That is something that we can reposition over time, and we would expect to be able to serve Tel Aviv when the violence ceases. And so, those three full points coming out relatively rapidly, you can’t take the cost out. That was the majority of the CASM — of the increase in the CASM for the fourth quarter. Industry is facing other issues, but that’s what happened here at United. And we expect to mitigate that in 2024 and beyond. The other issue, which I’m not sure how persistent is yet is that maintenance cost. Maintenance costs throughout the years have been higher than we expected. And for United, it’s been — a big piece has been the increased need for spare parts. That’s on aircraft, but particularly when we repair engines as the work scope has been larger than expected.
Some of that is related to supply chain, and it’s difficult to see when that ends. I will add — and so those were the two components, majority capacity and then some additional headwinds for maintenance in the fourth quarter. We’re not giving 2024 guidance at this time. The industry is facing cost pressures, inflationary cost pressures, labor cost pressures, maintenance cost pressures. What I will commit to today is that United will be industry-leading in how we manage our costs. Cost convergence is a structural trend. It is what is causing the lower-cost carriers and they’re not lower cost for long, low cost carriers to struggle and it is a foundation to United Next. So I don’t know where all that’s going to settle. We will give you guidance as we would normally on the January conference call, but I will commit to industry-leading CASM going forward.
Conor Cunningham: Okay. That’s super helpful. And then maybe just a little bit on — so a lot of your cost stuff next year kind of seems like it’s somewhat capacity-related or delivery — new delivery related. So, I’m just trying to understand if you could maybe — is there any swing capacity — excess in capacity that you may be able to have that could protect some of that growth that you have next year that may be slowed as a result of some of these delivery delays?
Mike Leskinen: Conor, you’re thinking about it the right way. But we are — given all the constraints, we are working to — in the incremental flights from United being quite profitable, given the great results from our commercial team. We’re going to fly as much as we can to maximize profitability, but we do face some of those constraints. The key around the pressure of growing is you do need to hire folks on board before you actually add the ASM. And so that’s a headwind United faces as long as we’re executing on the United Next strategy. We’re going to work to optimize that. But, that doesn’t go fully away until you would return to a slower growth rate.
Operator: Our next question comes from Catherine O’Brien with Goldman Sachs. Please go ahead.
Catherine Maureen: I noticed in the release you called out the Basic Economy was up 50%, year-over-year. Andrew, can you just dig into what drove that? Is that 12% of domestic passengers? Is that up significantly? Is there also a pricing element?
Andrew Nocella: It’s a good question. We — last year, facing the surge in demand, just maybe the simplest way to say it is we sold out too soon and we didn’t have appropriate room for these basic passengers and are gauge was smaller. And this year, as we get closer to implementing all of our United Next plan, we are much more careful not to sell out too soon. So our close-in bookings are actually quite strong. It’s interesting to say that as I read commentary from around the rest of the industry that kind of says the opposite, and I do have to wonder whether one is tied to the other, obviously. But because we say we didn’t sell out too soon because we have plenty of room and because we have just a normal booking curve for all this, we were able to accommodate those passengers in this quarter, unlike we did in the past.
And with the new gauge aircraft coming in the future, we’ll be able to continue to do that going forward. So, I think that’s the simplest and easy explanation as to why you saw that change in our Basic Economy passengers. And look, it’s a product we’ve talked about a lot, provides choice for our customers, on the low end. We have lots of products on the high end as well. It gives us the diversity we need. And I think it’s really allowing us to compete very effectively with all of our competitors, but particularly our ultra-low-cost competitors.
Catherine Maureen: That’s great. And then maybe one for Mike, just on a follow-up on the delivery — continued delivery delays we’re seeing. With the recent announcement on Pratt potentially putting pressure on engine availability and on neo deliveries, I don’t think the MAX 10 has been certified yet, but correct me if I’m wrong. How do we think about that delivery outlook for next year? Are there alternatives to the MAX 10 maybe you would consider, or — I appreciate now that you guys have in the queue the contractual deliveries versus the expected. But should we expect to see that delta maybe grow when we get the Q later today?
Mike Leskinen: That is what we can do is we can manage our expected deliveries versus the contractual deliveries and size the business appropriately, the more that we hire workforce for aircraft that don’t come, they aren’t delivered when we need them, the bigger that headwind is for us. And so, one of the first things I need to do in my new role is to properly size that buffer between expected and contracted delivery. So that’s point one. Point two, we have older aircraft, and we will push some of those older aircraft to fly longer with expected delays in delivery. I happen to love that option because that is also a return on invested capital enhancing. And so, in the long run, we want to simplify the fleet and those MAX 10s are going to be structurally lower cost.
We’re excited about them. The A321s are fantastic aircraft. Both of those aircraft are fantastic for a network like United, where gauge — we get a real advantage out of gauge. I expect those deliveries to really start to drive lower CASM in 2025, not 2024. And so, we should understand the timing of that. But we’ve got numerous levers to manage the delays from the supply chain, and we can do a better job optimizing based on delays that are becoming a little bit more predictable.
Operator: Our next question comes from Ravi Shanker with Morgan Stanley. Please go ahead.
Ravi Shanker: I just wanted to follow up on the commentary earlier about you need to cater to all customers, which I totally get kind of given the broad base of the market. But obviously, we’re seeing some of your peers try to push into premier or pushing into the low end. And just kind of the face of it feels like specializing may be an easier thing to go after than trying to cater to everyone with the network and the product you have. So just wanted to dig a little deeper into kind of why that strategy of kind of being everything to everyone rather than being just maybe a full-service premium network airline.
Andrew Nocella: I’ll start. I assume others may want to chime in on this. But first, I think there’s a really important distinction in your question that we need to clarify. We’re not trying to be all things to all people within the United States or around the globe. There are parts of our network that don’t cover every single market in the United States. And I think if you were to try and say we are going to cover every single O&D payer in the United States as the world’s largest airline, that would be incredibly challenging, and that is not something we’re trying to do. We are trying in our hubs and all the spokes we serve well from our hubs to make sure we offer a diverse range of products that appeal to all the customers that fly on United Airlines.
