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Okay. Let's keep flying high. Sorry, I'm going to work all the airline analogies in with United Airlines next, and very happy to welcome back to Laguna, CFO, Mike Leskinen. Mike, welcome back to Laguna.

Thank you, Ravi, and good morning. It's a great time in the airline industry. This industry is continuing to decommoditize. You're seeing the winners in this industry really create a value proposition for the consumer that's differentiated, and that's creating, I think, healthy financials through cycle. We're starting to see that in the valuations for our stocks, and I'm thrilled to talk a little bit more about it today.

That's awesome. We will get to the long-term value prop in a second, but if you can just start with maybe a lay of the land as you see it. Obviously, a lot going on in the space. The airlines had a very strong summer, obviously, transitioning from summer to the fall, kind of how do you see the world today?

Let me start with demand because demand is incredibly resilient. This is an industry that historically has kind of priced to the lowest common denominator. But the American consumer is becoming a lot more sophisticated, and they care about the quality of the product, the resiliency through irregular operations, whether you have Starlink or not, et cetera. And the consumer has disposable income and wants to spend on experiences. And so the industry, to maintain profitability, has had to push through some price to offset rising fuel prices. And I wouldn't say, to our surprise, it was our expectation, but it's proven out that demand is incredibly resilient. We have not captured price as an industry for the last 5, 10, 20 years relative to other categories in the travel spend bucket. And I think we have finally put together a product and a service that is demanding some recapture of that. And so it is nice to see that resiliency in this business.

Got it. I will say that Scott Kirby was spot on when he said that you guys saw that fuel prices would remain elevated for longer. How has kind of having that longer-term view that this is going to be a sustained issue helped you with planning capacity, planning yields and maybe kind of giving you an advantage over your peers?

Look, I think at United, we have a philosophy. It's a no excuses philosophy, and we have a business plan, a culture of driving profitability in all environments. And so when the world changes, we change. We don't kind of stick our head in the sand. And so you saw that as fuel prices spiked, we expected them to be higher for longer. We made some adjustments to our schedule because every airline has a bell curve of profitability if you look across the routes. And there are some routes that were on the lower end that get pushed into not profitable when fuel spikes like this. Not a lot because, as I said, the consumer has been incredibly, incredibly resilient. But there's some marginal routes that don't make sense in a higher fuel environment. So we cut them. And you should see us continue to behave that -- you will see us continue to behave that way.

So as you look into the fourth quarter, there'll be some flights in December that we won't fly that we thought we were going to fly. If fuel remains high, we'll make some adjustments into the first quarter and beyond into 2027. And so you always will see United do that. We are not flying to maximize market share. We're flying to maximize profitability and free cash generation. So we'll make those adjustments.

Got it. As you look into the fourth quarter as well, do you have a sense of what demand is shaping up as you kind of said demand being very resilient through the third quarter, kind of do you have a sense of what holiday season booking curve is looking like? And kind of how much are you booked so far?

It's really strong. In the third quarter, there've been some calendar items, the Jewish holidays when Labor Day fell that caused a little bit of -- I think when you look at the TSA data, it caused a little bit of a false indicator. But as we look into the fourth quarter, bookings are tremendously strong. We talked about that on our conference call. Bookings have continued as we expected. So that piece of the equation is resilient, very little evidence of demand destruction. I mean if you squint at some of the lower-priced tickets, you might be able to find something there, but very small for United Airlines.

And then the premium cabins just kind of humming along very nicely. Corporate business has been ticking up a little bit. We're still 4.5 points back from what we think trend line is, but we've seen a little bit more of an uptick in corporate and premium, but economy also very, very strong.

Got it. Just a couple of follow-ups there. Just on the yield curve, obviously, you guys had a very strong first half of the year. And you have been able to, both as United and industry, kind of pass through that jet fuel with getting back up close to the high watermark on fuel prices, is there room for further jet fuel pass-through do you think for yourselves?

Absolutely. Jet fuel price gets passed through with a lag period. We were talking about 100% recovery in the fourth quarter. Fuel prices have spiked pretty rapidly. We've got about 35% of our tickets booked already in the fourth quarter. So you can't go back and reprice those tickets. So there is a lag. And you all should think about that when you run your models. But there is nothing that is changing that causes us to not be able to pass through 100% of fuel with that lag.

Got it. And kind of you briefly mentioned corporate. If you can unpack that a little bit, I think you said still 4.5 points below what you thought would be baseline. There are many baselines here. So is that a pre-pandemic baseline? Is that where it should be given GDP? Is that where it should be given where fuel is?

It's a pre-pandemic baseline. And the point of sharing that is there's -- while corporate has been very, very robust, and we're seeing volumes pick up, there's plenty actually more room to run there. That's the point you should take away, but incredibly robust. In fact, the premium cabin in corporate has been very strong for quarter after quarter after quarter. It's the economy that has caught up to that with some really strong pricing in the economy cabin as well. But I would say it's just kind of caught up to parity. It's not like it's getting on top of premium.

Got it. On main cabin, that has been a source of weakness for some time now for the entire industry. Very encouraging to hear you say it's kind of caught up on the yield side. How are load factors in main cabin, and kind of do you guys have a sense of why and how that's catching up? Because I think one of the themes of this conference has been just how resilient the customer has been. Clearly, it seems that you're seeing that as well. So any color you have on kind of how and why that's catching up?

I think that it has to do with differentiating the product and consumers really choosing to fly on United for what we're bringing. And it's not just that we're making the premium experience better. We're making the experience better from nose to tail. And I think it's also a secular trend in society where customers care a lot more about experience than hard product. So more of their wallet is shifting in that direction. If you look at what -- and I talked about it a little bit earlier, but if you look at what consumers pay for hotel nights, frankly, this conference, you can't even get a room here right now. But even hotels, I understand the Marriott, you're paying $1,000 a night for the Marriott. Uber prices to and from the airport often cost more than the airfare.

The percentage of the trip cost that is dedicated to airfare has shrunk over the years because this industry has often competed in irrational ways. And you've got players that have been willing to lose money -- almost permanently lose money. And I think that the industry structure is moving in a way that as that low-hanging fruit as those kind of worse actors are forced to produce at least a positive return, certainly not their cost of capital, but a positive return, that's creating this opportunity to get a return, not just a pretax margin, but a return on capital. And so we're determined to do that at United Airlines. We've made great progress. And as I said, as we pass through fuel with a lag, we're completely on track.

Got it. Three months ago, when you guys were doing your 2Q calls, we thought the biggest debate at Laguna would be we would see evidence of how resilient pricing was going to stay in a lower jet fuel environment. That obviously didn't happen. But if we were to eventually go back to that debate again, kind of you guys said about 90% of the recent pricing improvement is structural cost inflation and harmonization rather than short-term capacity actions or jet fuel. Can you give us a little more color on kind of how you have -- how that thinking has evolved since and kind of how confident you are that this is a new baseline for pricing?

I love the question, Ravi. And as I think about the setup, there's 2 ways we can win. You could see fuel prices rapidly stabilize and hopefully fall as we start to see traffic move through the Strait of Hormuz. I've got no special insight into when that may or may not play out. And I think in that environment, we'll be able to maintain a heck of a lot of the price and our margins expand. And that could have happened 3 months ago. It could happen 3 months from now. I don't know the timing. But that is absolutely a path to getting to the double-digit margins we've been talking about for so long. And by the way, double-digit margins for United, really, I think, right around 9% margin is when we get to investment grade as well. So it really is the key to a whole lot of goodness financially for United Airlines.

But the second path is actually pretty favorable as well. And the second path is if fuel prices stay higher for longer, maybe go higher from now in the short term. And if that plays out, you're going to see more and more structural change in this industry. You're going to see there's such a bifurcation between the players that have positive margin and the players that have negative margin. And the balance sheets between those 2 players is becoming more and more stark. So the longer this difficult environment with fuel price plays out, the more structural change that plays out and the stronger our margins are on the other side because we will be in an even more differentiated position versus those weaker players. So I think it's kind of a situation where heads we win and tails we win.

That sounds a good setup. Just kind of -- on that note, I mean, I've said this a few times so far in this conference already, but I'm going to be a greedy sell-side analyst and kind of say that, "Hey, you just pointed out that there is so much room to normalize on yields for yourselves and as an industry to kind of real adjusted inflation levels." So this is not just about keeping jet fuel pass-through that they've already done because you need to offset structural costs and such. There is more room to come on yields over time. So let's assume that jet fuel goes back to something in the high 2s, low 3s and stays there.

There's more room for the airlines that are providing a differentiated customer experience. They have to invest in the customer. This is not getting something for nothing. This is providing a better product, a better service, a more reliable airline, Starlink Internet, better segmentation itself. I'm sorry, didn't mean to interrupt you.

No, no, that's exactly what...

It's key to it. This is not just pushing price and giving nothing back to the consumer.

Got it. Let's talk about giving back to the consumer. Kind of you introduced kind of base fares and premium cabins, kind of you're doing the segmentation there earlier this year. In 2Q, you said that the buy-up rate on standard Polaris was significantly higher than you initially expected. What have you learned from that rollout so far? And kind of is this bringing the, I want to say, middle of the plane to the front of the plane? Or kind of how is that shifting dynamics within the cabin?

Yes. I love your questions this morning. Thank you for that question. When I left Wall Street to come to United Airlines, I was very cost focused, like this is -- you win by having low cost. And what this most recent iteration and segmentation with the basic Polaris fare has proven is that customers love our clubs. They love our clubs. And they're -- by the way, the club is pretty expensive and take a long time to build. And we have a huge head start on much of the competition in that. But the buy-up is an indication to me -- it's not an indication. It's a proof point that customers love the club experience and they're willing to pay for it. And so it shows that we're not done with segmentation. And segmentation is -- in the end, it helps us drive yield, but it's customers paying for what they want. It's giving the customer choice. And the customer is choosing to have that full premium experience.

Got it. So you're seeing buy up within that premium cabin as well with post segmentation. It's not a case of people are saying, "Hey, I'm just okay, flying in the front of the plane and kind of I need the club too."

That's right.

That's incredible demand.

And in fairness, it continues to surprise me, but it is what the customers want. So we are going to provide it.

I want to say that you guys have been one of the most, if not the most innovative airlines in terms of new products out there, kind of you mentioned Starlink, but also the main cabin product where you can like put the 3 seats down and kind of make it a flat bed. I mean that was insane kind of -- I want to experience that at some point. But...

Great for families.

Great for families, right? How -- what is the product ideation process within United like? And how do you come up with ideas like that? And kind of how much more runway do you have to do innovative things within the cabin?

Well, we've got just an incredible commercial team. And Scott -- starting with Scott Kirby, we've got this culture of having a 5-year start-up within a 100-year-old airline. And so we are encouraged as the entire officer corps and down through managing directors and directors encouraged to be creative and try new ideas. And if the idea works, great. If it doesn't, we fail fast. And so I think nowhere do you see that more than in what we've done with a hard product. And as I said, it's from nose to tail for the aircraft. So what we're doing in the economy cabin is pretty incredible and differentiating for United. I don't think that's going to end. And so we've proven that.

Starlink, I'll use that as an example. When we first started to think about Starlink, look, it was more expensive than the other options. But we thought about what customers -- what could really different -- especially in long-haul flights, what could really differentiate the experience. And so we kind of took a little bit of risk, and that has been an incredibly reinforced -- incredible bet for United to make. And you've seen a lot of the industry trying to catch up. They'll be a few years behind. But a lot of loyal customers coming to United. And once we get those customers and put them in our loyalty ecosystem, I think that they're going to be permanently United customers. So more and more bets like that to come.

Got it. Another big change from your fleet and premium perspective was the XLR Coastliner kind of Elevated 787 coming into the fleet. What does that mean? Obviously, probably the first time, I think you're flying a narrow-body but a full cabin, a full suite product to transatlantic as well. How has the customer reaction in the early days to that announcement been like? And just overall, if I can ask you a bigger picture premium question, it feels like the entire industry is becoming more premium, which I think is -- I don't even know if it's a high-quality problem, but it's not a good trend for the industry to have. Do you think there's room for this much premium across the industry?

All of society is becoming more premium. This is not just an air travel experience. This is hotels, cruise lines, car service, et cetera. And we're just jumping on to that trend. Andrew Nocella, Patrick Quayle, brilliant in bringing the 321XLR into the United ecosystem. You've got to see it. If you haven't seen it, you got to get on board and see the experience. The Polaris suites on those aircraft are incredible.

And if you think about living on the East Coast, it's such a special competitive advantage for United Airlines to be able to fly direct to so many cities in Western Europe. It's going to be high margin, and it's going to be a unique opportunity for United because we order those aircraft and we're configuring them a way to fly those routes. You don't have to fly to Paris and you have a connecting flight go straight to these destinations. They're going to be incredible for these new cities on the map, too. So I think yet another example of the creativity of our team in driving a differentiated network to match the differentiated product, and it's going to lead to continued strong financial results.

Got it. You mentioned high margins there. So with your CFO's hat on, how do you think about the margin profile of these aircraft versus a kind of a more traditional transatlantic product or a more traditional long-haul premium product? Obviously, new planes so it will be cheaper to operate, more fuel efficient, et cetera. But overall, kind of do you have a sense of how the profitability changes?

Well, you need to -- for these smaller cities, you need to have a lower trip cost to make it work. And so this XLR is just a special machine for those missions. If you compete head-to-head with the same routes, with the same hard product, that's commodity and that's going to devolve into commodity-like returns. That is not the strategy you're seeing from United Airlines.

Got it. Understood. Let's switch gears and talk about co-brand here. So I think you said that new co-brand accounts increased 22%, card spend increased 14%. MileagePlus enrollment increased 9% in 2Q, all kind of incredible numbers off of not the easiest comp in the world. You made a bunch of changes to the card program. How much runway have you already made before you consider a new agreement in the coming years?

We've got a ton of runway in front of us. The team is doing a great job. We've made some tweaks to the program. If you are a loyal United customer, you should have the United Card in your wallet. There are some alternatives that get you some of the benefits of the United Card, and we need to make sure that those loyal United customers have a United Card. And so those tweaks are paying dividends. And you've seen a lot of cards -- a lot of customers shift to the United Card and bring that United Card to the front of the wallet. And so those results you just cited are evidence of that. We are on the right path, but we have so much runway because if you benchmark our program versus some of our competitors, we've got a lot more opportunity.

Now a lot of that is on United. Some of that is the relationship with Chase that we've got a strong partner in Chase and we figure out how to make the pie larger and get a larger slice of it at the same time. And so we're going to work on that over the next couple of years. But there are hundreds of millions of dollars of opportunity and upside into our loyalty ecosystem. The foundation of that is running a better airline, a differentiated airline. It's a loyalty program after all, and you want to be loyal to a company that has a product and service that's differentiated.

Got it. I think you have described the existing contract as in the sunset phase. Obviously, kind of coming to the end of it, what can we see in terms of potential changes kind of you alluded to the economics here, sort of changes, timing, kind of what does that look like for the short term?

Yes. The contract is in the sunset phase. But after every sunset, there's a sunrise. And sunrise is going to be really special, I think, for United. The opportunity is to drive more card acquisitions. We've a gap in our acquisitions, if you look back in time over 5 years, where our acquisitions didn't keep up with the level that I think that our business deserves. And so that means that the kind of the flywheel of number of customers that have the card in their wallet and front of the wallet is smaller. But that means that I've got all those customers to go out and capture and entice with a great product.

And so part of that is going to be new contract to drive card acquisitions. Part of that is going to be the rate we make on the spending. And so I think there's a big opportunity there. It's going to be a combination of a new contract and making sure that we make our card really attractive for the customer. And that will spool up. So that takes a few years, but a big opportunity. As I think about taking our industry -- top of industry margins and making it absolutely industry-leading, this is one of the biggest levers we have.

Makes sense. Let's switch gears and talk about the network a little bit. Scott Kirby has been one of the most vocal over the last several years about the need to make air traffic control changes, throttle and takeoffs and landings at kind of key airports. Obviously, you guys had some disruption in Newark last year, kind of you've lapped that brilliantly this year. There was a cap announced at O'Hare. But again, it seems like these changes may actually be benefiting you rather than the other way around. So can you talk about how you guys have built that into the network, what the net changes to economics have been at these hubs? Are there any other hubs that you see these changes potentially coming out?

Well, firstly, let me compliment the administration, Sean Duffy, Bryan Bedford. They have done so much to try to improve air traffic control for this industry, and they've really made great progress. There's a lot more progress to go and a lot of work to do. But it's kind of a simple math equation. And if you have an airport that the physical facility allows for 80 operations per hour and you schedule it for 85 or 90 operations per hour and there's weather on top of that occasionally, it's not going to be a great experience for the flying public.

And so I think common sense reform to bring airports and limit the amount of scheduled flights to match the physical capacity. And that's what has happened at Newark. That is what is happening in Chicago. And I think it is -- it's not just about United Airlines, it's about the experience for the flying public to minimize preventable delays. And so I think the teams have done a really great job. They've made smart decisions. There's more to come. There's a lot more work to do, but really pleased with some of the progress. And that does help profitability for United without a doubt.

I was going to say kind of -- it may kind of limit your frequency, but at the same time, potentially gives you fewer IROPs, better pricing opportunities kind of the net is a positive change.

Especially when you're a connecting hub.

Okay. Got it. Maybe kind of switch gears a little bit again and kind of apologies for a couple of short-term questions here. But with what fuel is doing, obviously, fuel has moved since your initial 3Q guidance. How are we thinking about the range today? Is it just a case of plugging in $6 jet fuel per month? Or how do we think about kind of some of the moving parts there?

Yes. We'll update guidance in the normal course. If there was something around our bookings, there was something around costs, we're not going to be shy, and we're going to update you very quickly. With fuel, it's very public. You can look at the price, you should make adjustments. Make no mistake, fuel does get passed through with a lag. And so we're going to work hard to do that. That's going to bolster revenue trends over time, but with a lag. But you all can see the fuel price just as easily as I can. And so you're going to want to make the adjustments appropriate for what is a very public fuel price.

Got it. You guys are very famous for including 1, if not 2, Acts of God in your guide. Is fuel an Act of God?

Fuel moving higher by $1 with the speed that it's moved is a big act. I'll just leave it at that.

Fair enough. I think you also said that 3Q represents peak CASM pressure and reiterated 2% to 3% core CASM ex for 2027, helped by the gauge that we've discussed already today. So how much of the improvement next year -- well, first of all, kind of is the '26 CASM ex to your point just now still running on track? And second, how much is the improvement next year simply a denominator given idiosyncratic gauge opportunity versus other actions that you're taking?

Yes. Well, firstly, costs are on track. We do an incredible job at United of managing a very efficient airline. We are also investing in the product, as I've talked about, and that's very deliberate, and that adds to cost, but it is margin accretive to do that. So you're not going to see us change anything around that. Q3 remains the peak as far as I can see for CASM ex. And so we'll see a peak in Q3. It will come down in Q4. And I think in 2027, as we're building the budget, it will be lower as well. We continue to target the core CASM ex to the 2% to 3% range. There'll be things that ebb and flow. As you pull out capacity closer in, there's a headwind there, but again, profit accretive when you make decisions like that. So I feel really good about the cost trajectory at United, the efficiency at which we're running the airline and what that means for long-term profits.

Got it. So maybe to tie this all together, given all the levers you have, let us assume for the moment, a normalized jet fuel environment, again, high 2s, low 3s. What is the ultimate margin opportunity that you guys see over time?

We have eyes on 10% margin plus with stabilization of fuel. I don't actually care if it stays high. I need it to stabilized. And we'll move towards that double-digit level. Longer term, absolutely still believe in the mid-teens opportunity. We've got work to do. That will take some years to achieve. But I think that's where this business model is headed. If you look at United -- you didn't ask this, but I'll offer it. Look at United for us to justify the CapEx we spend in this business. I think a return on invested capital exceeding our cost of capital is something we're going to work towards. Something around 8% to 9% pretax margin gets us there.

So we're right on the cusp of very strong returns on capital, exceeding our cost of capital. for some of the have nots in the industry, you need 5 or 10 points of yield just to get to a breakeven operating margin. And so I think that, that must happen. You can't continue to borrow money to fund operating losses. It is shocking to me how long the capital markets have patience for airlines that burn the furniture to keep the lights on. So I do expect that to resolve itself. When that resolves itself, that's a big piece of what drives us to mid-teens. But I don't have a lot of control over that.

Absolutely. Understood. Any questions from the audience?

I was just wondering with United, it's been one of the more visible airline backers of eVTOL through its investments in Archer and Eve and conditional aircraft orders. As those platforms move closer to commercialization, how has your thinking evolved on the role of eVTOL could ultimately play in United's network?

Yes. How amazing is this technology? And what Archer has done in particular, is pretty incredible. If you guys have not seen some of the test flights of this aircraft, I mean, go and get on YouTube and check them out. I mean it's an incredible aircraft.

United, in particular, operates hubs in very congested airports and very congested ground traffic. I mean it can take upwards of an hour to get out to Newark or to get out to JFK from Manhattan. And so in the long term, that's where I see this being very special for United. I want to make sure that we're front-footed on providing that opportunity for our customers to create a much more predictable trip, 7-, 10-minute trip to the airport instead of what could be half an hour or 1.5 hours depending on traffic. So I think that's where it heads eventually. But the air traffic control is a really difficult problem.

And so in those congested places where you're going to get the most utility for the customer from eVTOL, those are also the most difficult places to bring eVTOL into a congested air traffic control system. So we're going to work with the companies. We are. There are some very clever solutions and some good ideas around how to do that. I do think initial adoption is going to be in less congested airspace. And so how has it evolved? We want to look for some less congested airspace where there's also good consumer utility for these aircraft. But we're right on the cusp of these aircraft being flying and being a product that we can offer to consumers and then how we evolve that into congested airspace is something that's going to take a few more years. But our excitement and enthusiasm has only increased for what this does for the flying public.

Mike, you mentioned excitement and enthusiasm kind of United has a history of being a leader in making investments here. I think you personally as well kind of have directed some of these kind of almost running like a VC, if you will, eVTOL, supersonic, SAF. I think this morning, you had an announcement there. Do you still have the kind of time and bandwidth to kind of look at this stuff, this long-term stuff with everything going on? Or how do you not lose track of that?

So I think a lot of folks in my position, they take up hobbies like golf. My hobby is the venture capital team. I mean I just -- I love this stuff. I mean I was an investor for 20 years, and I just -- I love it. It just -- it gets me excited. So I make the time for it. And we're very thoughtful about how much capital we allocate, and we're nimble. We try to create options. And so we've had a portfolio where this isn't just about creating strategic knowledge for United, which it does, but we make money off of these investments as well. And so we've got a great team. They're doing a great job. Right now, I spend a lot of time thinking about air traffic control modernization because we know we've got some good investments in eVTOL, but to integrate that into airspace, you've got to modernize airspace as well. And so that's part of our DNA. It's baked into United. We're going to see more of it. We got a couple of pretty cool ones in the works that I'm not ready to announce today, but it is -- I have less time than I'm used to, but I love it.

Understood. That's great. Any more questions from the audience? If not, let's talk about free cash flow, which is typically not a question airlines used to get in the past, but you do now. So obviously, you've talked about 50% free cash flow conversion over the next few years, pushing to 75% towards the end of the decade. What are the kind of potential targets for free cash flow and capital usage? A, can we talk about the CapEx curve over the next 4, 5 years? And also, what are you going to do with the excess cash?

Well, a whole lot in there. First of all...

I have a minute, so I'm just packing up.

Healthy companies generate free cash flow. I mean the best measure of earnings quality is free cash conversion. And so I feel passionate about that. We can sit as an industry and we can gripe about our multiple. What's going to drive the higher multiple is free cash conversion. And so I will recommit today that we're on this path to 75% free cash conversion. We do have heavy CapEx investments, but that's because we are going to -- all these investments are driving returns well in excess of our cost of capital.

If you're getting yield for it, why not?

And so -- it makes sense. And so 50% going to 75%, I'll recommit to that today. But I'll also say that if you break our CapEx into maintenance CapEx and growth CapEx, maintenance CapEx delivering something like a GDP growth in ASMs and you take the CapEx above that, we're not headed to 75%. It's above 100%, and it should be for a healthy company. And so as you also -- as you ramp up profitability in the loyalty ecosystem, that's capital light. So we've got plenty of levers to continue on that path to a higher free cash conversion. And again, adjusting for growth CapEx, it's not 75%, it's above 100%.

Got it. So maybe really quickly to bring us home here, outside of refreshing our fuel chart every 5 minutes, what can we look forward to in 2027 from United?

I think that we've got to prove the case. But you ought to -- all of you in this room and anyone on the webcast, you ought to think about this industry and what has made it kind of cyclical in the past, the financial returns cyclical in the past kind of boom to bust. And you should see that this massive spike in fuel, how this industry has handled that differently. And that tells you that the industry is different. And if we can continue to prove that, you should continue to be willing to pay a higher multiple for the business because it's a healthier business. And it's proof, not promise in that regard. So let us continue to prove it. I think there's tons of opportunity for earnings expansion as our margins expand. And I think that what is special about this investment opportunity is on top of that earnings expansion, you're going to see multiple expansion as well. So lots of opportunity in the industry and I think even more in United Airlines stock.

Let's just hope macro cooperates in the near term.

All that would be is a pause. It doesn't change the trajectory. It changes the timing only.

Sounds good. Mike, thank you so much for the thoughts today.

Thanks, Ravi.

Good morning, and welcome to United Airlines Holdings Earnings Conference Call for the Second Quarter 2026. My name is Regina, and I will be your conference facilitator today. [Operator Instructions] 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.

Thank you, Regina. Good morning, everyone, and welcome to United's second quarter 2026 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 and are based upon information currently available to the company. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release, Form 10-K 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, and historical operational metrics will exclude pandemic years of 2020 to 2022. Please refer to the related definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures at the end of our earnings release.

Joining us today to discuss our results and our outlook are 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. We also have other members of the executive team on the line available for Q&A.

And now I'd like to turn the call over to Scott.

Thank you, Kristina, and good morning, everyone. I want to start by thanking the United team for staying focused on taking care of our customers and running a best-in-class airline and not letting the conflicts in Iran distract from the consistent execution we've become accustomed to. 2026 is once again demonstrating the durability and strength of the United business model. Our focus on building brand loyalty is evident in our strong top line performance with second quarter revenues up 16%, recovering about half the increase in fuel price for the period. The significant increase in fuel in just the past week is also proof that our strategy is resilient.

At this time last week, I was planning to tell you that we had a good line of sight to growing earnings year-over-year based on what we expected our guidance to be at the time. But fuel has gone up a lot in the last week, and we've decided to once again be a leader by changing our guidance policy on fuel. We feel we owe it to investors to update our practice and provide guidance to reflect the most current fuel prices. The fuel price spike this month is equal to $1.12 of EPS, so if fuel goes back to where it was earlier this month, we expect to be above the high-end of the guidance range. While our multiples don't yet reflect it, we believe this industry has structurally changed, as demonstrated by the quickness of the fuel recovery for United but also at an industry level. Perhaps the most important structural change in the industry has been the significant inflation and harmonization in nonfuel costs like airport fees, labor and maintenance. Cost inflation is what is driving fares higher, though fares still remain 13% lower in real terms compared to pre-pandemic.

In the quarters ahead, I expect yields to continue returning to reasonable pre-COVID levels that will ultimately allow the industry to earn its cost of capital. The impact of structural changes are just now beginning to be felt. Demand remains robust as we expect both 3Q and 4Q RASM to grow faster than 2Q's 12% and yields for fourth quarter are currently booked about 14 points higher for 4Q than at the same point in time for 3Q. Demand is strong and the overall cost pressure continue forcing fares higher.

United has proven that our brand loyal strategy is working, and we're using today's environment to accelerate our investments in all aspects of the customer experience from nose to tail. My conviction in building a brand loyal airline is stronger than ever and I'm encouraged by the consistent share gains we've seen across the board and the corresponding financial results. The more brand loyalty we have, the stronger we expect our earnings will be during good times and more resilient our earnings will be during industry shocks events. And I can already see and hear from customers that getting Starlink on all our aircraft is going to be a step function increase and are attractive to those customers.

And with that, I'll hand it over to Brett.

Thank you, Scott, and good morning, everyone. Second quarter is always an important moment for United as we accelerate into the busy summer travel season. And our employees once again rose to the occasion. Across the operation, our teams delivered a safe, reliable experience for our customers with the care, professionalism and commitment that show how good leads the way every day.

In the quarter, United carried 10 of our highest passenger days in company history, with the highest being over 640,000 customers carried on June 18. We had top-tier on-time departures for the sixth consecutive quarter, ranking second amongst our largest U.S. competitors and representing our best on-time departure rate in the second quarter since the pandemic. We also had our lowest second quarter seat cancellation rate in company history. Notably, we saw meaningful improvements at our Newark hub, our busiest global gateway. For the month of June, Newark ranked #1 in on-time arrivals, delivered its best on-time departure rate ever and its lowest seat cancellation rate since 2018. These results reflect the continued strength of our operation and the work our team is doing across the network to solve problems in real time, adjust as conditions change and deliver a safe, reliable experience for our customers.

And our customers noticed, we had our highest second quarter Net Promoter Score since the pandemic in the second quarter. Starlink is another example of how we are investing in a better customer experience and differentiating United. During the quarter, we accelerated the rollout of free Starlink WiFi and now expect to have close to 1,000 Starlink-equipped aircraft by the end of this year. Early customer feedback has been very strong, and WiFi satisfaction scores on Starlink equipment are more than double the scores of other WiFi operating aircraft.

On labor, we are pleased that our flight attendants ratified a new agreement in May. This agreement is an important investment that is included in our outlook for the third quarter and full year 2026, and we remain committed to reaching much deserved agreements across all work groups. United Next continues to be the right plan for the company. We are building a united that is more reliable, more elevated, more global and more customer-focused, strengthening the experience we deliver today and positioning us well for the future. We believe that our ability to remain nimble and proactively respond to evolving industry headwinds, such as higher fuel maximizes our earnings potential improves, but we have structurally changed for the better.

Thank you again to the entire United team for delivering for our customers and each other. With that, I'll turn it over to Andrew to discuss the revenue environment.

Thanks, Brett. Overall, revenue performance was exceptional in the quarter, and proved once again United's ability to quickly adjust to an ever-changing environment. I think our outlook for the rest of 2026 validates our commercial plans are working well.

United's revenue accelerated across the board in Q2 with total operating revenue up 16% to $17.7 billion. TRASM was up 12.1% year-over-year with load factors up slightly, which indicates strong demand for United's products. We observed minimal to no negative impact on demand from higher price points, a trend we see continuing. Domestic passenger revenue was up 20.3% with PRASM up 12.2%. International PRASM was also up 12%. Pacific led the way with PRASM up 14%, Atlantic up 12.1% and Latin up 10.7%.

Cargo revenues were also strong, up 22.6% and Loyalty revenue was up $11.3 million. MileagePlus program changes have been very effective in building momentum in new co-brand accounts, spend, engagement and membership as expected. New co-branded credit card accounts reached a record level for the second quarter, up 22% with Q2 card spend increasing 14%. MileagePlus enrollments were up 9%, outpacing capacity by 5 points. We saw the largest increase in membership in Chicago and in New York.

Premium revenues were up 16.4% and Premium PRASM up 11.6% in the quarter. RASM specific to the Polaris and Premium Plus cabins was up even more at 13.6% in the quarter. Main Cabin RASMs were up 11.5% in the quarter, this is the second quarter in a row where we've seen Main Cabin RASM positive after years of below average performance at an industry level. While Main Cabin RASMs turned the corner in 2026, our Main Cabin fares remain far behind inflation driven by all costs not just fuel. We are now just seeing a necessary catch-up in pricing. In fact, to put these current fare levels in context, the average Main Cabin fare today is minimally up versus 2024, well short of inflation, which is up nearly 7%.

Close-in business travel was exceptionally strong in Q2 with contracted business revenues flown up an impressive 27% year-over-year and bookings up 30%, led by technology, financial services and professional services. In Q2, United grew corporate share year-over-year in all of our hubs. These same positive business demand trends continued into early July, and we expect to continue for the remainder of the year. We have adjusted our revenue management posture to save more seats for Close-in business demand. The load factor contribution of business travel from all channels in the quarter was up about 0.5 point year-over-year. Our outlook for the remainder of 2026 assumes demand strength from Q2 is consistent in Q3 and in Q4.

Looking ahead, the pricing environment remains strong across the entire network with selling yields up mid- to high teens year-over-year in recent weeks, setting up a strong double-digit increase in year-over-year RASM. Currently, we're booked about 58%, booked through Q3 and given current selling yields and strong demand we do expect year-over-year RASM in Q3 and Q4 to exceed Q2. Consolidated Q4 yield is currently tracking up a strong 19% year-over-year, while Q3 yield at the same point in the booking curve sat up only 5%.

United continues to gain local share in each of our 7 hubs. Passenger share in our hubs has increased 7 points from 2019, by far the largest increase of any airline from their respective hubs. United's Q3 schedules are largely final. United's Q4 domestic schedules are not final and will be adjusted downward, when finalized. While we are not providing capacity guidance anymore, we will make a final determination on Q4 capacity as we get closer to the quarter where we can properly consider the latest fuel and demand trends.

United's efforts to decommoditize our revenue streams and create consumer choice are accelerating as we head into 2027. New fleet and product initiatives position the business for RASM and margin gains in '27 and beyond, and we're particularly excited to get Relax Row and the CRJ-450 out for sale. We also have a very clear path to larger gauge in 2027 as well, which we expect will be accretive to results in a tailwind to CASM-ex. We have renewed optimism that we'll take delivery of our first MAX 10 in mid- to late 2027. The MAX 10 has more premium seats than the aircraft it replaces along with the best-in-class CASM. We've absorbed an increase in gauge from 104 to 126 seats since we announced United Next, but we're still about 10 seats from our goal of 136 seats and North America.

We can also now see the horizon -- on the horizon, completion of key aircraft modification programs, including fast and free Starlink WiFi, seatback entertainment, larger overhead bins and our refreshed onboard branding. Our United Next plan will be largely done in 2027, but we have many new commercial and product initiatives coming. We will begin to rapidly spool up our flying on our new premium 321, the XLR and the Coastliner later this year and into 2027. We anticipate a fleet of 100 Premium-configured 321 by the end of the [ 2026 ].

At United, we're rewriting the definition of what a premium global airline looks like every day. By late 2027, we'll provide a consistent and elevated experience for all customers in all cabins unmatched by anyone. I wanted to say thanks to the entire United team for delivering these excellent results across the spectrum.

And with that, I'll hand it over to Mike.

Thanks, Andrew. The second quarter provided yet another proof point of the strength and resilience of our business and our United Next strategic plan. We have decommoditized United Airlines by earning an ever-growing proportion of brand loyal customers, which in turn then allow us to generate durable financial results, especially during tough environments for the broader industry. Our strategy continues to deliver margins at the top end of the industry, a strengthening balance sheet and an overall financial position that allows us to focus on the long term. Our confidence in our ability to deliver double-digit pretax margins in 2027 and mid-teen pretax margins beyond that had never been higher.

We delivered second quarter earnings per share of $1.99 at the high-end of our guidance range of $1 to $2, and pretax margin of 4.8% despite a $2.3 billion year-over-year headwind from fuel. Second quarter CASM-ex was up 6.1% year-over-year, which reflected pressure from labor deals and capacity reductions, all consistent with our expectations. We remain focused on driving greater efficiency without compromising the investments in our people, customers and products that underpin our growing brand loyal customer base.

In the quarter, we were able to recapture 50% of the increase in fuel expense and accounting for the sharp rise in fuel recently, we expect to recover 80% to 90% in the third quarter and full recovery by the fourth quarter. At today's prices, fuel remains almost $6 billion higher for the year compared to our outlook at the start of the year. Our focus on efficiency has helped offset some of the fuel headwind but our ability to drive higher yields has been critical in helping cover the heightened cost of our operations. And as Andrew mentioned, United has not seen a measurable demand impact based on the higher fares. In fact, if you zoom-out to consider price inflation for travel over the last 10 and 20 years, airfare stands out as a tremendous value. Our customers increasingly desire a better travel experience, and we believe they will continue to pay reasonable prices for it. That's why we invest billions of dollars into our business. It's why our margins have been near the top of the industry, and that's why we expect to continue to deliver strong top line revenue growth and mid-teens margins in the years to come.

Looking ahead, we expect third quarter earnings per share to be between $2.50 and $3.50, underpinned with an all-in fuel price of approximately $3.69 based on Tuesday's curve. Given the recent run-up in oil, we felt it prudent to adjust our outlook to reflect the current environment. For the full year, we are tightening our guidance range to the high-end of our previous guide and expect earnings per share between $9 and $11. Since early July, fuel prices have increased 15% to 20%, and our guidance reflects that pressure. However, if fuel prices return to prior levels, we expect to be above the high end of both ranges. Additionally, given oil volatility, we expect crack spreads to remain elevated for the remainder of the year.

In a year where the industry is experiencing a multibillion-dollar shock from oil. This will be a fantastic outcome that demonstrates United's ability to absorb and manage through times of uncertainty and meaningful financial pressure.

On cost specifically, our plan volume-adjusted has remained consistent with our expectations at the start of the year. The pressure on our unit costs in the first half of the year was solely driven by our close-in capacity adjustments, and will remain a headwind to unit costs for the remainder of the year. We've consistently demonstrated we will adjust capacity when necessary rather than operate flying that does not make economic sense. These actions reflect our focus on maximizing long-term profits and cash flow. With this in mind, in 2027, we plan to retire at least 80 aircraft as we continue to renew and up-gauge our fleet, a step-up from the last few years.

Turning to the balance sheet. As the quarter began, the industry faced significant risk and uncertainty driven by the hostilities with Iran and the closure of the Strait of Hormuz. Given that heightened volatility, we proactively secured additional funding to build extra liquidity to manage through a scenario where oil remained higher for longer. We raised capital through a series of private bank transactions that raised $3.7 billion of new debt that is attractively priced at a fixed rate equivalent in the low 5% range, pricing well inside of our most expensive existing debt. Once oil prices stabilize, our intent is to use this newly raised debt to prepay more expensive debt and to purchase aircraft with cash. Our ability to raise this quantum of debt at these terms further demonstrates United's improved financial position and progress towards investment grade.

Since the beginning of the second quarter, we have prepaid approximately $1 billion of higher cost legacy aircraft debt and PSP debt. We will continue to closely monitor the situation in the Middle East. But in interim, this cap will provide us plenty of flexibility. We ended the quarter with $19.6 billion of available liquidity. We remain focused on achieving investment-grade credit rating metrics and remain optimistic for our prospects later this year.

To wrap up, demand for the United product is as strong as ever. Our customers continue to demonstrate a preference for the value our products provide. This supports our relative financial performance and reinforces our confidence in the durability of our strategy and our ability to deliver mid-teens margins in the future.

I'll turn it to Kristina to kick off the Q&A.

Thanks, Mike. We will now take questions from the analyst community. [Operator Instructions]. Regina, please describe the procedure to ask a question.

[Operator Instructions] Our first question will come from the line of Catherine O'Brien with Goldman Sachs.

I know we're not going to get an actual RASM guide, but Andrew I just had a couple of questions all related on the fact that 3Q RASM should accelerate into 3Q versus 2Q. Can you just help us think what that looks like for each of your regions RASM, system RASM comp, that's fairly comparable to 2Q, but domestic has a tougher comp and then the 3 international regions have easier comps. And I guess just anything we should also be aware of on Other revenue or Cargo as we make our assumptions on RASM acceleration? Just trying to get a sense of the puts and takes.

Sure. When we look across the system, as I said in my script, we see strength just about everywhere. In Q2, I think we're particularly proud of our performance across the board but really in the Atlantic and Pacific. And if you look at those numbers year over two, even more proud, like we've got it really dialed in on those entities -- and we see continued strength in both of those entities in Q3.

Internationally, Latin America year-over-year will be the standout in Q3, considering it definitely has an easy comp, but the number for Latin in Q3 for PRASM growth year-over-year will be off the charts. Cargo had a really strong quarter. Most of the gains in Cargo were yield-related, not volume related. And I expect that to continue into Q3 as well. So I think a really good outlook. The only place that combined that has lower yields than I would otherwise expect is Hawaii. But other than that, I think the system is firing on all cylinders. We've done a really good job our capacity planning group putting capacity where it needs to be. And I think that shows up in our yields in the outlook for Q3 and what we've told you about the outlook for Q4.

Our next question will come from the line of Andrew Didora with Bank of America.

First question, Mike, I see '26 CapEx came down a little bit. I know there are some delivery changes. I guess as we think about modeling your free cash flow the next few years, what year do you see as sort of peak CapEx? And when do you begin to see it bend down a bit more significantly?

Andrew, thanks very much for the question. We're focused free cash flow, uniquely focused on free cash flow. We've talked about a 50% conversion rate for the next few years, heading to 75% as we exit the decade. The CapEx is going to vary based on our results. We're determined to get to double-digit margins, as I said in my script, mid-teens margins longer term. As we get there faster, we may allow CapEx to be a little bit higher as we get there more slowly, we'll manage CapEx appropriately. But what we're committed to is those free cash conversion figures.

Okay. Understood. And then just as a quick follow-up here, investment grade, obviously, a big goal of yours this year. When you couple that with that path to double-digit margins, kind of the CapEx comments you just had. How do you think about target leverage and future capital return potential as that kind of CapEx maybe decelerates from the peak?

We've had significant consultations with the rating agencies. I expect and we plan for net debt to be below 2 turns. I think if you normalized our earnings this year, for fuel, we would already be there. As we look into 2027, we will absolutely trend below 2 turns. And in addition to the actual metrics, what we've proven through this fuel crisis is the resiliency of this business. And at least for the airlines that have a brand-loyal strategy, we've proven the resilience that would earn us a higher rating for the industry and the business itself. So put those meaningful factors together, and I think we're -- the market is already recognizing us with investment-grade type terms. And I think the rating is right on the precipice.

Our next question will come from the line of Sheila Kahyaoglu with Jefferies.

Maybe just to start it off, can you talk about Starlink? You've now installed it on 450 aircraft out of your 1000 aircraft fleet, and that's expected by year-end or nearly most of your fleet. How do you think about monetizing the addition of Starlink and the advantage versus your peers? And I guess, how do you think about new product introductions more broadly? You mentioned MAX 10 finally coming into the fleet at the end of 2027 and the XLRs.

Well, thanks, Sheila. We've been doing a lot in the past 5, 6 years to really invest in the customer experience and we look at the -- this aggregated data, market shared data, every single one of our hubs like just incredible growth from the local customers, and it's been the right strategy. And I think Starlink is probably going to be the biggest of everything that we've done. And like the feedback I get from customers is just unbelievable, good when they get on a flight. We're doing everything we possibly can including taking aircraft out of service as fast as Starlink can produce the antennas for us. We're going to get them on the airplane. And I think particularly for many of the Premium customers, but all customers, but for Premium customers that really want to be able to make sure they're connected with high speed, it is going to lead to big share gains for us. We're excited about it, proud of it. And it's just the next step forward for us at United. But we can already tell it's going to be big.

Great. And just on the new product introductions with the MAX 10 coming in, how do you think about that more broadly?

Well, we've been waiting a really long time for the MAX 10. And hopefully, that wait is coming to an end. We have our first implementation going down the line for, I think, a July delivery of next year. So we're anxious to see that. With the MAX 10, you'll see us stop taking delivery of MAX 9 shortly thereafter. The MAX 10 will be superior in every way, a little bit larger and far less cost on the incremental side. So the marginal CASM is very low, [indiscernible] the bigger aircraft. And that goes towards our CASM-ex goal. I think it's going to be a really great aircraft for making sure we have efficient growth into the future.

Across the board, the products look great on these aircraft. However, the XLR and Coastliner, which is the 321 NEO platform, are arriving this year. They have a lot of premium seats on board those aircraft, and you'll see us deploy them rapidly as we go into 2027, which will increase our Premium seating faster than our Main Cabin seating for a bit. And we're really excited about that. These aircraft will have Starlink on board, they'll fly [ those ] premier routes within the United States and of course, to smaller definitions in Europe and Latin America. And I think we'll be a game changer. We have about 100 of these coming before the end of the decade, far more than any of our primary competitors. So we're really leaning into the premium narrow-body. We think it's going to be a structural advantage for United, and we're excited about that.

And then last, the elevated 789. We have those flying, the Studio suite is performing unbelievably well, and we are excited to rapidly introduce the size of the elevated 789 fleet in 2027. We will have an infinite number of aircraft with that many premium seats. That's a really large complement onboard, but we'll have enough to fly key routes in Asia into London, Heathrow where that plane makes appropriate sense, and our customers and the NPS scores show that they really love the amenities onboard the aircraft. So that all adds up to a lot of different product features. There is more to come, and we will let you know what those are, at the appropriate point in time.

Our next question will come from the line of Conor Cunningham with Melius Research.

Mike, it seems like we're going to face peak cost pressures in 3Q this year. I know it's early and you're still investing heavily in the product and the customer experience. But it just seems like you have the biggest opportunity on cost come next year. So maybe you could just talk about the puts and takes there? And just why shouldn't we already be penciling in United leading on costs in 2027?

Thanks, Conor. And to answer the question simply, I think you should. As we roll into 2027, we remain committed and expect the CASM-ex in the 2% to 3% range, core CASM-ex. That includes some investment -- continued investment in the consumer. I also think you are thinking about the pacing of CASM-ex in 2026 correctly. I expect Q3 will be peak, and everything is working to plan. We're doing a great job of managing core CASM-ex. We're investing in the customer. And the gauge growth that reaccelerates in '27 is going to get us right back on that 2% to 3% core CASM-ex path.

Okay. Great. And then you guys have obviously done a very good job of managing the business this year and your conviction level around double-digit pretax margins next year only seems to get a bit stronger. But like if I still think about the opportunity set in front of you, you have Starlink unlocking, NPS scores, Ad businesses and so on, Gauge, Premium, Merchandising. It just -- you have a ton of stuff. And a lot of that ramps actually past '27. So if you could just talk a little bit about how you view the long-term margin profile of the business. And it just seems like we are at a much different place than we've been ever before.

Well, thanks, Connor. I'm afraid to answer that because you said it all so well. I don't want to screw it up. But -- so -- but here is what I think the margin path is for United. And it's just consistent with what I said in the past. I think we're on a trajectory to get to low double-digit margins with no structural changes in the industry. Just everything that you just talked about, the path that we're on, gets us to low double-digit margins. And by the way, somebody may ask it later, but we're going to exit 2026 at a revenue run rate here in the second half that would just -- on its own imply double-digit margins for next year, which I also expect.

But we'll get to low double-digit margins with no other kind of structural changes in the industry. I do, however, think that -- and I think getting to mid-double -- mid-teens margins requires or is likely to require some more intellectual changes in the industry. And I do think that's going to happen. I mean it doesn't happen immediately. It takes time, but economic gravity always wins. And the reality is this year, 4 of the 8 publicly traded commercial airlines are probably going to lose money. They have an awful lot of flying that loses money on an individual route basis. And one way or another, that gets resolved over time. I'm not going to try to predict when. I'm not going to predict exactly when it happens. But I think that probably drives us into the mid-teens margin range. So on our own, even if none of that happens, we're in a pretty straightforward path, I think, to low double-digit margins. And you get to add several points on to that, structural changes happening in the industry.

Our next question will come from the line of Jamie Baker with JPMorgan.

Scott, on fuel, one concern we all hear quite often, particularly by the elevated fourth quarter schedules is that when fuel prices ultimately received capacity will come back on and hurt RASM. You may recall that back in 2015 and 2016, I actually criticized you -- well, I mean, not you personally, but we -- I know you can take it. We felt that American under your leadership did just that. Huge fuel cost savings at that time as a way to sort of hammer some of your competitors, particularly [indiscernible]. So that's the basis of my question. Do you think the industry has evolved to the point that this is less of a risk? Or is this something that analysts and investors should still fret about?

Well, let me start with why [indiscernible] prices have gone up. It's not fuel price. Fuel prices accelerated a little. It's not fuel price and it's not capacity. It is what I said in my script, probably the biggest structural change that's happened in the industry coming out of COVID is cost inflation and cost harmonization. And the harmonization is really important. And what has happened is airport fees have gone up something like 60% since COVID, labor costs have estimated dramatically, maintenance is off the charts in terms of escalation. And those are all costs that every single airline pays the same. And that has driven -- that is why 4 of 8 airlines are going to lose money this year. It's why 1 airline went out of business this year. That is the underlying driver of price increases. And even with fares up this year, as I said earlier this morning, earlier in my script, airfares are down still 13% in real terms, compared to where they were in 2019. And that's just basic economics, and any industry has to pass along the price increases.

So I look at kind of where prices are right now. I would say 10% of the price increase -- 10% of price here in the second quarter was less capacity growth in the second and third quarter. 90% of it is the structural change that happened with cost increases. There was another fare increase this week as fuel started to go back up. And there were no fare decreases when fuel went down. And so if you're an investor, what's different this time than 2016 is the cost harmonization across the industry. It's a dramatic structural difference. And so I think it's fair to be arguing about what the capacity is going to be. By the way, I think capacity for the fourth quarter is likely to come down. That's what happens every quarter, likely to come down. But if it doesn't, you're really talking about 10% of the fare increase that's sort of at risk. And the 90% is probably not done yet because all those costs haven't yet been recovered. This is about a structural change in the cost side of the business, which is forcing a structural change in the pricing and revenue side of the business.

Excellent. And then for Mike, on this capital raise in the quarter, how does this play into management's overall conservative? Is that conservatism -- excuse me, in the remarks in my view that you didn't need to be this proactive. You have [indiscernible] secured access. You've got access to [indiscernible]. I guess I was kind of wondering why you prefund all this CapEx when other options seem to exist?

Jamie, thanks for the question. And look, we just -- we have a track record, and we're going to maintain that of being proactive. We are right on the precipice of investment grade that's going to unlock a lot of options for us. And this is a very cost effective. And the net cost, as we invest the proceeds in money markets is very low. And so this was a very cost-effective way of adding some extra insurance in a way that will bring down our overall cost of carry as we prepay the more expensive debt. So it was truly a no regrets move, and I'm really proud of the treasury team for the execution.

Our next question will come from the line of Tom Fitzgerald with TD Cowen.

Two for me on loyalty. Just one, would you just update us on your latest thinking about the timeline on that contract renegotiation? I know that's one of the longer-term upside drivers for you guys? And then just my follow-up is I know you redid the credit card program in -- back in March just to further incentivize and align with the credit card holders. I'm wondering how -- what the early learnings from that's been? If that's having an intended result?

Sure. In terms of duration, I'll say, I think it's out there on the Internet. We're in the sunset phase of the current contract and -- but we have not started to reengage, with our bank partner Chase at this point. But soon, we'll do so. But I think we're -- I can describe it as a sunset phase.

In terms of the program changes, look, I gave a bunch of stats on my opening remarks, and we're really happy with the changes we did. Some of them were new and unique for the industry. But I think it's had the desired effect. I think the credit card space is most interesting and complicated and also full of a lot of upside for United Airlines as we grow and take advantage of these opportunities as our business -- core of our business, it allows us to grow the credit card business even more. So we're super excited about it. I think the numbers are all moving in the right direction.

Just to point out, we did have a out-of-period onetime adjustment in loyalty of the revenue in the quarter. That made our number look a little bit lower than it otherwise would be. It showed just under 8% when -- without that onetime adjustment would have been over 13%. So if you're looking at those numbers and thinking that the revenue slowed a bit in the quarter, they did not, we expect strong numbers in Q3 as well. So I think we're really set up well. I couldn't be prouder of the changes. That was 1.5 years of research and investigation and technology changes but they're all implemented. They were implemented flawlessly and are doing really well.

I'll also point out, we implemented a lot of changes on united.com and how we sell tickets, how we sell [ nested ] fares. All those changes are really critical to our evolving and more complex product mix. They were also implemented flawlessly. The technology worked perfectly, and I'm really proud of the team for delivering all that. And I think the nested selling is also delivering exactly what I wanted to deliver in the very early stages here.

Our next question will come from the line of Ravi Shanker with Morgan Stanley.

Scott, it's interesting that you tied the industry-wide fare increases to overall cost inflation rather than fuel. And you said there was another round of increase this month, despite fuel not hitting a new high watermark, I think that's a demonstration of that. So as investors or analysts, what do we think is the new benchmark for when United could raise pricing going forward in the coming years? Is there a certain number of points of CASM inflation? Is it specific cost catalysts like a new labor contract? Or I'm just trying to get a sense of how many kind of -- what is the opportunity for pricing ex-fuel benchmark for the industry going forward?

Well, I'm not going to answer a forward-looking question on pricing. But I think the way to think about pricing, what's happened this year is sort of cleaning up the core basic pricing environment. That's the 90% that I talked about relative to capacity. There are no more $9 fares from Houston to Central America or $4 tickets from Los Angeles to Cabo with some of the crazy stuff -- that just doesn't exist anymore. I don't think it's ever going to exist again.

And so the core fare structure is in a much more reasonable place today and it continues to go up as it has this week. The capacity side of the equation is really yield management. How often you sell the lowest fare versus higher fares in the market. And that's sort of the 90:10 ratio that I think exists. But I think really the way for investors to think about this, is to think about that 90:10 ratio. And the cost structure inflation and the harmonization meaning everyone's costs have gone up on those things that are outside of our control, it's 90% of the driver.

Our next question will come from the line of Scott Group with Wolfe Research.

Just two quick things. The comment booked yield 14% higher for Q4, like any way to help us think like what that actually means for our model? Like is the implication RASM accelerates further Q3 to Q4. I just don't know like how to actually -- what to do with that comment? And then, Mike, you said retiring 80 aircraft next year. How much capacity is that? Any like preliminary directional thoughts about capacity growth next year?

Well, I'll start. Look, we kind of -- we don't give RASM guidance, but I did give a lot of hints and that Q3 and Q4 would be above Q2. So we obviously think we're in a really good year-over-year RASM set up for the remainder of the year. In terms of that particular comment, I think it's a reflection that the incredibly low fares, as Scott pointed out, from L.A. to Cabo of $4 or $14. I think $14 is the accurate number -- are no longer out there. So leisure yields far out in the booking curve are actually seeing the highest year-over-year change because of their incredibly low base and they're reset during this current situation. So that's why that number seems so high. So I think we've given you the appropriate revenue guidance I think it's a really good revenue outlook, and I'll leave it at that and hand it over to Mike for the second half.

Thanks, Andrew. And Scott, thanks for the question. Look, we've seen an acceleration in production for the OEMs. So we do expect to see more new narrow bodies, and it be a few new additional wide-body aircraft delivered next year. The aircraft we're retiring are older, less fuel-efficient. They have older cabins. And so this refresh of the fleet is going to be an important driver to help drive a CASM tailwind to get us to that 2% to 3% range that I spoke about. So we're excited about it. Some of the aircraft, frankly, would have been retired sooner if there hadn't been so many OEM delays.

Our next question will come from the line of John Godyn with Citigroup.

Scott, you mentioned structural change a few times on the call. I think there's broad recognition that carriers like United are leading the charge in that, but that's obviously not the case for all the carriers. So the pushback we sometimes hear is that the industry structure is only as good as the least rational carrier and the lease rational carrier can be pretty irrational. I'm just curious how you address that? Maybe you could just kind of reflect on that and how you see that playing out from here? Obviously, you're making the right moves, but you're not in control of what other irrational moves others make.

Okay. I'll try. There's two structural changes. I talked about -- the first one I talked about which is going to be the focus -- the answer to your question is cost harmonization. And the short answer on that is not about doing something rational or irrational. Like when your costs go up like you either -- your revenue go up or you get fired, and the next person makes your revenue go up or you go out of business. And so that's like -- that's not about like people making some decisions about where they fly and stuff like -- they just don't have a choice. And that's the sort of 90% on cost.

They do have a choice on the 10% and sometimes they make bad decisions there. But again, it's like it's the 10% of pricing. I think that, that matters for. And that's the most important structural change for anyone trying to model the industry looking after the rest of this year, '27 and '28. There's a second point, which is, I think the second most important structural change that's happened is the emergence of brand loyal airlines. And there are 2 of us. It took us a decade to get there, a decade of investment. We look at our market share. You take at least -- I'm not trying to pick on them, but it's true in every one of our hubs in a place like Chicago, where in 2016, we had a 4-point deficit with [indiscernible] customers to our biggest competitor here, and we now have something like a 16-point premium. It grew again in the latest data, even with all the capacity that's been added. We just -- brand loyalty wins. That does give us a level of not 100% -- does give us immunity to what happens from a competitive perspective, but it gives us a lot of resistance to it, much less exposed to what happens from a competitive perspective because the competitive capacity stuff impacts the commodity portion of the business has a much smaller impact on the brand loyal part of the business. And so those two trends, the cost harmonization is, I think, incredibly important.

And then for United, specifically, the brand loyalty is a second structural trend that's permanent. I already said structural and irreversible.

Our next question will come from the line of Mike Linenberg with Deutsche Bank.

I just -- we saw that point caps were extended in Chicago, I think, a week ago through now the fall of 2027. How does that impact profitability? I know on one hand, you could argue there's less consumer choice. On the other, though, it allows you to run maybe just a more reliable hub and help connectivity. And then as a related follow-up, I saw recent caps being imposed in San Francisco. What's behind that? And is that a permanent change to the San Fran operation? And does that have an impact as well?

Mike, it's Andrew. I'll start off. So in Chicago, the FAA recently put out an order that extends the caps for a year. Quite frankly, I don't know what's going to happen in 12 months where that's going to change because of the construction projects that O'Hare extend out almost indefinitely. And so we'll see. But our current plan given these caps used to fly 650 flights per day, which is what we're approved to fly almost indefinitely. And so that does change the dynamics above, we will seek to up-gauge it in the years to come to facilitate growth. And like I don't think these changes are going to, in any way, hurt our profitability. So it is what it is. I think we're a little bit disappointed, but we now have certainty.

I think as to what it's going to look like for an extended period of time, and we will strive to gain as much market share, put as many large aircraft in here and expand through creative measures, and we will do so. We've done it in the past in New York, and we'll do it in Chicago, if that's the new reality. And I think I'll pass it over to Toby to briefly describe what's happening in San Francisco. Toby?

All right. So real quickly, the FAA has changed the approach into San Francisco, which lowered the rate. We have worked hand-in-hand with them to try to come up with a new approach, which will get the landing rates up again. I'm not so 100% sure yet that we can get back to 100% where we were before, but it should be an improvement in landing rates in San Francisco over the next 2 to 3 weeks.

There's also been a runway construction this summer. So that's a big driver.

And that will -- and that will be finished in October. Yes.

And as also part of that, Mike, the last thing I'll add is that at the same time, the government extended the order in New York. So we are under similar levels of caps in Newark for another year. And again, my expectation is that's likely to continue. We're simply out of runway space in many of these key airports. And it's why our long-term plan is to focus on gauge growth, which our fleet plan sets up really nicely.

Our next question will come from the line of Brandon Oglenski with Barclays.

Andrew, maybe just a good follow-up to that conversation there on the fleet plan. And maybe just one for Mike as well. Just like how do you leverage the newer and the older aircraft in the fleet? And I appreciate the increased disclosure today of 80 retirements. But even then, it looks like you're going to have a mix old and new. Are you looking to maybe leverage third portions of the fleet at peak periods, maybe on non-peak periods? If you could speak about those. I appreciate it.

Well, I think we're spending a lot of time understanding how much relative increase in capacity we offer in peak times. And we've talked about this on other calls. And I've been disappointed by our relative third quarter, for example, earnings and RASMs. And we worked really hard in this third quarter to make that a more durable quarter than it normally has. Obviously, the price of fuel kind of hide some of the progress we've made. But overall, I think we're less excited about pushing the airline super hard in any particular week or quarter that happens in the period of increased demand because the -- we're worried about the increased cost of a 30-day peak or 60-day peak as we run those cost structures throughout all 12 months of the year, don't make as much sense anymore as they used to. So we're taking a look at that. So overall, hopefully, that gives you a little bit of color on the way we're thinking about it. I think we're going to be really careful on how we peak the airline in any given peak period.

But Brandon, I think it's a really insightful question. So thank you for it. I think a barbell approach when it comes to fleet makes a ton of sense. Having a modern, larger-gauge fuel-efficient fleet for chunk routes and for a core of the fleet makes a ton of sense. And we've got great pricing, great financing, it maximizes not only profits, but it maximize return on invested capital to have some of these -- a larger amount of the younger, more fuel-efficient aircraft without a doubt. But as we think about modulating capacity in the short and medium term based on the economics, we talk about, we're going to match demand to supply.

Having some older aircraft that had a lower capital cost that we can use to peak and/or to -- we can sit down cost effectively if the demand environment doesn't justify, makes a ton of sense. And so that's exactly how we're managing the fleet. We want to make sure as we think about the aircraft we're ordering and we're taking delivery of that we always have an element and that barbell approach so that we can be -- remain nimble in many environments.

Our next question will come from the line of Duane Pfennigwerth with Evercore ISI.

Good call and good outlook. I wanted to dive a little bit deeper on the corporate travel recovery. I think that 27% or 28% growth number you put out. I don't know if you can get this granular, but I assume when you talk about contracted business travel, that skews more towards larger corporate accounts, larger enterprises. Do you have any insight into the growth in small and medium-sized businesses, which I assume were probably impacted more significantly by tariffs last year. And then just along those lines, staying on the corporate theme, just geographically, any standout hubs or markets where the corporate growth rates are tracking higher?

Sure, Duane. I'll start off. Look, it was a standout quarter, to say the least. And I'll go back in time, just after the pandemic, we found our large corporates actually trail into smaller corporates, by a pretty significant amount. And I think you're correct in the last few quarters, the large corporates have accelerated well above the smaller corporates, but not by a lot, they're just above. And I think if you look at it over a long period of time, they're just -- the large corporates are just kind of catching up with the [indiscernible] and probably even have got close to catching up yet. I haven't looked at that particular number.

But that -- I do agree, the large corporates were a little bit more robust this time around than the smaller ones. But really, I think a standout quarter. It looks to continue into this quarter. It's a higher percentage of our load factor, which is nice to see. Although to give you an idea, it's still 5 points of our load factor lower than it used to be pre-COVID. So if corporate travel continues to accelerate and close that gap with basically an 80% yield Premium versus Leisure, that's a significant amount of upside in the plan. We're not assuming that, but the 0.5 point of load factor growth we saw was great.

It's also great. I was looking at across the Atlantic and Polaris to see our load factor up and our load factor up, was up in business premium and our load factor was up in leisure premium at the same exact time. That is just the trifecta, I think we need a third one to make a trifecta is really great. And so if we can continue to drive premium leisure growth as we drive corporate growth, wow, that's a lot of upside, and it's one of the reasons I think we're bullish for late this year and into 2027. So hopefully, that answers the question.

Our next question comes from the line of David Vernon with Bernstein.

So Andrew, you mentioned earlier that your sort of -- you were very satisfied with the way that the nested selling strategy was kind of working out within the Premium cabins. I think that's related, maybe it's a load factor. But can you give us some color around what exactly that's giving to you in terms of buy-ups or better utilization? And where you are sort of in the process of of kind of implementing that fair strategy across the markets that you serve?

Sure. We rolled it out a few months ago. Again, it was a lot of research, consumer testing and then technology changes to make that happen. Fundamentally, it provides consumers more choice, they get to pick the aspects of the journey, they find the most value in. So we think it's a win for consumers.

Right now, it is early days. And if I go back to the start of basic economy, I think we learned a lot over a period of years on how to best merchandise things and refine those very effectively over time. And so I would say we're in the very early ends of this. the buy-up rate to the standard premium Polaris ticket is actually -- I'm not going to give you the number, but the number is high. In fact, it's higher than I expected by a lot. And so we have a lot of work to do to get things tweaked and optimize things. But again, early innings, we're really happy with it. and more to come as we offer more products and our technology evolves to best sell these products. So we're really far down this segmentation path but there's a lot more path ahead of us is what I would tell you.

Our next question will come from the line of Savi Syth with Raymond James.

I was just wondering if you could just follow up on an earlier question on kind of capacity growth. I wonder if you could provide a little kind of medium-term color on how you're thinking about it. in terms of domestic versus international, given what you're planning on retiring and what you're seeing coming in?

Sure, I'll start others may want to chime in. I think the domestic market is far more mature in my opinion. And so the growth rates need to reflect that ultimately with the GDP. The international market is different. I think it's been more lucrative for United, quite frankly, our hubs are in optimal locations for international growth, and the relationship to GDP for the international flying, it seems to be different than domestic. So that's a long way of saying that I expect our international growth rate in the coming years to be above our domestic freight.

That's helpful. And just if I might follow up on that. Just [indiscernible] Premium capacity was up 4% in 2Q. How do you expect that to trend over the next 12 to 18 months as you're kind of adding all these premium products and getting kind of larger [indiscernible] aircraft with a higher mix of premium?

Yes. So the Premium capacity will clearly grow faster than the Main Cabin capacity. I'm not going to give the numbers today, but that's fundamentally what our fleet plan and with the premium A321s that are coming online, that's going to happen. It's by design. We're happy with that. I'm pleased with that. However, that does not mean that we're going to step away from basic economy. It does not mean we're going to step away from the Main Cabin. There's a life cycle of the customer. We need to start with the customers that sit in the back of the aircraft and pay lower fares. So ultimately, someday, they can sit in the front of the aircraft and pay higher fares. We don't -- we know the full life cycle of the customer, and we're not going to forget that everybody matters on the airplane, and we're going to give an elevated experience to everybody on the aircraft. And I think we have a lot of proof points to say we're actually executing on that.

Our next question will come from the line of Chris Wetherbee with Wells Fargo.

Late in the call. I'll just keep it at one. So I guess you guys talk about capacity in the fourth quarter, I think and than -- you're thinking about adjusting it relative to cost input fuel, potentially other things. Is there a way to sensitize that? I mean what are the sort of levels that you're looking at that give you a view on how you think about capacity in the fourth quarter? Any help you can give us around benchmarks would be great.

I'll start. Look, as we were, I think, at the JPMorgan conference and the price of oil was spiking, we made some aggressive changes to Q3, and you can actually see them in our sell and file. We think that was the right thing to do, and we would do again if we necessary. We wouldn't change anything. As we think about Q4, we think about the same exact framework I will say, just for a little bit of color, the reason our schedules are loaded the way they are currently in Q4 is -- we have been waiting on the FAA to issue the orders from Newark and Chicago, which just came out. So they will allow us to adjust our capacity now sometime next week and a few weeks after that as we get everything firmly in place for Q4. So for all of you waiting to see what our Q4 capacity will be, you won't have to wait all that much longer.

Chris, I do want to pile on Andrew's statements just philosophically. We united are driving towards margins and cash flow generation. and we're going to match supply with demand, whether that's Q4, 2027 or beyond. We've built a good track record of that. You've seen when we've grown rapidly. We've done it in a way that is -- that does not dilute TRASM.

And we will now move on to the media portion of the call. [Operator Instructions] Our first question will come from the line of Alison Sider with Wall Street Journal.

I was wondering if you could talk a little bit about LAX just sort of what the state of competition is there. Does it feel like it's becoming more of a battleground? Or is this kind of just the way it's always been? Just sort of curious how you see that playing out?

Sure, Ali. LAX is interesting, it's 1 of our 7 hubs, we're firmly committed to it. We're growing it. It has been [indiscernible] ground, but so is New York, so is Chicago, so is San Francisco, like I feel we're in an incredibly competitive industry. The dynamics in L.A. are clearly, at least 4 large U.S. carriers with similar shares. I expect that to be through a year from now, 5 years from now and 10 years from now, like it's a very competitive marketplace, and we're in it to win it as well, but I expect it will be competitive for the foreseeable future.

Our next question will come from the line of Leslie Josephs with CNBC.

Wondering if you have any count on how many customers have defected, I guess, from other airlines and are now United buyers, loyal United flyers? And then just broadly on your growth in the U.S. is a pretty mature market. And I'm just wondering if you have any thoughts on that.

Look, we look at the market shares not every day, but quite often. And i spend more time looking at RASM than market share, to be honest. But that being said, we track the market share. We look at it quarterly from the government data that's issued. We're gaining in all our hubs. In the Bay Area, for example, in Q1 we were up 3.4 points year-over-year. That was the best performing share gain for United. But we gained in all of our hubs. We've done that consistently year-over-year. And I think it's simply we're offering a product that our customers love. -- and more and more people love it every day. So I think we're really happy with that. And then I said it a few minutes ago, I think the domestic market is far more mature than the international market.

The appetite for American consumers to travel overseas seems really high to me, whether it's Southern Europe or Japan or anywhere else around the world. I think the desire to explore is growing. And it's one of the reasons we're excited more about international growth in the coming years than domestic, but that's kind of where I think we are.

I will now hand the call back over to Kristina Edwards for closing remarks.

Thanks, everyone. We appreciate your time today. Best of luck to everyone navigating the rest of earnings season. Safe travels, and please contact Investor Media Relations if you have any further questions. We'll speak to you next quarter.

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect.

Thank you, United Airlines for joining us for the conference today. Scott Kirby, CEO, Kristina Edwards, IR. Mike Leskinen is also with us today, dropping everything off the stage. We are going to do a fireside chat format today. If you have questions, you want to put them in through the Pigeonhole. I have that device up here, and I can try to work those into the conversation. Before we begin, Krista is going to give us a few required disclaimers, and then I'll hand the mic over to Scott. First of all, thank you guys for joining us. And I'll hand the mic over to Scott to talk a little bit about the state of the state, and then we'll dig into the Q&A.

Yes.

Awesome. Thanks, Dave. The remarks made during this fireside chat may contain forward-looking statements, which represent the company's current expectations concerning future events and financial performance. All forward-looking statements are based upon information currently available to the company. A number of factors could cause actual results to differ from our current expectations. Please refer to our most recent filings for further information. Additionally, today's remarks may include non-GAAP financial measures. Please refer to our most recent earnings release for those non-GAAP and GAAP measures.

All right. Now that you've been properly disclaimed.

That was the highlight of the day .

I'm not sure if you want to actually say anything given the stock...

Yes, I'll start. Yes, no kidding. I don't want to screw up. Well, thanks, everyone, for joining us and to everyone listening online. I'll be brief. I'm sure we'll talk in Q&A about the more near term. Near term, though, is developing much like we thought. Oil prices have been high. As everyone knows, demand has remained strong as is well publicized. So we feel pretty good about moving as oil prices come down, moving to 100% revenue, 100% recovery probably even sooner than we otherwise would have as oil prices start to come down.

So we feel good about the near term. More importantly, we feel great about the strategy and the execution that we have had at United. We've been on a long-term journey to build a brand loyal airline that was durable, that had resilience in the revenue, that diversity in the revenue, multiple revenue streams, not just concentrated in one area. And we thought that, that would lead to higher margins in good times and provide a lot more resilience when times were more difficult.

And I think both last year and this year, there's been a lot of curveballs thrown last year and then oil prices this year, pretty remarkable compared to the history that I've been in the airline industry to see how resilient our results have been even in that environment. It really is because we've won brand loyal customers. I mean you get the customers wanting to go with you. It leads to much better financial results. Financially, as we look forward, we're -- this year's oil prices aside, we remain solidly on pace to have 50% conversion -- free cash flow conversion moving towards 75% as we start to taper off the number of aircraft deliveries that will take towards the end of the decade.

We'll be moving from 50% to 75%. So we feel good about that. We think that there's an awful lot of upside for us, not uniquely, but us, the biggest upside in the loyalty program. We've got a great partnership with Chase, but it's a decade old. And the other deals have been modernized. And we're just in the opening innings of starting to modernize our deal. You can see it through the disclosed financials that there's opportunity for us there compared to some of our peers. And we look forward to that. We do expect to double the EBITDAR in that particular business, double EBITDA in that particular business provides further upside.

So we kind of look forward, we had a really good strategy. The team has done a great job executing, whether it was the commercial initiatives, the operation, financials. We've done a great job of executing even though we've been growing a lot, generating significant free cash flow and expect those numbers to go up more as we aren't acquiring -- aren't spending as much on CapEx in the years to come. We're committed to getting to investment grade and I hope to do that soon. And those are the things that we are focused on at United. So we feel good.

All right. So you've described United. It's a decommoditized brand loyal airline, called the changes at United and in the industry structural, permanent and irreversible, which if you don't -- if you need a second career after this one, the marketing and the tagline here is great. But for investors and generalists who maybe heard that pitch before from this industry in particular, what do you think is fundamentally different about the market and about United today that would make somebody who's not as familiar with the story that you'd want to kind of emphasize to.

So I got asked by a reporter, they didn't publish it, but a reporter at an interview recently, like what's the biggest change in the last 10 or 15 years in the aviation industry? And I said, it is the emergence for the first time of true brand loyal airlines. And there's 2 of us. And most of -- for most of history, brand loyal met your schedule. That's the commodity part of the business. If you live in Dallas, you're probably an American Airlines frequent flyer. If you live in Houston, you're probably a United frequent flyer.

If you live in Atlanta, you're probably a Delta frequent flyer. If you live in Nashville, you're probably a Southwest frequent flyer because of the schedule. And so there are a lot of customers who -- the schedule drives it. But most people in the country live in markets where there's multiple airlines that have similar schedule utility. You live in smaller cities, live in Chicago, live in New York, live in Los Angeles, multiple airlines have schedule utility is equal. So that commodity part of the business is a toss-up.

So it's the first time that airlines have differentiated themselves on everything else that matters to customers. And I list 4 things in that bucket: technology, product, reliability and service. And you look at it like technology at United is -- we're a clear leader in across -- the across the board and around the globe. There's -- you can see it in the app, but the app is the tip of the iceberg for everything else that comes underneath it. We can just do things. We are doing things now that no other airlines that we're working on that, no other airline is even thinking about yet.

So we're way ahead on technology. Reliability. I think we, in about November of last year, moved into the point where we're the best operator, certainly in the country. I don't track every airline around the globe. But New York, for those of you here in New York, New York is now the most reliable of the 3 New York airports, a remarkable change. Thank you to the FAA for helping us get there. On product, we're doing more to invest nose to tail in the cabins than anyone, and you could feel it and see it when you get on airplanes, whether it's seatback entertainment.

We're going to have Starlink on our whole fleet by next year. We're already close to 500 aircraft with Starlink today, just across the board on product. And when you do all that, your people feel great. They're proud of the airline and they deliver great customer service. And because of that, we've just won overwhelming market share. You look at competitive market, I'm not picking on any one airline, but 3 big hubs where we had a big or have a big competitor in all 3 of those hubs in the last 5 or 6 years, we've won about 20 points of local market share.

Normally, 1 to 2 points is a big move in airlines. And when I say it's structural, permanent irreversible, what I mean is those customers have switched to United in all of those markets, not just one, in all of those markets. And for someone to switch back because the scheduled utilities, let's call it equal. Ours actually is better in all of them, but let's just call it approximately equal. To switch back, those other airlines have to be better than us. If you're on a scale 1 to 100 and we're 100 and they're 50, getting to 75%, they don't get 50% of the benefit. They get 0 because they still like aren't as good. They got to kind of get to 110 before they can switch.

And that's like a decade-long process. It assumes we sit still. It's tens of billions of dollars of investment. That's why I say it's structural, permanent and irreversible because you get -- in a business like this, you get a big enough lead, the others can't catch up. They just can't. And in those competitive markets, they're forced to be what we call a spill carrier. When we sell out of seats, they sell tickets, but we're not sold out, they don't sell tickets. And so I do believe it is structural, it is permanent. It is irreversible. You can see it in the financial results. And I realize other airlines might disagree with it, but it is structural, permanent irreversible.

All right. Thank you for that. So you have talked about this path to double-digit pretax margin in '27 and getting free cash flow going from 50% to 75%. Doubling the contribution of the loyalty program gets a long way there. But as you think about the rest of the levers that you have to play with premium mix, change to the network, efficiencies, investments in technology, what are the other sort of 2 or 3 things that really move the needle that investors should be paying attention to?

It's maybe a boring answer. It's continuing to do what we're doing. If you'd have asked me to make a bet on February '26, where we'd be at double-digit pretax margins in 2026 or not, I would have bet an awful lot of money that we would. Now 2 days later, the war in Iran started and that upended the fuel prices. But we were almost certainly going to be double-digit margins this year. And so a lot of it is just letting that play out. I think you just look at where we are right now, like nothing special needs to happen.

I'm increasingly -- it's early to give 2027 guidance and stuff can change. But I'm increasingly confident that 2027 will be double-digit pretax margins. All that has to happen is the current environment plays out. You don't need anything special for us to be at double-digit margins. So I think we're going to move -- I think by -- I think we'll be moving into double-digit margins next year. And then I think the path, I think that's sort of, call it, 12%, getting to 12% with no other sort of structural changes in the industry. And other structural changes, I think, is what kind of get us to mid-double-digit margins.

One of those has already happened, obviously, with one airline. There's still an awful lot of airlines that are breakeven or worse. If you're breakeven or worse as an airline, that means you got a bunch of flying that loses money. It's just simple math. It is what's happening. And like I don't know when that's going to get fixed, but that's upside for us. But I think we're -- the current steady-state pace, we're at double-digit margins.

The current performance of the business is double-digit margins. And just all the core things that we're doing, drive more next year. I really don't even include the upside from the loyalty program explicitly in that. I think that's the core airline. I think the doubling the EBITDA in the loyalty program probably comes on top of that.

Okay. So if you think about that projection into 2027, I'm assuming you're assuming some normalization of the crisis in the Middle East. It feels to me like when I look at consensus, and this is my read, investors have kind of taken the targets we had for '26 and just pushed them into '27. Is that the right way to think about it? Or is there more...

But certainly, if oil prices are normalized for 2027, our goal internally will be to make up for 2025 and 2026. And so I would want us to have margins and our goal has been 1 point a year. I would want us to have margins that are 3 point higher than 2024. So if I looked out today, we had a forecast that was less than 3 points of margin growth compared to 2025 -- 2024, sorry, because a lot happened in 2025, a lot's happened this year. I'd be pushing hard to figure out how we get to -- so that's about 11%.

Okay. So upside to that, that it's not just going to be a push from '26 to '27.

Well, I don't think it will be. And just I watch the dynamics in the market of what's happening. It feels -- I feel more confident can't be 100%, but I feel more confident about that path than I would have even a few months ago.

And I'm assuming some of that confidence comes from kind of what you're seeing in terms of the consumer and the demand environment in relation to the fare increases that the industry is putting.

Yes. I have expected more of an elasticity effect. I said there still will be. Like you can't -- we all took economics. You can't expect Q to not change. But the demand environment is pretty strong. But sort of a lot of pricing cleanup, I guess, has happened. We're starting from a structurally better or tactically better base as oil prices start to come down.

And have you seen anywhere in the portfolio, leisure, regional, domestic international, main cabin, whatever, however you want to slice it, where you've seen some demand response in response to higher fuel?

Not really. You always have some markets that are stronger and some that are weaker. But nothing that I think is structurally. It's just normal noise.

Okay. And I think earlier this year, you started out kind of saying you'd be at 100% fuel capture by Q4. That pace that you laid out at the start of the year, is it kind of like the similar? Are you feeling a little bit more optimistic, less optimistic?

Well, I think the demand and the revenue environment has been spot on to what we were thinking. But oil prices have come down as fuel price. So the hurdle to get to 100% is lower. So I think the 100% ought to be moving closer moving forward just because oil prices have come down. Nothing about -- the demand environment is very much like we thought it would be.

All right. So one of the $65,000 questions that I continue to get asked is fares are going up. unit revenue is fantastic right now, but at some point, it all comes down, fares will then come down with it. How much of this can you keep? As much as possible...

Well, look, we are going to recover less than -- we're going to be a little below 50% in this quarter. So we haven't recovered 100% yet. So I look forward to getting to 100%. And as I said earlier, I'm feeling really good about double-digit margins. I'm not going to talk about specifics of pricing, but I'm feeling really good about double-digit margins next year. You can interpret that as you will.

But as you think about that -- the market normalizing for fuel, like what are the things that have changed in the business that should allow you to kind of keep some of that as price?

Well, like I said earlier, I think we're going to be at double-digit margins this year. So it's not a lot -- not a lot has changed. Tactically, at United, we've pulled some capacity. There's no point in flying flights that are going to burn cash just because fuel prices have come up. But we really haven't changed much of anything at United.

We've always had confidence strategy has been working. Everything we see the strategy is working. So we've -- really, we've stuck to the strategy. And I think we would have been at double digits this year. So it's pretty easy to think you're going to get that plus a little bit next year. You just keep executing.

All right. And on that topic of the strategy and product innovation, you guys have done a lot of product announcements in the last sort of 12 months, Coastliners, the XLRs, [ Lie-flat ] Polaris, Spler Studio. Of everything in the pipeline, what are the 2 or 3 things that you're kind of most excited about bring to customers and think have the most potential to move the earnings data?

Well, Starlink on 100% of the fleet is going to be the biggest. That is going to be a differentiator versus every other airline. We're going to be the first to get there. We're going to be -- Southwest is going to get there, too. Alaska is going to get there, but everyone else is going to be miles behind. And that by far is going to be the biggest. And then all the other stuff are just -- it's the hundreds of little things that we're doing to invest for the customer that make. It's not 1 or 2 things.

It's a culture of investing for the customer and the hundreds of other things. So I was going to say a second one. It's one we already have, but we got some cool stuff coming and we've got some really cool ideas. It's the technology that customers experience using our app. I mean anybody that's flown -- it's the most universal comment I get from people that have flown United and have flown other airlines is how much better the app is than anything that they've ever seen anywhere else.

And it's not just the app that really is the tip of the iceberg. It's all the other things that go under the app that make it. And we've built a -- we built data lake. We spent the last -- we started 10 years ago, getting off of mainframes, spending money to get on modern technology, not just in the cloud, but getting a modern technology platform, organizing our data in ways that you could use it.

And those are the kind of projects that are hard for airlines to do because there's no immediate ROI. You spent -- we probably spent close to $1 billion, just taking our existing systems, putting in modern systems that did exactly the same thing as they did before. But once you get it in there, it just opens up all kinds of possibilities. I really think we're the only ones that have done that. And so we have some really cool stuff that we're going to do.

Anything you want to kind of...

No.

All right. And then I guess as you think about the -- that level of investment going in to support premium, I'd be curious to hear how you think about measuring that pace of investment because it sounds like, hey, there's a bunch of stuff we haven't done and there's -- if we do it, we can get customers to pay us more. Like how do you think about prioritizing?

It is -- you're getting this from a guy who is -- likes math and is good at math and understands math. But this is an art -- this part is an art, not a science because this is a challenge for everyone has building a brand loyal airline. Every single individual decision, you say, if I make the decision to spend more on meals, spend more on wine, whatever, hundreds of decisions like that.

Every single one of those, you look at it and say, well, really, like we spend an extra $5 million on wine and you think we're going to get enough people switching airlines because of the wine. And the answer is no. It's always no. And it's correct that the answer is no. And so any one decision saying no, letting the finance department say, no, sorry, Mike, letting the finance department say no, which I always want to do is the right short-term tactical answer.

But you string several hundred of those decisions together and all of a sudden, the brand is different. This is about building a brand. And so I don't have a perfect formula for it. I think of this as we have this vision of a brand little airline. It's a mountain off in the distance, and we're driving towards it. And as long as our results, absolute and relative results are -- they're mile markers along the way to that mountain. And as long as they're good, I feel like we're on the right path. And if they start to get bad in one way or another, then you've got to question what you're doing.

So we just keep putting a little bit more in every year. We watch what's happening with market -- not just financials, we watch the market share, which leads to financials, of course, watch what's happening with different classes of traffic. And we use all that data to try to do a little more art than science on what it means. But then we also have all kinds of great anecdotal data that supports Starlink is a 90-plus NPS for in-flight service.

And the rest of our WiFi I assure you was not a 90-plus NPS. Somebody told me earlier today that just in the past week as load factors -- past weekend for Memorial Day as load factors picked up, somebody just went and ran the analysis because it's heavy load factors that flights with seatback entertainment had a 15-point higher NPS than not.

And normally, it's 5 or 6 points, but it's 15 points when it's flights are full because that amps up the stress. And just like all those little -- so we do a lot of time going through data like that. So lots of anecdotal data that informs the judgment of how much is the right amount.

And how does this affect the cost profile of the business, right? Obviously, running an airline is an inflationary.

We spend more. We've been on a path really for at least 7 or 8 years to add about -- we've about 1 point of CASMx to our expense base for investing in the customer. And that's in the CASMx. We're trying to be -- we've done a pretty good job on cost compared to everyone else. That's core efficiency. I'd much rather drive real core efficiency in the business and not cut the customer expense. I mean the challenge in an airline is it's a lot like the U.S. government budget and entitlements.

Like 90% of our expenses are fixed, 80% of our expenses are fixed. fuel, labor contracts, airport landing fees, all those kinds of things are largely fixed. And so if you got 20% of your budget to play with and you want to cut CASMx by 10%, you've got to take 10% out of the customer, 10% of the customer. And you do that 10 years in a row and [indiscernible], you're way behind. That's what's happened to some airlines, like they've been great at CASMx and terrible at earnings profile because customers care about that stuff. And we've been investing about 1 point of CASMx. We don't do it all at once. We do kind of a point every year embedded within the CASMx that we've got at the company.

And I know the answer to this, but I'm going to ask it anyway because I'm going to ask it by investors. In a time like this, when your budget has been blown by a factor out of your control of the oil, is there any temptation from the Department of NO to pull back on some of those investments? Or are you just going full?

No. And we prepared for times like this. We prepared by having the best balance sheet we've had over 30 years and prepared by being the top of the industry and profit margins. We are confident that this one way or another will be temporal that either oil prices will come back down and/or capacity will come out of the industry. So we have not pulled back at all.

And as you think about then the outlook for the next level of efficiency coming out of the network, where does it come from? You've gauged up quite a bit. I mean I think you're getting a little bit more work to do in the Mid-Continent.

Gauge, because Boeing and Airbus have both been behind on aircraft deliveries, gauge hasn't happened yet. Gauge is yet to come. So gauge is coming. And we continue to use technology to just get more and more efficient with whether it's utilizing crews, running the operation better, just across the board, how we schedule and manage maintenance, like as good as the app is that people -- customers can see or investors can go see our underlying technology of how we run the airline, like we should do a tour someday and let people come out and see what our -- the technology our maintenance technicians work with and you could do a tour at another airline what their maintenance technicians work with, like technology is embedded so deeply in United.

That's -- I think that's an unheralded unappreciated advantage that we have. I listed it first in those things about brand-loyal with technology, those 4 items. I think it's probably an underappreciated advantage that we have at United.

And do you think there's still quite a bit of runway for you?

I absolutely do. And like I think a bunch of AI, I am now a believer -- a bunch of the stuff that people do with AI, I think, is ridiculous, like summarize your e-mail, if I want to read my e-mail. But its -- the ability to code and take your own data and just go experiment like the revenue management guys, like there's things that I wanted to do for 20 years, but like to experiment with it, like would have taken a year -- each one of those experiments like 10 experiments.

Each one of them would have taken a year of programming before you could even try and run it and then it might not work like an analyst can do it in a week now, can write those -- literally a good analyst can do it in a week and just run experiments and see what works. It's got some really good potential.

And how are you adopting that and rolling it out in the organization? Are you changing -- are you just training the existing people changing the way you're programming this? I was talking to another company I cover, and they've kind of gone away from this old idea of having like a team of developers to come in and think about stuff and just moving...

We're not doing much more. started with me. I hired an AI tutor for programming. And I would tell you, like it turned me around like with a few hours of lessons like amazing what you can do totally on your own. And so we're going into the business units and we're creating our own training programs to make people go be coders and experiment and try in a bunch of parts of the company.

That's exciting. All right. So let's see here. Obviously, you guys have been doing great on on-time departures. Cancel rates is very, very low. Operational discipline is a part of that, but also, obviously, some of the changes in Newark change in Chicago. Like how much of the differential step-up in performance is just because you're swimming in a less crowded stream versus you guys are really getting better at doing that get done.

New York is a big deal. Chicago never went up, so that's not anything. New York is a big deal that the FAA finally after 10 years of me banging or 9 years of me banging my head against that wall is managing the airport to equal the capacity. And it's just crazy that we schedule more flights than the airport can handle. This is like when the FIFA World Cup comes here, I don't know how many seats does that stadium sit? 80,000. Let's say 80,000 -- if it seats 80,000, would you sell 100,000 tickets to the game? Like it's just dumb.

But that's what we used to do with scheduling at New York. And so that's been a big -- really big deal for New York. But I also think -- I mean, part of the -- we're a technology-focused airline. I mean I have it in -- partly I have it in my blood. But the technology that we have to run our airline, like we watch what happens with our competitors when their storms come through, I'm like, good grief, like the next day, sometimes 2 days later, like what the hell is going on there.

And I mean, we know, but we're just -- and we used to have that like we had a hell week 3 years ago at Newark that was really, really bad. And we thought we have pretty good systems and technology, but that was a pivotal wake-up moment for us. We can now -- crews where this happens at airlines, like anytime airlines are canceling after the weather has gone through, it's crew issues that are -- there have been some other airlines that have had it recently, but crew issues that can linger in some places for days.

We can now -- the same person can process over 10x as much crew cancellation issues when there's events so that we can just stay ahead of it. So we're literally 10x what we could do. We thought we were the best before. We're 10x what we could do 3 years ago. And that means we have automated when weather comes through, like kind of push the button, let the system run. I mean it's harder than that. But we're pretty much always the next day up and running, and we cancel less during the day of the event because we have so much confidence about the next day, we don't have to cancel as much. And so we really like everywhere we fly, we're -- any time there's an irregular operation, we come through with the best of every airline in our cities.

So I think when we had this conversation in the last couple of years, we've, at some point in the conversation always talked about constraints whether it's power constraints or aerospace constraints, controller constraints. That's a little bit moved out of focus given the conflict in the Gulf. I'm assuming they've not moved out of focus for you. Like what are you worried about in terms of your ability to kind of meet your financial objectives for the airline from an input control.

Well, I'm not the worrying type, but...

What are you monitoring?

The constraint that is real, and it's not something to worry about, especially for an investor, that is real is engines and components of engines, forgings and castings and engines. like I'm sorry, like there's just not enough -- there's still 800 or 900 aircraft around the globe that are grounded for engines. And they're not -- that is not getting fixed this decade. And as rates go up at Boeing and Airbus, like they're producing gliders and they're both fighting with the engine manufacturers.

There's just not enough engines like supply is going to be constrained around the globe because there are not enough engines. It's not about how many Boeing can produce. It's not about how many Airbus can produce. It is about the engines and there are not enough engines and there's not going to be for many, many years.

And what about sort of air traffic and controllers and that kind of issue?

Yes. I think that under this administration and Secretary Duffy and Administrator Bedford, they're going to work to improve -- I think we're going to get more capacity into the system. And so it can -- most of that will just be to run better. So that will be much better -- as we do that, block times will come down. There's a bunch of routes that you can go look at that took longer -- takes longer today than it did 50 years ago to fly the route, even though the planes fly a lot faster. It's all because of the air traffic control.

So I think we'll be able to save time. So we'll burn less gas. We'll use the aircraft more efficiently, employees more efficiently. Customers will be better. It's less a constraint mostly on growth. It's going to be more about using the aircraft. It's going to be more about efficiency across the board. We'll burn less fuel, need less employee time, less customer time sitting on airplanes. And I think that we're on a good trajectory to finally make that happen.

I mean I think -- I mean, I've been doing more research on the FAA component on the airspace management part of it. It seems like there would be some opportunity to optimize the allocation of space, which would then allow you to run faster. Is that a risk...

We're working on it, but it's an easy problem to describe. In the real world, solving it is not as easy as because the world doesn't work as clean as -- if it was deterministic, it'd be an easy problem for math minds to solve. But the world is stochastic. And so you can plan great for exactly where every airplane is going to be 6 hours from now, but to within 100 feet. But the chances that they're all going to be within 100 feet of where you thought they were 6 hours earlier is pretty small.

What do you think...

I think there's tons of opportunity. But we got to probably experiment with it, take it a step at a time.

Over the horizon still.

Depends on where you think the horizon is. It's close enough to the horizon that we're working on it, working with FAA, they're actively working on it.

Cool. So let's talk a little bit about structure and sort of the structural change in the industry. Obviously, we've gone through the bankruptcy of Spirit, which is something that you would have seen in the cards going and commented as much. And Southwest changing its business model, right? Obviously, there's been a pretty significant change in the discount space. How is that affecting your business? How is that changing your opportunity set? How is that changing? How you're thinking about...

The discount set, particularly the ULCCs, truth is it's no longer that dramatic. One of the things that happened in the ULCCs is the big airports price them out of the market. Like when the New York airports are charging $52 per enplanement and Spirit and Frontier's average fare is $58, like be a rocket scientists know that flying to the New York area Airport doesn't work, like spending $52 before you paid for your gas or your employees or your airplanes or anything else, like it just doesn't work.

And so I think that, that portion of the market is one way or another going to retreat to the niche that works. The niche that works is big -- is leisure markets that don't have competition from big airlines. The Allegiant model works. And there's markets to Orlando and sort of Orlando, Vegas, maybe a few other beaches. But trying to fly in Atlanta is not going to work for any ULCC.

What about Chicago Vegas? Does that work at home or no?

It's too expensive. It's too expensive for them to fly. And we are now -- we can be -- we are price competitive because we've upgauged and we've got basic economy, like it doesn't work. I mean I look at the P&Ls of every airline. I bet that I know the P&Ls of my competitors better than most of their CEOs know the route-by-route P&Ls. Those routes don't work. I know they love them. Look, there's a golden rule for airlines. Like every airline in the world could earn its cost of capital if they would just follow the golden rule.

Don't fly places that lose money, have the discipline to stop flying places that lose money. And I, by the way, have closed 3 hubs in my career. As much as I like to be aggressive, I've closed 3 hubs in my career. Delta, by the way, closed 3 hubs. You cannot be successful if you're dragging around an anchor. And you cannot be successful if you're not willing to pull the losses on places that lose money. Most airlines aren't. It's hard on your ego for some people, at least, it's hard on the ego. Most airlines aren't. But that's the golden rule of investing. And Spirit didn't learn in time and I don't know if Frontier is going to either.

So what do you think happens prospectively then?

I think they're going to be materially smaller. I don't know if like they go bankrupt and shrink or they just shrink or somebody goes away or they're going to be materially smaller because they got to shrink down to the niche that works. Eventually, they're going to be in a niche that works that's solidly profitable for them. There's a good profitable model there. Spirit used to be solidly profitable. When they started to grow outside of their niche, you get out of your niche, you're in trouble, and they got out of their niche. And Chicago Vegas is out of their niche.

So is this more organic consolidation? Or do you think there's going to be opportunities for larger scale consolidation?

Are you asking me about consolidation?

Yes.

I'm waiting for you to get there. Well, look, here's -- I'll just speak for United instead of others. I thought there was -- for many years, have thought there was that only the kind of big transaction that we tried was the only one that made economic sense. And none of the other deals made sense. And also knew though that the big transaction required a willing partner, which we clearly don't have. So I don't think that United at least is going to participate in any consolidation for any time I can see in the foreseeable future.

So the thesis is out there that was swing big for American and then maybe it's easier to do a smaller deal.

[indiscernible] I don't understand that at all.

You're not going to offend me.

I don't understand that at all, but that was definitely not the plan.

Okay. I mean, do you think though that there would have been room to get that deal done?

It's not about room to get the deal done. Like, look, I have immense respect for Joanna and her team and what they're trying to do, and I wish them luck. And by the way, we're going to try to help them be successful. But I already talked about discipline. Like I've been disciplined enough to close 3 hubs. The last thing I'm going to do is buy a route network that loses money.

And I think for us, like I look at that, I can do the math, too, like we got to somehow think we can improve JetBlue's margin by 25 points to make it work. Like that seems mathematically close to impossible to me. Like I never understood why everyone thought we were going to do it. I never said it, never hinted at it. I never understood why everyone thought we were going to do it. It just seems mathematically not doable. I like I'm pretty good at math. So I never understood it.

All right. So you guys have obviously also made a lot of progress on the balance sheet, kind of improving the quality of the -- getting closer, I guess, to investment-grade rating. When you get there, what changes? Anything besides cost of debt? Or is there going to be a more formal change in capital return priorities?

I'm sure there will be. We're going to get there first, and then we'll have a good robust discussion...

It's about confidence in your...

It's a robust discussion with our Board who will appropriately want to be involved in that. But let's get there first. And look, 50% free cash flow now and then moving to 75% by the time we're moving towards the end of the decade, we're going to have a lot of free cash flow. I think we will be solidly investment grade and a huge -- a big chunk of that will be some form of capital return to shareholders, assuming we progress the way we think.

A conversation with the Board a later date.

Yes.

Okay. So CapEx, less than $8 billion in '26. It's kind of inside of your multiyear band that you guys laid out around $7 billion to $9 billion. The capital hierarchy within that $8 billion, right? Obviously, you've got some aircraft delivery. Beyond the aircraft delivery, where are you spending the reinvestment? What...

Technology.

Technology, okay. Customer-facing, internally facing?

Both.

Like the app, the connected media as...

I mean, it's sort of all of the above. We're spending on the app. We're spending -- we're going to be spending more on -- we are spending more on AI now. We're running experiments. We're spending money in revenue management. We're spending money in the operation sort of across the board. We -- I already said like we spent close to about 8 years getting our platforms modernized, largely modernized and getting them in data lakes where we have easy access to the data. They're not in some of the old systems that are in a lot of places.

We also, by the way, we're sort of in this unique -- we used to be an advantage we got lucky on this one. We're the only airline, I think, in the world that owns our own reservation system. We run on shares. We don't have to go through Sabre. We don't have to go through Apollo, but they're so difficult to deal with for others. I've talked to other airline CEOs try to do stuff like your data is all there, like you're kind of stuck.

So we're just in a better place because we did that. Now it's doing things to use all that data. But we're really -- we're kind of growing across the board. Our goal is within a year to be -- also to be twice as 100% increase in productivity for our DT team.

As measured by...

It's hard to measure it for sure. But you could measure it by lines. I don't know if you measure it by lines of code. I'm not sure that's the right metric, but to double the amount that they do.

Now as you think about maybe if we drill into the revenue management system component of that, right, there's been some talk about whether it's AI within the revenue management process or supporting the revenue management process. Your experience with coding and getting the data -- getting large series of progressions done sort of very quickly and being able to kind of do that stuff. As you roll that into the system, should we be expecting that to show up in a better unit revenue outcome, lower cost? Like how is it?

That's a better unit revenue outcome.

Okay. And then what about the extra time that the analysts that would have spent a year building a model that can get it done in a week then?

Well, they didn't spend the year before. Like to me, the promise of AI is much less what everyone else is talking about, about doing things that people already do faster efficiency. The promise of AI -- and by the way, I don't think you can justify the trillions of investment if all you're going to do is like read your e-mail a little bit faster and do that kind of stuff. I think you can justify the trillions of dollars of investment if you're going to do things that nobody thought were possible before and do new things.

And I'll give you one good example. Every flight is a story at United for customers. The goal is to get to a point where any time there's a flight delay, we tell customers in clear planning English that we send them text messages, we're going to start sending them videos like maintenance videos and cool stuff about exactly what's going on with their airplane and why and try to give them really good information because generally, if -- I mean most people in here fly.

And if you know what's going -- it's uncertain, it's killer. You walk up to a gate and it says your flight is on time and you're supposed to be boarding and there's no airplane at the gate. We don't -- I don't think that happens at United. But that does happen at some airlines, like it infuriates you. And so giving people good information. The goal I've set for the team is pretend, I'm on the flight and I've asked what's going on with my flight, what would you tell me I want to tell all of our customers that.

And we've been doing that, like we call it every flight story. And some of the results, I got some phenomenal statistics when we do it and do it well, but it's really hard to do for 6,000 flights, especially when there's weather and it's uncertain thunderstorms, maybe they're going to -- maybe the airport is closing, maybe it's not, you don't know. And so it's really hard to do. And I think we're probably 2 to 3x better than any other airline in the world just because we're the only airline that's really worked on it and tried to do it.

We've decided that the current path that we're on is never going to get to the nirvana that we want. And we're starting brand -- we started a brand-new work path that's built kind of native AI, building the right data so that it doesn't require any human intervention, that AI will be able to tell you about every flight and what's going on with every flight with no human intervention just from all the other data that we have and everything else that they can see about system.

By the way, I think that will be great for customers. It won't only help with customers. It will cause more brand loyal customers to fly United. It will be unique. It will feel different than any other airline in the world when we're able to do that. But I'm convinced we're going to find all kinds of ways to run our operation more efficiently when we built that. And that to me is what AI can do.

When we're building that, we're going to be able to run the airline better, a lot better than we could before because we built that infrastructure for every flight story. So that's one of my favorite examples of what we're trying to do.

Thank you for sharing that. Question from the audience. If you sort of disaggregate the customer reviews into areas where you're outperforming and areas where you can still improve, what are the things you're doing to improve those areas where you need to get better from a customer experience standpoint?

Look, we're trying to improve across the board, like the nearest term thing that we can do applies to every customer, which is WiFi. Like I told you 90-plus NPS when we have Starlink on the airplane. I actually like and now the most common complaint -- I don't -- I'm not counting like my flight got delayed for whatever reason. But the most common structural complaint that I now get is about WiFi. And partly, it's because we've raised the bar on WiFi by getting Starlink on and the legacy providers that we have just aren't -- it's dramatically different. And so getting that done as fast as possible is probably #1 on my list for customers.

Anywhere else that you are...

We're doing it across the board. It's not like there's some one magic bullet. This is about running the airline, running the airline well, doing all the hundreds of things well. We have a great team that's doing it. Like there's not some magic bullet. It's about executing and executing on everything.

Okay. And the part of that execution, obviously, is cultural transformation. We talked about this, I think, the last time you were with us. You've gotten the flight attendant agreement done. How is the level of satisfaction buy-in? How are you thinking about the team?

Our people are great. They're doing a great job. Our flight attendants, by the way, did a great job as we were going through negotiations a lot of times you've heard airlines and people that have followed along, bleed through and lead to bad customer service that did not happen at United. Our flight attendants were awesome. They're the best in the world. I'm glad they got an industry-leading contract that they deserve. But you guys go fly and you decide. But I think the culture at United is great. Our people are proud.

I told our team that I have the easiest job of anyone at United because I really only have one responsibility, create an airline that they're proud of because if they're proud, they're going to take care of everything else. And importantly, they're going to want you and customers to feel the same way. And I hear that from them all the time. I had someone stop me walking through the hotel here today just in their civilian closed. And he's all excited. He's a United pilot. I want to stop and take a picture and just excited.

I just -- I hear it from them all the time. I was at my daughter's wedding this weekend, which is pretty cool. But there was -- I had to get that in somewhere. It's call she betting market. I'm not, it's kidding. But there was a retired United pilot that retired 2 years ago. He was there and like he was just bragging to everyone like, oh, United is the greatest. And like I hate that I had to retire and he married to a captain for another airline. And she was -- well, I don't know who it was, if I tell you everything.

But anyway, she was wishing it was like that at our airline. But it's just great. I hear it from them all the time. I see it in the customer satisfaction score. I see in our NPS scores like across the board. They're doing a great job. And momentum is great, like you get momentum. That's another reason, by the way, to make the kind of product investments. Like I really look at the product investment through the lens of how our employees are going to feel about this.

And like I don't want our employees in a position where they have to apologize. They're having to apologize for something, they're behind the 8 ball. And like WiFi was the last structural thing that people had to apologize for. And it can't get fixed fast enough, can't get Starlink 100% fast enough.

It sounds like the employee buy-in is there. The product innovation is rolling. You got a group of generalist investors and obviously, investors on the webcast listening today. What's the bull case? Why is United the right place to put an incremental dollar of capital to work? And what's the one thing you think the market doesn't understand about the story?

First, I think we had a great strategy, and we've executed really well, and we're going to continue. We have a no excuses mantra at United. Like we've got all kinds of stuff happening that make excuses. But our Chief Operating Officer, I use no excuses because I went to the Air Force Academy. Our Chief Operating Officer, Torbjorn Enqvist, says, especially talking about the weather. It may not be our fault, but it is our responsibility. And that matters to how you pave on everything, but it also matters how you take care of customers.

And winning brand loyal customers really -- we've proven in the last 2 years, like this is close to a recessionary environment for many airlines. You can look across the results that we have resilience. And when times are good, we do even better. We outperform when times are good even more, and we retain more revenue when times are bad. And we've been investing a lot growing and buying aircraft. But as we've said all along, that starts to taper towards the end of the decade. So if you care about free cash flow, which we do, that number is starting to go up and you're getting it at just a remarkable multiple.

I do not think that airlines like United or Delta, by the way, are going to trade at 8, 9 multiples once we've proven durability, sustainability of earnings, high free cash flow conversion in the years to come. And so I think you're getting a pretty screaming bargain. I mean I know it's going to happen with stock tomorrow. I don't know what's going to happen straight or moves tomorrow, but a lot of volatility. I wish there was less volatility. But if you're a long-term investor, it's hard to come much better to me.

All right. With that, I think we're going to close it down. Thank you, Scott. Thank you to the United team for coming out and joining us.

Thanks, everybody.

Thank you all for supporting the STC. Enjoy the rest of the conference.

Good morning, and welcome to United Airlines Holdings' Earnings Conference Call for the First Quarter 2026. My name is Regina, and I will be your conference facilitator today. [Operator Instructions] 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.

Thanks, Regina. Good morning, everyone, and welcome to United's first quarter 2026 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 and are based upon information currently available to the company. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release, Form 10-K 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 and historical operational metrics will exclude pandemic years. Please refer to the related definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures at the end of our earnings release.

Joining us today to discuss our results and outlook are 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. We also have other members of the executive team on the line available for Q&A.

And now I'd like to flip the call over to Scott.

Thanks, Kristina, and good morning, everyone. I'd like to congratulate the United team on a strong first quarter. We're building the #1 brand loyal airline in the world, and our financial results are indicative of the structural permanent and irreversible changes that have happened at United and across the industry. Our first quarter results are just the latest proof point in our strategy to build a decommoditized brand loyal airline that's setting a new standard for what is possible for customers in air travel. We've proven that the winning strategy is to make travel easier and better for all customers. And while all of us at United are deservedly proud of the brand we've built, we aspire to go further, and we want to set a new higher standard by revolutionizing air travel for our customers. More immediately, of course, we're managing through the impact of jet fuel prices that have doubled. Industry stress events seem to happen every 5 to 6 years. While we didn't know exactly what or when it would be, we knew something would happen. It's the best thing we could do was to prepare United Advance. To that end, we have one, triple our cash balance; two, move to the top of the industry and profit margins; and three, strengthened our balance sheet. In fact, we ended 2025 with our highest credit rating in almost three decades.

Advanced preparation allows us to stay focused on the long term while making near-term tactical adjustments to account for elevated fuel prices. At the moment, our goal is to do whatever it takes to recover 100% of the increase in jet fuel prices as quickly as possible and to achieve double-digit pretax margins next year. Oil is incredibly volatile right now, but because we think we're moving towards 100% pass-through, it allows us to have confidence in both our near- and medium-term earnings trajectory, enough so that we can still provide guidance. For United, here's how we're thinking about our goals to get to 100% pass-through and achieve double-digit margins in 2027. For one, to recover 100% of costs yields need to increase by about 15% to 20%, and we are assuming that fuel may remain higher for longer. Two, as yields increase, there will be an elasticity effect on demand, we're estimating will lead to over -- to less overall demand. While we haven't actually seen that decline yet, ECOM101 makes us believe it's coming. Third, less demand means that we should be supplying fewer seats to the market. For United, that means we're targeting capacity to be flat to up 2% for 3Q and 4Q on a year-over-year basis. It simply doesn't make sense to fly marginal flights that will lose cash in a higher fuel price environment. Mike will provide more details behind our 2026 outlook, but our view for 2027 is that we're targeting a pretax margin of at least 10%.

We obviously have some time to see what happens, but if jet fuel remains elevated compared to our pre-war levels as we think it might, we'd once again expect to require less capacity growth in 2027 than we were planning just two months ago. Realistically, there probably isn't enough time to make up 100% of the fuel price increase this year. But I feel very good about 100% recovery and getting to double-digit margins in 2027. And because we've positioned United for success, we can make tactical adjustments to manage what we need to in the short term while also staying focused on our long-term plan. I'm also more convinced than ever that our decade-long strategy to build a great brand loyal airline that is successfully focused on making travel easier and better for all customers is the winning strategy.

Finally, we've got a lot of press coverage regarding consolidation rumors. We've not commented specifically on those reports and aren't going to start today. So you can ask me about it if you'd like, but you won't be getting anything new from me on it today.

With that, I'll hand it over to Brett.

Thank you, Scott, and good morning. During the first quarter of 2026, United carried a record number of passengers, while also navigating a challenging operating environment. The quarter experienced elevated weather events and geopolitical disruptions, but our teams remain laser-focused on recovering from these events swiftly and delivering top-tier reliability for our customers. In the first quarter, we continued our streak of ranking first in on-time departures among the 8 largest U.S. carriers. During the quarter, United's per seat cancellation rate averaged 44% lower than the next 2 largest U.S. carriers. Solid operational performance is the backbone of the airline and helped drive our highest first quarter on-time Net Promoter Score since the pandemic. During the quarter, customers increasingly engaged with our self-service tools, allowing us to drive more personalization throughout their journey. Day of app usage reached a record 86% supported by continued mobile enhancements, such as improved bag tracking and live TSA wait times. Additionally, I would also like to take a moment to thank the TSA employees who showed up to keep us safe during the government shutdown.

We have also improved our disruption communications by embedding live maps directly within customer messages. These tools and redesign help us recover faster and make it easier for customers to navigate disruptions. Another reason United remains differentiated, and why we continue to build brand loyalty. Late last week, the FAA issued an order regarding the summer 2026 schedule at Chicago O'Hare. We are currently reviewing the FAA order, and we'll share additional information, including any next steps as soon as our review is complete. We are pleased to reach a tentative agreement during the quarter with our flight attendance, represented by the Association of Flight Attendants. This agreement includes well-deserved industry-leading wages and other meaningful improvements for our flight attendants who play an essential role for caring for our customers and representing United every day. Voting concludes on May 12.

On April 6, United celebrated its 100th birthday a meaningful milestone for our airline. The generations of employees who have built it and our loyal customers who continue to choose to fly the [indiscernible] skies on United. I want to thank all of our employees for the care and commitment they bring each day to our customers and to one another. As we recognize this milestone, we remain firmly focused on the future and on building an even better airline through continued investment in our product, our people, our network and our operations.

With that, I will hand it over to Andrew to discuss the revenue environment and our other industry-leading commercial initiatives.

Thanks, Brett. Consolidated total operating revenue in Q1 increased 10.6% year-over-year to a record first quarter of $14.6 billion. PRASM increased by 6.9% year-over-year. All regions had positive PRASM in the quarter. I'd like to -- I described at the start of the year as strong for all customer types in all regions. For January and February, prior to any impact from the war, we saw a tick in for business revenues up approximately 12%, while leisure was up a healthy 6%. Looking back at Q4, business ticketed revenues were up 6% and leisure was up only 2% year-over-year, creating a nice sequential increase in the first 2/3 of the quarter. Premium demand remained strong with Q1 premium revenues up 13.6% on 4.4% increase in capacity. Premium RASMs were up 8.9% year-over-year, leading Main Cabin by 4 points. It is clear that consumers continue to seek elevated experiences. Business demand was strong in Q1 with revenues up 14% year-over-year and spread across all verticals. Headlines about TSA wait times did suppress demand between March 23 and April 1, but they have fully recovered since. Our Loyalty business continued to outperform and total loyalty revenue was up 13% in the quarter, acquisitions and spend were both very healthy and supported by updates we made to the MileagePlus program.

Late in the first quarter, we implemented five broadly successful price increases along with an increase in baggage fees that began to offset the increase in the price of jet fuel. Price increases in response to the increase in jet fuel have been significant and across the board However, global long-haul increases have been a bit stronger than domestic. In January and February, United selling ticket yields were up 4% year-over-year. In the first half of March, that increased to 12% and further increased to 18% for the second half of March. So far in April, this trend has continued and the last week selling yields for all future travel are now up 20% year-over-year. As you would expect, we sold 23% of our Q2 and 8% of our Q3 capacity at lower price points prior to the rise in jet fuel costs. We remain confident in our ability to fully recapture the fuel cost increases over time. And in 2Q, we expect to recover between 40% and 50% of the current increase.

In response to higher fuel cost environment, we've begun to adjust capacity downward by approximately five points throughout the rest of the year we now expect Q3 and Q4 capacity to be flat to up approximately 2%. Our adjustments removed marginal capacity on off-peak days and flight times such as red eyes, which we believe will fuel our recovery of fuel prices increases in the second half of 2026. Our current selling schedule is up just over 4% in the summer, but those capacity adjustments will be loaded in the next week or so to get the capacity out there selling appropriately. On our January call, I hinted about new commercial initiatives that we believe will drive brand loyalty choice and increase revenue for United over the medium and long term. We have now formally announced these initiatives, and I will summarize them today for you. To be clear, these changes have been in the works for years and be made across all aircraft, all cabins in many different areas of the commercial business. First, and maybe of greatest importance we've made the largest change in a decade to how we display and sell products on united.com and in our app.

Internally, we described this change as nested sell-in. Bestselling years research program and test and is now active in our digital channels. We can now properly merchandise our growing product lineup. We have already seen large increases in upselling because of these website changes. We simply were unable to show all the products we had for sale easily on the old website display. Second, as part of the website evolution, we've introduced base fares in our premium cabins, base fares come with less check luggage, no early seat assignments and different club access features. To be clear, everyone on a base fair will be able to secure a seat assignment at any point via an ancillary purchase are for free during the check-in window. These base fares allow consumers more control over their experience by choosing what services they launch included on their journey and were a tremendous success in the economy cabin with basic economy. Third, we announced that 50 A321 coast liners are planned to join our fleet. With the coast liner, we can extend our award win and are brand for the first time on all United flights from New York to Los Angeles and San Francisco. Fourth, we unveiled United's new Airbus A321 XLR onboard products. These products on each XLR consistent with the coast liner. However, we've modified certain aspects of each XLR for the unique needs of an 8-hour Atlantic Crossing versus a transcon [indiscernible] flight including the larger snack bar, more laboratories, more galley space and less main cabin seating density.

Combined between the coast liner and the XLR, we expect to have a fleet of 100 A321s equipped to 20 lay-flat beds and 12 premium plus seats, a commitment to this unique narrowbody platform, unmatched by others. Premium Plus seats will be for the first time deployed on domestic routes at scale. Fifth, to be a premium brand, we needed to have a consistent product no matter what plane you're flying or where you're going. United redefined service to smaller communities a few years back with the CRJ550, and we've now extended that idea into what we're calling the RJ 450. Sixth, we announced Relax Row, our latest product innovation for young families on global routes a few weeks ago. Relax Row is a main cabin product that transforms three seats into a flat surface and includes bed and pillows. And seventh, we said we would change MileagePlus to accelerate United's earnings, and we have Members will now be awarded more miles when they fly if they hold our co-branded credit card versus members who do not hold the card. We also announced discounts for redemption only available to credit card holders, all these actions will increase the value of being a MileagePlus member and hold in our credit card. While we continue to work under a long-term co-brand contract with our partners from Chase, we're making changes to what we can control today. In due course, we expect to have a new contract optimized for all stakeholders due to the current market dynamics.

Turning to our fleet, we have taken delivery of four high-premium Boeing 787-9s with up to 16 more expected to be added in 2026, a total of 33 planned over the next 2 years. The interior of our new 789 has something for everyone, and we believe further strengthens our premium brand. All of our commercial initiatives announced over the last few weeks have been years in the making, tested with countless customers and employee focus groups and are ready for prime time. Our launch plan is bold, quick and designed to increase customer choice, revenues and brand loyal customers. These new initiatives plus previous initiatives like Signature Interiors and Starlink or addition is expected to be largely rolled out in two years. The future is now. United is now on final approach towards our product and premium vision, but a completely transformed United versus pre-pandemic for all customers.

I could not be more proud of the United team that has spent countless years and hours planning these product changes. These are the type of changes and product improvements across all cabins and for all customers that we believe genuinely differentiate United. We will continue to watch the demand and pricing environment very carefully in the coming weeks and quarter to refine as necessary our approach to this rapidly changing environment.

With that, I'll hand it over to Mike to discuss our results and our outlook. Mike?

Thanks, Andrew. The first quarter has been a reminder that successfully managing the airline for the long term requires being prepared for short-term shocks. We've accomplished that at United by earning brand loyal customers. That strategy has led to margins at the top end of our industry and the best balance sheet we've had in almost 30 years. The financial strength that's created reinforces our ability to make the right long-term decisions. The latest challenge in our industry is the massive run-up in fuel prices created by the conflict in Iran. Fuel prices remain volatile, and we're monitoring the situation closely. We delivered resilient results with first quarter earnings per share of $1.19 within our initial guidance range of $1 to $1.50 and up 31% year-over-year, even with a $340 million higher fuel bill in the quarter. Our pretax margin was 3.4%, a 40 basis point expansion versus the first quarter of last year. Demand for the United product was already robust going into this heightened fuel environment. We believe we have the ability to pass on the increase in fuel due in large part to our brand loyal customers, continued demand strength and preference to fly United even at higher fares. In this elevated fuel environment, we began to swiftly adjust capacity in addition to pulling our Tel Aviv and Dubai flights, which together were 1.5 points of our capacity. These close-in cancellations from low CASM markets, along with significant storm-related capacity reductions throughout the quarter, pressure unit costs. And as a result, our CASM ex for the first quarter was up 5.9% year-over-year.

As discussed, we are also proactively removing about 5 points of capacity for the rest of the year that we don't believe can cover the elevated cost of fuel. We expect capacity in the back half of the year to be flat to up 2%, and several points lower than our original plan. That will continue to pressure our CASM ex, but we expect it will improve profitability and cash flow for the remainder of the year. This is precisely why we don't manage to CASM ex, but to long-term profits and cash flow. Looking ahead, we expect second quarter EPS to be between $1 and $2 anchored by an all-in fuel average price of approximately $4.30 per gallon. For the full year, we are providing an updated and widened guidance range to encompass multiple scenarios. As we've experienced over the last 2 months, the world can change quickly, but in both higher and lower fuel price scenarios, we expect to recapture 40% to 50% of the increased fuel cost in the second quarter 70% to 80% in the third quarter and 85% to 100% by the fourth quarter. We expect to deliver full year 2026 EPS in the $7 to $11 range.

The demand environment to date remains strong, and we expect will support a double-digit increase in RASM in the second quarter and for the full year. If fuel prices remain on a downward trend, we expect to be in the upper half of the guidance ranges, and if fuel reescalate, we would expect to be in the lower half of the guidance ranges. With that said, United remains in a strong financial position our resilience in a high fuel price environment as well as our relative position in the industry provides further confidence in our long-term target of achieving double-digit pretax margins as soon as next year. Our proactive approach to managing the network in this environment is helping us achieve this outcome.

Turning to the balance sheet. We continue to march towards our goal of being investment grade. In the quarter, we took actions to make further progress towards this goal and paid down more than $3.1 billion in debt, unencumbering more assets by accelerating our repayment of $2 billion of our notes that were secured by our slots, gates and routes while also prepaying $400 million of near-term maturity or higher cost aircraft debt. Additionally, the first quarter marked United's return to the unsecured market. As we raised $2 billion across two unsecured bonds, our first unsecured issuance since 2019. The 5-year bonds priced at [ 5 and 3/8 ] while the 3-year bonds came in under 5% at [ 4 and 7/8. ] We successfully reset the credit curve for United, compressing the gap in our credit spreads with investment-grade peers to historically low levels. This was the first high-yield bond issued with a coupon below 5% since Ford did it four years ago.

Our execution exceeded our initial expectations as the market responded with incredible demand. This is the strongest evidence yet that the buy side appreciates that we're knocking on the door of investment grade. In the first quarter, we generated $2.9 billion in free cash flow. And while our free cash conversion in the near term will be pressured as fuel prices remain elevated, we remain committed to generating durable and growing free cash flow.

To wrap up, our first quarter performance remained resilient. We are managing the business with the expectation that jet fuel remains elevated in the medium term. We're nimbly adjusting the network and cutting capacity that doesn't cover fuel costs all while continuing to invest in our people and our hard product. As we look to the future, United is positioned to deliver stable double-digit pretax margins, strong free cash conversion and strong EPS growth on the other side of it.

I'll now turn it to Kristina to kick off the Q&A.

Thanks, Mike. We will now take questions from the analyst. [Operator Instructions]. Regina, please describe the procedure to ask a question.

[Operator Instructions] Our first question will come from the line of Jamie Baker with JPMorgan.

So Scott, in the CNBC interview where you articulated, do you have a larger brand that would capture passenger flows that are currently flying foreign competitors. It sounds like this is an idea that's still under development at United. But I'm curious could you envision a world where United might operate its own hub in Europe the way that PanAm once did? And second, do your existing partnerships with Star Alliance members? Do those relationships factor in at all to your thinking in this regard? I mean I think the idea of capturing for inflows is fascinating. I'm just trying to think through how you might get there and maybe consolidation is the only way.

Well, thanks, Jamie. I thought you were going to get through that without saying the C word. You always, but. First, I think it's extremely unlikely that we'll open a foreign anywhere in that form. Our Star Alliance partnerships are great. They enable global reach and breadth. They enable us to fly to at -- give our customers the ability to fly to lots of cities around the globe that are never going to be picking up for United Airlines on our own to fly to and use fire miles to go to those kinds of places. And so those are all great. And really, everything that I've said today are [indiscernible] CNBC and Bloomberg this morning are all things that I've said in the past, I know people are now viewing it in a different light because of the rumors that came out last week. But everything that I said are things that I have said in the past. And really, it comes from we've had this vision to build a great brand oil airline, and it just worked incredibly well. Like if you look at our first quarter results, like with this kind of increase in fuel prices, to deliver those kind of results to be able to look through to the full year with fuel prices doubling and still have reasonable confidence in $7 to $11 of earnings and stay focused on the long term. It's just -- it is dramatically different here at United than it was in the past. In the past, this would have been furloughing and deferring aircraft orders, cost-cutting exercises and just all kinds of stuff to try to manage through the near-term noise. And it's dramatically different. And we've won by winning customers in all classes of service, by the way. We invest nose to tail. Like most of our investments apply to all customers, Starlink seat-back entertainment and every seat WiFi, the best app in the world. They apply to every single customer on the airplane. And because that strategy has worked -- I thought it would work, but it's worked even better than I thought. And you can see in our financial results, you can see it in the market share data. And any in all of our hubs where we had big competitors, same thing happened everywhere, not unique to competing with any 1 airline. It's happened everywhere. You can see it in the data. And it's worked even better than I thought, which -- because it's worked even better than I thought it would. It allows us to raise the bar on ourselves and aspire to something even bigger. And I think there is this big global trade deficit in the U.S. We compete some really good airlines in the Middle East and Asia. And they have some advantages that we don't have. And like I actually haven't said what it takes to do it. And I don't even know the answer. Anything that might be an answer comes with complications, and there's no certainty that any of them get there on their own. But it's an aspiration that we have at United. I've sort of talked about it and hinted at it at least in the past. It is an aspiration that I think United uniquely is in a position to take a run at. Dream big, that's the way you accomplish big things.

Okay. And for my quasi-related follow-up, it's on the take its administration that is readying a $500 million rescue package for Spirit. I've been with you for the last couple of years in terms of permanent and irreversible structural change. But how does the industry continue to evolve if the government chooses to prop up failing businesses who failures have nothing to do with fuel.

Yes. Well, first, I don't know what's going to happen there. And I think that we're proving right now that well-run airlines like United Airlines can even be profitable and certainly don't mail out in a time like this. And to your point, Spirit was I feel bad for the people of Spirit, but it's been pretty obvious that Spirit's business model was fundamentally flawed in the airline was not going to be able to make it or cover their cash operating costs. So I hope that doesn't happen. But if it does, we're going to keep focused on winning brand loyal airlines like -- this is -- for us, rental customers. For us, I don't think that this is nearly as big a deal as for others that are in the more commoditized space. If I was working at one of the airlines that depended on more commoditized travel, I'd be -- I rate probably about this. But for us, like I think we've so distanced ourselves from the rest of the industry that at least policy. But I don't think it's going to have -- whether Spirit failed or [indiscernible], I don't think it has much effect on United one way or another to be honest.

Our next question will come from the line of Conor Cunningham with Melius Research.

I'm pretty happy that I don't need to ask the Spirit question. in a world where fuel remains elevated for a long period of time. Just curious on how that changes your management style to have. Just like your general view on profitability to the to the overall system. I assume you're refreshing that analysis for yourself all the time. Are you doing that for your competitors as well as you look for opportunities more broadly?

Yes, I think the answer is affirmative on all of the above. We look at this daily, weekly, quarterly, monthly, you name it. As fuel prices go higher, the question is how will demand reacts. And at this point, we can tell you that the price increases are going well and demand hanging in there are really strong. What we've done is proactively canceled flights, particularly on off-peak days and off-peak times, expecting that there could be some demand weakness in those channels, we'll see. So we think we're ahead of the curve here, and we'll continue to watch it and monitor it. But so far, so good and demand is hanging in.

Perfect. And then maybe just on the demand restructuring commentary a little bit. I'm trying to unpack it a little bit because in the past, you've talked about demand being somewhat inelastic price. And I realize you're not seeing it fall off now, but there's a lot of speculation that may happen. So as you run your scenarios, is it -- like can you just talk a little bit about like how you expect premium, maybe the business traveler to change or I assume that the demand destruction really comes from the leisure side of the equation. So if you could just talk about how you -- how the scenarios kind of play out within your 2026 guidance.

I think we're a bit in uncharted territory. I think we can tell you right now that all types of customers remain particularly strong. Like just in the last week or so, our yields are now up 20% year-over-year. But even more importantly, the business part of our business, business traffic is over the last 2 weeks, up 25%, business revenue up 25%, and that's accelerated from up 16% in quarter 1 and 9% late last year. So these price points are being absorbed and passed through and volumes are increasing. And for United, you'll recall, we had the unique headwind last year related to Newark, which we're going to lap in about 10 days, I believe. So it will create easier comps for at least United and maybe harder comps for others. But the numbers look really fantastic over the last few weeks. Now we'll have to keep watching it, particularly as summer ends. And like in order to maintain lease up yields at United, I felt like we needed less capacity on Tuesdays, Wednesdays and Saturdays at offpeak times, and we've done that. But look, business traffic is strong. Leisure traffic is bounce in the mid-single digits right now, which I think I'm happy with. And so we'll continue to watch it. It is uncharted territory given the massive amount of changes we've done, but we've had five broadly successful price increases. And right now, we are passing on yields that are up 20% year-over-year.

Conor, this is Mike. I just want to pile on because you asked about the guidance policy. We've long had a guidance policy of building in an active God into the guidance. And so what you're hearing from Andrew, what you're hearing from Scott, there's nothing in our bookings that suggests there's demand destruction. But I believe it's prudent to be prepared for that. But we are not seeing it. We're hopeful that we won't see it. The economy seems robust. The stock market is indicating the economy is robust. And it may be that, that is an active guide we did not need to be prepared for. But that is our policy, and we need to be prepared for lots of scenarios.

Our next question will come from the line of Ravi Shanker with Morgan Stanley.

Just on fuel, it appears the debate appears to be moving from fuel inflation to fuel availability. Just trying to get a sense of what kind of visibility you guys might have, especially out in Asia or Europe regarding potential fuel shortages and what the plan B might be in that case?

Hi, Ravi, it's a great question. We've got really good visibility for 4 or 5 weeks. And you are right to say that this issue is centered on Europe and Asia. It's much less of an issue in the U.S. We don't see a lack of availability being an issue at all in the U.S., it's a price issue. However, even in Europe and Asia, as we sit here today, we think it is a price issue, not an availability issue. We think that as prices rise, and you're seeing the price of jet rise much more than the price of Brent as crack spreads widen out. And so we think that price is going to be a rationing function that means there will not be spot outages, but we're walking it closely. The longer the straight remains closed, the more that is of risk, and it is of risk in the regions you noted, Asia and Europe, not so much the U.S.

Great. That's very helpful color, Mike. And maybe as a quick follow-up. Scott, your first response. You said that you compete with some really good airlines in the Middle East. Obviously, they're having a little bit of an issue right now. Do you see any structural share gain opportunities in Transatlantic or even longer haul from some of those challenges or vice versa? Do you expect them to be aggressive when the situation settles down.

I think it's temporary. And I think you look like what divide, not just Emirates, but Dubai. City stage Dubai have accomplished is remarkable and impressive. And if I had to make a bet, I'd bet on Dubai. I think it's going to come back fully. We'll come back immediately. It's temporary, but we'll come back fully.

Our next question comes from the line of Scott Group with Wolfe Research.

So Scott, maybe this is a naive question, but why does the industry need a crisis to start pushing through such higher yields? Why can't we do it more sustainably? And then maybe just [indiscernible] I'll lump it on to like one question. When I take your 10% pretax margin for next year. It sort of gets you to roughly $18 of earnings. I know you don't want to get into specifics, but just at a high level, as fuel hopefully starts to normalize lower do you assume you hold on to this higher yield, or do we have to give some of that back?

So I call answer that first question. And maybe I can try on the second one. I've watched this for at least 25 years now. And I've come to the conclusion that -- I guess I'll start with the conclusion. Every airline CEO should have to have spent two years at a reasonably senior position in revenue management to understand it. At its core, most of them haven't. That's the reason it's harder to get fair set. And I think what happens at airlines is the math geeks that are really smart that run revenue management. I'm looking at one of them in the room sorry, [indiscernible]. He's awesome. But I'm one of them to know that air travel demand is elastic and that there's room to price more appropriately for our cost of capital and to return our cost of capital. But the people in marketing and government affairs are better at telling the CEO hole, like that's a bad message to. And so they're much better communicators to CEOs. And so the pressure internally in the organization is really hard to raise fares. I mean great right now, a couple of airlines that are raising fares like crazy and then they run a fair stale every week. Like just the marketing team disconnected from the revenue management team and the marketing team are better marketers, and so they tend to win. It is really what happens. And so you see it in a crisis. And by the way, like another like sure, almost sure bet is in late October or November every year, there's going to be fare increases. And I have it figured this out 20, 25 years ago that in October, the teams finished the budget, and they roll it up to the CEO and the CFO, who pound the table and said that's an unacceptable result. And they say, go rates fairs, which they do. But it takes -- that's not exactly a crisis, but it takes something like that. And it's goofy to me that, that's the way it happens. It's nonsensical. But I actually think that's the reason that happens in gut that for a long time. and a crisis caused it to go up more. Now as to the question of does this hold next year? I think actually that this situation like this at least has the potential to be different and for pricing to hold more. First, like as I said earlier, I think or I said somewhere today, I forget ever I've talked that airfares in real terms are down 27% in 2025 versus pre-pandemic. And that had put a bunch of airlines either losing a lot of money or sort of breakeven is really kind of only a couple of airlines returning their cost of capital. And everyone has to eventually return your cost of capital. And so I think it is more likely than not this time. And certainly, the longer this lasts, the higher the probability goes that the pricing increases hold. We probably won't hold 100% if we'll normalize it. I told the team earlier today. And this is just my guess that if things went back to February normal. I think we get -- keep 20% of the price increase next year. And I think that's going to move towards 80%. And every day, it's ticking up longer this goes on. So we're not going to give guidance for next year. But I do think that we'll be double-digit margins next year, and your analysis is not unreasonable.

Our next question will come from the line of Brandon Oglenski with Barclays.

Scott, I'm wondering if you could elaborate on winning brand loyal share and specifically as it equates to your ChicagoH'are hub, especially now that there's a proposed FAA summer cap on operations there. I guess, a, how are you faring versus your competitor? And then b, how do you anticipate complying with that?

So I mentioned more questions today than I like, but I'll do it. It's [indiscernible]. We're still reviewing the order, but it does appear that we're not going to get to grow as much as we and our customers would like. But the real point is 1 you make, like we've won brand loyal share here in Chicago. And it's never been about the number of flights or the number of gates. Number of gates and flights were the output of what was happening with brand loyal customers. And we have, by far, the best technology. We have by far the best service, the best reliability are the best product. And customers have overwhelmingly voted, not -- this isn't unique to Chicago. This happened in all of our hubs. Customers in all of our hubs have voted overwhelmingly for United. We got three big hubs. We have three different big competitors, each of which we won about 20 points of market share. Here in Chicago, we've actually won 38 points of market share with business travelers. So customers care about quality. Quality really matters. And we give great value to all customers, and so the brand loyal customers have switched and absolutely nothing about that changes here in Chicago. But it does look like the FAA is going to not let us grow as much as we and our customers would have liked. And I wish we could grow more, but we can't. We've got other places we can grow and look forward to some time being able to grow more here. But nothing changes about the sort of structure here in Chicago. And the decade that we've spent winning brands or customers by creating a great airline for them.

Our next question will come from the line of Andrew Didora with Bank of America.

Maybe changing gears a little bit, throw this one out for Mike. Just doing to cost a little bit more on the maintenance side. Just trying to think about how this kind of trends, I know it can be lumpy throughout the year, but particularly as it trends as you cut five points of capacity throughout the rest of the year. I would think you get some leverage on the maintenance side or I'm not thinking about that the right way? And just from a long-term kind of maintenance cost perspective, is this something we should think about growing maybe a couple of points. more than your capacity growth? Just curious on that line item.

Thanks, Andrew, for the question. And I'll make a few points. Firstly, you should broadly expect our CASM ex trends to move inversely with the amount of capacity that we take out. I think that's maybe obvious, but that's what happened in Q1. That's what you should expect for the remainder of the year. Number two, the sooner you take out flights, the further out those flights are, the more you can variabilize the cost. There's no doubt about that. But at United, we're winning brand loyal customers by investing in this business. And nothing about this crisis is long term. And so you can expect us to continue to invest in the business. The final point I'll make you made around maintenance. I think at United, we have some unique opportunities to fight that trend, where maintenance cost is expanding as a percentage of our costs. Part of that is gauge, but part of that is what we're doing in global procurement and how we are working with the great tech ops team that we have. So I'm very optimistic we will not face that same trend at much of the industry faces.

Got it. And then just my second question certainly seems like you were busy start of the year on the balance sheet. But just on the buyback, you had stepped it up this time last year and all the market volatility, but 1Q this year, very similar to the last few quarters. Just curious your thoughts on how you thought about the buyback.

Look, I think it's a great question, and it's valid. But we have two objectives with our buyback and our capital management. Number one, we are committed -- absolutely committed to getting to investment grade. And so we need to balance our buyback and our opportunism around buying shares when they're below intrinsic value with our commitment to get investment grade. And so what you saw in the first quarter was another example of how we're balancing that. Really proud of the team for what we did with the two unsecured offerings. And I just want to reiterate that we are going to get to investment grade in all scenarios.

Our next question will come from the line of Sheila Kahyaoglu with Jefferies.

Maybe another question for the revenue management peaks out there. You're removing five points of prime capacity through the end of the year. How do you think about what range fuel would need to settle in for United to return to that mid-single-digit capacity growth in the second half? And how do you think about irrational capacity coming back online? And how do you manage cost in that environment as well as you continue to invest?

That's a lot of questions.

Just pick one, it's okay.

Look, I think we're going to watch demand really carefully. We know how price is created in the business, and we've cut this off-peak capacity because we want to make sure that we can sustain these type of yield increases that we see right now. And we'll continue to watch demand. And we're going to manage the business to hit the financial targets and margins that we have out there. And so if if we can do that with more capacity, we'll gladly bring it back online. But where we are today, and the economic lesson that Scott gave you at the opening, I would say that there should be some level of demand reduction related to a 20% bear increase. We haven't seen it yet. And if we don't, a really great outcome, but we're planning for that. If it doesn't turn out to be the case, we'll appropriately adjust our plans.

Our next question will come from the line of Tom Fitzgerald with TD Cowen.

I just want to ask a multipart question of Andrew about the commercial initiatives. If we bucket them into maybe merchandising fleet and MileagePlus would you by just walking us through the margin uplift you're kind of contemplating over the longer term from some of these initiatives that they pan out? Like just in terms of thinking out some of those Airbus aircraft on those routes, like how they compare to the aircraft they're replacing, things like that.

Yes, I'll keep it really high level, but -- and I'm glad you asked the question because the current conditions are super interesting, but we've been working literally years on the initiatives that I had in my script earlier. And we are really proud of all of them. We think all of them are material, but properly merchandising our products and being able to sell them like we were unable to sell [indiscernible] products, is valued in hundreds of millions of dollars per year. And the new aircraft we bring on that are optimally configured for the premium demand that we're seeing is also a gigantic number. I'm going to avoid assigning value to each of them individually. Maybe we'll do Investor Day someday where we can talk about it in more detail. But all of those initiatives, and there are seven of them, and they're really all seven of them are very, very significant, are about setting our future up to reach not only double-digit margins, but ultimately mid-teen margins as we've talked about, and we are well on our way. We've got it dialed in. We've, I think, figured this recipe out. We've segmented really effectively, and we're not done is also what I would tell you. We have other ideas in the works and plan another media day next year to talk about because we're really proud of all this. And there's RM stuff, the segmentation stuff, the willingness to pay, all of it giving customers in all cabins more choices is incredibly effective, and we're winning share all the time. So hopefully, that answers your question appropriately, but I'm going to say it's just really materially significant to lay the proper foundation for the future.

Our next question will come from the line of Michael Linenberg with Deutsche Bank.

Just one question here. Just on revenue recapture. I mean, thanks for outlining the progression for the year. What gives you confidence that you're going to get to 100%? Do you actually need maybe outside help, whether it's other carriers cutting capacity? And maybe just give us a sense of how you recovered Russia, Ukraine, how quickly you were able to recover it back in 2022 when we had the last major fuel spike?

I'm not going to count on other airlines for anything, that's for sure. But from our perspective of the fact that we've already gotten to a 20% yield increase, and we've done is we've cut off key capacity to make sure that we can sustain these higher yields. I feel really confident. And I would say, look, before the fuel situation happened, I would tell you, fuel is a pass-through. And so I feel really confident we're passing it through. Demand is hanging in there. We've made the appropriate capacity adjustments for United to make sure that we can get to full recovery by the end of the year, and we're well on our way already between 40% and 50%. And -- but the most optimistic thing is the fact that within a matter of at 7 or 8 weeks, we went from yields being up 2% to 3%, to yield being up 18% to 20%. It's pretty darn remarkable.

Mike, the underlying point is that for a growing portion of our customer base this is a decommoditized business. The brand loyalty United. You get a better experience, you get better value. And I think that the results speak for themselves.

Our next question will come from the line of John Godyn with Citigroup.

I wanted to just follow up on the fuel pass-through. I think that commentary in that guidance was great. If we could maybe get a little bit of geographic color kind of how pass-throughs are evolving in your opinion, internationally versus in the domestic market. The capacity trends are very different. The fuel surcharge activity is very different. The hedging of the competitors is different. Maybe a little bit of color there would be helpful.

Look, I think the color I would add is I thought that the domestic would be quicker to move than international, and I was wrong. The international environment pricing -- well, both are strong. I want to be really clear. But the international environment is actually better than domestic, that the price increases have been more substantial and are covering more of the fuel burden than they are domestically. And I think that's really remarkable. I think there's been changes in the overseas pricing behavior that have actually surprised me, quite frankly, given that -- I don't every detail, but given what I know about the industry. So I'm really pleased with that. And I do think these fares are going to be up. And as Scott said, depending on how long this lasts, the longer it lasts, the higher they'll be up and the longer it will stick, in my opinion. But the international environment is better than the domestic environment at this point.

John, I can't help myself. But you mentioned hedging by foreign carriers if they hedge Brent, they're not hedging jet fuel. The biggest portion of the move in jet fuel has been crack spreads. So I think this experience has proven once again that hedging is a poor policy.

That's great color, guys. And if I could just follow up one more on the pass-through through the end of the year. it sounds like the assumptions embedded in that are status quo. Like you're not expecting all the other carriers to flash capacity or something like that, driving your pass-through. Is it safe to say that, or are there other kind of industry dynamics that you're looking for to kind of drive a 100% pass through by the end of the year?

Look, I can't speak for other airlines. We've engaged in self-health. We know what it takes to pass on these price increases by what we're going to fly. And we're out here to hit our financial targets and hit a double-digit margin next year, as Scott said. So I don't know what the goals and motivations and missions of the other airlines are. I won't speak for them, but that's ours. And we're going to manage our capacity to achieve our goals independent of what the industry does.

Our next question will come from the line of Chris Wetherbee with Wells Fargo.

Maybe just sort of sticking on the theme of the fuel pass-through and ultimately, retention rates, you talked about holding on to 20 and maybe that going to 80 over time. I just want to understand the mechanism behind that? Is it just simply duration? Is it sort of competitive actions around capacity and others take? Is it other price actions you could use like bag fees or other ancillaries that kind of stick even when prices come down. I just want to understand that dynamic of how you can hold on for longer.

Well, I think the longer the price of fuel remains in this range in the longer consumers pay these prices and airlines get used to this revenue stream, the more likely it is to stick. That's the simple perspective on it. I do think that international is running really well above domestic, as I said a few minutes ago. So it will be interesting to see if that normalizes. But the environment right now, I think airlines want to return their cost of capital and particularly here in the United States, most don't. And that is unsustainable in the long run. So something had to change. It's unfortunate it had to be an oil crisis, but here we are.

Our next question will come from the line of Duane Pfennigwerth with Evercore ISI.

Just on the mileage plan changes, which seemed like they were motivated to get more people to sign up. Can you speak to the changes you're seeing in credit card update since you've made those. And I wonder if you could give us your current thinking about the time line for a new comprehensive agreement.

Look, we've been working on the MileagePlus changes for well over a year. We thought we would engage in whatever activities we could control outside of a new contract. And numbers, the uplift, the spend has been incredible. We're really, really happy. With that, let's -- it's really new. So hopefully, in a few quarters, I can still describe it as incredible. I expect I will be able to do so. But these are changes that I think are really motivating for our frequent fliers, and we're at a record penetration rate of cardholders that are premier members at United. So I'm really happy with it. I think the details regarding our deal with Chase are largely confidential, but I think you can Google the expiration date and know that it's not tomorrow, but it's not that far off. And we're working with Chase. They're a great partner and run a really sophisticated program, which is required by United given the size and magnitude of our co-brand portfolio. We look forward to what the future brings.

Our next question will come from the line of Michael Goldie with BMO Capital Markets.

By the end of the year, your aircraft count will be up some 8%. How do you think about the operating leverage of these assets in a recovery versus the decremental drag if flight activity remains constrained. And then related, how are you thinking about managing labor requirements as you take on this new equipment while managing capacity?

Michael, I'll take the fleet question, and I'll try to answer the labor question. In an elevated fuel environment, it only exacerbates the advantage of new fuel-efficient equipment versus older equipment. And so you can see in our fleet plan, we expect to continue to take delivery. We're really pleased with Boeing increasing production rates on an narrow body. They've been a great partner to us. It is financially advantageous to take the new aircraft, both from a margin and a return on invested capital standpoint. So you will see that. Now the other end of the spectrum are older aircraft. There's an opportunity to fly those aircraft in a capital efficient way by managing the maintenance at the end of the life to maximize the value we get out of those aircraft. You can bring the utilization down, have extra spares and have additional flexibility to fly the golden hour and to manage peaks. So I think we're in an enviable position from a fleet standpoint, you shouldn't see us change anything. When it comes to managing labor and labor efficiency around that fleet, we've got a very sophisticated team and we make sure we are hired across all work groups at the appropriate level to make sure that we're managing -- while we invest in the customer, we're investing in the hard product, we're investing in our people. We need to make sure that we manage the workforce efficiently. And I think we do that very, very well here at United.

And we will now switch to the media portion of the call. [Operator Instructions] Our first question will come from the line of Leslie Josephs with CNBC.

Just on the Spirit potential bailout, I guess, at this point looks like the administration is moving towards that. One, what's your comment on that? And two, does that change any of your assumptions for capacity? Or do you think there's going to be more capacity than you expected out in the market just because there was a liquidation risk earlier this year. the recent weeks? And then second, just had a demand question. If there's any geography where you are seeing a pullback. I think you mentioned that international was a bit stronger than domestic at least on yield. So curious if there's been any softness in any area.

Leslie, I'll briefly -- I just said earlier in the call, you may have not been on. But it's more fulsome, I suppose. But in brief on Spirit, well-run airlines are still solidly profitable even in this environment. As you see from United, I don't think this crisis anywhere near big enough to caused the need for an airline bailout. And [indiscernible] lots of coach for me over the past several years, going back into the last administration that the spirit business model is fundamentally fans going to fail. I feel bad for the people. A lot of them will land jobs of airlines every time that we have a new hire by class, and I go to talk to them, I ask where people are from. And there's a lot of Spirit hands that get raised in the room. But I don't think it's necessary. I also don't think it's terribly relevant to a brand loyal airline one way or another, like United.

On demand, look, in the Middle East aside, we're seeing strength everywhere. But what I'll point out is we're really seeing strength in premium cabins going forward into Q2, particularly across specific and across the Atlantic. We're teeing up to, I think, a really strong performance. And United has already gone into this summer season with a pretty conservative global long-haul capacity number, I think, actually down year-over-year. So I think we're actually really set up to produce some very good numbers, and we have very good business demand going into the blurs cabins is my answer.

And I will now turn the call back over to Kristina Edwards for closing comments.

Thanks, Regina. As always, we don't control the environment, but we do control how we perform in it. I appreciate your interest today, and we will see you next quarter.

Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect.

All right. Folks, moving right along, apparently fresh from the Magic Kingdom. I'd like to introduce Scott Kirby, also joined by Andrew Nocella, Mike Leskinen on stage, and Kristina Munoz. Kristina, do you have to read some safe harbor stuff? Or should I turn it over...

Yes.

So I'll turn it over to you. Scott, welcome back.

Thank you, Jamie.

Awesome. All right. Well, good afternoon, everyone. Thanks for joining us. Our presentation today might contain forward-looking statements with information currently available to the company. Unless otherwise noted, the financial measures we will discuss are on a non-GAAP basis. Please refer to our latest earnings release for definitions and reconciliations to the most directly comparable GAAP figures.

On to you, Scott.

Thank you, Kristina. Thank you all for joining us today. My last -- are we the last airline? Save the best for last. That's important. So good to see Okay. We -- all right. Second best for last. Second to last. Well, thanks for having us here. It's good to be here. This is always a fun conference. So Jamie -- hey, Bob, you come hear how things going in the airline industry come on in.

Jamie, you got to stop doing these conferences on this day because 6 years ago, we did it on the phone, and we always have something going on, it seems like. But we much -- you've heard a lot already today about the short term, and so I'll hit a few of those highlights. But we feel really good about how things are going at United, both in the short term and how it sets up for the long term.

And we've talked about in the past having a goal of adding 1 point of margin per year, and we believe that we can get ourselves into the low double-digit margins on that path. We remain on that path. Prior to the fuel price spike, you've heard some of the revenue stuff like we were likely going to get not just the full point this year, but make up the point from last year and be in the low double digits even this year had this not happened. But we also married solidly on the path. And I think this has the potential if it lasts longer to actually accelerate some of the industry restructuring that moves you into the mid-double-digit range.

So with that sort of backdrop, the near term, I'm going to say the same kind of stuff that everyone else has said today. The revenue environment is really strong. By the way, we have a goal this year to fully offset the increase in fuel prices, which is about $4.6 billion at the moment for revenue to fully offset that. And to do that, we need RASM to be up another 8.5 points. So it's an interesting kind of thought experiment. Is that doable or not? How achievable is being up 8.5 points? And so a few stats on that.

We have had the 10 biggest booking weeks of our history, have been the first 10 weeks of this year. It only been 10 weeks this year, and they're #1 through 10, which is pretty remarkable. The last two have been the two biggest. We're currently running booked yields. Those are running up, but now they're running up between 15% and 20% in the last week. So pricing has been going up as one would expect.

Open -- people ask the question with pricing going up like that, is that going to have an elasticity effect? I'll just give you some food for thought on that. If you look at it on a year over 2-year basis, it's more like 5% CAGR. But if you look at it more importantly, going back to 2019, from 2019 through 2025, inflation in the U.S. was up over 25%. Air fares were down 2%. So we're 27 points behind. So 15 points, we sort of covered half of the inflationary impact. So I don't think that's going to happen unless the economy really gets hurt, which is a different effect. But I don't think the elasticity effect is going to be high because we're really still recovering, and we're doing it rapidly, but this is where we're recovering kind of what happened post-COVID.

So with some of those numbers, March RASM end of February, it was booked up 8%. It's going to end up plus 14%. So we're going to have March up plus 14%, double-digit RASM in 2Q. And so that 8.5%, I don't know if we'll get there or not, for sure. But you can look at all the data, and you can certainly make a credible case that at least as the environment sits today that we recover 100% of that increase in fuel price. So we'll see what happens for the rest of the year.

The question becomes, though, what in that environment where we still do feel really good, is there anything that we should be doing differently? And at United, we are going to make adjustments because of what's happening with fuel prices. Even though we feel good, our goal is to recover 100%. And we'd much rather -- there's two kind of errors you can make in a situation like this. You can say, oh, everything is going to be -- is going to be short term, everything is going to be great. And -- or you can say, well, I hope everything is great. But if it's not, we're going to prepare proactively for it.

I'd much rather -- and proactively at the near term at least mostly means cutting capacity. and eliminate marginal flying. I'd much rather make the mistake of leaving a couple of months' worth of demand on the table because we cut more and then you can get it back, as opposed to making the mistake of oil prices stay higher and longer and you're flying flights that lose cash. So we already, last Friday, loaded about 1 point of capacity reductions for May and June. We're working on more to extend that time line out. It's all utilization flying, Tuesday, Wednesday, Saturday, red eyes, stuff like that. But we're being proactive about it.

And so I think what all this means is the other thing that's going to happen, particularly if this -- where this gets really interesting is if fuel prices stay higher for longer, that's really where it gets interesting. I think there's a reasonable chance that, that happens. And if it does, it's going to, I think, further accelerate the gap between the brand loyal airlines and everyone else. And the truth is there's 2 brand loyal airlines in the country. And I think we will outperform in that environment. It will also lead to kind of the structural changes in the industry much more rapidly that I think leave us to get us into the mid-double-digit margin range.

And so at United, I think we're still consistently on course. We're sort of growing margins by a point a year to get into the low double digits. And there is a potential, not the certainty, but there's the potential that if this lasts longer, that it gets us pretty solidly into the mid-double-digit range by the time it ends if it does go for longer. So we feel good about where we are. We feel good about the track that we're on. We've always hypothesized that in a situation like this with a big fuel price spike, the industry restructuring would pass that along pretty quickly. It is as fast as I've ever seen it in my career and pretty remarkable to be standing here with this fuel price spike and not just United, but other airlines talking about recovering, having at least the possibility and the potential to recover 100% of the increase in fuel price.

So thanks for having us, Jamie. With that, I'll sit down and we'll do Q&A, whatever you guys want.

So I'm happy to start, but hopefully, we get some audience engagement. So in terms of the speed of fuel price recovery, where you left off, do you think it's the financial duress that some of your competitors are on that explains that? Is it changes in how the U.S. consumer values the proposition of commercial air travel? Is it international fuel surcharges, which just sort of mechanically you make things -- I mean, why the rapid escalation?

I mean, maybe all of the above. But in some ways, you basically got -- you had 2 airlines that were 100% of the industry profitability last year, a couple of airlines that were essentially breakeven. You had low cost. The more you're biased to the low-cost end of the spectrum, the worse your margins were. They tend to be the price leaders. We tend to be price followers. And so the urgency at those -- and fuel is a bigger percentage of their expenses as well. So the urgency at the low end to raise prices is even higher. And -- so that's one.

I think the industry largely has management more -- at least more has management teams that are focused on profitability and are well managed as opposed to fighting for market share. I saw Bob walk in. Southwest has been the airline that actually, I think, has done the most in the last year to really make changes. If you're willing to make those kinds of changes at an airline.

We talked about it. I'm sure.

But if you're willing to make those kind of changes at an airline, you're also willing to look at like fuel prices just going up 60%, 70%, do something about it. And so the industry, like the leadership teams are just different. Not all, but at most.

Andrew, has there been any change in consumer behavior in terms of the booking curve? I mean, are people just pulling forward their summer travel decisions? I mean this is when you should be booking the transatlantic anyway for summer, right?

We're definitely in the peak booking season for the Atlantic, and I don't see a change in behavior. I just see relatively strong demand. And last year was an easy comp, but still good strong demand.

Scott, you mentioned elasticity. It's one thing I wanted to ask because we were talking to some of the low-cost carriers and one of them specifically sort of admitted that. In the old days, we could -- if we were at $79 and we moved to $69, $59, $49, we could stimulate demand. But their point was you can throw all those models out the window because if United is in the market at $99, it doesn't matter what they do. So can you maybe talk about that dynamic in terms of your comment on elasticity and how brand loyalty sort of plays into that? Is it fully played out?

I'm getting over the shock that they said that because I said that 10 years ago, and they said 10 years saying I was wrong. But that's the point. What used to -- 10 years ago, what happened and how they built their models were not price elasticity of demand. It was price advantage. If they had a lower fare, people would book them. But that doesn't work now. And they could often have a lower fare.

By the way, like the very first job I had at American Airlines when I first got in at AADT actually, was estimating price elasticity of demand. I've looked at it 200 different times, 6 ways to Sunday. Demand is inelastic. The overall price elasticity of demand is about minus 0.5%. So demand is inelastic period in the airline industry.

But I think a lot of what has happened is the necessity to raise prices has forced them to rethink that paradigm and realize that in the past, they have price advantages. Today, they don't have price. That is the biggest change that happened to the ULCC model is that they're no longer have price advantage. And the reason is because we can be price competitive. We needed basic economy, and we needed higher gauge. But with those two things, we can be price competitive.

So if you're going to try to fly in Chicago or New York, or like -- we are not going to go try to -- we wouldn't be successful competing with the ULCC from Akron to Orlando. But in our hubs, like we can be price competitive and like no carrier is going to fly a ULCC over United at the same price. At least they're not going to do it twice. They might make the mistake once, but they're not going to do a second time.

And Mike, fuel question for you. We've spent some time with both Alaska and Air Canada talking about how they source fuel, and how they have flexibility in where they source fuel. Obviously, there's a lot going on. There's a lot of difference right now between New York Harbor and Singapore and everywhere else, right? So can you talk a little bit about United's setup and what flexibility you have to move your fuel sourcing around?

Yes. Thanks for the question, Mark. And just to share with everyone, we have about a $400 million headwind in the quarter related to higher fuel prices. That's consistent with what you've heard from our peers. So it shouldn't be a big surprise. And we're having a lot of success passing through price.

We have been on a 3-year journey to improve actually our systems accounting for fuel. So we know precisely what we pay for fuel in Sydney, and we know precisely what we pay for fuel in San Francisco and New York. And so around the edges, we do optimize based on those changing prices. And those prices in the recent weeks have been really volatile. And so that around the edges changes how much fuel we might tanker from one location to another. You can't do a lot, but you can move around the edges there.

We also are very active in trying to figure out how to not figure out sourcing some of our own fuel and bringing in some through pipelines, et cetera, to try to minimize that price. So I think really successful. Given the magnitude of the move in prices for jet, it's going to be -- that's going to overwhelm the couple of pennies we might pick up by being smart around the edges.

I would say to Jamie's earlier question, I think one of the things that makes for a healthy industry is an industry that passes through the cost of its inputs. And so for the first time, no major U.S. carrier has fuel hedges. The hedge is a natural hedge, and that is that we pass through to the consumer as the price of fuel rises.

Scott, when United Next was unveiled, I paraphrased it as going for gauge. I don't know why, and there were obviously more.

Andrew agrees.

Yes. So since you brought up gauge as it related to the competitive dynamic vis-a-vis some of your smaller competitors, are you -- and you admitted at the time that Delta had about, what, a 4- or 5-year lead on gauge. Is United properly gauged today? And how much more? Okay. So Andrew is shaking his head for those who are listening. So when do you get there?

I don't know when we'll get there. I know we're on a constant journey here, and we have a lot of upside. We're still undersized in our hubs. I think our hubs can support 170, 180 seats per departure, and we're well below that. And I think our average today is like 132 in North America. So that number -- it is difficult to move the number mathematically when you have this many airplanes. But I just think that we have a unique tail gauge tailwind that will be with us for at least another 5 to 6 years.

Well, and just to push back on that, and I happen to agree with you, but just in pursuit of devil's advocacy, isn't that the problem that the discounters ran into was going for gauge and just 321s and it was all a CASM exercise. So...

Going for gauge without connectivity. Like we have massive load -- we have massive connectivity. And I'll also point out, like going for gauge just for the sake of putting airplane seats on airplanes is just fundamentally flawed. I think the industry has now figured that out. We figured that out a long time ago with the 767 and the CRJ-700, which we made into 550s. And I think there's a lot of lessons to be learned by all that.

So it's not just about gauge for gauge sake. The gauge allows us to put multiple product choices on an aircraft and do it profitably. And so gauge is just a panacea for a lot of things. And I think it's very unique to United. You look at our order book and our hubs, we have this opportunity, and I don't think other airlines do.

Scott, personally, I'm not a heads I win, tails you lose kind of guy, win-win situation. No, no, I'm not. But I think you made the point before about the fuel price change. The longer this persists, the more structural change is likely to take place that ultimately feeds into United's prosperity potentially.

So my question, I don't know how often you revise your internal forecasts, but if fuel prices stay here, do you think your 2027 -- '27 emphasis moves higher, lower or stays the same, given the knock-on effect that that's going to have...

I'll give you a longer answer probably. One, I can't help myself, but -- because you sort of hinted at it. In a situation like this, as was true 6 years ago, this is obviously nowhere near the magnitude of COVID was 6 years ago. But in a situation like this, it's really important to be right about what the future is going to look like as opposed to what you hope the future is going to look like. And it's magnified if you are right and everyone else is wrong, which is what happened in COVID. Like we got COVID pretty much right and everyone else got it wrong, and we came out massively stronger.

I'm not predicting yet that that's going to happen in this case, but it is a possibility that oil prices stay higher for longer. And like I just read the summary that I didn't listen to anything that's flying in here today. But there's a lot of -- this is going to be over soon with definitiveness. I'm not definitive about that. It's certainly a possibility, but we're going to prepare for it to be deeper and longer.

And so if it's -- let's say, it's deeper and longer and oil is -- we've run a scenario actually on it, where we said oil goes to $175. Their Strait stay closed for 3 months, oil goes to $175 ends the year at $120, and ends 2027 at $100. I think that's a world where we have the ability to grow earnings next year. It requires assumptions on what happens to other airlines. But we've done the same analysis like some of our -- even our big competitors, if they don't do something, come out in 2027, 30x levered, which is impractical. And so I think it forces change. So that's an example of a scenario that we've run.

I wouldn't make the forecast for sure today that we come out and be able to grow margins, but I think it's certainly plausible that we could in that environment. And by the way, if you look at kind of yields and revenue to get there, like you got 27 points to make up plus you're going to have inflation this year and next year, like not hard -- like saying, modeling yields just recover inflation, that's going to be 30 points improvement in yield from 2025 through 2027. The math is viable.

So on that inflationary issue, and we had a panel with John Heimlich, the A4A yesterday, and we talked about some of the same figures that you cited today. So for that yield improvement to take place, do you think consumers will pay that? Or does that have to be carved out of elsewhere in the travel ribbon? I mean for airfares to stage the sort of recovering at least directionally with what inflation has done, do other travel entities have to give that up to the airline?

So interesting point. Like I do think the price -- the right way to think about price elasticity is price elasticity of the trip, as opposed to price elasticity of the airlines. And every other part of the travel segment has done a pretty good job of recovering it except for airlines. And so I think fuel prices increase the probability that we do that.

I do think that -- like it's naive to say that there's no price elasticity effect. There is a price elasticity effect. We raised yields 15%. There's going to be some fewer volume of passengers like we all took Econ. It's Econ 101. It's not as much as the 15 because of the trip point that you make. And it is primarily coming out of the commoditized portion of the industry. And I think the capacity comes out to reflect that loss of volume from the capacity part of the industry.

So I think if you got to a year like 2027, where you had a 30% increase in yields, it would be harder for that part of the journey. The airlines would disproportionately recover that, not -- maybe not 100%, but would disproportionately recover that. There'd be some loss of volume. But I think that loss of volume for airlines would almost entirely come out of the commodity capacity in the airline industry.

Andrew, maybe you can talk a little bit about Middle East flying Tel Aviv. I mean it's an important lane for you. You've had quarters before where it's had a material impact on your results. Obviously, it's still important. Maybe just talk about in the short term, how you're managing that, what you're seeing, how you're thinking about that for the rest of this year?

Sure. I think we're getting used to this volatility. If it's not one thing, it's another. So we're always prepared to be agile and move aircraft around. In this case, I think roughly 2% of our capacity was between Tel Aviv and Dubai. We've clearly canceled both and have reallocated those widebodies into the system flying transcon at this point. And we've grounded the 757s they replaced. So we're going to -- in other words, ASMs will come down, as Scott indicated earlier. And so we'll move them back when conditions allow.

But at this point, we're expecting not to return to Dubai until later this fall for a number of different reasons. And hopefully, we'll be able to get back to Tel Aviv this summer. But we're not going to sit and hold the aircraft completely separate and pretend that they'll have a use. So we've come up with a different use for them right now.

Just a follow-up. So how many 777s does that free up between...

Probably 7 widebodies, something like that.

So where do they go?

There -- some of them are not reallocated yet, but they'll be flying on transcon missions where we're seeing very strong demand. So New York, San Fran and New York, L.A. And the 757s they replace, those 757s will be parked for the short term.

So net, same number of airplanes flying.

I think Jamie just wants to know because he wants to fly that Polaris from...

There's a 777-300 out there somewhere in the domestic.

Jamie is going to hunt that down. Mike -- exactly. I know you too well. Mike, you have a goal for the first time ever from your seat, United has a goal to become investment-grade rated. And we were just talking in the hallways of San Diego last week. I sort of polled the audience of aircraft financiers about your ability to get there this year, next year. And the good is everyone still thinks you can get there within the next, sort of, year, 0 to 18 months, something like that.

Is there an argument to be made that if you power through the next couple of quarters here that, that can actually be accelerated that -- I mean, if you can prove that you can handle this type of fuel shock and still sort of meet your guidance and so forth, is that sort of the nail in the coffin, if you will, to them viewing you as not worthy of high grade?

Yes. Look, I mean, I'll leave that to the rating agencies, but I'll say it certainly ought to. The biggest knock in getting to investment grade, our leverage ratio is fine. Our margins are marching higher. The knock is the industry rating at all the rating agencies. And if we prove that this is an industry that has more stability of earnings power through macroeconomic events, which I think is precisely what we're going to do this year, it ought to accelerate it.

The other thing that ought to accelerate is we issued $2 billion of unsecured right on top of where investment-grade paper is trading. And so the buy side is already voting, and that is that we're right on the cusp. So we'll be at the metrics, I think, towards the end of this year, and I hope we get there towards the end of this year, but I feel really confident we'll be there no later than next year.

Scott, your Chicago expansion was characterized as reckless by -- you're former employer this morning. So far...

Took those in compliment.

If you care to respond, feel free. But more importantly, having been sitting at the negotiating table, and I know a resolution hasn't been achieved. How do you think this settles out? And can we be confident that the outcome is not punitive to United?

Yes. I think the DOT is, for the first time in my career, doing what they're supposed to do, which is manage schedules so that they equal the amount of capacity at the airport. I am highly confident that the DOT does not want to put their thumb on the scale either for United, unfortunately, or for American, that they want this to -- a bunch of questions about what's the fair starting point and all that. But they don't want to put their finger on their thumb on the scale, and I don't think that they will. So it's all going to be fine. Lots of histrionics, it's all going to work out fine. Actually, going to work out better because the airport is going to be managed capacity there.

But I also think it's interesting to sort of how do we get here? There's really 3 moments in time that got us to this point. The first one is 2016, when United Airlines decided to embark on a strategy of investing in the product the service, the technology, the reliability to be a brand loyal airline. And American, I'm not criticizing them, but they chose a different direction. They chose to focus on costs. I don't actually know what they said today, but they talked about cost, and how good they are at managing costs. And they have been good at managing costs. But that is the opposite of what you do if you're trying to be a brand loyal airline. They focus on the commoditized portion of the industry, and we focus on the brand loyal.

So we went in 2 different directions. And the consequence of that first moment in time led to the second moment in time, which is coming out of COVID, that point, American had lost massive market share in Chicago. They went from local customers, they went from having higher market share than United in 2016 to coming out of -- by the end of last year, we had a 19-point advantage with local market share and a 38-point advantage with business traffic in Chicago. We won -- not because of our schedule, we won because of product, service, reliability and technology. We're just a better airline. And the consequence of that was that American was now losing money in Chicago.

And so American made the second moment in time, a perfectly rational decision to deploy their capacity coming out of COVID in Dallas and Charlotte. They grew those double digits. They made money there, and they left Chicago to shrink on the volume. They didn't grow it back because it lost money. It made sense for them to do that. The consequence of that second decision was they lost gates in Chicago. That's the way it works. They lost gates.

By the way, it wasn't because of anything United did. We didn't -- we grew Chicago just like we grew the rest of our system. American failed to grow. And so American -- we didn't win gates. American lost gates, which led to the third moment in time, which was December 26 of last year. American decided to add 117 flights a day to start at the beginning of February. So 5 weeks to sell, it lost 40% of the booking window for a full summer schedule that they lost -- February demand is 29% below the summer. They added a full summer schedule with 5 weeks to sell it. That's a tell. That was not about profitability. That was not about rational economic behavior. That was a desire to, sort of, during the holidays, put a bunch of flights in, hope United wouldn't respond and they could win gates. Cost a lot of money, but that they could win gates. I mean they were on track to lose $1 billion in Chicago, which I don't think they even argued with today. Lots of [indiscernible] about variable costs, but they didn't even argue with.

They spoke about that.

And so that's sort of how we got here, those 3 moments of time, which, by the way, United never actually did anything, like United wasn't trying to harm American, or even win gates from American. American made decisions that they lost gates, and those are the consequences. And so that's what happened. We were forced to respond. I'm not going to call what they did reckless, but I'll leave you to decide if losing $1 billion a year at a hub, how you want to characterize that?

I know that I would fire someone for doing that. But that's how we got there. But all the histrionics that have happened to get to this point, the DOT is going to come in and play dad, and forces to share, and it's going to all be fine.

So Scott, I have to remind myself sometimes we're in Washington, D.C. here. So I just want to ask you, number one, conversations with Secretary Duffy about FAA modernization and the pace at which you think that's -- it's increased, but is it meeting your expectations? Or what are reasonable expectations for that?

And I also want to ask what you're hearing from your lobbyists about just credit card interchange fees, loyalty changes, all that noise that's around the loyalty and credit card system?

So first, like this administration, Secretary Duffy, Administrator Bedford, is the best triumberate that we've ever had by far in aviation. They care. They want to get it. I was at Disney World yesterday and Secretary Duffy called me just to make sure everything around the world is going okay with oil because he'd heard that maybe there's places it's hard to get jet fuel and like proactively called me to ask about that. And like he does that kind of stuff all the time. Bryan Bedford does the same thing.

Like we've never had someone that wanted to make -- they hold us accountable, but never had somebody that wanted to help make the industry work. And the reality is 90% of the delays and cancellations in the country are air traffic control. That includes weather. That's not all on them. But weather and then all the other issues that happen. And like there's just -- like everything combined that you could do to fix to improve aviation for customers is not as big as improving air traffic control system, and they are great at doing that, and we are fortunate to have them. And all of us in aviation are supportive of them. And I think if I speak for all the airline CEOs when I say that.

Credit card and interest rate legislation, particularly on the interchange rate, 86% of people have rewards cards in their wallets. People love them. Politicians are generally smart enough not to pass legislation that passes off 86% of their voters. And so that works really well, I think, on the hill. We'll have to keep fighting. I know there's one senator in particular, more than one, but one in particular that keeps pushing the legislation. So we'll keep fighting that. But the reality is consumers love them. Those programs exist because customers love those programs. That's why they're there. That's why they're successful. And the only way we keep them that way and keep them successful is that we're giving customers loyalty programs that they love.

That's a good segue into my question for Andrew. So in the last earnings call, you teased that MileagePlus changes were going to take place in I don't remember what you said 8 weeks or something like that. And when I tried to corner Kristina on that, the way she described it, she said that the flyer in me, the passenger would be much more interested than the analyst in terms of those changes. Okay. And that was helpful. And that diffused -- I was like, okay, I believe.

But some of your competitors are now criticizing the changes that you have made. And I guess they don't go into effect until early April, April 2, something like that. So I guess the question is, how confident are you that you didn't hit too aggressively with those myriad changes? Because when I saw them, I figured, okay, United, first-mover advantage, others will likely follow because there's a lot of imitation in this industry. But yes, we've heard some criticism that those changes are too aggressive. What do you have to say?

Look, ultimately, we probably will follow. I don't know. We changed our champagne and others changed their champagne. So apparently, we have an impact on others' behavior, which we're really proud of. Look, we researched this for 18 months. We held countless focus groups, and we created a new value proposition where you can earn more and you can redeem for less. And right now, our credit card acquisitions are off the chart. Like if we were to continue at this pace for the rest of the year, I think we'd be up over 30% versus last year.

So I think we are going to reward loyalty and those that hold our credit card are much more engaged with United Airlines, fly us more often and the numbers just price out. And we wanted to do something different. We put it out there. We're really confident it's going to work, and we're really confident it is working.

Okay. Question from the floor.

Scott, I think it's fascinating when you talked about running the analysis of $120, $175 oil and still being able to, at least right now, I think you can grow earnings through '27. And that statement just would not have been a statement you could make 10 years ago or something like that. So I think it's phenomenal.

How do you think about it in terms of the work you and the rest of the team have done in terms of the cost side and the stuff that you can really control, and just being a better operating business, versus what may be a structural change in how the consumer thinks about the product you're offering? And so the consumer ultimately is willing to say, look, I'll stomp that because I want to go to Disney World, I want to see Mickey Mouse or whatever, and I'm willing to pay for it. How do you -- have you done any thought?

I'll try -- I'll say there's 3 legs to that stool in order of most -- probably at least significant and how it makes us feel. Number one was building a brand loyal airline. A brand loyal airline is the best inoculation you can possibly have to any stress event like this because if traffic starts to decline, if the economy gets weaker and traffic starts to decline, we still keep all of our brand loyal airlines, but those extra seats, then we disproportionately take customers from other airlines, that were commoditized customers, but we disproportionately take. And that drives other airlines to be forced to cut capacity.

I mean if the scenario I just laid out is true, it doesn't matter what people stood on this stage and said that they wanted to do. Economic gravity will force their hand. You can't -- they just can't get through it without making changes. And so winning brand loyal customers, is the first leg of that pillar.

Second one is real core efficiency in the operation, not cutting the food budget, not running tighter on flight attendants and pilots and having meltdowns every time there's a storm, not those kinds of things that impact the customer. But getting the core -- and that's what Mike and team have really done, getting the core cost efficiency of the airline to be higher. And it's hard for you to sort through what that is because you just see CASM.

Like at an airline, if you're trying to measure -- one of the reasons we start giving CASM guidance because you all want us to have low CASM. But if you want to hit low CASM, basically, all you can do in the near term is higher -- fly more by higher utilization or cut the customer expenses. You can't control the other stuff. The other kind of stuff in the near term is you got to do the investments to have better technology and change the prices. Those things take 12 to 24 months at least. You got to be ahead of the curve. And so that's the reason we stopped giving guidance. And we're just better at that core CASM than anyone in the world.

And you can even see it like recovering from the operational disruptions that have happened this quarter, like we couldn't have done this 4 years ago. We're so much better from a technology perspective at getting the airline back up and flying. So first is brand loyal customer. Second is the CASM. And then the third is to have a really strong balance sheet. And we have the best balance sheet that we've had in at least 30 years. And that gives us the confidence to sleep well at night and stay focused on the long term.

I would not be wanting to -- if our scenario -- the scenario I just laid out turns out to be, in fact, anything close to true, boy, there's a lot of places I wouldn't want to be. It's going to create a lot of stress. We put those 3 things together and it really weigh -- I'm not -- I'm hoping that oil prices go down, but in a way, like it's an opportunity for us. We will definitely win on the other side.

Final quick question for Mike. What role are sale leasebacks going to play for United? And how should we frame your answer against free cash flow generation?

I mean it's a great question. And at this point, as we're on our path to investment grade, this is all about optimizing our cost of capital, not just our debt cost of capital, but our equity cost of capital. And so we have been using some sale leaseback when it's opportunistic. When the cost of a sale leaseback is cheaper than other financing options. When you think about the cost of equity and the cost of debt, it's that simple. We clearly disclose the amount of sale leasebacks, number one.

And number two, I'd highlight, we are the -- we lease -- the least percent of our fleet of any major airline. So if you compare us to even Delta, we're leasing about 50% less than they do. But there's an optimal mix in there that gives us optionality in how we manage our fleet and brings down our cost of capital.

Thanks, Jamie. Thanks, everybody.

Welcome to day 2 of Barclays' 43rd Annual Industrial Select Conference. I'm Brandon Oglenski, airline and transport analyst. Next up, we have United Airlines. Very excited to have them here. And I think Kristina wants to read a quick message.

Yes. Thank you, Brandon. So our presentation today might contain forward-looking statements with information currently available to the company. Unless otherwise noted, the financial measures we will discuss are non-GAAP. Please refer to our latest earnings release for definitions and reconciliations to the most directly comparable GAAP measures.

Thank you, Kristina. Well, good morning, Mike. Joining us for United is Mike Leskin, Chief Financial Officer. Glad to have you guys down here.

Really quick, before we get into the conversation, I just want to do the ARS questions. So for those that were here yesterday, the keypad in front of you, we're going to do a couple of questions here real quick. So question number 1, please. Do you currently own United? Yes, overweight; 2, market weight; 3, underweight; or 4, no.

Mike every year I say I need to get you quicker, but we don't.

Question number 2, please. What is your general bias towards United right now?

You don't let us see the results.

Positive, negative or neutral. Got be fast. There were some owners in the room for sure. I think I see a couple. Skewed very favorably.

Smart group.

All right. And question number 3, in your opinion, through cycle EPS growth for United will be above peers, in line with peers or...

This is an IQ test, guys.

I think Burley might have been hitting the button a few times there. Well...

100% unanimous in the room, above peers. That's great. Look, I'm going to say 1 minute things -- this is a transformational time for this industry. Last year it was an airline recession for a number of reasons. And at United, we bucked the trend. We grew EPS despite that, albeit by a very small amount, but it was an earnings recession for the airline industry, no doubt about it. This year is setting up very differently. And despite Winter Storm Fern, we have the #1 A0, the #1 D0 and the #1 A14 that we have ever had in United's history year-to-date.

We also have NPS scores that are continuing to rise. And I know there are some concerns around -- little skirmishes around the country. We actually have mid-single-digit RASM in the first 2 weeks of February in O'Hare. We're tremendously excited about this year. Q1 is shaping up near the high end of our EPS guidance range so far despite the noise that we've seen in the industry. So it's a great time to be part of the U.S. airline industry. It's a really great time to be invested in United Airlines.

Mike, that was a pretty strong opening there. I guess, can we talk a little bit on the 1Q color? And I know you guys are only guiding to an EPS range, but what's driving the upside as you see it today through February?

There's tremendous demand strength. I think it's -- we're seeing continuing evolution of the American consumer to have brand loyalty and to like the segmentation, like the product, like the experience of flying on United Airlines. So I do think that there is an overall strength in the industry, but I think we're seeing continued preference of our customers to book directly on United Airlines.

Well, someone call this the golden age of brand-loyal airlines. Do you guys think you're just getting started on this, though?

I think that this is a secular trend. I think that we have a 5-year lead, if not more, on the competition, and it's going to be a very special decade.

Okay. Speaking about 2026, can we just unpack the volatility that we saw last year, though, because I think a lot of airline investors would say, hey, look, the stocks are cheap. I'd love to own them. But with earnings volatility like we saw last year, it's just hard to get really excited even when maybe the quarter is good, but you could potentially face headwinds very quickly.

Yes. I think it's incumbent on us. Lots of executives complain about their valuation. I'm not going to do that. We need to earn our valuation. We've seen some expansion, and I think we've earned a lot of that. But the earnings volatility with some players in the space that act irrationally has been too much. One of the things we're doing at United in addition to the foundation, which is driving brand-loyal customers, which takes the volatility out of earnings, by the way. It creates a much more resilient path. It's -- frankly, it's why we performed the way we did in 2025 at United.

But the other thing we can do is we can continue to fix the balance sheet. So all of you have heard me pound away at our path to investment grade, take out some of the financial leverage at the same time that we're taking out the operating leverage by driving brand loyal customers. And so I think you're going to -- you have already seen a muted volatility in our earnings profile. And I think you'll see that continue to be -- you're going to see continued stability in our earnings as they grow towards double digit.

Okay. I definitely want to talk about the longer-term prospects here. But in the near term, is it corporate demand that's incrementally better, leisure? Where are you seeing it in your bookings?

Our strongest demand, our strongest profitability remains in the premium cabins and international. But I will say that the main cabin and domestic is also seeing an uplift, but we're still seeing more strength internationally in the premium cabins than main cabin.

Okay. But Main cabin has incrementally improved?

It's better.

And that's where the challenge has been for the past year.

Both -- let's be clear, both have improved. International premium has improved from more profitable levels.

Okay. And any mix of corporate or leisure?

Corporate is feeling pretty strong, but really, it's broad-based strength right now.

Okay. And visibility looking good into like peak spring break periods?

I think I opened by talking about how we're trending towards the high end of our quarter's earnings guidance. So you can take that to me and the spring break looks strong as well.

Okay. Appreciate that. When you talk about a brand loyal customer, can you unpack that for us a little bit?

It's a customer that increasingly books directly on united.com or through our app. It's a customer that loves our clubs. It's a customer that has been on one of our E175s and experienced Starlink. So it's a customer. We always have to be schedule and price competitive. But it is a customer that as long as we are competitive, has a distinct preference to be on a United aircraft. And so we're seeing that more and more. I think that's what makes for a healthy industry. It's why the hotel industry has done so well. It's why some of the cruise line industry is doing really, really well. And the airline industry was just a little bit slower to pick up on that trend.

But we are now there. 2 airlines in the U.S. are now there, and it's going to create not only a differentiated level of profits, but it's going to create stability in those profits. And you already -- you don't have to take my word for it, you're already seeing evidence of it.

I've experienced Starlink on one of your E175s. It was pretty amazing.

It's better than the Internet of my house. talk to Xfinity about what's going on with fiber to my house.

What's the rollout schedule for that, though, fleet-wide?

We're going to have a significant amount of mainline aircraft by the end of this year. And then by the end of '27, we should be substantially complete.

Okay. Apart from Wi-Fi, what else is coming on the brand-loyal side, especially in terms of product?

Well, I can't give you all of my secrets today. We do have a Media Day coming up, is it next week? In March. And we'll share a little bit more then. We also have plans, as Andrew Nocella alluded to on the earnings call, to improve our loyalty ecosystem. I think that will end up driving some card acquisitions to United, but I'm not going to give any of those details today either.

Okay. But I think he did mention relaunching the website. Is that right?

You're going to see more details in 2 weeks.

Okay. We'll keep our calendars open. So apart from those changes that are coming, what are network priorities in 2026?

We are continuing to grow out our mid-continent hubs, and we're getting closer to that. We talked about that on the conference call. So this is about upgauging and continued growth in connectivity.

And I think Andrew maybe mentioned that a lot of that had been accomplished. Is that true?

We have seen peak growth around connectivity of mid-continent, and that's what he said on the call.

Okay. And I think what was important for me and maybe other investors, too, you guys did mention that the high watermark, and correct me if I'm wrong, for domestic capacity growth for you guys would actually be 2025. Is that correct?

You did say that.

So how do -- and I know you guys don't want to guide to capacity, so I'm not trying to tease that out, but how do we think about the right long-term growth rate for your network, maybe domestically and internationally?

You are teasing it out a little bit. This is about driving profits, not capacity. And so as we are determined to get to a double-digit level, double-digit margin, you're going to see us bring capacity in, bring capacity up, bring it down to flex utilization to drive the maximum profits long term. And so you're going to continue to see us do that. We think that the connectivity in the mid-continent has largely been built out. And now as Boeing continues to deliver more MAX aircraft, we need to get 787 rates to be a little bit more stable. But as we see more narrow-body deliveries, we can accelerate our upgauging.

Okay. So should we assume that there's going to be maybe some accelerated retirements to older aircraft?

We'll see.

Okay. And as we think about cost performance and the MAX 10 and upgauging, how important is the MAX 10 to your long-term unit cost?

The MAX 9 is a great aircraft. The MAX 10 is incrementally better for us. But we're going to have a good path forward with either. I am excited about the prospects of the MAX 10. And I think it's really -- it's built for the United network in a lot of ways. So I think it's going to be powerful. But our path to double-digit margins is not predicated on it.

And when you say double-digit margins, is that pretax or operating margin?

Pretax.

Pretax. I think on the last call, Scott maybe alluded to this as well, like double digit in the near term and teens margin. Is that right?

Well, Scott's always stretching us. That's what makes him a great CEO. He sets high targets and then you march towards them. I have clear visibility to the double digits. And I think that what's going to happen with this industry, we've got the secular trend, which is driven by brand loyal customers to United and preference for United. And so we have within our own control, a path to double digit. And then at some point, I do believe that the low-margin airlines in this industry that have knots in this industry, their stakeholders is not going to allow them to continue to lose money.

And so at some point, there's a transformation that those lower-margin airlines become more rational. And when that happens -- and maybe it happens this year. I'm not going to predict when. But when that happens, there's a step function improvement in the profitability of the entire industry that United also benefits from. And so the combination of the idiosyncratic trends that we've built at United and that transformation in the industry, which must happen, it's economic gravity, that's what Scott describes as getting us to mid-teens.

Okay. And by the way, if there's any questions from the audience, raise your hand, we'll get you a mic. Coming back to cost, though, you guys don't want to guide to unit metrics, which I actually appreciate. I think it's good just to having an earnings target out there for investors.

Well, you're just beat me up about stability of earnings and the volatility and all of that. And I think it's fair, like that's a fair criticism. But you must therefore -- if you feel that way, you must, therefore, give us the room to maneuver to deliver on the bottom line earnings per share to deliver on bottom line pretax margin, but give us some levers because fuel prices move, demand moves. There is some level of cyclicality to the industry. But if you give us the levers to control, we can kind of mitigate that and drive EPS and pretax margin. And that's what we're trying to do.

And I think more and more airlines are adopting that approach. I think it will create a healthier neighborhood, a healthier industry because you can -- you should hold us very accountable to delivering those bottom line metrics. But in any given quarter, I might want to deliver the bottom line metrics in a different way.

What can we -- I wasn't getting that CASM specifically, but just inflation in the business. Obviously, you have some outstanding labor deals as well, right? So how do we think about inflation this year and next year?

Inflation for aerospace for this airline industry has been running hotter than the overall economy for -- since the pandemic. I don't think that's going to end. At United, we're going to do better than the industry over time on CASM-ex. We've proven that. Last year was a phenomenal year. Specific levels for this year were not given.

Okay. But you do have outstanding labor deals that could add a couple...

I have labor deals. I have the outsized industry inflation, but I have all the global procurement next goodness. I have better operations. I have up-gauging. I have all of that in the mix. And when we give you EPS guidance, all of that is in the thinking. I fully expect to have labor deals done this year, and I fully expect to have to pay that bill, and that's in my EPS guidance.

Okay. Appreciate that. And then I think 2 other areas that have been pretty inflationary airport costs and maintenance costs. What can United do to address those as well?

Airport inflation is -- I'd like to have really nice airports for our customers. It's part of differentiating our brand. And so I want to make sure we're efficient in how we run these projects and manage these projects. But having nice airports is important. So that's an inflationary item that I think is not going away. And you're going to see it at United. I think we'll do -- we'll work hard to mitigate, but it's an industry-wide phenomenon. Maintenance costs at United, we're making a lot of progress. I've got nothing to share today, but we're making a lot of progress at bringing down -- bringing the efficiency of that operation up, bringing the -- making sure we have really competitive contracts for spare parts. And so I think we're going to moderate that trajectory pretty meaningfully in the coming years.

That sounds encouraging because most airline executives that we talk to just say maintenance costs are almost...

Well, it's tough. It's tough and the engine manufacturers have a lot of power. But we have some unique opportunities at United to do better than we've done historically. And you're going to see that. You've already seen some of it. You're going to continue to see it.

Okay. And I think in the past, you guys have really focused on deploying technology across the operations here, right? Where do you stand on AI and potential?

It's -- we're just starting to scratch the surface. For AI, we're doing a lot with customer service reps to be able to access information faster, answers to their questions, to be able to answer customer questions faster. We're doing more preemptive maintenance. We're doing more predictive maintenance. We have iPads in the hands of our technicians that are making them more and more efficient. We have some of the operation where we can create some more automation around ground handling. I think it's going to be helpful to overall cost trends. I don't see transformational just yet, but I do see helpful.

I think another good example that I'm really proud of for the finance team is we're getting better at closing the books faster and using more technology to help us do that. In fact, you may not have noticed, but we filed the 10-K a week earlier than we historically have. I'd like to even bring that a little bit closer to when we file earnings. But a lot of that is around modernization of our finance tools.

Okay. Maybe that's a good point for question #4 for the audience. So get your keypad there. And I think we -- there is question number 4, I think [indiscernible] did.

Yes, but I like this question, so we can answer it again.

We can go to question #4, please.

100% nice.

In your opinion, what should United do with excess cash, bolt-on M&A, larger M&A, share repurchases, dividends, debt paydown or internal investment?

That's a good question.

Well, M&A has been a topic at this conference, not specific to airlines, but how do you feel about the environment right now, especially as you're talking about low-margin airlines having to face economic gravity.

Well, this is a brilliant audience. That's about how I feel about it, too. I think it's a unique environment that -- where M&A is possible. We'll see how that plays out. But I do think that this industry would benefit from some.

Okay. Question #5, please. In your opinion, what multiple 2026 earnings should United trade? Less than 10, 10 to 12, 13 to 15. 16 to 18. All right. We can vote, please. I see some folks...

6. They're going to answer 6.

Okay. I think anything in that range would actually be pretty positive.

I think in the mode there, 3, 14 to -- 13 to 15, that feels like we've got to earn it, but I completely agree that that's where we're headed. It might take a year or 2.

Can we pull up question #6, please? What do you see as the most significant share price headwind facing United core growth, margin performance, capital deployment or execution and strategy?

Well, I think that's because none of the answers were good. So people just had to like they're like, oh, I'm out of options, so I have to answer 4.

Well, Mike, there's been a little bit of maybe a dust up, if you want to call it that, in hometown Chicago between you and another airline that maybe has a hub there. Can you talk to us about some context of what's occurred here and...

Temporarily.

Temporarily.

Temporarily, they have a hub.

Well, can you speak to United's perspective on Chicago and maybe why this is such a...

It's our hometown. I mean this is where we're headquartered. This is where a lot of the brand-loyal customers were winning corporate customers, my neighborhood, everybody is switching from American to United and they're doing it because we have a differentiated product, we have differentiated service. And so yes, there's a lot of capacity being added to Chicago, but not all capacity is created equal. And so not only do we have a better hard product, but we have the schedule and we have the connectivity, we have the clubs.

So they can fly around some empty airplanes, and there is some gate calculus around that. And so that puts us in a spot where for the long term, we have to protect our gate positions. It's going to be a modest impact to our level of profitability. We've given you guidance. I gave you an update in guidance today. So you can see that it's not leaving much of a mark at this time. So I feel really confident in our strategy. We are making money in Chicago. We made a nice profit last year in Chicago. The other guy that's adding so much capacity is not. There's pretty good math out there. You can create with public data to get at that. And so really, you should talk to them. It's an irrational strategy to accelerate their losses.

Okay. But we shouldn't view this as something that's going to spill over into the broader market between the 2 of you?

I'm not overly concerned about it.

Okay.

You should fight -- I mean, this is an industry where rational players that are focused on their shareholders, which is our obligation to be focused on our shareholders. You should add capacity where you have excess profits and you shouldn't do the opposite. And so economic gravity is going to come up -- is going to catch up with players that are in an ego-driven way, adding capacity where they're losing money.

Okay. You mentioned international remains strong and -- but also that 787 maybe deliveries aren't quite to where you want them. Is that true this year?

We have a great partnership with Boeing. I've got tremendous respect for that leadership team. They've done a lot to turn the company around. We've seen it on narrow-bodies. 787s are still struggling a little bit. But I'm confident they're going to get there. It's taken them a little longer, and we're having -- we're seeing some incremental delay on 787 deliveries. So it is frustrating, but that management team is great, and they're going to -- they will fix it.

And what have you guys said about expansion ambitions this year in your major regions?

We haven't. I'm not going to today.

Okay. I think -- but did Andrew talk about transatlantic being roughly the same? Or is that...

He talked about taking a breather in the transatlantic.

Okay. All right. And then on loyalty, I know you teased that when we need to...

Some of the international growth, just to address that head on, since you reminded me, we did say that. We do have a few 777s that are Pratt powered, where I do not have parts for those engines. And so those aircraft are going to be grounded in the summer. And so it's putting a little bit of pressure on our international ambitions in the short term. That will be resolved in 2027.

That's a broader issue for the industry at large, though, right?

It is a broader issue, and I think it's an issue that's going to last for a few years to come at least.

Okay. And again, not to dig too much into what you guys are going to talk about in 2 weeks or 2 weeks' time, but can you speak to MileagePlus and the evolution there? Maybe to date, the performance that you've seen with your co-brand card and...

It's so intertwined with brand loyalty. So you have a loyalty system. And when you were a smaller airline and you were an airline that maybe wasn't differentiated, it was less compelling. But as you build this airline where customers are brand-loyal and we are growing it above GDP, the growth rate in card acquisitions haven't caught up. And so I think what you're going to see is the changes we will announce are going to accelerate the card acquisitions to match the growth in our brand-loyal customer base. And I think that's going to be a really powerful profit driver in years to come. That's a pretty good tease. The details you have to wait for.

Got you. Any concern about capping interest rates and things coming out of the White House?

We've got a partner in Chase that's dealing with all that. So we're following it closely. But that's -- our customers don't revolve largely. So it's not really our fight.

Okay. So the value proposition is coming from other aspects of the car.

The value proposition for our loyalty program is around the relationship with United and the bags and the clubs and the points you earn by flying on United aircraft.

Okay. So it sounds like more to come there. Mike, we only have a couple more minutes left, but nobody from the audience? Any questions in the audience? I think you said you have -- do we have one in the back?

Just going back to the AI question, it's just so frequently asked this week and particularly among some of the other subsectors Brandon covers. You talked about some productivity initiatives internally that it could benefit. Some people are starting to allude a little more to also top line benefit, whether it be pricing or something else. Is there something there that we should be thinking about for the industry and for United?

Yes. We've got a great revenue management team and revenue management system. And we do use a lot of technology, but I don't see a big needle mover using AI at this time for that. What I do see, and I didn't mention earlier around AI is when weather hits and your crews get displaced all around the system, and your customers need to be reaccommodated, technology tools to function in those irregular operations are really, really important. And this is an area where I think because of the geography of our hubs where United is far and away the leader globally is developing systems with how we recover.

And you saw that recently with Winter Storm Fern, where it was really disruptive nationwide, but the recovery at United was aided by technology so that we got our crews and our customers all where they needed to go as fast as possible.

Michael, we only have 1 minute left, but adding all this up, especially with your confidence on line of sight to double-digit pretax margins, how do investors think about free cash flow, especially with a still pretty large order book on the horizon here?

I mean double-digit pretax margins should drive an expanding multiple. So you kind of get like a you get a multiplication effect of growth in earnings and growth in multiple. And all of that is on a foundation of a higher quality of earnings, not just more stable earnings, but higher free cash conversion. So I've talked about free cash conversion of around 50% as we go through this growth phase because a lot of our CapEx is growth, not replacement. And then as we exit the decade and you have a lot more -- you get closer to the level of maintenance CapEx instead of growth CapEx, you see movement towards 75%.

And then beyond that in the 2030s, I don't know. Let's see how it plays out. I do know that the best companies out there with the highest multiples, you need to get free cash conversion closer to 100%. I'm not ready to promise that yet today.

Mike, this was an excellent conversation, truly the golden age of brand-loyal airlines. So thank you.

Great to see you. Thank you all.

Good morning, and welcome to United Airlines Holdings Earnings Conference Call for the Fourth Quarter and Full Year 2025. My name is Colby, and I'll be your conference facilitator today. [Operator Instructions]

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.

Thank you, Colby. Good morning, everyone, and welcome to United's Fourth Quarter and Full Year 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 and are based upon information currently available to the company. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release, Form 10-K 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 stressing our financial metrics on a non-GAAP basis on this call, and historical operational metrics will exclude pandemic years of 2020 to 2022. Please refer to the related definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures at the end of our earnings release.

Joining us in Houston today to discuss our results and outlook are our Chief Executive Officer, Scott Kirby; President, Brett Hart; Executive Vice President and Chief Operations Officer, Toby Enqvist; Executive Vice President and Chief Commercial Officer, Andrew Nocella; and Executive Vice President and Chief Financial Officer, Mike Leskinen. We also have other members of the executive team on the line and available for Q&A.

And now I'd like to flip the call over to Scott.

Thank you, Kristina, and thank you to everyone for joining us today. 2025 had more than its fair share of unusual challenges, but the people of United did a truly remarkable job of living our no-excuses culture, focusing on the customers and overcoming obstacles. Last year, was really a proof point that the strategy we've had to build a revenue-diverse, brand-loyal airline at United for the last decade is not only working, but it's remarkably resilient in tough times as well.

The proof is in the numbers, and we expect to be the only U.S. airline that managed to grow EPS year-over-year despite all the headwinds. The United team truly is the best in global aviation, and I'm very proud of them. They have made today's United a remarkably different airline than it was in the past.

Before turning to 2026, I want to wish all the best to a friend and an industry icon, Glen Hauenstein. My first real introduction to what has become modern successful airlines like Delta and United was at Continental in 1994 with Glen and Andrew Nocella as they were dismantling CALight and building the Newark and Houston hubs that we at United are now proud to call our own. I remember Glen once coming into the conference where I sat and yelled at me for being too loud. Something, by the way, that my wife, Kathleen, wholeheartedly agrees with Glen on.

At an airline, I think the most important and impactful job is building a great commercial strategy, and a large modern airline simply cannot succeed without a commercial superstar. Glen and Andrew are simply in a separate league from all the other commercial minds around the globe. And Glen, on a personal level, given the momentum at United, I'll just say that your retirement timing is impeccable.

After a solid year in 2025, 2026 sets up as more of the same at United but with a much better industry backdrop. Our plan has been working for the last decade. And while we make minor adjustments to it every year, the core of building a great revenue-diverse, brand-loyal airline remains the same. We've had the right strategy for a long time now and the United team across the board is just better at executing than any other airline in the world. I'm proud of them and excited as we continue to build the best airline in aviation history.

On to you, Brett.

Thank you, Scott, and good morning. While 2025 presented a challenging macro backdrop for the industry, we remain laser-focused on the customer experience and on building brand loyalty. Continued investments in the travel experience, communication and reliability helped us navigate disruption and deliver for our customers.

Our strong Net Promoter Scores for the year highlight the care and consistency built into the United travel experience. Despite the operational headwinds of the year, we finished 2025 with an almost 3-point increase in our overall Net Promoter Score. And during the month of November, amid an unprecedented government shutdown and real-time flight reductions, we had the best NPS month in the company's history. This is a testament to our customer focus, decisive actions and customer-friendly policies and commitment to transparent communication especially during disruptions. Toby will share in more detail the specific actions we took to produce these customer-friendly results.

We've also continued to innovate, and in the fourth quarter, we introduced new features and more personalized updates in our award-winning United app, including enhanced mobile bag tracking; Virtual Gate, real-time boarding updates and more detailed arrival information. These enhancements are designed to improve transparency, save customers' time and provide clearer real-time communication at key moments of the journey. With more than 85% of customers using the United app on the day of travel, another one of our competitive advantages. And we are confident that these investments are meaningfully enhancing the United experience, earning customer trust at every touchpoint and winning brand-loyal customers.

On labor, we are currently in active negotiations with four of our labor unions. We look forward to reaching industry-leading contracts with these groups, and we'll share more when able.

We have a bright 2026 ahead of us, and I want to thank our employees for the important work they do every day. I am proud to say they will be receiving over $700 million in well-deserved profit sharing for 2025. Their resilience and shared commitment to our values and customers are what make United strong.

I now hand it over to Toby to discuss our operations.

Thank you, Brett, and I'm happy to join you all on this morning's call. At United, we're proud of our no-excuses culture, and last year, it was really put to the test as the United operations team confronted a wide array of challenges outside of our control. I'm so proud of how the team responded and delivered for our customers. Capitalizing on investment in our people, new tools and other innovations allowed us to be nimble and react quickly to capacity directives from the FAA and to recover faster and stronger during other irregular operations than ever before.

As a result, we had the highest seat completion factor in our history and #1 of the big three legacy carriers in 2025. In fact, at O'Hare in 2025, we canceled at half the seat rate of our largest competitor. We flew a record 189 million passengers and ranked #1 in STAR D0 for the second year in a row. For the year, United ranked #2 in on-time departures and #2 in cancellations, and United Express operation delivered 134 days of perfect completion. This is a remarkable performance in the face of the outside challenges that we faced at Newark and staffing challenges at the ATC.

Beginning in the early November, the FAA directed airlines to temporarily reduce departures at 40 major airports due to staffing and system constraints from the prolonged U.S. government shutdown. We worked closely with FAA leadership to swiftly implement the reductions, and we want to thank them for their partnership.

At United, we were intentional with how we made these cuts. From the start, our priority was protecting the integrity of our network. We made a clear decision not to cut long-haul international and hub-to-hub flying. Those flights are the backbone of our network and aided in retaining connectivity and flexibility for our customers. We focused on reductions where we could minimize customer impact with the majority of cuts concentrated on regional flying and non-hub domestic routes with smaller narrowbody aircraft. In many cases, that meant trimming frequency on routes where there were multiple daily options rather than eliminating connectivity altogether.

Where we could, we consolidated flights in fewer departures with larger aircraft to move the same number of customers more efficiently and reducing further disruption. Even with these changes, total cancellations were only approximately 4% of departures during peak periods and had a minimal impact to our capacity in the quarter.

Operationally, I'm very proud of how our team managed the rolling schedule changes. We're no strangers to managing through irregular operation, and that has contributed to the speed and flexibility in which we respond to these situations. We published cancellations several days in advance to give peace of mind to our customers and directly communicated any changes through our app and website and focused on reaccommodating customers wherever possible, as quickly as able.

Notably, nearly 60% of our customers, who's flights were canceled, were rebooked within 4 hours of the original departure time. Any customer traveling during this period could request a refund even if their flight ultimately operated, and that included nonrefundable and Basic Economy tickets. It was the right thing to do.

Thank you to each United employees who helped us successfully navigate these real-time schedule changes. We closed out the year on a high note. United delivered the best operation in the industry over the holidays, ranking #1 in on-time departures and on-time arrivals. We canceled less than 1% of our flights during the holidays. And following the Caribbean airspace closure in the early 2026, we added 10% more seats over a 3-day period to help customers return home, an outstanding way to close out the busy holiday season.

2025 is a year, we should all be proud of, especially given the multiple headwinds United and the industry faced. Running a strong operation sets the foundation for delivering on our financial commitments and helps attract the brand-loyal customers that we speak so much about. Thank you again to our incredible team here at United, and I look forward to building on our momentum in 2026 together.

Now to you, Andrew, to speak about the revenue environment.

Thanks, Toby. United's top line revenues increased 4.8% to $15.4 billion in the quarter on a 6.5% increase in capacity year-over-year. Consolidated TRASM for the quarter was down 1.6%. Q4 was United's highest revenue quarter ever. Premium cabins outperformed main cabin once again in the quarter. Premium cabin revenue were up 12% year-over-year on a 7% more capacity. PRASM for premium cabin outperformed the main cabin by almost 10 points in Q4. Main cabin revenues were up 1% on a 6% more capacity for the quarter. For the year, premium revenues increased approximately 11%, while standard and Basic Economy revenues were down approximately 5%.

We did see a nice bounce back in our international flying in Q4 after a challenging Q3. The Pacific and the Atlantic performed well with PRASM turning positive in both regions. Latin America, on the other hand, had yet another challenging quarter.

Cargo revenues for 2025 were up -- were $1.8 billion to -- up 2.1% year-over-year. Loyalty revenues for 2025 were up 9%. Remuneration from global co-brands was up 12% for the year and 14% for the quarter. And for the third year in a row, we added over 1 million new co-brand cards. As we look to Q1 2026, we expect to see sequential improvement with the possibility that all regions have positive RASM year-over-year.

Last year did start very strong from a bookings perspective but then dropped off sharply towards the back 3rd of January and for the rest of the quarter. Based on what we've seen so far this year, bookings and yields are outpacing the strong start from last year, and we're hopeful that the momentum will continue, which could admittedly cause our guidance to feel a bit conservative.

We also expect the domestic capacity environment to be quite favorable for the first half of 2026 with small but meaningful amount of perennial unprofitable capacity by others leaving the market. However, in Q1, premium revenues continue to lead the way, while standard main cabin seats continue to show some weakness. This main cabin weakness is due to unprofitable capacity offered by other large spill demand U.S. carriers as ULCC capacity becomes less relevant.

We also have a tailwind in Newark later this spring with operations running well. We expect Newark to give United a unique RASM tailwind versus the industry considering the events last spring. With the number of flights now limited to what the runways can accommodate, our customers can and are booking in confidence. We did make aggressive Latin capacity adjustments for Q1 to correct underperformance we saw in Q3 and Q4. However, recent geopolitical events are having a measurable negative impact on bookings in the Caribbean. Yet, we still have a chance at positive Latin RASM depending on when concern dissipates.

All United hubs were once again profitable in Q4 and for all of 2025. A fully profitable hub framework allows United to invest incremental capacity on a solid foundation. We think we're only one of two large U.S. carriers that can say all their hubs are profitable in 2025, and these same two carriers are expected to represent the bulk of industry profits in the year. We also believe that of the three airline hubs located in Chicago, only United's Hub was profitable in 2025, and we expect it will be profitable again once again in 2026.

Today, I also wanted to talk about our commercial focus points for 2026 to drive higher RASMs and margins. Our first focus will be new seasonal capacity shaping of our long-haul schedule. Peak demand for international travel has spread from the second and third quarters to other parts of the year. As a result of this shift, we expect the fastest-growing quarter for United's international capacity to be Q1 in 2026 with minimal growth in Q3. Flattening capacity across the quarters would have not been correct in 2019, but it is today.

A second focus will be enhanced merchandising of our growing product lineup. We plan to increase segmentation and customer choices with our changes, which we'll announce in early 2026. This effort includes the largest redesign of united.com in a decade.

Our third focus will be enhanced connectivity, and we will soon approach the connectivity goals we set in 2021 with the United Next Plan by 2027. As a result, 2025 represents United's high watermark on domestic capacity growth as we draw this very successful part of the United Next plan to an end.

Our fourth focus will be MileagePlus, enhancing the growth potential in the coming years via drawing a larger distinction between true loyalty programs and reward programs offered by others. We have a legacy contract that continues with our banking partners regarding core economics, but we still have plenty of ideas to boost growth in revenue in the meantime.

And premiumization is our fifth focus in 2026. We've had this premium focus for almost 8 years now. And while our lead is now being followed by a range of other U.S. carriers, it's United's seven business-centric hubs that dictate this plan and why we expect to be more successful at it. Last spring, we announced our new Elevated interior for our widebody jets, including the new United Polaris Studio seats, Polaris seats with doors, along with countless other upgrades to the soft product. Four Elevated 787s are now being prepared for delivery in the coming weeks, and we expect 16 more for the remainder of 2026. These aircraft, along with other new deliveries will result in our premium capacity growth accounting for more than half of our growth in '26.

We look forward to another innovative set of products and aircraft announcements in 2026. United is defining what premium means for all customers, no matter where they sit or what they pay. Our United Signature Interior mods and Starlink installs are now moving at pace and will be completed in 2027, creating consistent premium product we hoped for when we announced United Next in 2021.

A quick but important preview for 2027 is our long-term focus on gauge. While gauge is not a focus in '26, it will be in '27 and beyond as a much higher percentage of our growth equation. Most of our commercial focus areas in '26, of course, ladder up to decommoditizing our product, providing consumers with more choices and winning a higher share of brand loyal customers. We like our plan. We remain focused on doing more of the same in the coming years.

With that, I offer my thanks to the entire United team for a great but challenging 2025 and hand it off to Mike to talk about our financial results. Mike?

Thanks, Andrew. We closed out 2025 on a high note and delivered fourth quarter earnings per share of $3.10, within our guidance range of $3 to $3.50, and that's despite a $250 million impact to our pretax earnings from the government shutdown. 2025 was a challenging year for the airline industry. Between macro volatility and idiosyncratic challenges at Newark, each quarter of 2025 experienced a material event that pressured earnings and further widened the performance gap between industry leaders and laggards.

Our full year 2025 EPS came in at $10.62, which was slightly up versus 2024 and despite an $0.85 headwind from our challenges at Newark. I expect we will be the only U.S. airline to grow EPS last year. This is an incredible proof point of United's ability to execute through times of elevated uncertainty when most of the industry cannot.

An airline with a business anchored by brand-loyal customers isn't only more profitable. It's also more resilient. Our plan is working, and I'd like to thank the entire United team for their hard work in the face of all of these challenges. I'd particularly like to thank our frontline flight attendants, pilots and customer service representatives. Through an extraordinarily difficult time during the government shutdown, you served our customers, leading to the highest Net Promoter Scores in United's history.

Over the last year, we've invested $1 billion in the customer and, as a result, customers are taking note. From larger clubs to free StarLink Wi-Fi, the United product offering as well as further segmentation continues to attract more and more brand-loyal customers, driving strong top line performance and more durable earnings. The investment in the customer has been enabled by our industry-leading efforts to drive cost efficiencies across the core business.

In the fourth quarter, our CASM-ex year-over-year was up only 0.4%, bringing our full year 2025 CASM-ex up to 0.4% as well. We expect this performance to be industry-leading and will continue to drive efficiencies across the business in 2026.

Now turning to the outlook. Looking to the first quarter, we expect earnings per share to be between $1 and $1.50, an approximately 37% earnings improvement versus the first quarter of last year at the midpoint and margin expansion year-over-year. Building off a strong quarter, for the full year 2026, we expect earnings per share to be between $12 and $14. At the midpoint, this represents over 20% growth and implies continued margin expansion as we march towards double-digit margins.

Turning to the fleet. This year, we expect to take delivery of over 100 narrowbody aircraft and approximately 20 widebody aircraft. Accordingly, we expect our capital expenditures for the year to be less than $8 billion, consistent with the $7 billion to $9 billion multiyear CapEx guidance we provided back in 2024.

On the balance sheet, becoming investment-grade rated is a major priority of mine, and in 2025, we made meaningful progress towards investment-grade metrics. We paid off $1.9 billion of our high-cost COVID-era debt and brought our total cost of debt down to 4.7%. Our net leverage at the end of the year was 2.2x. As a result of our deleveraging efforts, combined with our earnings power and industry bifurcation, we've received five upgrades to our credit ratings across Moody's, S&P and Fitch over the last 13 months. United is now just one notch below investment grade at all three agencies, our highest ratings in over 25 years. In 2026, we plan to delever further and target net leverage below 2x with the intention of achieving investment-grade metrics by year-end. We're hopeful to achieve investment-grade rating shortly thereafter and are committed to managing our balance sheet to achieve that goal.

Free cash flow generation remains a key priority. In 2025, we generated $2.7 billion in free cash flow, and in 2026, we expect to deliver a similar level of free cash flow given higher aircraft deliveries. In the medium term, we expect free cash conversion to remain around 50%. And as we exit the decade, we continue to expect free cash conversion to expand to around 75%.

On the buyback, we have $782 million left in authorization from our Board of Directors. We will continue to balance our priority of being investment grade with making opportunistic purchases of our shares when market opportunities present themselves, hopefully less frequently.

2025 proved United could effectively manage through macro volatility and company-specific challenges while also delivering resilient earnings. Our relative margins remain strong and, moving forward, our focus will be on continued margin expansion and achieving double-digit margins. The industry continues to transform and competitive dynamics are evolving with United firmly in the lead. Taken together, United Airlines is positioned for another year of growth and success that will drive value to our employees, our customers and our shareholders.

Now back to Kristina to kick off the Q&A.

Thank you, Mike. We will now take questions from the analyst community. [Operator Instructions] Colby, please describe the procedure to ask a question.

[Operator Instructions] Your first question comes from Conor Cunningham from Melius Research.

Just on the corporate travel comments, you've noted a lot of strength there in January so far. And I actually think that's your much -- most difficult comp of the quarter. So if you could just talk about how things change throughout 1Q. I just think that you're going to be exiting at a much higher booking rate in March than you are right now. So if you could just talk about that in general.

Thanks, Conor. I think I agree with your conclusion. 2026 has gotten off to a really, I think, very strong start. But in particular, business volumes have gotten off and are just really compelling. And the way I look at it is, if you think back to early 2025, we saw actually strong business volumes at first, but those numbers quickly trailed off to be up just very low single digits in February and March. This year, for the same early January week, business revenue is up high single digits and nearly 20% year over [ 2. ]

So if current business volumes simply continue, you'll see year-over-year growth for the last 2 weeks of January for business up 12%, 13%, 14%. The further you push this math into February and March, the stronger it potentially gets. So I think I agree with your conclusion. Well, it's still early in the year, but just -- we're off to a great start from a business point of view.

Okay. Great. And then, I mean, I know you spent a lot of time diversifying away from the main cabin and with all the premium and corporate and all that stuff that you're doing. But it just feels like we've been -- I mean, you noted ongoing issues in the main cabin into 2026 so far. So if you could just talk about how that segment potentially flips to the positive. And are you assuming any sort of like rate of change or that flipping positive at some point later in the year?

Well, look, I think it's inevitable. Premium cabins are really on their fourth year in a row. But I do think it's inevitable that the coach cabin and the main cabin improves. And it's a really simple equation. It's the unprofitable capacity offered by others in the marketplace that continues to fly more than you would otherwise expect to fly. So we'll see how that all shakes out.

I can't predict the timing. But I do think eventually businesses stop doing unprofitable things. We'll have to see when that happens. But I remain bullish that we are going to see the performance of the main cabin flip at some point in the future. And when it does, that will be enormous fuel to our margin growth and be great for the industry itself. So time will tell, but I remain optimistic that we're on the course for that at some point in the future.

Your next question comes from David Vernon with Bernstein.

So Scott, maybe I'd like to get your thoughts on how you're thinking about some of the changes that are being discussed around the credit card ecosystem and kind of -- what that might mean for United as we look forward the next couple of years. If some of these changes are implemented, how do you think about what you can do to manage around it? And what are you and your partners thinking about as the most likely set of outcomes as far as whether it's the cap on interest rates or the credit card competition and what have you.

Sure. I'll take the question. I think it's a really good and relevant question, obviously. And first, we're in constant contact with Chase on the issue. Obviously, Chase is our largest co-brand partner, and we talk to them all the time on this issue. And what I'd say is while much remains uncertain, of course, United's portfolio would be impacted. But in our view, it would be impacted a lot less than just about everybody else.

MileagePlus co-brand holders tend to skew towards higher FICO band ranges often revolve at a lower rate and have low loss rates. These factors make us different than most non-airline co-brand programs and maybe even a lot different from a lot of other airline co-brand programs.

We're going to let the banks sort this out. Interest rates and revolve rates are more of their thing. Our focus is on providing amazing benefits via this program that our consumers love. So a lot more to come on this subject. But we feel like we're on top of it, and we will be ready for whatever happens in the future.

Right. And then maybe just as a quick follow-up, you mentioned some additional stuff you might be able to do outside of the -- on top of the existing sort of agreements that you have with your card partners. Any more color you can give us in terms of kind of what that means in terms of specific changes or enhancements that you can drive the program in the near term outside of renegotiating the contract?

Sure. I'll do my best. But first, I want to welcome Jarad Fisher to the team. Jarad is our new Head of MileagePlus. He has experience in credit cards, strong brands and airlines, which make him a perfect fit to lead MileagePlus into the next chapter. Richard and Luc have just done a great job. And as you can see from our new card growth stats that I said earlier in 2025 along with remuneration growth.

I know I often talk about these changes at MileagePlus without a lot of details. But what I'll tell you is Jarad and I will have a lot more to say about this, and we're going to say something within the next 10 weeks to accelerate growth and pull levers that we can pull that are in our control. So just a few more weeks and I'll be able to, I think, answer that question sufficiently for you.

Your next question comes from the line of Sheila Kahyaoglu with Jefferies.

Great quarter. Mike, maybe the first one is for you. The unit cost has been stellar across 2025 quarters, even in light of the investments you guys are making around the product, the experience. And you're debunking that sort of view that there's a variable cost relationship here. So maybe can you dissect what you guys are doing right, what the opportunities are for efficiencies going forward and how that plays into 2026 growth?

Thanks, Sheila. And I'm very proud of our cost performance in 2025. I think it will prove to be industry-leading, as I said in my prepared remarks. Look, the cost efficiency in 2025 in the fourth quarter, the strong operation form the foundation. And so a lot of credit goes to Toby and his team for driving that strong operation. Strong operation is a cost-efficient operation.

But in addition to that, we are driving a real cultural efficiency here at United Airlines. And I'll give a few examples, and we can talk more about it as time goes on. But a few examples are as we continue to invest in industry-leading app, it drives a lot of automation for quicker check-in. It's customer-pleasing. It also takes some costs out, some variable costs out of our system.

We've also overhauled our global procurement organization. And I'm really happy to say that through this first year of that overhaul, we've identified and delivered on $150 million in run rate savings in the procurement organization, and there's a lot, lot more to come. And then finally, we are using sophisticated technology to help to model the demand for our tech ops organization. And that's leading to more productive technicians, fewer grounded aircraft and a more productive fleet overall.

So those are few examples. I'll tell you that there's more to come. This is a culture at United to drive efficient operation. We reinvest a lot of that in the customer, and it's helping to drive higher structural profitability for United. So thanks for the question.

And I just want to add on, mostly to compliment the team, I think this is, from an investor perspective, one of the differentiating points of United versus all the other airlines in the world. We are the best airline in the world at the real core cost efficiencies, something that we've talked about a little in the past. And credit to Mike, Brett and Jonathan Ireland, who's sitting in this room; Toby Enqvist, our Chief Operating Officer; and Jason Birnbaum, who runs technology for us.

We culturally are great. But we've also made technology investments that I know do not exist at any other airline. And that's the foundation, the culture and the technology, that drives core efficiency. And we keep doing more, and Mike told you a bunch of the tactical things that have happened recently, but then we keep finding more. And one of my favorite stories was we finished the budget last year and finished the budget, and Toby came forward and said, I think we got chances to drive another $250 million out of that operation in core efficiency, nothing that impacts the customer but helps the airline actually run better. and saves money.

And there's no other Chief Operating Officer in the world that is doing that. They're all begging for more money in their budgets. Like this is real at United. I think we're going to drive cost for years to come that outperform the rest of the industry because what we're doing is real and it is not coming at the expense of employees or customers.

That's great. And maybe if I could ask one on your fleet. You talked about '25 being a high watermark for growth, but you have 100 narrowbody deliveries plus 20 787s. So that's 10% growth by the end of '26, given you only show 20 retirements. Plus, you have the gauge benefit that accelerates in '26. How are you thinking about the guardrails to capacity growth this year? And where in the network and the fleet plan, you're keeping a buffer there?

Well, look, we're not going to give capacity guidance other than to tell you that our United Next plan has been working well and this last -- past year was the high watermark. So we'll manage capacity as appropriate for demand, but that's the guidance we're giving today.

And Sheila, regarding the 100 narrowbody deliveries. And it could be a little more. I mean, Boeing and Airbus have been doing a better job of repairing the supply chain that's been damaged from the pandemic. And so production rates are improving. If we get a few more than that, we're going to welcome that on the narrowbody side. That's going to help us up-gauge more quickly. And the profitability of those new aircraft is really robust versus the aircraft that we can replace.

And on the widebody front, it's a similar story. We expect 20 787s in 2026. I think we'll take about that amount in future years as well. And that modernization of the widebody fleet is not just for growth, but it helps drive better profitability and better returns on capital for United going forward. So I feel really good about the CapEx profile and what it's going to do to the financials.

Your next question comes from the line of Catie O'Brien with Goldman Sachs.

Andrew, I wanted to start with you and just dig in on how you're thinking about the sequential trends by region underlying your 1Q EPS guidance. Is it fair to assume that most of the $250 million pretax hit was driven by lower domestic revenue? So just trying to understand, like should we see the most sequential improvement in domestic? Obviously, you had really strong performance in some of the international regions in the fourth quarter. So I'm really just trying to get a sense of the relative improvement you're expecting between the four regions.

Yes. Clearly, in Q4, the larger hit was domestic. I wouldn't say international is 0 from the government shutdown, but it was mostly domestic. As we look into 2026, we do have this Caribbean situation which is impacting the numbers there. So I'm going to be careful what I say about the Caribbean. We still think it could be positive but it's going to be close. But we are looking for sequential improvement everywhere.

Clearly, the Atlantic is leading the way, which is great to see. We're growing a lot across the Atlantic. A lot of it is Israel, but we're still growing a lot across the Atlantic. And we think we've got the capacity equation really dialed in, in that region. So we're really proud of that. Pacific, I think it looks pretty darn good. South Pacific is not as good as the North Pacific. And domestically, it's going to be another improvement. And what I'd say is premium cabins are leading the way not only domestically, but across the entire network.

Great. And Mike, maybe one for you on the '26 cost outlook. Obviously, I understand -- I'm not asking for guidance. But you just detailed a bunch of things that you were really excited about this year, the operation, the procurement, like there's some pretty big numbers that you guys have gotten out of the system. I guess, on the '26 punch list, like what are the opportunities you're most excited about? Is it just following down some of these same paths? Like how should we think about the opportunity to cost out this year versus the great success you had in '25?

Thanks, Catie, for the question. I think a continued strong operation, number one. I mentioned global procurement. We're just getting started there. So you should see continued improvements on that front. And then we're working with our technology team led by Jason Birnbaum, and there's some significant multi-hundred million dollar opportunities there. So we'll give you more details as we deliver on those, but this is a permanent cultural shift at United to drive efficiency.

Your next question comes from the line of Ravi Shanker with Morgan Stanley.

So it's pretty clear that your full year guide is quite conservative. I think you guys may have hinted at that in your comments as well. Just trying to get a sense of kind of is this as conservative as it usually is? Or do you see reasons to make it kind of even more conservative for '26? Just trying to get a sense of how many acts of God are in that full year guide for this year.

Well, look, the way I would -- obviously, Scott said something last night about this, so it helps with the answer just a little bit, I suppose. But let's think about the process. We think carefully about all these forecasts and we're pretty consistent on how we approach it. We did our forecast for 2026 more than a few weeks ago. And clearly, as we refined it coming into the new year, we focused on refining it in Q1 because that's where we're at. And we focus less on refining it in Q2 and beyond because that's how we do the process.

So we'll see how it goes. I'll just start off with the year has gotten off to a really great start. The international entities are looking pretty darn good, even the Caribbean, considering the situation we're facing there. So we remain bullish. And business demand looks really pretty amazing right now and we'll see if that continues. If all of that continues, which I assure you we think it is, and Scott definitely thinks it is, our forecast will prove to be more conservative than it usually is. But that's all I'll go with at this point. Maybe Mike wants to add to that.

Ravi, I'd just say 2025 proved a year -- if we talk about acts of God in this industry, we got walloped. The industry got walloped. And I'm incredibly proud of United's full year results.

I'm particularly proud of the fourth quarter, where we had a government shutdown. Just about every other major airline had to issue 8-Ks to update their guidance. And we delivered within our original guide. That is testament to how we guide at United Airlines to make sure that we deliver on our financial commitments even in imperfect times. And 2026 will be no different.

Very helpful. And on that note, kind of obviously you guys are coming to the end of the United Next kind of original guidance range. I mean, 2026 seemed like an eternity away back in '21, but here we are. So what can we expect next in terms of like when do we get the next set of long-term targets from you guys? Obviously, incremental, loyalty [ this year, ] kind of what's the timing on that? And what is the forum for that?

Ravi, I am thinking about that. And all of our quarterly calls and, frankly, when we go to conferences, I think we talk very big picture, very long term, which is serving us well. It is important that we have long-term goals that we communicate with the investor base.

At this point in time, our commitment to get to double-digit margins, our commitment to get to free cash flow conversion of 75%, our commitment to get to investment grade, those are the longer-term benchmarks that we're fighting for. And so I feel like we're in a pretty good position around the long-term targets at this time.

And I'll just add, we look forward to sharing what comes next. And what comes next is something that I've been thinking about and the entire commercial team has been thinking about for years because in order to prepare for what comes next, we need to put that into place with a lot of foresight and a lot of thought. So we look forward to sharing with all of you at some point in the future. But rest assured that we have a lot of, I think, really great commercial plans and opportunities for the latter part of this decade.

Your next question comes from the line of Jamie Baker with JPMorgan.

Scott, I'm guessing the term CALite just got a few dozen more Google searches today than...

Well, you remember it without -- without searching...

Yes. No, I appreciated the comment. So Andrew, sorry, I'm just getting over a cold here. Andrew, in your prepared remarks and also to Conor a few minutes ago, you mentioned that some degree of unprofitable domestic flying out there is increasingly a function of hub-and-spoke peers as opposed to the usual domestic discounter suspects.

Now in the case of discounters, I think it was very reasonable to assume that a lot of that would go away just given the staggering system-wide losses. But the difference with certain hub-and-spoke competitors that you referenced, their returns are subsidized by loyalty and premium. So put differently, discounters had no choice but to back off. As Scott likes to say, it's just math. But hub-and-spoke peers do have a choice. I'm curious if you agree with that. And if you do, does it influence your confidence that ultimately some of these competitors do cull that loss-producing capacity?

Yes. I think it's a really good question. I think economic gravity is the same for all, and money-losing businesses need to figure that out and do something different. And in this case, I do think money-losing routes or hubs should ultimately be closed.

I have some experience in this. I've worked on closing a number of hubs in my career at different airlines, not at United, obviously. And these decisions are complicated and big. But ultimately, it was making rational capacity decisions and recognizing what makes money and what loses money kind of has led at least United to where we are today. And there's only one other airline, I think, that can say that all of their hubs make money.

And so I still have a lot of confidence, I just don't know when, but I have a lot of confidence that money-losing flights will eventually exit the system and airlines will move to what they do best. And the industry will be better off and all the airlines will be better off. But I don't know when, and it may be a while. And they do have a lot longer runway than other airlines for all the reasons you said earlier. But again, I'll go with economic gravity applies to all.

And by the way, Jamie, I'm just going to -- since Andrew talked about closing hubs. So one of the things that just in my opening remarks about Andrew and Glen being the two best in the world. They have each closed three hubs that I can count in my career. The most important thing for a successful commercial airline is know when to pull out of loss-making markets. It's emotionally hard to do. Very few people have the discipline to do it. It is the most important characteristic for somebody that's going to run a network at any airline in the world, and it's rare.

I appreciate that, Scott and Andrew. And then just a quick follow-up. Something, Andrew, I think you and I were discussing it in person not so long ago or maybe it was me and Patrick. But the fact that many of your recent international additions were coming in at a margin premium to their geography as opposed to a deficit that would hopefully rise over time.

I'm curious if that's still the case. And if it is, how long can that continue? And should we assume that those premium margins get competed away over time? Or are they sustainable, which would imply the broader geography also gets more profitable, holding other inputs constant?

Yes. That's a very broad question. And look, I would say that there's nobody better in the world than Patrick than -- looking at these opportunities. And what we have found, which I think is contrary to normal, is that the fruit that we're picking off the tree after all these years continues to be excellent. In other words, we're able to find different opportunities because the world is getting smaller. The aircraft technology obviously with the 787 has changed. But most importantly, United is different today than it was a decade ago.

And our differences in attracting the brand-loyal customers, as Scott often says, our product, everything we do has enabled us to add these new routes that couldn't have been done years ago and add them at higher margins than the bulk of what the airline has done. So it's a remarkable journey. And I think on the international front, we're frankly just getting started. New York, San Francisco, Washington and L.A., when you combine all those together going across the Pacific and the Atlantic, there's just amazing opportunities.

And I think, obviously, you know that the A321XLR is being made for us and will arrive. And we're going to use that aircraft for its unique capabilities, not unlike Continental did 20-plus years ago with the 757. And I think we'll be the only airline to use the aircraft in a way that really does bring on a bunch of new markets. We're not trying to down-gauge, over-gauge widebody jets, for example. We're looking to expand our network and our scope and our depth. And there's just a lot more to come on this front.

And so kudos to the whole United team. It is just an amazing achievement. And we look forward to seeing what our international network will look like a decade from now.

Your next question comes from the line of Tom Fitzgerald with TD Cowen.

I'm wondering if you could expand a little bit on the distinction between the loyalty program and rewards program. You commented on that a few times. I'd love to hear like how investors should think about MileagePlus being differentiated.

Sure. I think the most simple way to think about it is churn of members. People join our program and stay with it just about forever and people grab and get our credit card and stay with it for a very, very long time period.

So we have very little churn in our programs, and therefore, we don't need to do extraordinary things to attract people to United. We already have done it with a great product, a great network and rewards that they really want, which is travel. Like people really want a first-class seat or a Polaris seat to Tahiti as a reward. And all of the other programs out there tend to use constant bonus points and other benefits and have a lot of revolve around customers going in and out, switching credit cards, so on and so forth often, to game the systems. And I just think an airline program and particularly the United program is different. And as we approach the future, we should harness the power of that to figure out how we can make it even stickier and grow it faster, which is what we'll talk about in the next 10 or 12 weeks.

Okay. That's really helpful. And then just as a quick follow-up. It seems like an important monument that 2025 is a high watermark on domestic capacity growth. So maybe just remind investors how they should think about as you guys harvest some of the gains from achieving your United Next investments.

Sure. In 2021, we announced United Next and we announced the growth that would come from the connectivity. The growth was always the outcome of the connectivity. We weren't growing for growth's sake. I think that's really important. And I remember at the time, we did distinguish that not all growth is equal, which was really controversial back in 2021 because I think many thought it was. And I think we proved it was not.

So as we've gone through the whole cycle of United Next, we are approaching our connectivity goals. We'll hit them in 2027, probably a year late given some of the delivery delays we experienced from Boeing but close to on time in the grand scheme of things. And as we do that, our hubs have reached this critical level, around 650 flights per day in our mid-continent hubs with a lot of connectivity, big banks and large airplanes. It's exactly what we are contemplating.

So as we go forward past 2027, we're going to be a lot more focused on gauge and growing our operation that way versus more flights. We do think there is a point when hubs grow past 900 flights per day, for example, that the marginal economics become really challenging. You compete against yourself, and you drive a lot of operational complexity no matter how many runways you have available to fly from.

So we really like our plan. It's based on moderate frequency levels and large aircraft. And I don't want to give too much of a preview for what comes next, but that was a good hint as to where we're going. But -- so that's -- the high watermark comment is related to all of that. And I'm glad to get back to focused on gauge in 2027 and beyond. I think it's going to be very lucrative for the business.

Your next question comes from the line of Brandon Oglenski with Barclays.

Congrats to the team on what was a pretty good year in a tough environment. But Scott, and I don't mean to kiss up too much here, but I think a lot of folks on this call really appreciate your industry commentary and a lot of your projections have been correct the last few years. Can we talk about just broader industry growth?

Because if we look at revenue to GDP or even revenue growth last year, it was effectively flat versus GDP that was up 3% or 4% nominal or real. Do you think that signals that we're just like in a shrinking industry now? Or has Zoom taken over? Or has this really been too much low-cost capacity in the industry just can't get pricing? What's your prognosis here?

It's a supply problem. It's not a demand challenge. It's a supply problem and it's a supply problem. I'm not going to call it low-cost capacity. It's a supply problem with [ still ] carriers. And Andrew said it and I'll repeat it, like economic gravity ultimately wins. It doesn't win overnight. Ego usually beats economic gravity in the short term. But economic gravity always wins in the end.

And I feel pretty optimistic that even in this environment, well, I feel really good in this environment how well United is doing. The brand loyal strategy, I thought was going to be successful. I've been on this path with Andrew for really for 20 years. We switched airlines, but we've been on this path for 20 years. I thought it would be successful. It is more successful than I thought. Like it is remarkable how much resilience we have in bad times or to competitive activities.

And so that's good. But I look at some of the flying competitors, and it's going to push north of negative 20% margins this year. You can do that for a little bit of time. But when the down -- actually, to be honest with you, I think the supply really comes out in the next downturn hits. The next downturn is going to make it extremely tense for airlines that are going into it with breakeven-ish margins in good times. And so I think that's probably what it takes for the next kind of wave of supply.

So I think we'll do okay in main cabin between now and then. We'll do well in premium. I think to an earlier question, we are targeting growing margins adjusted for any kind of anomalies that happen but growing margins a point a year. That means we got to make up a point from last year, by the way. And I think that takes us into the low double digits. And I think when the next downturn hits, coming out on the other side of it and the supply comes out, we come out with mid-teens margins. So that's a long answer, but off the cuff, but that's what I think is going to happen.

Your next question comes from the line of Michael Linenberg with Deutsche Bank.

Just touching back on kind of what Jamie brought up. I think the prevailing view is that domestic will be the best-performing geography in 2026, maybe domestic RASM, maybe profitability. But when I think about the fact that one of your competitors in Chicago is adding a lot of flights, and I've seen reports that they're already losing, I don't know, $700 million or $800 million under their current schedule. Is that going to be a drag on your domestic to the point that maybe it's transatlantic, maybe it's another geography that comes out on top, or do you have maybe a diversified enough domestic network? I mean, you have a massive domestic network that will be more than overshadowed by strength in some of your other markets like Newark, for example, which is probably going to run very well in 2026.

Well, thanks for the question, Mike. I was afraid we'd get through the call without addressing Chicago. So I'm happy to do it. And it's probably a good follow-up to the last question that I talked about. And I want to start with at United Airlines, we've been a decade-long strategy to build a brand-loyal customer airline. That was all designed to get us out of the commoditized part of the industry where all that mattered was the schedule. And that meant in both focusing on the product, the technology and service to get customers to choose us.

That has been a really successful strategy. It didn't happen overnight. It really has been a decade in the making. But you can see the results, and we've had market share increases everywhere that we fly. In Chicago to be specific, in 2016, American actually had higher local market share with Chicago-based customers and higher share with business customers. In 2025, even after all the growth from our competitor, United now has a 22-point lead with Chicago-based customers in Chicago and a 38-point lead with the brand-loyal business customers.

Being a brand-loyal airline just really inoculates us mostly from that competitive activity. And in fact, in 2025, even with all that growth, the Chicago RASM outperformed the rest of the system by 1%, and we made a $500 million profit. By the way, I think we probably would have made $600 million. So it probably cost us about $100 million. But our competitor lost $500 million even though they didn't start that really until May, so bigger on a full year basis.

As we enter 2026, there's another wave of growth coming from that competitor. Most of that's going to wind up exactly the same as it did last year. It was one difference. In 2025, American added gates. That means we watched it. We could have responded. We chose not to. They're going to win three gates back at our expense when the analysis comes out later this year. We knew that was going to happen. We figured we'd just let it settle into a new normal and that would all be fine.

But in 2026, we're drawing a line in the sand. We are not going to allow them to win a single gate at our expense in 2026. We're not trying to win gates, but we're going to add as many flights as are required to make sure that we keep our gate count the same in Chicago. Look, we're just going to stay focused. We've had the right strategy at the whole network for a decade. We're going to keep doing it. It's a winning strategy. It's working. We're going to keep doing that in Chicago.

For what it's worth, I think that we will likely grow our earnings. Certainly, we'll make at least the same $500 million, I believe. And likely, we'll still be able to grow our earnings in Chicago for the same reasons it worked last year. American, and we're pretty good at estimating this, is likely to push to about $1 billion in losses in Chicago. But we're going to just stay focused on the strategy that's worked for the last decade. Our team is doing a great job taking care of customers and it's working for us.

Your next question comes from the line of John Godyn with Citigroup.

Scott, I was hoping you could revisit your thoughts on the shape of industry structure from here. We've seen M&A announced among some of the smaller carriers. There seems to be an expectation of more. I'm curious what you think equilibrium in the industry looks like?

And second, obviously, when I think about your history, America West-US Air, US Air-American Airlines, you're no stranger to be a leader in M&A. Is there any scenario where United gets involved in M&A considering you have what seems to be an accommodative DOJ, which isn't always the case.

Well, I'm not good at resisting the bait but I'm going to resist the M&A bait today. Bob Rivkin is nodding appreciatively at me not talking about that. But I think the structure of the industry is ultimately going to be low-cost carriers will shrink down to the niche that works for low-cost carriers. That is big leisure markets. And I don't know if they're going to liquidate, if they're going to merge, if they're just going to all shrink for sure. But they're going to shrink down to the niche that works. And that will be good for them. I think they can have solid margins, but it's a much smaller niche than where they are today.

I think there's going to be two brand-loyal airlines. That's already the case. I gave you the numbers in Chicago. That game is over. I realize that not everyone knew the game was on. The game is over. And when we have that big of a lead with customers, like you just don't win it back because you'd have to have technology, product, services that were somehow better than United and somehow better than Delta to even start. And you're a decade behind.

And then I think the rest of it will be sort of finding places where you can be big in other cities, non-hubs of Delta or United, and you can have a network that works, and it gets a little more commoditized but you can have a network that works. And so I think that's what the structure. And it's an open question about whether consolidation helps us get to that structure. But that's what the structure is going to end with consolidation or without.

Your next question comes from the line of Scott Group with Wolfe Research.

So last quarter, I think you laid out an expectation we should get at least a point of margin improvement a year. I think, Scott, you just said it again. I guess the high end of the guidance range gets you there. The midpoint would be less than a full point. So I don't know, just at the end of the day, like help us think about price cost this year given the momentum you've got right now, the comps that come in Q2, Q3.

Like I would have thought this would have been the year where like it's a pretty clear like point of margin. Like is it just the conservatism that maybe you said a couple of times? Or are there other things we should be cognizant of, I don't know, labor, what's going on in Chicago? I don't know. Just help us understand like if this is the year we should be doing the full point of margin.

Scott, I love that you did the math. And trust me, we've done the math, too. This industry got hit by multiple asteroids last year. We want to make sure that we deliver on our financial commitments. We've given you very clear targets for the longer term, and we're going to deliver on those targets, the timing of which there's some uncertainty around. But the full year guide was very deliberate. We're telling you that if current booking trends stay on this path, there's upside. And you should think about that as you make your own estimates.

Your next question comes from the line of Chris Wetherbee with Wells Fargo.

Maybe, Mike, just following up on that question. As you think about unit costs as you go through '26, obviously, there's labor dynamics that we have to factor in. If we exclude that, take a look at 2025, how good of a benchmark or sort of range is that for us to use as we think about sort of ex labor dynamics of unit cost for 2026?

And then maybe just zooming out a little bit. It sounds like you still sort of have lots of opportunity in terms of managing cost efficiency as we move forward. So how big a story is this beyond '26?

Yes. Thanks, Chris, for the question. And look, we're not going to give PRASM guidance. We're not going to give CASM guidance. But we've been pretty clear about this is a new culture at United around cost management and discipline and driving efficiency. And let me remind you, we really have not benefited from gauge yet. That gauge benefit is still on the come.

So '25 was a great year. We're going to work really hard to make '26 an equally great year from a CASM standpoint. And keep in mind, some of the tailwinds we haven't really started to even benefit from.

Your next question comes from the line of Atul Maheswari with UBS.

First, just quickly, do you think there can be any meaningful tailwind from the Soccer World Cup this year? And if so, is there anything that's assumed in the guide and any way to dimensionalize how large that tailwind can be?

I'll take that. Look, we're looking forward to it. I'm sure some of us will attend a few games. I think the interesting thing we see is it creates what would be normally countercyclical traffic flows. So it creates inbound into the U.S. demand in June, which is normally an outbound time period. So quite frankly, yes, I think that we do expect some upside from that. Given the broader macro trends, I'm not going to judge exactly how much that is. But we do think this particular sporting event will be a positive for United.

There are other large sporting events that are not because they drive just leisure traffic and business traffic evaporates in those situations. This is not one of the situations. So we do expect some level of upside. But I want to caution you, it's still -- given the size of United, I'm not sure it's all that meaningful, but it is positive.

Got it. That's helpful. And then second question, one point of pushback that we get from longer-term investors who want to deploy capital to airlines and to United is that how can industry capacity discipline persist as Boeing and Airbus ramp up deliveries from here? Like headline numbers for last year is still pretty positive with respect to capacity growth. So how can that persist? Like what can you say to give comfort to those investors that capacity discipline can, in fact, persist [ against ] ramp-up deliveries?

First, we never say those words, and I'm not even going to repeat them because that's not how we think, and we don't ever say those words. But what I think the limit on capacity is not about aircraft. It is engines. It is already engines. There's about 800 aircraft around the globe that are grounded with engines. We even have some -- we bought tons of spare engines in advance, but we even have some that are going to be grounded this year for engines. The engine manufacturers are not going to catch up due to the combination of the need for MRO replacement engines and new aircraft deliveries, in my view, until sometime next decade. So engines are the constraint.

We will now switch to the media portion of the call. [Operator Instructions] Your first question comes from the line of Leslie Josephs with CNBC.

Just wondering, can you please clarify what you meant about the Caribbean? This is the airspace closure in the beginning of the year that's impacting bookings now in Q1. And you said that it was measurable. Could you provide some more detail on that and how much that might cost?

And then second, your competitor in Atlanta was hinting at some segmentation at the front of the plane. Just wondering where United might be on that? And is that -- could we see a stripped-down business class or first-class products, maybe no seat assignment or something along those lines?

Leslie, it's Andrew. Look, on the Caribbean, we're a pretty big airline in the Caribbean and we're a small airline in the Caribbean. I'm just pointing out that there's been a little bit of a book away from the Caribbean. I don't think it's measurable in the grand scheme of things when it comes to United Airlines, to be blunt. But demand has been impacted by the situation in Venezuela to some extent. We expect that to dissipate over time. And in fact, the last few days have been better than the first few weeks of the year. So I think we're in good shape on that front.

And look, on cabin segmentation, I'll add that that's been very good for United Airlines over the years as we invested in more premium products and a larger array of products out there. So we're going to continue to do that. The only more reasonable hint I'll give you is that we have a large redesign of united.com coming as we seek to do different things on how we sell products. So we'll leave it to that, and we'll talk to you sometime in the first quarter or second quarter about our overall strategies on merchandising.

Your next question comes from John Pletz with Crain's.

Scott, any additional color on Chicago? Drawing the line in the sand, does that mean you're going to add flights?

It does.

Can you give me a little color on what scale you might be considering adding flights here?

They will be -- the color will be they will be in the black while American is in the red.

All right. And any idea of how much, I guess, is what I'm asking...

No. I'm not going to announce that today. I think we're going to have a scheduled load next week that will give you the answer.

That concludes our question-and-answer session. I will now turn the call back over to Kristina Edwards for closing remarks.

Thanks, Colby, and thank you all for joining us as we celebrate our 100 years here at United Airlines. Contact Investor and Media Relations if you have any further questions. Bye.

Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect.

Good morning, and welcome to United Airlines Holdings' Earnings Conference Call for the Third Quarter of 2025. My name is Regina, and I will be your conference facilitator today. Following the initial remarks from management, we will open the lines for questions. [Operator Instructions] 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.

Thanks, Regina. Good morning, everyone, and welcome to United's Third 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, which are based upon information currently available to the company.

A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release, Form 10-K 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, and historical operational metrics will exclude pandemic years of 2020 to 2022. Please refer to the related definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures at the end of our earnings release.

Joining us on the call today to discuss our results and outlook are 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. We also have other members of the executive team on the line available for the Q&A. And now I'll put the call over to Scott.

Thanks, Kristina, and good morning, everyone. For the last few years, we've talked about an industry that is transforming and the United Airlines is competitively positioned to win. For United, that's meant winning brand loyal customers. The third quarter is another data point that is consistent with the structural, permanent and irreversible changes is occurring in this industry.

We delivered strong third quarter results despite macro volatility in the first 9 months of the year, and we now expect to grow earnings for the full year. The first 3 quarters of the year were an economic downturn for airlines at least and our ability to grow earnings in the face of the macro issues is proof that the brand [indiscernible] United next strategy is resilient in tough times and a clear proof point on our path to solid double-digit margins.

What we've really proven is air travel is not a commodity. Our calls in the last few years, we spent a lot of time appropriately talking about the industry structure and making predictions about how that would play out in the future. We're now seeing those predictions come true and even though it's only the second or third inning, I think the general contours of how that is going to end or widely known and easy to forecast everyone at this point. And given that, I think it's time to shift the focus and talk about how United gets to double-digit margins even in the current industry environment.

There are 2 points on the revenue side and likewise, 2 points on the cost side. On the revenue side, it starts with winning brand loyal customers. United is investing over $1 billion in customer product enhancements annually. And that investment is in all cabins and class of service. Every customer who flies United gets more value. For basic economy customers, we don't just offer them a competitively priced ticket. We offer them the best app and on-time flight power in every seat, seatback screens, a great loyalty program, just to name a few.

For brand loyal customers, we -- all the benefits I just mentioned, plus expansive clubs, more seats upfront, better food, more extensive route network to exotic destinations around the globe, and a loyalty program that gives bigger rewards and a tremendous amount of utility for their miles.

And most importantly, our people are our best asset, and they're delivering for all of our customers each and every day. We're in the people business and our people have done an amazing job of caring and providing friendly service that makes customers feel good and is the foundation of keeping them brand loyal. From basic economy all the way to the Polaris class, every United customer simply gets more value at United than what our competitors offer. And that's why they're brand loyal.

It's also why we're winning more brand loyal customers every day, and it's the important competitive advantage that's giving us a generational lead versus most of the industry. We believe that winning brand loyal customer sets up our second revenue advantage, the potential to double the EBITDA from our loyalty program in the years to come. We're still in the pre-game warm-ups for taking the United loyalty program to another level. But in order to invest over $1 billion per year in incremental customer products and services, we had to find a different and better way to manage costs.

Historically, airlines looking to reduce costs and focused on cutting customer-friendly amenities like food, because most of our expense is in areas we can't control, like union contracts, airport fees, fuel, et cetera, or by adding utilization flying late at night on off-peak days [indiscernible] slower times of the year. United is doing the exact opposite of that industry [ dogma ], namely investing more for the customer and focusing on flying at times that can be profitable instead of just trying to maximize aircraft utilization. And you can see it in our numbers.

Our major cost focus at United is to drive real cost efficiencies through our use of technology that can also improve the customer experience. In public discussions, we tended to focus more on the app and customer-facing technology, but we're doing far more behind the scenes and we're the most cutting-edge technology airline in the world. Mike will give you some examples of these technology-driven savings that allow us to lower true CASM-ex. These technology investments are efficient for costs, but they also help us to run a more reliable operation for customers.

And secondly, on costs, we have large gauge increases coming as both Boeing and Airbus get back to a better delivery cadence. This strategy is working and I expect us to add at least 1 point or more of margin each year normalized for any unusual macroeconomic activity up or down, which gets us to the low teen margins in this industry capacity environment. But as I said earlier, the industry restructuring, i.e., each airline focusing its capacity in markets where they can be profitable is only in the second or third inning. And as that process plays out, I expect that to add several more margin points to United, moving us up into the mid-teens margins. And as we deliver on that, I'd bet that our multiples move up meaningfully as well.

I'll now turn it back to the team for a run through the quarter and our outlook.

Thank you, Scott, and good morning. This summer was the busiest in United's history. We surpassed 1 billion available seat miles in a single day and flew over 48 million customers in the quarter. Even with these volumes as well as significant summer weather disruptions and system-wide ATC challenges, our operation was resilient this quarter. The third quarter marked our lowest rate of cancellations for any third quarter in company history, and 6 of our 7 hubs ranked first or second for on-time departures.

We continue to adapt under pressure and to maintain flexibility during irregular operations, preserving travel plans for more than 290,000 customers by managing delays rather than canceling flights for the use of [ connection sale ]. This is what drives the most value to our customers and helps build the brand loyalty we speak so much about. And our customer NPS score was up nearly 7% this summer versus summer 2024. This performance is a testament to the dedication of our United team. So thank you to each of you.

At United, we remain focused on innovation and providing our teams with the most advanced tools in the industry to help them deliver their best every day. We are modernizing applications for employees that allows us to recover faster, scale support for customers, enabling better experiences even when things don't go as planned. We also continue to invest in our industry-leading digital customer experience with a new dedicated section and our mobile app focused on making tight connections smoother and more predictable for customers through real-time personalized tools and communication, driving further improvements in our customer experience and NPS scores. As we continue to take aircraft deliveries, we will also be growing our team. In 2026, we expect to hire over 2,000 pilots and over 3,200 new flight attendants.

We are all proud of the fact that we continue to be a destination for great talent with over 27,000 applicants in just a few days for the most recent flight attendant posting.

Regarding the negotiations with the AFA, we met with the mediator in mid-September, and our negotiation is scheduled for the end of October. We remain focused on getting our flight attendants, the best in the industry, the industry-leading contract they deserve.

I want to thank Secretary, Duffy; Administrator, Bedford and the administration for their support and leadership on the improvement at Newark. We are pleased with the FAA's announcement that flights in Newark will be capped through October 2026 at 72 operations per hour, which better matches the capacity of the airport. The reduction in emissions, along with the continued focus on technology upgrades and ATC staffing further underpins our confidence in Newark's long-term outlook. Newark achieved its best ever on-time departure and Star D0 for any third quarter, clear proof that the investments being made are working.

Yesterday, our first Starlink Equipped Boeing 737-800 took off from Newark following FAA certification last month. This marks a major milestone in our journey to deliver the fastest, most reliable and free for Mileage Plus members, WiFi in the skies. More than half of our regional flight now has StarLink successfully installed. We believe this superior in-flight experience will be truly game-changing as it expands across the remainder of our fleet by 2027.

Thank you to the entire United team for your continued hard work and commitment to excellence this quarter. I will now hand it over to Andrew to provide an update on the revenue environment.

Thanks, Brett. United's top line revenues increased 2.6% to $15.2 billion in the quarter on a 7.2% increase in capacity. Consolidated TRASM for the quarter was down 4.3%. Domestic PRASM was down 3.3% in Q3 on 6.6% more capacity, premium cabins outperformed the main cabin once again. After a long stream of positive RASM in quarters, United's international flights in Q3 had PRASM down 7.1%. Global long-haul demand continues to spread both earlier and later in the year out of Q3 making those periods stronger, but trade we take any day.

Premium revenues were up 6% year-over-year and PRASM for premium cabins outperformed the main cabin by 5 points. United had the company's all-time highest business revenue [indiscernible] during the week ended October 5 of the top 5 best weeks in our history, 3 of the remaining 4 occurred in September 2025. Leisure demand is also healthy as we head into Q4. Not unlike 2024, capacity and demand are simply better balanced in the last quarter of this year, particularly for global long-haul flying. We saw bookings inflect positive in early July, and industry revenues are expected to be positive year-over-year for all remaining months of 2025. We expect our consolidated RASM to meaningfully improve in Q4 year-over-year. International RASMs in Q4 will outperform domestic based on the current outlook. We also expect that Q4 will have United's best revenue quarter ever, but also have the highest absolute RASM of any quarter of 2025.

As you can see by the stressed financials at many airlines, it is clear much of their domestic flying once again lost money in 2025, but also in the peak summer quarter. It is already beginning, but we believe more unprofitable industry flying will continue to be scaled back, although the timing remains uncertain. While the supply/demand imbalance did impact United's profits in the third quarter, we can report all 7 of our hubs who are profitable in the quarter.

We, at United, remained focused on refinements we can make to the network and commercial strategies to build a stronger margin, particularly in the third quarter of each year. Two years ago, we focused on adjustments to our Q1 network deployment that led to nearly a 4-point improvement in pretax margins. And in 2026, we're going to take a similar approach to Q3.

For most of recent prepandemic history, Q3 RASMs were consistent with Q2 and Q4, with the modest peaking of the capacity in Q3, where marginal RASM was greater than marginal CASM. However, in 2024, we saw GAAP emerge where Q3 RASM at United trailed Q2 and Q4. We expect -- in 2025, we expect this gap to once again exist and to have widened. This Q3 issue appears to be an industry issue not specific to United. As much as we love the relative Q4 performance in recent years, the idea that Q3 trails by the magnitude we've seen in 2024 and in 2025 represents an opportunity for margin expansion.

In 2026, we'll adjust how peaked our summer capacity plan is by ending the summer schedule a week early, operating 15% fewer Red Eye flights and tended more capacity from the July 4 holiday to name a few, in pursuit of higher margins. I also expect that our Atlantic capacity year-over-year, excluding Tel Aviv will be flat to negative in Q3 2026.

United's business model now has a more balanced demand levels across more of the year as our increasingly optimal mix between leisure demand, premium leisure demand and business demand is yet another emerging advantage we have over commodity-based airlines. United's ability to further de-seasonalize capacity, we think, creates yet another opportunity for cost convergence versus commodity airlines, they only see profit opportunities on peak leisure travel demand days or months. I think it's interesting to note, profitability is now inversely correlated with aircraft utilization in the U.S. The highest utilization airlines have the lowest margins.

Mileage Plus had another strong quarter with total loyalty revenues up over 9%, overhead remuneration was up 15% year-over-year and should end the year up over 12%. We are seeing increased retention of cardholders along with higher spend as United's brand grows.

Today, I'd also like to share my view of where United has come from in the past decade, why our actual 2025 results thus far have proven so durable and what we expect to drive continued gains among brand loyal customers and double-digit margins down the line. Starting with our many transformational annual investments of over $1 billion for our customers, we have successfully decommoditized most of United's passenger revenues. We believe that our tilt to brand loyal capacity and products in the last 5 years was well timed, but also consistent with the demand profile in our hub cities, which is why it's worked so well and why our premium efforts will be more margin accretive than others. However, it's important to understand we're always investing to create value for all passengers in all cabins. Even our most premium yield passengers often fly in the main cabin and our efforts to convert passengers to brand loyal clearly starts in the main cabin.

Basic Economy has altered the competitive landscape in the U.S. and providing United a profitable entry far to attract many customers over a full life cycle.

Quality and value matters more than ever to U.S. consumers, clubs that are not overcrowded, enhanced meals, great wind, industry leading technology, great customer service, seat-back screens and fast WiFi to name a few, those are the attributes we focus on. The quality part of the product offering was often overlooked by many as we favored simplicity and low cost. In our view, quality goes well beyond the schedule we offer are inherent excellent reliability. Smaller details do matter, and that combined with best-in-class customer service our team members deliver sets us up for success.

Consistency of our products and services was unsurprisingly low at the early stages of our transformation, but is now reaching critical mass. United now operates 765 jets with more than 146,000 seat-back screens. These screens are 1 way of defining a premium airline in the U.S. Our signature interior conversion is now at 64% and an investment of over $1.6 million.

At United, we've proven our ability to increase our relative RASM with the best results, while at the same time increasing domestic gauge by almost 20% since 2019. We said a decade ago that not all capacity was created equal, and our results have proven that business case. The statement is only true for Brand Loyal Airlines. Domestic gauge is expected to once again accelerate in 2027 as our [ 200 A321 ] fleet reaches critical mass after years of delay, helping drive better customer experience, but also creating cost convergence with others. This gauge increases a proven formula for margin growth and accelerate as we retire smaller, lower-margin A319 and A320 aircraft from our fleet by 2030. United hubs can support this higher gauge and allows us to accept more basic economy fasteners at a profit.

Our transformation is making the world a smaller place for United and allowed us to add unique find places including, but not limited to, Greenland and Mongolia. A large thanks to the 100,000-plus United team members together have built this durable generational lead. I'm going to turn it over to Mike to talk about our financial results. Mike?

Thanks, Andrew. We delivered a strong third quarter. Customers are speaking with their wallets and are increasingly choosing to fly United because of our strong operational performance and the significant investments we made and continue to make in the airline. StarLink is another example of how we're differentiating our customer experience for the better.

This quarter, I'm particularly proud of our team for our disciplined cost management. I expect that our [ negative 0.9% ] CASM-ex performance will be industry-leading.

As Scott mentioned, we made strategic investments in our products that drive higher costs, but we are helping to offset those by running the core airline more efficiently. And those investments are increasingly differentiating United Airlines, creating brand loyal customers, decommoditizing United and driving solid margins and returns on capital. We've been investing over $1 billion annually over the last few years into improving our aircraft, our clubs, our food and our WiFi, and we expect to spend another $1 billion next year.

We increased the amount we spend on food by 25% this year. We're investing $1 billion on our rollout of Starlink WiFi so that our customers have the best-in-class connectivity. Our investments in clubs doubled in 2025 and is expected to more than double in 2026 as demand for this product continues to grow.

These are just a few examples, but it's important to note that we're doing this all while delivering industry-leading cost performance. Being able to invest in our customer experience is possible because we're simultaneously driving efficiency in the core operation. That produces meaningful and permanent savings. Some examples include: modernizing all of our maintenance technologies so that can be used on iPads, allowing our technicians quicker access to United resources. For example, before introducing iPads throughout the shift, our technicians would walk to and from our hangers and aircraft, checking the aircraft's paper logbook, printing manuals from the legacy mainframe systems at the hangar and ordering parts from their terminal at the hangar to ultimately fix the aircraft. Today, iPads give technicians the ability to instantaneously access, troubleshooting manuals and order parts, all while at the aircraft, turning airplanes faster and improving the efficiency of our workforce.

Additionally, significant investments in people, process and technology have been made to improve our recovery from IROPs events which enables us to restart the airline following an event much quicker than we have in the past. One particular tool already in use is our Orca tool, which optimizes aircraft routing, crew pairings and customer connections so that our targeted delays or cancels prioritize our customers and the optimal plan for guiding the airline through significant events.

Our operational leadership and frontline employees are performing the best in our history. This has led to United leading the industry in the quickest recovery following significant events and you can see the direct impact of that comparing our third quarter cost to others in the industry.

We're not just looking to make our operation more efficient. We're making process changing -- changes and using AI to make -- the work of our headquarters management team more efficient too. In fact, our management headcount is 4% lower than last year as this efficiency work continues, we're planning to shrink another 4% in 2026. This is a new culture at United Airlines, and as such, I'm going to give a long-term framework on how we're thinking about CASM-ex.

General inflation in this industry is running about 3% to 4% annually, and we expect that to continue inclusive of labor. At United, our gauge growth should provide about a 1-point annual tailwind through the end of the decade. We're also committed to driving efficiency into the core business of another 1 point per year. So together, our core CASM-ex growth should run up at 1% to 2% annually if we did nothing else. But as we've been highlighting, United is transforming because of our investments we have made into improving the customer experience and decommoditizing air travel. You should expect that to continue. And on average, we expect that to add about 1 point of CASM-ex pressure per year that is more than offset by revenue generation. Altogether, our CASM-ex run rate should run up around 2% to 3% annually.

Now turning to the quarter. We delivered third quarter earnings per share of $2.78 above the top end of our guidance range of $2.25 to $2.75. And ahead of Wall Street expectations of $2.68. Our pretax margin was 8% and would have been a point higher absent the disruptions earlier this year at Newark. We had industry-leading operational performance that underpins strong unit cost performance. Our third quarter CASM-ex was down 0.9%.

Our costs in the quarter did benefit by approximately 1 point of expense moving to the fourth quarter, primarily driven by maintenance and approximately 1 point from the timing of certain labor contracts.

Looking to the fourth quarter. The momentum in the revenue environment, Andrew described continues, and we expect fourth quarter EPS to be $3 to $3.50, that brings our full year EPS towards the better half of our full year 2025 guidance range of $9 to $11 and should position us to be the only airline to grow earnings this year. This demonstrates that winning brand loyal customer drives resilience in the business and when the economy rallies provides upside.

As I mentioned last quarter, the industry now has 2 brand loyal, structurally profitable and revenue diverse airlines, which together will represent about 100% of industry profits in 2025. We continue to target double-digit pretax margins in the long term.

Turning to the balance sheet. We continue to march towards our goal of an investment-grade balance sheet. During the quarter and earlier this month, we bought back [ 377 ] aircraft off of expensive COVID Air leases to carry implied interest rates in the high single digits. This accelerated our deleveraging efforts while further optimizing our cost of capital. We've eliminated all expensive financing from the balance sheet and have no fixed coupons over 6%, an average floating margin of 1.9% and an average cost of debt of less than 5%. These actions are being noticed by the rating agencies. We are upgraded by S&P to BB+ from BB on August 12, the highest they have rated us in over 2 decades. This change gives recognition to the fact that our business plan is working as our earnings grow and become more resilient and continue our migration towards investment-grade credit ratings.

Free cash flow generation also remains a key focus, and we expect to generate over $3 billion in free cash flow this year. I've talked about free cash flow conversion around 50%, and this year, we're trending well above that due to the timing of aircraft deliveries. As aircraft deliveries accelerate and CapEx rises, we expect to remain in the 50% range. And as we exit the decade, we expect the conversion to accelerate closer to around 75%.

On the buyback, we continue to take a measured approach and take advantage of opportunistic moves in the market while also working towards getting our net leverage below 2x.

To wrap it up, I want to thank the team for their continued execution. Our ability to manage through what has been an earnings recession for the airline industry has been remarkable. And while I still think there is upside to our absolute margin, and that matters the most, our relative margin is outstanding. My confidence in the financial future continues to grow as we exit the year. United Airlines and the industry continue to transform into a customer-centric brand-loyal business. United Airlines will continue to provide more value to our customers, to our employees and to our shareholders. Now back to Kristina to start Q&A.

Thanks, Mike. We will now take questions from the analyst community. We want to get to as many of you as possible, so please limit yourself to 1 question and if absolutely needed 1 follow-up question. Regina, please describe the procedure to ask a question.

[Operator Instructions] The first question comes from the line of Catherine O'Brien with Goldman Sachs.

So first, a follow-up to Scott's margin commentary to kick off the call. We've seen domestic main cabin seats come out of the market this year, although there has been backfill. You noted that system margins would go up a couple of points if the industry rationalized more. But what's your view on what would happen to main cabin margins if there was a step function change in main cabin supply? Would that narrow or even close the gap between main cabin and premium cabin margins? Or there just always going to be a gap given the demand profile of price-sensitive versus more premium customers?

So thanks, Catherine. That's an interesting and, I think, insightful question. But to answer it, I'm going to give you some of the -- I think you guys take a step back and give some of the history and evolution of the industry. And for most of my career, essentially everyone associated with the airline industry -- airline executives, including myself for the first decade, but Wall Street analysts and investors have thought of the airline industry as a commodity, not just price, but that schedule. Schedule drove everything. And that's how most of us thought of the industry. And by the way, it's why people on Wall Street right notes that essentially every seat is created equal and do competitive capacity analysis or implicitly the assumption that every seat is created equal.

I also think, by the way, it's the reason we trade at such low multiples because that's what happens in commodity industries. But what we've proven and continue to prove in the last few years is that it is possible to transform into a [ brand loyal airline ], which is dramatically different than the commoditized portion of the industry. For brand loyal customers, if you think about those, I think that the majority of customers in the industry, they're not all, but they're the majority of the customers in the industry. And for them, schedule is still the #1 factor. That's kind of how we got to thinking of this as a commoditized industry. But most customers have multiple airlines that have broadly competitive and similar schedules that give them the option. And so most of those customers like to choose an airline to give their loyalty to accumulate miles, get the credit card, go on great exotic destinations around the globe. And winning those customers is the winning formula. You have to win them, you have to give them great value, but winning those customers is the winning formula.

And for those customers, it starts with the schedule, but that's just the starting point. And from there, it's the product, it's the technology, it's the service, it's how people treat all of them that allow us to win those customers. And we look at the data from the last 5 years in each of our hubs, we've won significant market share of customers that live in those cities. And it's those brand loyal customers that we have won. And that's something that we've been working on for almost a decade now, billions of dollars of investments to get there, a focused strategy that has been consistent over time.

That's why I say that is structural, that is a structural change, but because it's structural, it's permanent and irreversible. What that means on the commodity portion of the business, we do have some of our seats that are being supplied to the commodity portion of the business. It's less -- the percentage is less than others, but everyone does. I think that portion of the business currently loses money for everyone. For the ultra low-cost carriers, they're 100% commoditized, and you can see how much it loses, but it really loses money across the board. Brand loyal is higher margin, but commodity loses money. That supply is adjusting in the commodity portion of the business. I think it is going to -- I just started the tip of the sphere is the airlines that are 100%, but it's not going to stop there. And I think within a couple of years, the supply and demand will be balanced for the commodity portion of the business, and it will be profitable for everyone. I think it will be low margin as all commodity businesses are, but it will be profitable.

But the great news for us is that the majority of our revenue is going to come from the brand loyal customers. I think we're proving this year that, that revenue stream is resilient in tough times, but that also has more -- even more upside in the good times. So I think commoditized seats on an airline, the more commoditized seats you have, the lower the margins are going to be. I think they will be profitable. But that future really is going to go into the couple of brand loyal airlines that I think are going to be able to achieve more stability in earnings, less cyclicality, more stability and mid-teens margins.

I really appreciate it. Maybe if I can squeeze in a quick follow-up for Mike on cost. So last quarter, you had said fourth quarter costs will look similar to 2Q inclusive of [indiscernible] deal. There's quite a lot of moving pieces since then with the flight attendants and some maintenance shift. Can you just update us on pulling that tethered could CASM still be close to that 2Q reference point? Or if not, just help us frame it a bit more?

Thanks for the question, Catie. And look, we -- we've got about a point benefit from maintenance moving from 3Q into 4Q, as I said. We also get about 1 point benefit from the labor agreement. Underlying that, we also got a further third point of goodness that I think is indicative of what you're going to see in the future from us of underlying core efficiency. So all that came together for really an excellent result. I do expect 4Q to trend up from the 3Q level, but really proud of those results.

Our next question comes from the line of Jamie Baker with JPMorgan.

So a question for Andrew. Last week, the topic of premium leisure yields exceeding certain corporate yields came up. Obviously, it's easy to find isolated examples of this. But my question to you is how widespread might this be across your network? And does this potentially represent a secular change? Or should investors still remain focused on corporate yields as representing the gold standard in the long run, the way they clearly were a decade ago?

Happy to, it's a really good question, Jamie. And it's a new [indiscernible] based on everything else in our business that's complicated. So the answer is the premise is correct that we've seen the growth, the premium leisure and the yield quality accelerate really fast. And when we look at it across our domestic system, we find, in fact, the quality of premium leisure business often exceeds that traditional corporate business, which, by the way, is a much smaller percentage of United business than it was in 2019.

I think the distinction that I'll give you, that's a little bit different is that, that same phenomenon is not yet true in global long haul, that the corporate there does remain a much higher yield than the premium leisure business at this point. But again, premium leisure continues to accelerate. The percentage of the cabinet continues to grow, and our overall sold load factors and Polaris continue to grow. So we seek through RM, the best of both worlds. We seek to maintain all that corporate business and gain corporate share, while at the same time, as we reconfigure aircraft, taken on more and more premium leisure business.

So I couldn't be more excited about this trend, like it's just an amazing thing that I don't think anybody would have predicted in 2019, but it's come true and it's come true quarter after quarter, I think for 3 years in a row now, and it will come true again in the Q4 this year, and we will lean further into premium capacity next year as a result with things we planned a couple of years ago.

And somewhat related to that, Andrew, the relationship between revenue and nominal GDP got a lot of airplay during the recovery from COVID. It's not really a talking point anymore, but the bull case at 1 time, was it enough structural change has taken place that we would see the industry exceed the pre-COVID long-term relationship. And certainly, based on the A48 data that hasn't happened yet, maybe you crunched the numbers differently. But is this topic merely a blast from the past or something that we should continue thinking about? Do you think about it, put it that way?

I don't think about it that way anymore. And I don't think about it that way. In a large part, what Scott gave is a narrative on how we're different, how a few airlines like us are different. And our revenue streams are simply different and durable relative to the commodity-based airline. So when you look at the GDP relationship, you're looking at one big total of revenues, and it doesn't distinguish the high-quality airlines and the high-quality seats from the low-quality seats. And that's the thing that I think has been lost in the formula that we all used to rely upon. So no, we do not rely upon that formula as we used to.

Our next question comes from the line of Andrew Didora with Bank of America.

First question for Andrew. I guess I noticed the air traffic liability fell only 3% sequentially. If I look back historically, it's been closer to down [indiscernible] so I think this clearly supports some of the bullish commentary that you've had on the call. I guess my question, how should we read into this decline in the ATL? Does this speak to just the strong pricing that you're seeing? Or does it say something just in terms of how you're booked today for the rest of the year in terms of volumes than maybe you typically are at this point in time?

Those facts are correct in terms of the ATL. I would -- it's the momentum in the business. It is clearly a lot of good bookings that we've taken over the last few months and months reflecting our outlook for Q4, which we're really proud of the outlook for Q4 and how it is inflected nicely from Q3. We're also booked a little bit ahead as we go into Q4 that reflects that. But overall, we've seen a really good environment. I said in my prepared remarks, what we saw from business traffic at United, our bookings over the last few weeks, which have been really amazing. So looking forward to a positive news for Q4 and great 2026.

Got it. And then just as a follow-up, I kind of wanted to ask you on the Latin America results in the quarter. Your calls are very focused on margins. So just curious, why did you grow so much in Latin America in 3Q when it seems like the RASM performance certainly didn't warrant it. Just curious your thoughts there and how maybe you can fix that going forward?

Yes. I think that's a very fair question. Look, results for Latin, we're disappointed. As we look towards Q4, I think Latin will have our largest sequential improvement, but that's not an easy -- it [ is an ] easy comp, I guess, at the end of the day. So look, I expect elevated year-over-year capacity in the region to exist for approximately another 2 quarters by United and the industry, while competitive capacity tailwinds are favorable across most of our network in the coming quarters, that isn't true in Latin America, and that's very focused on Mexico and Central America.

As we see in our domestic line, we believe most of the new competitive line in the region to the United States is unprofitable and transitory. We have a good position in Houston, and we intend to hold our ground. Noncore, non-Houston line by United that underperformed will be removed. And I'll also say deep south line is setting up for a nice peak season driving improvements. But core United capacity [indiscernible] from Houston to Mexico and Central America will continue as planned, and we remain very focused on the long term when it comes to our Houston hub and our Latin American franchise.

Our next question comes from the line of Sheila Kahyaoglu with Jefferies.

Maybe 2 questions. The first one, short term. Can we talk about the sequential unit revenue trajectory for Q4, the moving pieces of domestic versus international. It's just somewhat interesting that international is going to outperform given where schedules are shaping up? Can you just give us a little bit of data on the booking curve and how the holidays are looking?

Sure. Look, it's Andrew. Q4 is setting up nicely, as I've indicated. And I think as you all can figure out, if you look at our guidance, we're seeing really significant sequential gains in our RASMs. I'll start off with is Newark clearly had a substantial negative impact on Q3 of a little more than 1 point and while we're always yield focused as a premium branded loyal airline, we did temporarily use lower prices across all products to regain share following that event, and that continued for most of Q3.

New York share did rebound first with lower yield in local leisure passengers and then with higher yield leisure and corporate business following the improvement throughout the quarter. And while the impact of bookings is largely dissipated, we did build a small deficit of Q3 bookings traveling into Q4, which is in our guide, by the way. The remainder of our Q3 gap relates to the timing of events in 2024, including the Paris Olympics and CrowdStrike. And I think that's pretty simple math that others in the industry have explained.

So I'm really excited about the inflection. I think all 3 international entities are going to see really good sequential improvement. By the way, I think Atlantic, even with elevated capacity will absolutely be positive in Q4 year-over-year and probably the same is true for our Pacific entity. And so we did see this onetime gap in Q3 based on how we shape capacity. And as I said earlier in my prepared remarks, we're going to alter our schedule for 2026 to account for that.

And then in the end, across the entire globe, Hawaii has definitely been a strong spot for us. But I'd say the rest of the globe is all performing at the same rate, which is a rate we're pretty happy with when we look again at the sequential improvement.

And maybe a longer-term question. So maybe for you, if you'd like. You mentioned the 100 bps of margin improvement per year. How do you think about that as [indiscernible] 2% to 3% per year. It implies margin expansion is assuming [indiscernible] low to mid-single digits per year. So how do you think about the drivers of that? And obviously, a significant divergence from history?

Yes, it does -- the math means that RASM has to outperform CASM. I do expect that to happen. I mean if you look at next year, [indiscernible] comps to start with. But we just continue to have a lot of traction with brand loyal customers and look deeper into the data where we won market share in each of our hubs and how that is reacted -- how that is flowing through the margins. I feel pretty confident that we ought to be able to get at least 1 point of margin per year. And I think if you kind of look at this year, there's been an unprecedented amount of stuff that has happened this year kind of across the whole industry at a macro level and also to us, specifically in Newark. And the fact that we're going to grow earnings this year, I think, is quite remarkable.

I use the word resilient, but it's also a demonstration that our strategy. If you strip all that out, we [indiscernible] more than a margin -- a full point of margin this year. And so we feel really confident to dig into the data on brand loyal customers and what's happening in each of our hubs that that's going to be a tailwind. And I also briefly mentioned it in my opening remarks, but we have some really big ideas on the loyalty program, which we're not going to tell you today for anyone else asking, but I think we're going to double the EBITDA by the end of the decade in that program, which is going to add more. I think we're just beginning to realize the full potential of the loyalty program, and there's a lot of -- a lot of runway there.

Sheila, I can help the pile on. When I talked about the CASM-ex buildup, I talked about 1% to 2% of CASM-ex related to inflation after we manage -- have the opportunity to drive Engage. And then we're adding a point as we create more segmentation, more premium product. We're adding that point very cautiously because it's driving consumer preference. It's driving consumers to upgrade their cabins, driving consumers to buy what is a premium product. And so that's profit accretive. If it wasn't profit accretive, we wouldn't spend it.

And then I'll just [indiscernible] since we're all talking for next year, our premium capacity will be up 2 to 3 points more than our total capacity. I'm not going to give you guidance for next year. But we've preprogrammed this long ago to make advantage of these premium trends. And we know that we need to change our commercial strategies, our configurations and our products in order to achieve those RASM gains. And the good news is we've preplanned it, and it's going to happen.

Our next question will come from the line of Duane Pfennigwerth with Evercore ISI.

I appreciate you've covered a lot of good stuff already. But I wondered if we could bridge from the tone mid-September conferences to today, not really about the third quarter, but forward bookings. I assume you have a good head start on 4Q bookings and advanced yields year-over-year. Can you comment on how much of a head start you've built, specifically maybe on advanced book yields. And is your relative optimism about transatlantic, is that a volume comment? Or is that a yield comment?

Look, definitely, over the next 2 months, we've booked ourselves ahead versus last year. So we go into the quarter, booked a couple of points ahead, which was intentional on our part. We did use a little bit of yield to make that happen again, but that was intentional based on what we did last year and how we manage the capacity. And so we're happy with that.

On the Atlantic, there's a Tel Aviv story, which is different than the rest. But Atlantic, again, we've learned a lot about Q3 seasonality and where capacity should be placed, and we are going to be a lot more prudent with July and August in particular next year and push capacity out into the other quarters. And so as we look at Atlantic, and you can see the numbers, we're growing pretty swiftly in Q3 or Q4, sorry. And I told you already that we expect we will be positive RASM across the Atlantic. So we properly placed our capacity. We're aware of the demand trends, and we're very happy with what it looks like.

And the last thing I'll add is, in particular for us, the propensity or the share of revenue in premium cabins is the lowest in Q3 and the highest in Q4, which favors United Airlines given our business-centric airline and how we do well. And so we're heading into amazingly, which is a point of strength Q4 across the Atlantic, which, again, I don't think if we went back to 2017, '18 or '19, I would be able to say that. And I'm really excited about that. I think that opens up all kinds of possibilities for the airline on how we manage our capacity and it's off to a great start. We're early in the quarter, but it's off to a great start.

And just quickly on costs. Mike, can you talk more specifically about the maintenance expense that shifted here? It just -- I mean, the muscle memory is such that there always seems to be something that's going to come back and then it never does. So I think you've been good and conservative there. Is there an accrual for flight attendants specifically baked into the 4Q guide? And should we think about 2026 as one of your framework 2 to 3 years?

Thanks, Duane. I think there are 3 questions in there. Let me try to address them in order. 2020, the quarter, the 1% movement was primarily engines. This happens with some frequency where an engine event that we had been expecting pushes from 3Q to 4Q or 2Q to 3Q that happens. And then, yes, sometimes what happens is that another separate engine event pushes from 4Q into 1Q and therefore, you don't see a catch up. I do think you'll see the catch-up of that point in 4Q of this year. So that was the point.

Regarding flight attendants, look, we've got the best flight attendants in the business. They deserve an industry-leading contract. We're going to give them an industry-leading contract. We're hoping to get back to the negotiation table here in late October and very optimistic we will have a ratified deal in 2026, early 2026 to get them that industry-leading pay, but we're not going to accrue for expenses in the quarter when we don't expect a ratification in that quarter.

And then your final question around 2026. I think that 2% to 3% is the right expectation for CASM-ex as you look over a multi-year time frame. We have -- we do have a build to pay on the labor front. I've been saying for some time that, that bill is 2 to 3 points when all of those labor agreements ratify. And so we will have some added expense relative to that in 2026.

Our next question comes from the line of Conor Cunningham with Melius Research.

Scott, I know you asked us not to ask about the doubling of the loyalty EBITDA, but it's a pretty big cat, so I have to ask. Maybe you could talk about -- you redid the deal with the -- on your credit card with Chase right before the pandemic. I think that we're getting up to the time when we start to renegotiate a new one. So maybe you could talk about what is the driver behind doubling in terms of a new rate and versus what you're going to do behind the scenes to make the loyalty program more valuable?

Well, look, I'll start. Look, we -- I mean, we couldn't be more excited about the opportunity. There's a lot going on in the space, and I'm not going to divulge the details of our Chase contract in terms of its term, that remains confidential, but the term doesn't go forever, just like every contract we enter into. I think the broader point is when we think about the frequent flyer program, United is a true loyalty program. And loyalty is different than a reward program. And it's important that we manage our program in that vein. And there are a bunch of things we can do to take advantage of our unique status. And we think there's only in the United States, 2 to 4 loyalty programs, everything else we talk about is a reward program.

And so we're not going to announce it today, but we're going to be working very hard to make sure that consumers fully understand the distinction between our program and the alternatives and the rewards and the value that can be achieved at United in a way that I don't think has been done in the past. So I think that's enough of a hint for now and more to come. But as Scott said, we're very excited about this, and we'll see where we get.

Okay. We'll look forward to that. Maybe sticking with the whole hub stuff in capacity in general. Scott, I think you did interview not too long ago, you talked about how United only fights [indiscernible] from the high ground. When you first came here -- when you guys first came there to take over United and reshape it, you talked a fair bit about the Mid-Con hub strategy. I was hoping you could just mark where we are in terms of that rebuild. It just seems like there's -- the industry is in flux right now. There's an opportunity to kind of start to potentially think about focus cities and whatnot. Can you just talk about the opportunity beyond the 7 hubs in general?

Well, I'll start off and I'm sure Scott can add some of his listening to the conversation. But we haven't completed the United next assignment that we set out to do. We should complete that either probably in late 2026 or maybe early 2027, and that goal is to reach a certain level of connectivity, critical mass engage that allows us to achieve much higher domestic margins than we have traditionally achieved in our domestic hubs. As I've said many times and I'll say again today, international margins lead the way united. And while I expect that to be true over the long run, I do expect the gap to be able to shrink dramatically based on what we plan for the hubs.

And in particular, this gauge calculation, we still remain under-gauged, that gauge is going to change our cost convergence calculation even further allow us to capture more share the high end and more share at the low end all profitably. But we still have roughly 1 to 2 more years to go. We'll figure out the exact end point. But after that end point, we will take a broader look beyond our hubs at what makes sense. But we're very careful to make sure that whatever flying we add is margin accretive, and that will be a test beyond our hubs. But for right now, still very focused on our hubs.

Our next question comes from the line of Scott Group with Wolfe Research.

I've got 2 quick ones, I'll just lump them into one. The loyalty EBITDA doubling, like just a rough starting point, like what percentage of the EBITDA is it today? I just want to get a sense of the base. And then Mike, just your point about 2 to 3 points -- point bill from labor. Is that all 2 to 3 points incremental that comes [indiscernible], have you realized some of that from some of the other labor deals? I just want to -- [indiscernible] incremental 2 to 3 points, I guess, that's what I'm trying to figure out?

Let me take the expense question, Scott. This is not the time where we would give 2026 guidance and nor do we give CASM and TRASM guidance anymore. But what I will tell you is with the underlying inflation, with the labor headwinds we expect, we feel very confident about margin expansion and growth in earnings in 2026. For more detail on that, you're going to have to wait for the Q4 call. I'll give loyalty to Andrew.

We can answer -- I mean, Andrew just answered a very similar question right before this, Scott. And we'll have to -- we'll also wait and see for an Investor Day when we provide a clear breakdown of the contribution of this business. But it's obviously a very meaningful portion of our earnings.

And for those of you that have -- that are next in the queue, I'd suggest you take my recommendation to limit yourself to 1 question.

Our next question comes from the line of Tom Fitzgerald with TD Cowen.

I was wondering if you could just update us on the cadence of Starlink installation as we move through 2026 and then how the opportunities that opens up for Connective Media?

I'll give it a start. For United Express, I think we're over halfway through at this point with the [ Embraer 175s ] and the [indiscernible] on board the aircraft, by the way, is amazing. Hopefully, everybody tuned into the today show yesterday to see that demonstration on board. And if you haven't, you can find it on social media and TikTok because it was quite amazing.

Our first 737-800 took off yesterday from New York to Houston with dramatically higher NPS scores like off the chart on that aircraft equipped with StarLink. It is a game changer, a gate-to-gate experience, reliable and as fast as your living room. This is going to be a unique differentiator versus our other competition. And I'd tell you like of all the things we put onboard aircraft, all the changes we've made, whether it's wine or food or better seats, StarLink could be the biggest of them all.

And as you pointed out, one of the more exciting things is how we intersect StarLink and the ability to deliver unique content to each and every seat in our Connected Media business. Obviously, we have, I think, through the end of 2027 to install StarLink on all of our aircraft, and we're going to do it on every single one of our aircraft. And when we have that fully enabled. So it's still a bit down the road, the unique things we can do by no one who's in a seat and being able to deliver unique content to that seat very quickly. And by the way, that's not only the media opportunity, but that's about delivering [indiscernible] to help in the travel journey, whether you're luggage made an onboard the aircraft or what you're about to eat or any other thing you need to know to make sure that you are stress-free when you travel on United Airlines.

So, so much upside. Again, I'm going to go back to the NPS scores on that flight the other day, we're off the chart, like a game changer for United. We couldn't be more excited about this. It's one of the biggest things we've done in a really long time and may be underappreciated, but it will soon be appreciated.

And if you want to geek out, this is Toby on statistics, we had 145 paying customers, 170 devices connected on the inaugural and 145 gigabytes used on the flight, which is about 1,000x more than a normal life. But [indiscernible] nerves out there.

Our next question comes from the line of Mike Linenberg with Deutsche Bank.

Scott, I know this fourth quarter, I believe, you're going to be making a decision on the future shape and size of your wide-body fleet. And I know historically or at least the prevailing view has been that bringing on another airplane type, especially on the widebody side comes with various pain points. Can you just discuss some of the factors like how has that evolved? Or is it still as prohibitively expensive to bring on an additional type? Just your thoughts around that?

Mike, this is Mike. I'm going to take that question. You're right. We're always thinking about fleet decisions and this fourth quarter is an important decision for us. There are complexity costs around having additional aircraft types. That is always true for United given the nature of our hub network that has not changed. The larger we grow and to the extend it to a larger sub fleet that gives us opportunity to mitigate. But there are also different capabilities of different aircraft and you need different range and you need different gauge.

And so we're weighing those against one another, and we're weighing the price, and we're weighing the expected maintenance cost of the aircraft, and we're going to make the decision that optimizes profits for the long term for United. So stay tuned.

Our next question comes from the line of Savi Syth with Raymond James.

I was curious if you could remind us again how you're thinking about the fleet plan. It seems like you had a few more deliveries this year than you had additionally planned, so Airbus and Boeing getting their act together. So curious how you're thinking about kind of 2026 and how that progresses?

Thanks, Savi. Look, Boeing is definitely getting their act together on the narrowbody side. And we're getting some additional deliveries versus what we had expected. And I think that's going to continue in '26. And maybe even '27. On the widebody front, we're still seeing some delays, although there's reason for some optimism on that front as well.

To the extent that occurs, we'll see additional deliveries that will drive CapEx up in the short term. But the updating on the narrow-body side, in particular, combined with the financing terms and our prices, it is margin accretive. It's pretty quickly actually even return on capital accretive. And so we're welcoming -- welcoming some faster deliveries of delivery of aircraft. And as I talk about free cash conversion, we run a whole multitude of scenarios, and I feel very good about expanding free cash conversion even with growing CapEx.

Our next question will come from the line of Ravi Shanker with Morgan Stanley.

Apologies if I missed this, but I think there hasn't been much talk of the government shutdown so far. If you can just help quantify what you're seeing out there? What are some of the puts and takes in terms of the range of outcomes and whether that is your active guard building your guidance for the quarter?

Okay. I'll try. First, the controllers, despite a lot of the press, the controllers are professionals. The vast majority of the controller workforce is showing the business, we also have more communication and coordination at all levels with the FAA than I ever have seen in my entire career. And the sum of those 2 means that the system is actually running well.

We have our most cancellation rate in a decade for October, second best on-time performance. From a bookings perspective, the first couple of weeks, there hasn't really been a measurable impact in the first couple of weeks of October. Though I think the longer this drags on, obviously, the risk will grow on both of those points. So I hope our politicians will figure out how to get in the room, compromise and get something done.

Rob, to your question of an active guide. I think we calibrated the range of earnings per share for Q4 with government shutdown in mind. It's one active [indiscernible], but we've got reasonable room there for continued government shutdown, but it's not infinite.

Our next question comes from the line of Brandon Oglenski with Barclays.

I think I'm going to ask like a nerdy and geeky question of Andrew here. But speaking of brand loyal airlines versus commoditized low-cost carriers, I think from our perception, the booking window might actually be shorter at the lower end of the market, especially for like a spirit right now. So I guess can you talk to -- we're going to see another big chunk of capacity come out of the low end of the market here. That's disclosed by them in their reorganization plan. How is that going to impact dynamics competitively, especially as we go through the fourth quarter here. I don't mean to make this a near-term question, but I guess any insights you can provide would be helpful?

Sure. I'll give it a try. Clearly, future schedules have been recently loaded that are materially different than past schedules and unprofitable capacity is leaving the system. Certain airlines definitely have a very close-in booking curve based on pricing and how they price relative to others, I suppose, is the macro level thing, I would say. And their booking curves are different than United's booking curves because we have a full range of customers and products and flying all over the world.

What it means for the future, look, as more and more unprofitable capacity comes out, we'll continue to adjust, but I'll tell you, basic economy is an entry point. There's always going to be ultra low-cost carriers in the marketplace. They may have different names over time. And we will always be competitive with them. The one thing we do think is going to change is unprofitable flying is going to be diminished because it just doesn't make sense in the long run, whether it be for United or any other carrier, we're going to make adjustments to Q3 as I reiterated earlier and others will [indiscernible] and are being forced to make adjustments. So it's a really great setup as that unprofitable capacity and that commoditized capacity leaves the system and supply and balance demand rebalance to a great outlook.

We will now switch to the media portion of the call. [Operator Instructions] Our first question will come from the line of Niraj Chokshi with the New York Times.

I was just curious, you guys have talked about how premium demand will be resilient in a downturn. Can you just kind of talk through a little bit more about how that is, why you believe that?

Sure. Actually, I call it brand loyal demand instead of premium demand to start with because many of our brand loyal customers are flying in economy. They sometimes fly up -- upfront as well, but they often are flying in economy. And -- and that demand has been resilient, I think, is resilient. There are people that, one, in many cases, do have the income to continue traveling. Travel is high on the list of what people want to do and most of those people do. [indiscernible] of business travelers that are flying for business. And because you have a higher share there, that's what really makes that resilient.

If demand kind of bleeds off on the lower end when there's economic stress, there's more seats available on United Airlines for those brand loyal customers. And so it makes it resilient. And you can see that in our results this year, I think.

Our next question comes from the line of Rajesh Singh with Reuters.

Scott, I had a question on Russian overflights. United said this week that restrictions on flying over Russia means you are effectively bought from flying directly to China, from Chicago, Washington or New York. And United have called for expanding a proposed ban on Russian overflights to include Hong Kong. Should this band be included to other countries to bar their airlines from using Russian aerospace for flights to the U.S?

And the second part of my question is that how much of a competitive disadvantage is it for U.S. airlines compared with other non-U.S. carriers that are currently using the same aerospace?

Well, I'm going to focus on China. And I absolutely think this is just a matter of basic fairness. The Russian government does not allow U.S. airlines to fly over Russia. And we are competing with Chinese airlines that are allowed to. By the way, a country that is supporting Russia in the Ukrainian war. And a perfect example is we used to fly from New York to Hong Kong, and we cannot do it now. And we're competing with a Chinese airline that is allowed to fly from New York to Hong Kong, and that just isn't right, that isn't fair. And all we want is a level playing field and I absolutely think we should get it.

And I really appreciate that this administration is looking at the issue and focusing on the issue and it started. They started with Beijing and Shanghai, and I hope they will continue the logical efforts and include the other large Chinese city, Hong Kong in those efforts.

Our next question comes from the line of Leslie Josephs with CNBC.

With the shutdown, is there a certain point that you think the airline could start feeling some of the impact we heard from another airline that maybe if they went on for 10 days longer, which we're kind of in that territory now that things could get a little bit more difficult? Is there any sort of cutoff that you see there? And then second, there are a lot of other airlines large and small that are trying to go premium now. How successful do you think that can be? And how long do you think it takes to, I guess, to go upscale in certain products?

So on the first question, the answer is we don't know. It was a little unprecedented or at least it doesn't happen often, so you don't really know. So I -- I think that at least for the first couple of weeks, people thought it was going to get resolved, so they just kind of continue business as usual. But as time goes on, as people read headlines and say, it's not going to get resolved soon, people start to lose confidence in the government and the government's ability to resolve this. And that's going to start to impact books.

So I don't know when that happens. It's not some magic step function. But every day that goes by, the risk to the U.S. economy grows. So I hope we will avoid an unforced error here.

And the second question on other airlines. Look, we've been doing the investment in the customer for a decade. It is billions of dollars of CapEx and OpEx. There's 2 ways that you can get market -- you can get revenue improvements from the kinds of premium investments that people are making. One, you can get your own customer base to buy up to those products; two, you can get market share shift. The other airlines, I think, will have some success in getting their own customers to pay more for some of their products. But the biggest upside is getting market share shift, and you're not going to get market share shift away from an airline that's been investing for a decade. Another airline getting a little bit better than they are today. Is it going to come nowhere close to what United is. And a brand loyal customer is not going to say, all of a sudden, airline X closed one of 100 points of gap between United and them. So I'm going to switch my loyalty. They're going to stick with United.

So I think they might have upside in their own customer base, but there's really not much upside in the market share shift part of it.

And I will now turn the call back over to Kristina Edwards for closing comments.

Thanks, Regina. Thanks for flying with us this season. We'll see you again next quarter. Please contact Investor and Media Relations if you have any further questions.

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect.

With United Airlines next, I'm very happy to welcome back at Laguna, CFO Michael Leskinen. Mike, welcome back.

Thank you, Ravi.

So no 8K from you guys, which is good. That's the standard.

But can you give us an update on kind of what you're seeing out there and trends in 3Q relative to expectation?

Well, it's a standard, I think, not having an 8-K this business, stable business that is on a reasonable trajectory, you shouldn't have a lot of surprises. But we're not quite there yet. This industry, I mean, I've never been more excited about the transformation that the industry is undergoing.

And it's undergoing a transformation, that is customer led. Customers are choosing to fly on specific airlines because of the product, because of the clubs, because of the food, because of the loyalty programs. And that's fundamentally different than the past when customers were choosing basically primarily pricing schedule. Pricing schedule matters but now so much more matters.

And so you're seeing a divergence in fortunes based on the airlines that have a business model that's based on the customer and giving the customer choice and giving the customer options and those that had primarily focused on cost. And that's so fundamental to our path to double-digit margins. It's so fundamental to our path to an investment-grade credit rating. And so fundamental to proving out the stability through a recession or whatever next cyclical event.

If we start going into an economic downturn at 12% margin, and we lose 5 points, we're still mid- to high single-digit margins with an investment-grade balance sheet with tens of billions of dollars of unencumbered asset, we will never dilute shareholders again by issuing equity in a crisis. And that's what's going to lead to, I think, significant, significant multiple expansion for those players with a higher margin.

And you've seen it in the past. This is -- but we need to prove it, we need to improve that margin. But never have I felt more confident about that path. I've been dreaming about this transformation for years and years, but never I've been more confident than this year because this year, despite the results that we put up, despite the results that Delta has put up, the rest of the industry is in a recession. We got hit starting right after the inauguration with a significant decline in demand.

And that impacted us, no doubt, and Newark has impacted us in an idiosyncratic way. But despite all of that, our margins have proven resilient. I'm really proud of that. And the other players in the industry that are lower margin, are pivoting and they're pivoting in a way where they are trying to invest in segmentation. They're trying to invest in ancillary products that will give the customer choice. But they're 10 years behind those of us that have been investing in it.

We talk about investing in clubs. It takes 5, 10 years to build a club. It takes 5, 10 years to think about changing the cabins on an aircraft. It takes 5 to 10 years to put seat-back entertainment into our aircraft. And we're not standing still. Starlink, I'm incredibly excited about. We invested $100 million over the last year in improving food on our airlines -- on our aircraft. I hope all of you have experienced some of that. It makes a big difference.

And so we are a commodity industry that is turning into a customer-centric industry where customers follow, with brand loyalty. It's going to create strong, stable double-digit margins and investment-grade balance sheet. And I think there's a tremendous amount of alpha that will be generated for those of you that see that transformation early.

Got it. So maybe we'll come back to the near-term trends in a second. But just to stay on that theme, to your point, the other airlines are trying to reinvent themselves, and they are behind you. But they're also trying very hard to look like you. So do you think that -- what impact do you think that rate of change will have on the industry? Meaning do you think it's good for all of them to look more like you and that is a rising tide of RASM for everybody.

Do you think that that's potential competition where they can say, "Hey, I have a new plane and I have a new cabin and so come to me instead of flying United" kind of how do you think that plays out?

I think there's only space for a very small number of differentiated brand loyal airlines at the top of the industry. I think there's only so much space for that. I do think that there is a very important role for cost-focused airlines to play in smaller and midsized cities, leisure destinations like Orlando and Las Vegas. And there will always be a place for those types of airlines.

It's just smaller than what it has historically been. As more and more of the population in the United States has a preference for the products and services that we're offering. And make no mistake, this is not something that like United has done or Delta has done. This is something that the customers are choosing. This is about customer choice. It's just transformational.

Got it. So what do you think this industry looks like in 10 years? Like are we going to have 3 mainline carriers, 3 regional carriers and 3 ULCCs? Or do you think it looks fundamentally different?

I think probably in 5 years, I'll go even sooner than 10, I think in 5 years you're going to have a couple, maybe a few, but probably a couple of players at the top that have tremendous brand loyalty. And then you have maybe a player or 2 in the middle where they're serving mid- and small-size cities. And then you're going to have a constant churn of airlines that are low cost that are serving smaller cities in a point-to-point model place for that. I think that's probably where the industry stabilizes. I think it will be a healthy -- a much healthier industry, frankly, for everyone.

Got it. Speaking of healthier industry, again, I will give you guys all the credit in the world for first going out and publicly saying that there are people who are losing money flying and that's not sustainable and that's going to end badly. So here we are.

But given that the industry has now picked up that baton and they are cutting back on that unprofitable flying, do you think them shrinking is good for the industry overall. Have you seen enough at this point? For all the changes this industry has embraced we've had last year and this year, 2 pockets where there's been too much capacity and the industries had to take a bunch of it out, kind of has it now got to a point where this is sustainable going forward?

I'm not going to take debate on talking about others' plans. What I will say, having come from an investment management background, return on invested capital matters, delivering on your financial targets matters. And I think we're approaching a period where that enforces financial discipline on the industry. And so if you are earning a lot of money in some of your southern hubs and the margins are strong, fantastic. If you're losing money, in hubs consistently year after year after year that's not going to work.

And I think shareholders are going to increasingly hold leadership teams accountable as they should to deliver on financial metrics. And so I think that's what's healthy around it. And it's healthy because not everyone has been dealt the same set of cards. If you have spent a decade or more building out a customer-friendly model, you can't fix that overnight.

And so that's what I think is going to determine the winners and losers. I think it already has. I think that the investment community is starting to realize that, but I still think we're early innings. I think we're inning 3 of that transformation for this industry. I think it's going to be really healthy.

We've seen it in other industries. We've seen it in the hotel industry, the cruise line industry, I think, are good analogs. They're not perfect analogs. That's happening in the airlines now.

Got it. So you mentioned in your earlier remarks the path to double-digit pretax margins. How -- can you just give us the kind of big building blocks to get there, right? How much of that is building on this premium product, how much of it is share gain, how much of it is United Next and the new aircraft, how much of it is potentially cost take out? What are the big chunks there?

Look, I think most of it is customer led. It's customers. The demand profile that we see in the premium cabins, in international cabins, even in the main cabin, it seems to be different than the demand profile that some of the lower-margin airlines are seeing. It's fundamentally different. You can see it in the way we're all behaving. You can see it in what we're seeing at conferences. You can see it in the results. You're going to see it in the 3Q results, you can see it in the 4Q results.

So I think that's foundational to it, and we're going to have a revenue -- a unit revenue advantage that only widens because customers are choosing it. But on top of that, I think we've been really disciplined. I'm really proud of the finance team at United right now for what we've done on the cost front this year in what has been a recessionary year. We brought our cost down significantly relative to what I thought back in January.

Our procurement team has been restructured. We got a new leader [ Bob Rai ] out of RTX that's been fantastic. He's off to a running start. He's got some key lieutenants that are doing a great job, being smarter about structuring our contracts. We're the largest airline in the world, we should get the best pricing in the world. We increasingly are. And so that's been a big tailwind. We've got opportunities to run a more efficient tech ops organization. The team is doing a great job there. It's synergistic with an improved procurement department.

And so there's some real, I think, relatively low-hanging fruit on the cost front that we're going after at United, and I'm really, really proud of that. And that's definitely helped '25 relative to what I thought at the beginning of the year. As we look at the '26 and '27, I think some of that actually gained momentum. So we've got some nice tailwinds on the cost front.

But in addition to that, we have a gauge benefit. So as Boeing starts to produce more aircraft, especially MAX 9s and 10s, it's going to help us accelerate our gauge story. And that's going to be idiosyncratic for United for 2 or 3 years at least. I'm so really excited about that giving us a nice relative tailwind. So I think we've got a nice cost tailwind. We've got a structurally transformed industry that's driving strong unit revenues.

Andrew Nocella and his team, Patrick Quayle done an absolutely incredible job driving the network in a way where this connectivity just feeds on itself. And so I think that you're going to see it come from both. I'm not going to give an idea of is it 50-50, I don't know. But it's both that drive our margin expansion into that double-digit range.

Got it. So on that platform, let's talk about near-term trends and kind of how the quarter is shaping up. Obviously we've heard already from a number of airlines and July was a tricky month for a number of reasons, but there does appear to have been an improving trend in August, September, going into October. What are you seeing so far relative to that?

The strong trends we talked about on our Q2 conference call have absolutely continued. I feel great about it. There was like -- it was like a light switch, late July, early August. And we're seeing it across segments, across industries, really strong. I do agree with comments from some of our competitors that corporate recovery is leading really good.

Fourth quarter, international, I think, is going to be really strong. Third quarter. I think we're still working through match and supply with demand at the industry level. And so there's some work to do for next year via tailwind, but really strong. In fact, one stat from my team, we were just going through most recent bookings, if you look at the out bookings, 2 months and more out since Labor Day, it's been double-digit improvement year-on-year. So we just feel really emboldened. I mean that's a short trend, but I mean, the bookings are really strong, particularly corporate going into the fourth quarter.

I will remind everyone that for second and third quarter, we had an issue with Newark. And so we booked some tickets at lower yields. We'll see that in the third quarter. So what I expected when we set the guidance in August, so everything feels really, really good. But I want to remind everyone about that idiosyncratic difference for the third quarter. Fourth quarter looks fantastic. As we look for the setup into 2026 based on what we're seeing in bookings, really, really emboldened.

Got it. That really I'm going to hear -- I told Delta as well, I'm a little bit surprised to hear the tone from all of you guys on corporate travel, just given that in the general view that corporate America is somewhat in the cusp of recession, now attendance is up 50% here at Laguna Conference. But beyond that, kind of do you have a sense of what's driving that? Is it actual optimism on the corporate side for '26? Is it pent-up travel from what they didn't do in the first half of the year? What's driving that bounce?

I think it's simple, Ravi. Corporate is the segment that hasn't fully recovered since pandemic. I look around this full room, and I look around the conference, I think this is the top attendance it had. Business travel is coming back. And so I think that there's more to come. I mean we're not counting on it, but I think it's more to come and I think it makes sense relative to the levels we saw prepandemic that, that's -- we still have some more catch up there.

Got it. Let's talk about Newark. Obviously, kind of unfortunate disruption there. So you said trending towards the 0.9% drag that you had expected in 3Q so far. But how is the Newark resolution? And there seems to be some ongoing developments there kind of trending versus your expectations?

I'd tell you, we couldn't be more grateful for the administration and Sean Duffy and the team and what they're doing to drive more resiliency and stability into the system, particularly in the Northeast and Newark. So it's been tremendous. 72 operations per hour. I don't know if it stays at 72, it goes a little bit higher, but it's been -- it's foundational to run the airport at a level of capacity that the airport can handle on blue sky days.

And I think we finally have found that unlock. And so it will create a much, much more reliable hub, a hub that you can count on for connectivity. I think it's going to improve profitability. We've built lots of like buffers into the system to try and make it more recoverable during irregular operations. But if we can fix the overall throughput to balance supply and demand and with the physical capability of the airport is, you can kind of take some of that out.

So I think we'll see -- we talk about the path to double-digit margins. One element to that, that maybe is underappreciated is just how much improvement we can see at Newark. And so we're very excited about the future. In fact, if you look at the operational results at Newark versus LaGuardia versus JFK, really proud of the results at Newark since we brought the operations down to 72 operations. It's really right in the hunt when historically, it hasn't been.

Got it. You said in the past that you've been a big proponent of reducing the flight rate at Newark and kind of capping that capacity and now you have got that. Can you remind us, again, kind of who makes the decision on how many departures there are going to be and kind of what factors they're looking at while they make that decision?

It's government decision, and it's across agencies and in groups to make that decision. We have input, but we don't get to make that decision. But it's really just simple math. It's -- you've got 2 parallel runways. What -- how many can you fly on a blue sky day and you shouldn't schedule more than that. And that's where we are now.

Got it. So just to confirm, any book away, any weak RASM that you saw from incentivizing people to come back to Newark in 3Q, that is behind you in 3Q and from 4Q onwards?

We're almost fully behind us in 4Q. There's probably still a few corporate customers that have still maybe pushing a little bit of their flights out of JFK. From the disclosures you see, you wouldn't be able to see it, but we're still fighting to get a little bit of that back, but really excited about what's happening there.

Got it. Any other noisy items to think of in the third quarter. I think a couple of airlines have flagged July weather being disruptive from AIRO perspective. I think you guys had a tech outage very briefly for like a few hours, at one point in 3Q so anything else to keep in mind?