United Airlines Holdings Inc (UAL) — Q1 2018 Earnings Call Transcript

Thank you, Brandon. Good morning everyone and welcome to United’s first quarter 2018 earnings conference call. Yesterday, we issued our earnings release and a separate investor update. Additionally, this morning, we issued a presentation to accompany this call. All of these documents are available on our website at ir.united.com. Information in yesterday’s release and investor update, the accompanied presentation and the 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 earnings release, Form 10-K 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 the most directly comparable GAAP measures, please refer to the tables at the end of our earnings release, investor update and presentation, copies of which are available on our website. Joining us here in Chicago to discuss our results and outlook, our Chief Executive Officer, Oscar Munoz; President, Scott Kirby; Executive Vice President and Chief Commercial Officer, Andrew Nocella; and Executive Vice President and Chief Financial Officer, Andrew Levy. In addition, we have Executive Vice President and Chief Operations Officer, Greg Hart, in the room, available to assist with Q&A. And now, I would like to turn the call over to Oscar.

Thank you, Mike. Good morning everybody and thank you for being on the call today. Before I go on to our first quarter results, I would like us to take a moment and just keep all the passengers and crew of Southwest Flight 1380 in our thoughts. I know that the entire United family stands shoulder to shoulder with our Southwest colleagues in this difficult time. As we turn to slide four, yesterday we reported adjusted pretax earnings of $179 million with pretax margin of 2% as adjusted. We achieved the top end of our guidance due to a strong demand environment and robust revenue trend, particularly in our international markets. Our earnings per share of $0.50 as adjusted, was 19% higher than our first quarter results of last year. Our first quarter reflects exceptional operational performance in the face of back-to-back winter storms in the Northeast, as well as other various weather events. And not only did our employees power through these challenges, they continue to deliver record-setting operational performance. I want to thank all 90,000 of our employees for their outstanding work and dedication to keep our airline running not only safe but on time. Every day, every flight, our team is focused on delivering a positive experience for our customers throughout their journey. We’re equipping our employees with the modern tools and support they need to provide our customers with the best possible travel experience. As you can see on slide five, this quarter, we completed the rollout of 10,000 mobile devices for our airport agents who support gate functions such as rebooking during irregular operations, applying the upgrade, coordinating family seating and many other tasks. These tools not only help our employees and customers but help drive efficiency, something we are extremely focused on. During the quarter, we also began training our team on United’s customer service decision framework developed alongside our frontline employees, we call this the core4. It is a hierarchical framework based on principles of safe, caring, dependable and efficient. Biggest change is that caring is second only to safety. And what that means is giving our employees the flexibility and more importantly the ownership to take actions for our customers when our policies and procedures don’t fit the situation in hand. Early results evident in our customer satisfaction scores were very positive and we’re on track to have 80% of our employees complete this core4 training by the end of the year. As you know, improving customer service and experience is one of the top priorities for us here at United. At our January 23rd investor event, we laid out a three-year plan to deliver a CAGR and earnings per share of about 25%, as shown on slide six. To execute on this plan, we have two primary focus areas. First is strengthening and growing our domestic network; and second is driving asset efficiency and productivity, which is underpinned by our commitment to keep CASM-ex flat or better through 2020. We have tremendous network potential and have defined and aligned on the strategy designed to unlock our opportunities to better leverage what we call our uniquely United strength. We’re very confident in our multiyear network growth strategy and remain committed to the long-term financial targets we laid out in January. In fact, we’ve seen early successes on many of our new routes. That said, we believe the strongest evidence that the plan is working is our march towards our adjusted EPS targets. Despite the recent increases in fuel, today, we’re tightening our full year 2018 adjusted EPS guidance range by $0.50 based on the combination of our first quarter results and our increased confidence in the remainder of the year. Our new adjusted EPS guidance range is now $7 to $8.50. We’re entering the second quarter with the momentum, encouraged by trends in the revenue environment and how our employees continue to raise the bar on operational performance and customer service. And so with that, I will turn it over to Scott.

Thank you, Oscar, and thanks everyone for joining us today. To begin, I would like to thank all of our employees for delivering another quarter of top tier operational performance. We set our best-ever first quarter consolidated D0 with March marking the seventh month in a row of being first among our primary competitors. We believe that D0 really is the best measure of an airline’s core operating performance and I’m proud to be a part of this leading team. And we are running a great operation, getting customers through their destination on time with their bags, with the minimum amount of hassle. The essential requirement to being a customer-centric airline, it clearly isn’t enough. We at United have to do much more to run an on-time airline. Empowering our frontline to put customers first, use their judgment really is one of the keys to making United great in the long-term. That’s the reason why you hear all of us talk about the core4 training as such a critical element of our plans here at United. The core4 represents not just some flavor of the day corporate initiative but a real necessity to change our DNA and put the customers first. Moving onto the revenue environment. All regions performed above expectations for the quarter, both business and leisure bookings did well domestically and the front-cabin drove outperformance in our international business. A healthy revenue environment coupled with the commercial initiatives, Andrew Nocella will touch on shortly, got 2018 off to a strong start. Running a great operation allows us to focus on executing our network strategy to strengthen and grow our hubs. On slide 10, we have tightened our full-year capacity guidance to 4.5% to 5.5% from the previous quarter’s 6%. In addition, there seems to be some misunderstandings about scope relative to our three-year growth plan that I’d like to take a moment to clarify. We believe changing scope and giving a regional product that is competitive is important to United’s long-term future. However, it takes time to negotiate a new agreement, then takes time to negotiate an aircraft deal, and then it takes 18 months or more before the first aircraft are built and start actually flying. So, while it is important to the long-run competitive position at United, there really was never enough time for us to get all of that done and aircraft delivered to have a meaningful change in our regional fleet before 2020. So, our targets through 2020 were not and are not predicated on changes to scope. We have great confidence in our $11 to $13 adjusted EPS target but it is based on our existing fleet plan. We are pleased with how the year began, but as we look forward to the remainder of the year, we will continue to focus on running a great operation, executing the growth plans, and increasing our efficiency and productivity. We also know that we have more to do for the customer experience, which is represented by our core4. We feel really good about the demand environment overall and we more specifically for how that revenue outlook is shaping up here at United. And while we are doing everything we can to drive revenue performance, our cost base is the lever that we can most control. And doing so, it’s fundamental to improving our earnings profile. Andrew Levy will talk more about our cost performance and our opportunities going forward, and I’d like to thank him and the entire United team for their hard work in the first quarter to keep us in the middle of our guidance range despite the significant impact of storms. We feel encouraged about how the first quarter came in and are optimistic about the next couple of quarters that we have visibility on. It’s early, but based on everything that we can see so far provides us with increasing confidence that we are on the right path with the growth plan. Before I turn it over, I’d also like to congratulate Mr. Leskinen, who has a baby due tomorrow and assure his wife that we will rush into the airport after this call to make sure he gets home in time. And with that, I’ll turn it over to the Andrews.

Thanks, Scott. Turning to the revenue environment on slide 13. Our system PRASM was 2.7% higher year-over-year for the first quarter. As Scott mentioned, all regions exceeded initial expectations with close in strength materializing in the week before Easter holiday, which has been historically weak. We also had a 50 basis-point tailwind from foreign exchange in the quarter. Domestic unit revenue sequentially improved throughout the quarter with corporate revenues being up 9% year-over-year, led by the energy sector. This outpaced our top line growth of 6%. As a result of an intensified competitive landscape and corporate pricing, particularly in the small and medium enterprise segment, we invested in sales initiatives that have sharpened our competitive position across all sectors, geographies and the entire fare spectrum. The Atlantic region had our strongest year-over-year PRASM of any region in the quarter. We saw sequential improvement each month in the quarter and now have seen improvement for six consecutive quarters. This positive year-over-year PRASM momentum is driven by strong performance in the economy cabin and we continue to see strong revenue performance upfront, as well as a 2-point benefit from foreign exchange. Overall, forward-looking trends show the second quarter looks promising with anticipated continued strength in demand for both cabins. Latin followed in performance with the bulk of the strength driven by the Caribbean beach markets and Central America, both of which had double-digit PRASM growth in the quarter. After 13 quarters of underperformance in the Pacific, PRASM inflected strongly positive in the month of March with demand catching up to supply. China PRASM improved throughout the quarter. Excluding Micronesia, our Transpac PRASM would have been positive in Q1. Looking ahead, we anticipate second quarter PRASM to be up 1% to 3% year-over-year. Moving to slide 14, I’d like to give an update on some of our commercial initiatives we outlined at our investor event earlier this year. At the end of the first quarter, Gemini, our new revenue management system is rolled out on all flights and we expect Gemini to be running in all cabins by the end of this month. Initial results are on plan and show better managed places as measured by a more optimal mix of medial fares. I’m really proud of the team and we believe these preliminary results are encouraging and represent the opportunity we can expect Gemini to drive moving forward. Our Basic Economy product continues to evolve and is currently available for purchasing about two-thirds of our domestic non-stop markets. Now, that it’s begun to mature and is competing with similar products from our large competitors, Basic Economy is contributing as we hoped with 60% to 70% of our customers buying up to standard. While there is still room for further optimization, it’s been an effective competitive tool. In November, we began offering dynamic pricing for Everyday Awards for our MileagePlus members. Since making this announcement, we have seen a 16% increase in saver awards. This allows MileagePlus to offer lower price awards to members while at the same time optimizing award expense to United. On the MileagePlus card, new card acquisitions continue to build on strong fourth quarter performance, and we’ve reached an inflection point with the 7% increase in acquisitions in the quarter. This is the largest number of new accounts in the quarter since the second quarter of 2016. Card spend was up 3%, which we view as a significant opportunity for further growth. We will continue to work with Chase to grow card acquisitions and improve the programs to make it better for our joint customers. Another customer enhancement is WiFi. We’re bringing Viasat’s latest generation in-flight entertainment and connectivity system to the 70 aircraft, including our Boeing 737 MAX. This system is designed to provide customers with fast, reliable internet connections and to be able to connect with key business applications such as corporate, VPN and secure email. Moving on to Polaris, on slide 15, we remain on track with our aircraft reconfiguration schedule. We plan to induct a Polaris-configured aircraft every 10 days through the end of 2020. We are very excited about Polaris and continue to invest and improve the soft product in response to customer and employee feedback. We’re currently on schedule to open four Polaris lounges this year with San Francisco opening in just a few days at the end of this month and New York and Houston in one more month and Los Angeles later this year. In summary, we feel the revenue environment is robust and as strong as we have seen in a long time. Our commercial initiatives have taken off in the right direction. And with that, I’ll turn it over to Andrew.

Thanks, Andrew. Yesterday afternoon, we released our first quarter 2018 earnings and our second quarter investor update. I will discuss both our results and outlook at a high level, and please refer to those documents for additional detail. Slide 17 is a summary of our GAAP financials and slide 18 shows our adjusted results. We are pleased to report adjusted earnings of $0.50 per share, which was 19% higher than the first quarter of 2017. Adjusted pre-tax income was $179 million and adjusted pre-tax margin was 2%. We were very pleased with how the quarter came in compared to initial expectations. Slide 19 shows our total cost per ASM for the first quarter of 2018 and our estimates for the second quarter and full year. Turning to slide 20, non-fuel unit costs in the first quarter increased 0.6% on a year-over-year basis, which is slightly above the middle of our initial guidance range despite the impact from weather events which cumulatively added 40 basis points of non-fuel CASM ex-headwind in the quarter. We expect second quarter non-fuel CASM ex to be between flat to up 1% compared to the second quarter of 2017. The combination of higher regional capacity expense and increased airport costs represents almost 2 points of CASM ex pressure. But, we expect these will largely offset year-over-year by lower unit costs in other line items. It’s important to note, these were known areas of cost pressure for the second quarter when we provided our 2018 cost guidance in January. We also expect to see a nice decline in CASM ex during the second half of the year which we get into on slide 21. During the third quarter of 2017, we started to ramp up our 50-seat flying, so as we get into the back half of the year, we start to lap these costs. This alone is expected to provide half a point of CASM ex tailwind compared with the first half of this year. Our capacity growth rate is also expected to be meaningfully higher in the last two quarters with much of the increased rate of growth driven by flying during off-peak periods. As we discussed in January, we believe increasing the productivity of our fixed costs will have a very positive effect on helping contain growth of non-fuel unit costs in 2018. We’ve also launched several initiatives to drive increased cost savings as the year progresses. These include our supply chain excellence projects, which will improve the efficiency of our aircraft part supply chain, and several projects in our maintenance planning area which will improve our airframe heavy maintenance programs and further optimize our checks. Finally, we’re continuing to utilize our balance sheet by purchasing aircraft off lease, which optimizes our aircraft ownership costs. All in all, I’m very confident in reaffirming our non-fuel unit cost guidance of down 1% to flat for the full year 2018. Turning to slide 22, year to date through April 16th, we have purchased $747 million of our shares, which represents about 4% of the total shares outstanding at the end of 2017. That leaves us with $2.3 billion remaining of the $3 billion repurchase authority granted by our Board in December of 2017. We plan to continue to opportunistically return excess cash to shareholders through repurchases of our stock when it’s trading below our view of intrinsic value while maintaining appropriate liquidity. For 2018, we continue to expect adjusted CapEx to be between $3.6 billion and $3.8 billion. On fleet, we took delivery of two Boeing 777-300ERs and four Boeing 787-9s in the first quarter. We also continued to take advantage of our balance sheet and purchased six mainline and 17 regional aircraft off of lease, which gives us greater flexibility and better economics for our fleet. Looking forward to the second quarter, we plan to take delivery of our first six Boeing 737 MAX 9 aircraft and are scheduled to begin operating the aircraft in June. We’re very excited about the efficiency improvements and customer experience enhancements this aircraft will bring to our fleet. We also continue to be very active in the used aircraft market and recently secured a deal for 20 Airbus A319 aircraft scheduled to be delivered to us in 2020 and 2021. Used aircraft provide us an enhanced opportunity to maximize returns regardless of where we are in the economic cycle. And we’re in discussions for more used widebody and narrowbody aircraft. Slide 23 includes the summary of our current guidance including second quarter projected fuel price range using the April 12th fuel curve. The range provided for capacity, revenue and costs imply the second quarter adjusted pretax margin between 9% and 11%. And as Oscar mentioned earlier, on slide 24, we are raising the bottom end of our full-year adjusted earnings per share guidance by $0.50 to a new range of $7 to $8.50. The momentum we’ve established in the first quarter has increased our confidence in our ability to deliver adjusted EPS in this tightened range. With that, I’ll turn it over to Mike to kick off the Q&A.

Thank you, Andrew. First, we will take questions from the analyst community, then we will take questions from the media. Please limit yourself to one question, and if needed one follow-up question. Brandon, please describe the procedure to ask the questions.

Hi, guys, thanks for the time, good quarter. Scott or Andrew Nocella, thanks for the color on the scope constraint. I guess, the other constraint to your growth that I’ve been wondering about is on airport assets. Do you have enough spare gate and runway availability to execute your growth plan at the Mid-Continent hub, or do you need to go on and get more?

For the most part, we have what we need. Really when you look at our schedule, the fact is the airline operates, bank structures where one or two of the banks were completely full through the day but the rest of the banks structures, the rest of the day had excess capacity. So, as we fill in the capacity in the other time today, really obviously very cost-efficient, we don’t need incremental gates across most of our hubs and we’re able to grow there.

Okay, great. And then, I guess on kind of a similar topic. My sense is that you have some room to grow at Dulles perhaps more than anywhere else, but that wasn’t really a focus when you rolled out your network plan back in January. And so, I guess, I was just wondering if there is room to drive more connections over Dulles specifically, because my sense is that you’d like to refocus more towards the local market.

So, Dulles is a great hub. It operates four departure waves per day today and only one of those departure waves is full from a gate perspective. So, there is a lot of opportunity in Dulles. We continue to evaluate exactly how to take advantage of that but we are excited about all of our hubs and Dulles is one of those hubs, and I do think there is opportunity to grow Dulles in the future.

And then Andrew Levy, on the CASM guidance, it looks like you need about 200 basis points deceleration in the second half of the year to get to the full year midpoint. Can you just help us bucket what some of the big moving pieces are? If you could help quantify it, that would be helpful.

Well, I think, the big pieces are the ones I have referred to that are on slide 21. The 50-seater alone is 0.5 points improvement in the second half relative to the first. We are growing substantially more in the back half of the year, you can see that from our capacity and as we noted, the decent amount of that growth is coming during off-peak periods and that’s a very, very low marginal cost. So, that’s a cost saving that we will see in the large number of our P&L, income statement line items. And then, as far as some of the things that I specifically mentioned, I don’t want to give you actual numbers on what the value of those are. However, they are accelerating as the year goes on. For instance, the supply chain excellence project is something we’re really excited about, spent a lot of time planning at the end of last year. And we are just beginning to ramp that up that’s going to deliver benefits to us we think more so as time goes on, including more in the next year. Aircraft rent expense is something that we continue to see some goodness there as we have shifted more airplanes on the balance sheet. So, we will continue to see some benefits there. So, beyond that, I’m not sure how much more detail we want to give you right now but we feel really confident that the combination of these items that I have mentioned as well as several others that are less impactful are going to help us drive our CASM ex meaningfully lower in the second half of the year. And that’s why we are so confident reaffirming the full year guidance.

My first question is this: When considering the first quarter, which has historically been the toughest for you, it's quite significant that you have two consecutive years of profits. As we think about moving from the fourth quarter to the first quarter in the future, is this the new standard? Are we going to see higher profits in the first quarter going forward compared to what United has experienced in the past?

Thank you for your comment, Helane. We were pleased with our performance in the first quarter this year. The fourth and first quarters are typically the weakest for United due to having less service to Florida and the Caribbean. Thus, the significant movement from the Northeast to these locations during winter doesn't have as much of an effect on us compared to other airlines. We are seeing improvements in these quarters and expect this trend to continue across all quarters. The positive changes we experienced in the first quarter should carry through to subsequent quarters as well, including our peak seasons in the second and third quarters.

Right. And so just to follow-up the holidays then are less impactful for you than it might have been in the past years or they might be for other carriers, is that sort of accurate?

I believe the level of impact for us is likely similar to past years, but it is less significant for United compared to other carriers that offer fewer services from the Northeast to Florida, especially during the Easter holiday. It does affect our domestic network, with the first quarter benefiting from it and the second quarter facing a tougher comparison, but the overall impact is much smaller than what other carriers experience.

That’s what I was referring to. I think it will be; our outlook shows that right now.

At United, our long-term goal is to become the best airline in the world. This involves offering a competitive product and fleet. I recognize that our clients have historically been hesitant about scope because we were using regional aircraft in larger markets that should be served by mainline services, such as Newark, Atlanta, and Chicago to LaGuardia, and Dallas to Chicago. For the next few years, we do not anticipate any changes to our fleet plan due to timing considerations. Currently, we are supporting our growth plan by relocating regional jets from markets like Newark to Atlanta to more suitable regional markets. Achieving our goal of becoming the best airline in the world relies on this adjustment. There’s no urgent timeline for this process. We have begun preliminary negotiations with our pilots on several issues, and I see this as a mutually beneficial situation as long as we continue to grow the airline and utilize regional aircraft effectively to feed the mainline with profitable traffic. This shift also provides our pilots with additional growth opportunities at the mainline. I am confident we will reach an agreement, but there is no pressing deadline. By sourcing large regional jets from markets that should be served by mainline services, we can effectively navigate our planning horizon. This opportunity will become evident as it materializes.

Scott, I was wondering if you might be able to add a little bit of color as to when kind of getting resolution on the scope issues is going to be important to executing the growth strategy and what the future might look like, if you can’t get the kind of negotiated agreement on that issue that you are looking for right now?

It’s something we look at carefully. I think, the foundation for that needs to be though, we’ve changed the profile on how we fly and we’ve changed the profile of our connectivity. And that connectivity being in the hands of the airline really helped us most in the off-peak quarters than the peak quarters because of the way passengers flow through the system. We have more seats. So, in the off-peak time period, as we build this connectivity, we feel really good. Q1 came in with the off-peak flying better than our expectations, and that’s given us a lot of good views as to what the fourth quarter will look like in a similar off-peak situation. So again, the fundamental change is the connectivity new to the airline is allowing us to absorb this capacity in off-peak periods and do very well with it.

Hey, good morning, everyone. Thanks for taking my question. I guess, I want to piggyback off of David’s question there. I mean, you guys do have lots of moving pieces in the network right now like rebank in Chicago and adding connectivity in your Hawaiian expansion as well. But then, on the positive side, you have the Gemini and the revenue management systems flowing up. So, I guess I just want to ask, should we think about these expansion projects slowing up over time, driving incremental revenue as time progresses? And with like the revenue management initiative should investors expect that we start to see these accrue to unit revenues a few quarters out or is this more of a margin story?

Definitely managing the margin, but as we move forward, the new routes definitely have lower RASM in their first year than their second year. So, I think there’s a lot of different moving pieces and a lot of initiatives, some of which overlap with each other. But, we’re really hopeful that when we look at how a route will do in year two and how this capacity does in year two, it’ll be better than year one. Also with Gemini, we recently turned the system on. We think we have a long way to go with Gemini in terms of making it better and there are further enhancements coming. So, whether it’s that or many of the other initiatives we have in the pipeline, we think the pipeline’s pretty full with ideas that are going to drive margin and drive RASM in the long run. Sure. As I said, we’re rolling out a Polaris plane every 10 days. We are going to be done by the end of 2020, and we’re really happy with that. Premium Plus is our new mid-tier product in between Polaris and economy that is going to also be done on the same schedule as the Polaris aircraft. So, we have a little bit less than three years to go, just given how we do aircraft modifications, that’s what made the most sense. So, we have approximately three years to go on both products. We should start to sell Premium Plus sometime during late this year or early next year for our first flight in the first quarter, but we will have aircraft showing up into the system later this summer with the seat available for purchase with an upgrade. So, we’re very excited about all these initiatives. These are I think really important; it further pushes us down the road as segmentation, particularly with the mid-tier cabin, it’s exactly where we want to go. And we’re really confident in its ability to deliver value for the airlines. So, a lot more some on that front but we’re on a way and we’re really proud of the product that we’re going to be putting there over the coming months and years.

Hi. Good morning, everyone. I guess, Scott or Andrew, staying on this theme of RASM, margin accretion from this new hub-spoke flying. I guess, when I do look at your domestic schedules, obviously regional ASM’s are up around 10% this year versus down last year, mainline not drastically different. With regional flying garnering nearly double the PRASM of mainline, shouldn’t this have a positive mix effect on your RASM? I’m thinking about this the right way? And if so, can you provide any color on what you think a potential tailwind from more of this line could be?

We have introduced a number of 50 seaters and I would like to think we’re at our max in the number of 50 seaters that are flying for United. And those aircraft do come in with higher RASMs and they push higher RASM, higher yield traffic across the entire United system, both domestically and internationally, a lot of the flying is brand new. It is doing as expected. We’re happy with it. We will make tweaks as needed but this is going to be a tailwind to RASM as they go forward and we’re pretty pleased by it. I’m not sure what else to add to that. Sure. I really think it is a sales force that has just gotten so excited about the United and what we’re doing. And we talked about all the tools that they need to be competitive in the marketplace, and we’ve armed them, and they are out there promoting the United in a way that I think has really helped us and has shifted some demand to us. Although we still have a strong underlying marketplace out there for premium demand as well. So, it’s all kind of working together. But, I really will give credit to our sales force for making a huge difference in the quarter and we’re really proud of them. And we think Q2 to see even more of that.

So, given the tragedy that happened yesterday on the Southwest flight, I’m wondering if United is planning to look into or speed up any inspections of engines in its 737 model jets and any others with the CFM engines.

Alana, hi. This is Oscar. As Greg mentioned earlier, a service bulletin was issued just last week regarding an event that had happened previously on another airline. And so, as a result, we did kick off the program to address the bulletin and we’ll be fully compliant. And again, that started just recently. So, yes, we will follow the same program.

This is Greg Hart. We have about 698 of these engines in our fleet.

This is Andrew. I don’t have the numbers at my fingertips as to how many aircraft are coming off operating lease in the next few years. But the number of aircraft on operating lease continues to shrink as we bring more aircraft out of the balance sheet. The reason we do that is we are agnostic about financing but oftentimes it is just simply better cash economics to purchase those airplanes rather than continue to lease them. And so that’s we are doing a lot of that. As far as on a go-forward basis, we look at each individual deal on a case-by-case basis. And I suspect that there are many that we will look to acquire or extend. And there are others that we will simply give back to the lessor. So, we’ve provided some information on the 2018 fleet plan in the investor update. And we’re not really compared to go into a whole lot more detail other than the specific callouts we have today on a few expected deliveries and we expect to see including the Airbus used A319 transaction that we discussed earlier. Yes. I think clearly, yes, we definitely have that expectation that we will see growth in order to execute on the long-term growth plan that we’ve provided information on through 2020. Certainly part of that is dependent on adding additional aircraft into the mainline. So, we absolutely will be growing mainline.

Oscar and Scott have talked about this before, just kind of deepening the alliance front and putting yourself in a place with some of your rivals who perhaps had alliances a bit longer have done. I just wonder, if you could comment a little bit on what that actually practically entails. And I guess, just as a side line, was there a bit of a credibility gap because of its operational problems which kind of made some deeper alliances more problematic? That’s maybe putting the cart before the horse but any comments on what you can practically do to deepen the alliances would be useful.

So, first actually Star Alliance and United as a founding member is the oldest of the alliances. That said, we had opportunities to work more closely together than we had historically. We got some nominal alliance partners. We’ve spent a lot of time working with them. Andrew Nocella and myself personally meet with them frequently. And having that kind of high level of engagement has already led to changes. They are not going to be some big bang and press release talking about it, but we every day get better. If you look across the Atlantic, our impressive results are partially because of our partnerships with Air Canada and Lufthansa, and how we are working more closely together as a team. And we think that there are continuing opportunities to improve that going forward. But, we are very pleased with our partners and how...

Yes. Can you give maybe a little more information on these 20 used A319s? We’ve been hearing that easyJet may be the source of those. Can you talk about where these are coming from and in fact are they coming from easyJet?

Hey, Mike. So, they’re midlife aircraft that we’re acquiring. As far as where they’re coming from, we’re not able to disclose that information due to provisions in the purchase agreement. So, as much as I’d love to tell you that I’m just unable to do so.

Mike, the seller asked us not to disclose yet.

Thanks to all for joining the call today. Please contact media relations if you have any further questions. And we look forward to talking to you next quarter. Thanks.