United Airlines Holdings, Inc. (NASDAQ:UAL) Q4 2022 Earnings Call Transcript

Page 10 of 15

Andrew Nocella: And Scott, we should add to that though, what you said earlier that we’re getting rid of a large number of regional jets. So, the departure activity that we’re planning from our 7 key hubs in 2023 is still materially behind where we’re in 2019 from a departure level. The ASMs are a whole another story as we’ve talked about because of what we’re doing with gauge. But we’ve created the room in our hubs to be able to execute our plan. We have sufficient runway and gate space to do so.

Operator: Our next question is from Scott Group from Wolfe Research.

Scott Group: I got one near term and then one bigger picture question. Just when I just look fourth quarter to first quarter, the RASM guide, the implied revenue guide just worse than normal seasonality. Just given everything you were saying about February, March bookings, just help square with the revenue and RASM guide, please?

Andrew Nocella: Yes. What I would say is that we definitely see a different set of numbers for like January 6th through February 15th than we do beyond that. And as I think about it, it’s our hypothesis that we do have a bit of a different type of seasonality post-pandemic than we did have pre-pandemic. So it just depends on the year — the quarter-over-quarter year that you’re looking at. But look, the trade-off would be every weekend is potentially a holiday, allowing us hopefully to be able to depeak the summer and run a more constant level of operation from mid-February all the way through October, that’s really exciting and a lot more upside than maybe a few weeks in January that don’t look as good as they used to be. So, I think the trade-off is fine. But our hypothesis at this point, it is a different type of seasonality related to a post-pandemic environment.

Jamie Baker: Okay. And then, Scott, so bigger picture, if you’re not getting the unit cost leverage from capacity growth that maybe you thought you would have gotten a year ago, I guess, why grow so much and risk adding too much capacity to the market and risk pricing? And maybe just asked differently, if you didn’t grow as much, do you think you’d still hit the 9% margin, but at the same time, just generate better free cash flow?

Scott Kirby: Well, to be clear, we’re focused on margin, not CASM. We’re focused on margin. And while we aren’t updating — upgrading our margin guidance, we’re already way ahead of the Street. I think everything we had in our deck today and everything we’ve talked about today certainly creates a plausible case that margins are going to be higher for all the reasons we’ve talked about. If we were not growing, I think our margins would be lower. I mean, clearly, it would impact our CASM. But I think the capacity that we’re going to add would be soaked up by someone else. And I think that — anyway, I think our margins would be meaningfully less if we weren’t doing what we’re doing. And so, we’re doing it because we think this is a — look, I think this is a once in the history of the industry opportunity.

Page 10 of 15