United Airlines Holdings Inc (UAL) — Q1 2015 Earnings Call Transcript

Thank you, Brandon. Good morning, everyone, and welcome to United's first quarter 2015 earnings conference call. Joining us here in Chicago to discuss our results are Chairman, President and CEO, Jeff Smisek; Vice Chairman and Chief Revenue Officer, Jim Compton; Executive Vice President and Chief Operations Officer, Greg Hart; and Executive Vice President and Chief Financial Officer, John Rainey. Jeff will begin with some overview comments, after which Jim will discuss revenue and capacity. Greg will follow with an update on our operations. John will follow that with a review of our costs, fleet and capital structures, after which we will open the call for questions, first from analysts and then from the media. We'd appreciate if you would limit yourself to one question and one follow-up. With that, I'll turn the call over to Jonathan Ireland.

Thanks, Nene. This morning, we issued our earnings release and separate investor update. Both are available on our website at ir.united.com. Information in this morning's earnings release and investor update and remarks made during this conference call may contain forward-looking statements which represent the company's current expectations or beliefs 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 materially from our current expectations. Please refer to our press release, Form 10-Q and other reports filed with the SEC by United Continental Holdings and United Airlines for a more thorough description of these factors. Also, during the course of our call, we will discuss several non-GAAP financial measures. For a reconciliation of these non-GAAP measures to GAAP measures, please refer to the tables at the end of our earnings release and investor update, copies of which are available on our website. Unless otherwise noted, special charges are excluded as we walk you through our numbers for the quarter. These items are detailed in our earnings release. And now I'd like to turn the call over to Jeff.

Thanks, Nene and Jonathan, and thank you for joining us on our first quarter 2015 earnings call. Today we reported pre-tax earnings of $585 million, the highest first quarter profit in United's history, and over $1 billion improvement compared to the first quarter of last year. We earned $1.52 per diluted share, achieved a pre-tax margin of 6.8%, and expanded our return on invested capital to 17.1% over the last 12 months. In the quarter, we generated more than $1 billion of free cash flow and repurchased $200 million of our common stock. Our cost discipline continued in the first quarter, with non-fuel unit cost down 1.5% year-over-year, bringing our average non-fuel unit cost over the prior four quarters to approximately flat with only 0.4% capacity growth. It is also the seventh straight quarter in which we improved productivity. We continue to deliver on our goals under Project Quality, our $2 billion efficiency initiative, and we’re making substantial progress on improving our balance sheet. Additionally, in the first quarter, our operational performance improved nicely with year-over-year improvements in our on-time arrival and completion performance. This quarter, all four of our Northern tier hubs experienced more snow days and more de-icing events than the first quarter of last year, which you'll remember was a very tough winter. Yet we canceled 17,000 fewer flights, inconveniencing 1.3 million fewer customers. Importantly, we've delivered our operational improvements while also increasing efficiency and productivity. We made improvements across every part of our business in the first quarter, and we could not have done this without the dedication and professionalism of our employees. I want to thank them for their great work and their pride in United. I'm pleased that each quarter we've been building on previous accomplishments. We expect that the second quarter will be another record quarter for United, with pre-tax margins between 12% and 14% driven by strong cost performance and lower oil prices. At United, we manage our business to maximize shareholder value. While unit revenue is an important metric, we ultimately make business decisions to maximize margin and return on invested capital. In this morning's investor update, we provided second quarter unit revenue guidance of down 4% to 6%. Jim Compton will explain the component of our second quarter present guide in more detail in just a minute. But I want to mention that some of the decline is directly related to earnings, accretive actions that by their nature are presently dilutive. The remaining anticipated unit revenue decline is due to external factors that we’re working to mitigate where we can. United has been the industry leader in capacity discipline, and as we've shown in the past, we'll take the appropriate actions to ensure we are matching capacity with demand. Accordingly, today we reduced our full-year capacity guidance by half a point and now expect to grow 1% to 2% in 2015. The first quarter was a good quarter for United in which we improved our operations, expanded earnings, generated significant free cash flow, paid down debt, and returned cash to shareholders. We will continue to work aggressively to bolster our revenue and increase our efficiency while maintaining our focus on expanding our margins and return on invested capital. Over the last several quarters, we have demonstrated that our plan is working and we remain excited about the opportunities ahead. With that, I’ll turn the call over to Jim, Greg, and John.

Thanks, Jeff. I’d like to take this opportunity to thank our customers for flying United. Every day we are working to improve our reliability, our product, and our offering of destinations and schedules you desire. In the first quarter, our unit revenue was up 0.4%, higher than the midpoint of our initial guidance. Our domestic unit revenue was up 1.6%, and our international unit revenue was down 0.5%. Our domestic unit revenue performance was largely driven by lower capacity in the quarter that outperformed anticipated results from our revenue initiatives and the timing of Easter. A contributor to our strong domestic performance was the re-banking of our schedules in Denver and Houston. We have seen both yields and volume of connecting traffic increase year-over-year in these hubs. We re-based Chicago in March, and are pleased with the initial results. Our domestic results were also positively impacted by the timing of Easter this year, as Easter travel began in the first quarter. This provided a tailwind of 0.5 points to the consolidated network. This Easter travel share will reduce PRASM by a similar magnitude in the second quarter. Transatlantic unit revenue increased 6.9% in the quarter, mostly driven by our seasonal shaping initiative, which reduced this flying during the lower demand in winter period while increasing flying during the higher demand summer period. This initiative helps to offset the pressure from a strengthening dollar, which generated a headwind of 1.4 points of PRASM in the Atlantic entities. Pacific unit revenue was down 7.4% primarily due to four factors; first, the weakening currencies in the Pacific contributed approximately 2 points of unit revenue decline; second, we grew our Pacific stage length as we revamped Australia flying and transitioned our unprofitable shorter haul intra-Asia flying to our joint venture partner ANA. This change in our Pacific flying, although earnings-accretive, drove approximately 2.5 points of unit revenue headwind; third, declining fuel service charges, particularly in Japan, drove more than 2 points of Pacific PRASM pressure in the quarter. Finally, some capacity additions in China continued in the first quarter and accounted for 1.5 points of unit revenue degradation. Turning to corporate revenue, in the first quarter, our corporate portfolio decreased by approximately 1% year-over-year, as our oil-related corporate customers began to reduce their flying. On a year-over-year basis, the revenue from our corporate energy accounts declined approximately 20%. Excluding energy, the remaining corporate revenue portfolio increased 1% year-over-year, with strength coming primarily from the healthcare sector. Ancillary revenue continued to grow in the first quarter, averaging more than $23 per passenger, an 8.6% increase year-over-year. Economy plus pricing optimization continues to be a leading contributor to our ancillary revenue performance. Quite simply, our customers value and are willing to pay for the extra space and comfort of our economy plus seats. In the first quarter, our economy plus revenue per available economy plus seat was up 16% compared to the first quarter of last year. In the second quarter, we expect our unit revenue to decline 4% to 6%, with capacity up 2.25% to 3.25%. Based on our current projections, we believe that the second quarter will produce the lowest unit revenue performance of the year. For the second quarter, we anticipate domestic PRASM will be down approximately 3% and international down approximately 7%. There are three primary contributors to the unit revenue weakness that together will pressure our second quarter PRASM performance by 5.5 points; first, the earnings-accretive improvements we have made to the United’s network that are PRASM dilutive contribute 1 point of PRASM pressure; second, there are external factors driving 3.5 points of pressure which consist primarily of the strong U.S. dollar, lower oil prices, and a 0.5 point headwind from the timing of Easter; third, competitive capacity and pricing pressures are generating approximately 1 point of unit revenue decline. I will walk you through each of these in greater detail and describe the actions we are taking. First, we've made a number of network and fleet improvements including several that reduce cost and expand margins, but aren't a drag on unit revenue. These improvements include the installation of slimline seats, the extension of our stage lengths, and the consolidation of seating arrangements, which in total we expect to drive 1 point of year revenue decline. As an example, we've installed slimline seats on 386 aircraft to date and expect to have 485 completed by year-end. These slimline seats improve fuel efficiency, generate very low marginal non-fuel costs, and are highly accretive to earnings. However, the additional seats create a headwind to PRASM, as they generate lower than average yields. We remain committed to these network and fleet modifications despite the unit revenue pressure they provide, as they generate significant cost benefits, are accretive to our margins, and will improve our operational reliability. Second, external factors are also contributing to our expected second quarter revenue performance; we expect that the strong U.S. dollar will contribute 1.25 points of consolidated unit revenue decline. We anticipate that as we move into the summer, U.S. point of sale will increase and offset some of this projected weakness. This will be more pronounced on the Atlantic entity as we expect American consumers will take advantage of the strong dollar and take European vacations. Where we don't anticipate a point of sale shift, we will benefit from capacity adjustments we are making through our network. In the second quarter, we will benefit from an 11% reduction in Japan capacity and a 13% reduction in our Canadian capacity to offset the weakening currencies in those countries. We will continue to monitor ongoing capacity reductions into the winter months to address continued foreign exchange pressure. Our current expectation is to reduce Japan capacity in the fourth quarter by 7% year-over-year. Declining oil prices are also affecting unit revenue. As I mentioned earlier, many international surcharges throughout the world, but primarily in the Pacific, have decreased as a result of lower oil prices. In the second quarter, we expect the average surcharge to decline compared to the first quarter and contribute approximately 1 point of year-over-year PRASM pressure to the consolidated network. Where demand permits, we have increased base fares to offset a portion of this headwind. Additionally, the Japan capacity reduction I mentioned earlier will help offset the surcharge reduction. We don’t anticipate these actions will completely close the gap, but they should mitigate some of the effect. Lower oil prices are also causing energy-related corporate customers to scale back their travel budgets. We expect this to reduce consolidated unit revenue by approximately three-quarters of a point in the second quarter. We are working closely with our corporate customers to address their travel needs, and we have begun taking appropriate capacity reductions in several energy-centric markets to address their declining performance. Coming into the summer, we plan to reduce capacity in these markets by 6 percentage points compared to our original expectation. We will continue to closely evaluate the performance in these markets and are prepared to make additional changes if necessary. The third contributor to our unit revenue decline is the competitive capacity and pricing pressure we are confronting. With respect to competitive capacity in the second quarter, our routes will face 6% competitive seat growth. This growth will come largely in China, the transatlantic market, and Hawaii. We anticipate this will provide a 1 point headwind to PRASM. We expect that this competitive pressure combined with the external factors and margin-accretive actions we are taking will put a toll of 5.5 points of pressure on consolidated unit revenue in the second quarter. With respect to capacity, today we lowered our full-year guidance by half a point to 1% to 2% year-over-year. With this level of capacity, we can accomplish our goals of durable, margin-accretive growth while also addressing the pressure points that we just discussed. In conclusion, we are pleased with the progress we have made to expand our revenue premium over the last few quarters. The current environment has brought new challenges, and we will continue to manage our network as we have for several years with discipline. With that, I'll turn the call over to Greg.

Thanks, Jim. I'd like to take a moment to thank all of our employees for their great work in the first quarter. It was a challenging quarter and a tough winter, but our operational performance improved as a result of their professionalism and dedication. As Jeff mentioned, in the first quarter, we faced record cold and had more snow days and more de-icing events than the first quarter of last year, the year of the polar vortex. Despite these challenging conditions, our operational performance improved year-over-year. One area of keen focus for United has been our express operation. In the first quarter, our express completion factor improved by almost 5 points compared to last year. Our mainline operation also had a strong quarter, with on-time performance increasing by 1.5 points year-over-year, and in February, we had the fewest cancellations of any major carrier despite having four northern hubs. Much of this improvement is due to process changes and the investments we made to improve how we manage through and recover from regular operations. For example, in late January, we experienced a significant snow event at our north hub; using our new crew solver software, we were able to quickly and efficiently redeploy our flight crews after the storm, resulting in a quicker recovery for customers and employees. On the following day, our on-time departure performance was at least 6 percentage points better than we would have achieved last year. Additionally, we had the best express recovery day in United’s history. Proactive planning and the great work of our employees combined with new software and other technology solutions all helped us to improve our operations in the first quarter. While I am pleased with our progress, we continue to take actions to improve our reliability. And now I will turn the call over to John.

Thanks, Greg. And thanks to everyone for joining the call this morning. I’d also like to take this opportunity to thank our employees. The progress we made this quarter demonstrates their commitment to improving United. With their continued support, I know we can carry this momentum into the future. Today, we reported our highest ever first quarter pretax profit of $585 million and grew our earnings per share by $2.85. We increased our trailing 12-month return on invested capital to 17.1% and generated over $1 billion in free cash flow. Both our earnings and free cash flow represent a $1 billion improvement over the first quarter of last year. I am pleased with the progress we’ve made but even more excited about the opportunities that we have in front of us. First quarter consolidated costs excluding fuel, profit sharing, and third-party business expenses decreased 1.5% year-over-year, once again demonstrating the great progress we are making in reducing cost, becoming more efficient, and improving operations. We continue to make solid progress in executing our project quality efficiency initiatives, including continued productivity improvements. In the first quarter, productivity improved 2% year-over-year, marking our seventh consecutive quarter of improved productivity. We also benefited from a strengthening dollar which drove approximately 0.5 points of unit cost improvement. Looking to the second quarter, we expect consolidated costs again excluding fuel, profit sharing, and third-party business expenses to be up 0.25% to 1.25% year-over-year. Our full-year guidance remains unchanged as we continue to expect non-fuel costs to be between flat and up 1% versus 2014 despite reducing our full-year capacity guidance by 0.5 percentage point. Project Quality continues to be key to achieving our cost goals. In 2015, we expect to achieve $800 million in non-fuel savings from these initiatives and we expect productivity to improve by approximately 3% for the full year. Turning to fuel expense, we recorded approximately $200 million hedge loss in the quarter, which includes approximately $10 million from second quarter positions closed out during the first quarter. We are now 11% hedged for the second quarter and based on the April 16th fuel curve expect to incur approximately $109 million in hedge losses while participating in 93% of any future price declines. For the second half of 2015, our current hedge book is in a loss position of approximately $340 million and allows us to participate in 79% of any decline in oil prices. Based on our guidance, we expect our pretax margin to be between 12% and 14% in the second quarter and expect to generate significant free cash flow again. We plan to utilize this cash in a balanced fashion; to buy back stock, pay down debt, accelerate funding of our pension, and make appropriate investments in our business. In the first quarter, we returned $200 million to shareholders through our repurchase program, and we have now completed $520 million of our $1 billion program. Our current expectation is that we will complete the share buyback program in 2015. We continue to make good progress in de-levering our balance sheet. In the first quarter, we made $320 million of debt and capital lease payments, including a prepayment of approximately $120 million, and also announced our intention to prepay $600 million of 6% notes in the second quarter. By May 1st, we will have prepaid approximately $750 million of debt year-to-date, generating $40 million in annual interest expense savings. In addition, in the first quarter, we contributed $180 million to our pension plans and now expect to fund approximately $700 million in 2015, well in excess of minimum funding requirements. Our capital expenditures for the first quarter were $794 million, and we continue to expect full-year capital expenditures to be between $3 billion and $3.2 billion. In the quarter, we took delivery of 12 mainline aircraft consisting of nine Boeing 737 900 ERs and three Boeing 787-9s. We also introduced 12 more new 76-seat E175s in service. In addition, this morning, we announced several refinements to our fleet plan which will further our efforts to achieve our long-term capacity goals of being disciplined with our capital investment. We have discussed for some time our need to reduce our dependence on 50-seat regional jets and to do it in a capital disciplined manner. We are in final negotiations to lease between 10 and 20 used narrow-bodied aircraft which we will take delivery of over the next few years. These aircraft require only modest reconfigurations in order to be compatible with our current fleet. Additionally, we are extending the useful life of 11 more of our 767-300 ER aircraft which are in addition to the 10 we previously announced. By adding an all-new interior which will include new Y-class seats, a state-of-the-art entertainment system with WiFi, winglets, and modifications to improve aircraft reliability, we expect these aircraft to continue to be productive for years to come. Importantly, these fleet changes allow us to reduce our reliance on 50-seat regional jets from approximately 8% of our ASMs at the beginning of last year to about 4% by the end of next year. Finally, we signed an agreement with Boeing to substitute 10 787s for 10 777-300ERs without any material change to our capital spending. The increased gauge of the 777-300ER will allow us to better serve certain high-demand markets and will integrate seamlessly with our existing 777 fleet. These decisions are significant steps in achieving our long-term capacity plans, including the elimination of a significant portion of our 50-seat fleet. In conclusion, I'm pleased with our performance in the first quarter, we've demonstrated great progress for four consecutive quarters and are executing against our plan to continue to increase shareholder value. We will take the appropriate actions required to expand earnings, grow margins, generate free cash flow, return cash to shareholders, and increase our return on invested capital. I will now turn it over to Jonathan to open up the call for questions.

Thank you, John. First, we'll take questions from the analysts' community, then we'll take questions from the media. Please limit yourself to one question and if needed one follow-up question. Operator, please describe the procedure to ask a question.

On the fleet changes you guys announced the transitioning of some of the wide bodies under the domestic entity, can you just, I understand you're looking to pull down some international capacity but can you just walk through how that impacts kind of the domestic capacity trends over the next few years?

Hey Joe, this is John. I sense that the main question out there is there fuels domestic capacity growth or not, and the answer is no, it doesn't. What this is going to allow us to do, it's going to permit us to reduce frequencies and increase gauge which is part of our network optimization plan. So this is a seat neutral initiative that we're doing here. Let me give you an example of where we fly high frequencies in our hub-to-hub and markets, take the example of San Francisco to O'Hare. Within 90 minutes on the late flights of the night, red-eyes, we fly three narrow-body aircraft. This is going to allow us to consolidate frequency to use that 777 in that market.

And I'll tie it to John's comment where he on numerous times mentioned removing our reliance on 50-seat regional jets, these narrow bodies then we'll be able to free up and do exactly that, is move, as our 50-seat reliance as we move away from that. It generates the narrow bodies to cover that, so there's a cascading effect to it, so in general, it really promotes more cost-efficient flying while serving the demand that's out there.

Joe, I would just add, this is John, and this is a bigger picture all part of our plan to utilize the assets that we have more efficiently and to improve our return on invested capital so that we can deploy capital in a manner that best creates shareholder value.

Thoughts on LaGuardia parameter rule and the impact on PS out of JFK, also wondering if this ties to the domestic wide body phenomenon, you clearly have the aircraft required for Transcom out of LaGuardia on 7,000-foot runway. But the facilities there are lacking in my opinion, the lounge is air side and obviously land side and obviously your slot portfolio isn’t quite as rich as Delta or Americans. Does this tie together and what are your aggregate thoughts on this topic?

This is Jeff; let me take a crack at that. The parameter rule has been in place I think for something like 60 years. It’s worked pretty well as is. We’re certainly consulting with the port authority about what their thoughts are and our thoughts and then different carriers have different views on that. As for operations in JFK, I don’t think really at this point we want to comment on that.

And Jamie I would add, this is Jim here, our Transcom product continues to improve and perform very well across all the ports there so we’re excited about the product that we’re bringing in and what we can do in that market across our network.

And then follow up, question probably for Greg, as we think longer term about the ramifications of potentially pursuing more of a used aircraft strategy, I think Delta would argue one reason of their strategy has been successful that they have this sufficient Tech Ops in place that one really needs to support a somewhat older fleet. Is there a corresponding investment in maintenance for United that we should think about modeling as it relates to this strategy, or do you have the systems and people in place? I realize we’re only talking 10 to 20 shelves for now. I am just trying to think a little bit longer term.

I think we’re particularly well positioned to be able to manage any used aircraft we bring on market or into the market with our facility in San Francisco which we think are some of the best in the world and the services we provide there. So I think we’re very well positioned, and it is well a lot of what the aircraft we’re looking at are actually similar vintage to what we already have in our fleet today.

Q1 was a very strong quarter for free cash flow, those were $1 billion, but only $700 million looks seasoned deployed for debt pension and buybacks and I assume that free cash continues to improve in Q2 and Q3. John, you mentioned balanced deployment, but can you offer more color on the cadence of that deployment between the different opportunities and why we aren’t seeing more buyback especially with year-to-date stock performance?

Certainly, Julie, we’ve talked for some time about our need to continue to de-lever, and we’ve set some intermediate targets out there of gross debt goals in the neighborhood of $15 billion. The steps that we took to prepay the debt that thus far this year, as we’ve announced, will help achieve some of that. I do firmly believe that there is significant shareholder value opportunity with de-levering our balance sheet. We are too heavily levered today and it’s a vestige from an industry which we’re not operating in it anymore, it’s much more reformed industry. As we look at the opportunities that we have to de-lever, we don’t have a lot of other options to prepay debt where it makes sense for the secured debt that we have, the term loan facility of about $1.3 billion. So as we begin to pick off these pieces of debt like the 6% notes, there are less opportunities to prepay that, and you will see us probably gear more towards returning cash to shareholders at that point.

Two questions here, if I could. Firstly, John, I want to make sure I heard you correctly. I think you indicated that you were going to prefund the pension by 700 million this year?

That's correct.

Okay, so, I don't think you've put out your annual yet, but just based on where the deficit was, plus the 700 million this year, it sounds like you're actually pretty close to removing the underfunding. We could be a year or so away from that; is that right?

Well, that's fairly close. At the end of the first quarter, we’ve got an unfunded liability position about $2.5 billion. And what I was alluding to earlier, you could actually find yourself in a situation where if you close that entire gap and then interest rates were to rise again, that reduces the projected benefit obligations, so you could actually be in a situation where you have an overfunded pension, and that's not necessarily the best use of that capital. So, we're very thoughtful about the amount that we're going to fund so that we can get close to fully funded but not be in a situation where we'd be overfunded.

It's a question John on, looks like your ancillary business expense guidance ticked up at about a $100 million incrementally in the back half of the year. Is there any revenue attached to this, and if not, come the chasm mix fuel guide did not come down from the prior guide, it even went a little lower capacity and given how Project Quality is going I would think that that would sort of lead to a reduction in the full-year chasm mix fuel guide, unless again this is a new initiative and there's some other revenue I can put in the model in the back half.

That's an insightful observation, Hunter; we do have in that guidance an assumption about resuming some of the third-party sales we've done for fuel. Just this quarter alone you know it's about a $130 million variance from the previous year, so to the extent that we got an increase in the revenues and we have more or less in all setting expenses. It's a profitable business, but it’s pretty low-margin.

Perfect. And just my second question to Jim, on the 777s, the ones that are being redeployed to domestic; appreciate the example that you provided. I mean the way we should interpret that or think about that airplane, is it going to be utilized hub to hub flying or Hawaii is that going to be the primary use of those airplanes coming back into the domestic?

Hey Michael, this is Jim and you hit it right on the hub. It'll support us in frequency consolidation hub to hub, and also support our Hawaii so that’s exactly right.

Just two questions from me, to what extent did pilot availability factor into your decision to accelerate some of these regional fleet changes, and wonder if you can offer any comment on your partners' ability to fly the schedule you want them to fly?

This is Jeff; I'll talk a little bit about that. Pilot availability clearly, particularly for the 50-seat operation is an issue for us which does indeed affect the availability of our express operators to fly the scheduled flights. Moreover, the 50-seat product is something that is not as good a product as the 76-seaters, for example the new Embraer 175s that are in the market; it is a very attractive airplane, very comfortable airplane that has WiFi, has quality food upfront, has better ancillary revenue opportunities, and comfortable seats and is a very good product. But the shift of the pilots, our reduction in availability of pilots for smaller airplanes is clearly affecting us, as it’s affecting all of our competitors who operate the regional program.

It's fair to assume that, Duane, a lot depends upon earnings, but to your point, we tend to build a lot more cash in the first and second quarters, and we expect a very strong cash generation there. We have a goal of being free cash flow positive in every quarter, and given the earnings profile of this business, that's not an unreasonable assumption.

Thank you, John. First we'll take questions from the analysts' community, then we'll take questions from the media. Please limit yourself to one question, and if needed one follow-up question. Operator, please describe the procedure to ask a question.

Apologies for yet another 777 question, but I can't resist. I'm just wondering if the move is potential prelude to adding a fourth cabin domestically, and how should we think about the pros and cons of that kind of a strategy?

Dan, this is Jim. We have no plans to add a fourth cabin domestically. Given what we’re doing, ancillary revenue particularly with the economy plus, we actually were really early in the game of driving as sort of the revenue with that product today, so we're going to continue to build on that, and so the answer would be no.

We continue to make good progress in de-levering our balance sheet. In the first quarter, we made $320 million of debt and capital lease payments, including a prepayment of approximately $120 million, and also announced our intention to prepay $600 million of 6% notes in the second quarter. By May 1st, we will have prepaid approximately $750 million of debt year-to-date, generating $40 million in annual interest expense savings. In addition, in the first quarter, we contributed $180 million to our pension plans and now expect to fund approximately $700 million in 2015, well in excess of minimum funding requirements. Our capital expenditures for the first quarter were $794 million, and we continue to expect full-year capital expenditures to be between $3 billion and $3.2 billion. In the quarter, we took delivery of 12 mainline aircraft consisting of nine Boeing 737 900 ERs and three Boeing 787-9s. We also introduced 12 more new 76-seat E175s in service. In addition, this morning, we announced several refinements to our fleet plan which will further our efforts to achieve our long-term capacity goals of being disciplined with our capital investment.

Thank you for participating in the call today. Please reach out to media relations if you have any further questions. We look forward to speaking with you next quarter. Goodbye.