United Airlines Holdings, Inc. (NASDAQ:UAL) Q2 2023 Earnings Call Transcript

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Andrew Nocella : I guess I’ll add on a few more details. First, I think we’re in the really early stages of the United Next plan, and our results this quarter give us a lot of confidence. We’re on the right path. But I really look at all the details. And when I look at them all, what I would tell you is, one, the MAX 10 and the A321 are really important to our plan. They’re large single-aisle narrow-body jets that everybody knows has superior economics, and we don’t have a single one in our fleet today, and that’s a gap we will close. We’ve already increased gauge by 20% since 2019, more than any other U.S. airline and 8 points more than the industry and yet we lead in unit revenue performance. The United network has been under-gauged and we’ve said that over and over again.

And our ability to add low unit cost planes at high marginal RASMs is now well proven and will drive earnings. Larger gauge, of course, gives us the ability to manage our overall unit cost down in a way others just don’t have the ability to do, in our opinion, and this again is a unique advantage to us. We think our gauge growth in the coming years will be faster than any of our competitors based on the public [sheet plans] (ph) that are out there. Of course, all of our mainline jets will eventually have a signature interior with seat-back screens and Wi-Fi. These jets have higher NPS scores as a result. These jets also come with larger first class cabins, more economy plus seats. They provide our customers with more options to upgrade and choose their ideal onboard experience while generating increasing levels of ancillary revenues.

The pandemic clearly created a boom in premium leisure demand that we see today and these passengers often purchase an upgraded experience. As Scott said, we have a large order book of narrow-body jets. Boeing and Airbus are largely sold out until the end of the decade. We can use these planes for growth or we can use them for retirement depending on conditions. Also, as Scott said, and I think really, really important, the international long-haul environment is just structurally different. This cycle for our business will have higher international margins versus domestic, a reversal from pre-pandemic. United has the largest international network amongst U.S. carriers. And as a result, we’re going to benefit the most. No other U.S. airline has coastal gateway hubs like United.

Our hubs are where most of the business class premium demand and cargo demand enter and exit the United States, and they have superior geography for connecting traffic. This advantage is largely unique to United. Of course, we have a larger order book for wide-body jets, as Scott said. Our domestic connectivity is not where we want it to be. We know we can close it and we know what the margin gains are going to be for that. And while we continue to use regional jets, we won’t over rely on them. Cargo is an amazing strong spot for us that really helps fuel our global long-haul growth. The other thing I’d say, and I think this is really important, is all United hubs are producing strong profit margins. And we have the option to grow these hubs with our large narrow-body order book, which creates a different paradigm for United than most.

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