletch: Recession have any impact on that?

Andrew Nocella: On the growth? You know, it could potentially, but at this point, you know, we’re operating a record schedule in 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. But, you know, this period shall pass, and we’ll get back to doing what we need to do in Chicago. And we remain really confident.

John Fletch: Okay. Thanks.

Operator: This concludes the question and answer session. I will now turn the call back over.

Kristina Edwards: Thank you, everyone, for joining United Airlines Holdings’ first quarter 2025 earnings conference call. We appreciate your time and engagement. Have a great day.