United Airlines Holdings Inc (UAL) — Q4 2024 Earnings Call Transcript

Thank you, Regina. Good morning, and welcome to United's Fourth Quarter and Full Year 2024 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, 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. Please refer to the related definitions and reconciliations in our press release. 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. Joining us today on the call 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. In addition, we have other members of the executive team on the line available to assist with the Q&A. And now I'd like to turn the call over to Scott.

Thanks, Kristina, and thanks to everyone for joining us today. I want to begin by saying that our thoughts are with those affected by the wildfires in the Los Angeles area. We've been in close touch with our employees and communities in the area to offer them support. We'll continue to monitor the situation to see if there are more ways that we can help. Turning to earnings, 2024 was another solid proof point on our way to double-digit margins. By the fall of 2020, several months after COVID struck, we at United had a clear vision of how our airline and the industry were going to evolve. And 2024 seems to have been the year that we gained broad recognition from others that the vision is playing out as we expected. Our outlook has always been based on a realistic view of how the economics of the industry were going to change and how those changes had the potential to drive structural, permanent and irreversible changes in the entire industry. Our 2024 plan developed from that vision and our results were the culmination of years of thoughtful planning, bold action, and strategic investment. I'd like to thank our employees for these stellar results and I'm proud to say that we'll be paying out $713 million in profit sharing this year. In 2024, United continued to make progress with our United Next plan and once again delivered earnings within our original range. Our investments over the last several years have further differentiated United from the rest of the industry and led to strong customer preference for the United brand. But the bigger point here is that the changes that led to this moment are structural and durable. Cost convergence, which we first talked publicly about on this call in Houston two years ago, combined with effective revenue diversity at United for the first time ever, and industry-leading product and service causing customers to choose United are just irreversible structural changes that have created a competitive moat for United. Answering an analyst question two quarters ago, I talked about how this feels very much like 2012 to 2014, but today I'll add that there are two additional tailwinds this time around. The international environment, which Andrew will discuss in more detail, is going to be far stronger for longer because of the structural supply constraints that are going to last at least for the rest of this decade. Wide body supply, both airframes and engines, is even more challenged than narrow bodies. And importantly, all of this means that the industry is evolving into an equilibrium where each airline driven by economic necessity will be primarily focused on flying where they have a competitive advantage. Different airlines have different competitive strengths and weaknesses in the post-COVID era. Cost convergence has been the most impactful at the big, high-cost airports in the country. The cost per passenger in the three New York City airports is $48 compared to the average ULCC fare of $67 in those three airports. When an airline is spending 72% of their fare on airport costs, it's hard for me to imagine that they could ever be profitable in those airports. At the same time, ULCCs do have an advantage and will always be able to be more profitable than United in point-to-point, low-cost airports. It really is a transformed industry, and United more than anyone is leading the way. We have seven great hubs. We got well ahead of the curve in investing for the future, and we're focusing all of our efforts and growth in our hubs where we have the competitive advantage. The combined virtues of our size and our innovative culture make us a competitive juggernaut. We know who we are, we know our strengths, we also know our weaknesses, and we're going to focus on our strengths and nothing else. But we won't rest on our laurels and will never be complacent or satisfied with our results. We'll continue to be an airline where good leads the way by focusing on ways to be an even better airline for our customers. Starlink is one of the most obvious high-profile investments for customers, but it is really just the visible tip of the iceberg. Our digital team is expanding our best-in-the-world technology by making further improvements to make the airline even more transparent and easy to do business with. And our ops team is focused on changing the unchangeable and trying to solve problems that no other airline in the world has ever even tried to fix. And we'll continue to invest in a brand that inspires pride in employees and customers alike. This year, we expect to grow our EPS by approximately 18% at the midpoint, and we'll deliver strong free cash flow while continuing to invest in the future. That includes signing industry-leading contracts with our United team, which is made up of the best aviation professionals in the world. We are the best airline in the history of aviation and we're going to continue to raise that bar. That's been and will continue to be increasingly good for our employees, customers, and our shareholders. And with that, I'll turn it over to Brett.

Thank you, Scott, and good morning. 2024 was an exceptional year for United. The investments we've made to improve our operational reliability and resilience have driven top-tier results. We served a record nearly 174 million customers last year and finished the year first in on-time departures at all seven of our hubs. We had the busiest December in our history, flying an average of 511,000 people a day. And when so many of our customers were counting on us to get them home safely for the holidays, we closed out the month of December ranked number one in on-time departures. I want to thank the incredible professionals at United who worked through the holidays and through tough weather to deliver for our customers. Thanks to enhanced processes for recovering crews during our regular operational events, we achieved an 82% reduction in crew-related cancellations compared to prior years. Additionally, we continued refining our aircraft turn process, focusing on key components such as aircraft cleaning time and boarding efficiency, driving improved turnaround speed and overall operational performance. In 2024, we had the company's best post-pandemic turn execution, reducing cancellations and improving efficiency, both meaningfully cutting costs and resulting in a much better experience for our customers. Despite that progress, staffing at the FAA remains a challenge for the airline industry and most importantly, the traveling public. In 2024, even on clear blue sky days, 66% of United's delays were driven by ATC challenges in technology and staffing. We remain engaged with leaders in Washington and in both parties to get the FAA the resources they need, and will look for opportunities to work with the new Congress and new administration to achieve that goal. Over the last several years, our culture of innovation has fueled countless advancements in technology and empowered our employees and improved customers' experiences. In just the last several months, our team has developed new capabilities for our award-winning app, like integrating Apple AirTag data to help us reunite customers with their bags and allowing customers to select seat preferences, so they can get moved to the seat they prefer automatically as soon as it becomes available. Translating our entire app into Spanish drove usage even higher and now nearly 90% of customers engage with our digital channels on the day they travel. In 2024, these and other app enhancements enabled half of our customers who experienced a cancellation to utilize a self-service or automated method to get back on their way, a 28% increase year-over-year. Our industry-leading app has led to happier customers who have more control over their travels and employees who have more time to help customers who most need it. At United, we're proud of this culture of innovation because it's central to our effort to differentiate our brand and give our customers even more reasons to choose United. With that, I'll hand it over to Andrew to review our strong revenue performance in 2024 and discuss our expectations for the revenue environment in 2025.

Thanks, Brett. The fourth quarter revenue environment materially improved as the capacity backdrop for the industry became more constructive. United's Q4 TRASM increased 1.6% year-over-year, on a 6.2% increase in capacity. The Sunday after Thanksgiving was our best revenue day in history, shattering the former record by 25%. United's domestic capacity increased 7.8% in Q4, with RASM down 1.9%. We project domestic RASM will turn solidly positive in Q1. The domestic pricing environment is improving as underperforming airlines remove unprofitable capacity at an increasing rate and business traffic growth accelerates. Industry fare sales are less prevalent with lower discount rates, as airlines are prioritizing profitability. All United's hubs were profitable in Q4 and for the last 12 months with only a 7-point pre-tax margin difference between the best and the worst performance hub, the narrowest spread we've recorded in a quarter since 2016. Our network health is very strong with room for margin expansion as we continue our United Next Plan. After years of waiting, we're also finally starting to gain a critical mass of larger narrow-body aircraft, which allows us to execute on our plans to increase gauge. United's international capacity was clearly the star of the quarter in terms of RASM growth relative to Q3. As a result, international margins continue to outpace domestic margins in 2024. United's plan during the pandemic was to double down on international flying and it's proven to be the right move. Q4 Pacific capacity moderated and China headwinds slowed versus Q3 resulting in PRASM flipping from down 15.7% to up 4.1%. Pacific PRASM was up high single digits for the last two-thirds of the quarter versus last year. United has profitably digested a 31% increase in Pacific capacity in 2024, and we have now fully reinstated our pre-pandemic capacity levels across the region with margins that are now above system averages. In the past, the Pacific margins routinely lagged. We plan to moderate our Pacific growth as we head into the first half of 2025. During 2025, we are excited to launch a new initiative to operate 737s on a small number of Narita flights to destinations in Asia that do not support nonstop service to the U.S. We anticipate this unique initiative made possible by our Guam base will extend our lead as the largest trans-Pacific carrier to build an unmatchable network scope. We're going to redeploy underperforming assets and efficiently grow load factors from Japan to the U.S. where local origin demand still is not fully recovered from the pandemic. 2024 was also a great year for the United Atlantic network, and Q4 was no exception with PRASM up 7.1% on flat capacity. We entered 2024 with PRASM capacity growth for the year in the Atlantic after rapid growth in the region post-pandemic. Our plan for 2024 worked extremely well. All months in Q4 were PRASM positive year-over-year with December RASM up double-digit. United is the largest U.S. carrier flying over the Atlantic by ASMs. And in 2025, we plan to have low to minimal capacity growth in Q1 to support continued RASM strength. From what we see today, we expect the first quarter to be our best Atlantic financial result in the company's first-quarter history. Latin America trailed the other regions throughout 2024. However, it is important to note that United continued to operate profitably in the region despite these challenges. PRASM was up slightly in Q4, and the outlook for early 2025 is positive. Overall, the momentum for international flying in the fourth quarter was exceptionally strong. We believe the pandemic era global long-haul reset along with a sluggish delivery rate of new wide-body jets sets up the industry really well for years to come in international flying. Cargo also had a very strong showing in 2024. Cargo revenues for the year were up nearly 17% and up almost 30% in Q4 versus last year. It was a very good quarter and year for cargo. The business traffic recovery was a nice tailwind in Q4. Results in Q4 and our outlook for Q1 clearly show this strength in higher yield corporate traffic volumes. Flown business revenue grew 16% in Q4 year-over-year. We expect that trend to continue in Q1, which is a tailwind for our business-focused network. Contracted business sales in the quarter for all future travel were up 14% year-over-year. Premium passenger revenues increased 10% year-over-year, and premium cabin unit revenues were positive. Both trends have persisted throughout the year. We see no change in consumer behavior seeking out increased premium experiences, but we also remain committed to our most basic product. In Q4, Basic Economy passengers increased 21% year-over-year and now represent 15% of domestic passengers, up 2 points versus 2023. Loyalty revenues grew at a healthy pace at 12% in 2024. Co-brand spending was up 9% with 1 million new card acquisitions. Turning to the product, we reached a milestone in the deployment of our signature interior with nearly 50% of the fleet completed as of year-end 2024. With installation work moving quickly now, we expect to be at 70% by the end of 2025. Across the entire United network, we expect to have 150,000 seatback monitors, full of rich content available to all of our passengers with a better ability to personalize everyone's experience by the end of 2025. As you can see from our first-quarter outlook, we continue to make progress on improving the financial performance of that quarter. Changes to our capacity deployment across hubs, days of the week, and times of day have been very effective. Returning to more corporate traffic and the desirability of Southern European vacation in the winter is also a tailwind. As we announced a few weeks ago, we are tracking ahead of our schedule on Starlink installation, which we think will be a material advantage versus slower paid Wi-Fi services offered by other U.S. carriers. United's Starlink plan is yet one more action to elevate our product, creating a brand customers choose more and more often. We will share more on product innovation, merchandising, and capacity optimization in the coming year, furthering our lead. We will also talk about how we believe Starlink will unlock a host of new digital benefits for our customers and shareholders. We believe that creating more choice, more segmentation, and enhancing our products is the winning formula. Merchandising, sell-in, and managing the complexity of these multiple experiences is our proven expertise. With that, I want to say thanks to the entire United team for an amazing 2024, and I'll hand it off to Mike to talk about our financial results.

Thanks, Andrew. We delivered record fourth-quarter earnings with earnings per share of $3.26 ahead of expectations and a fourth-quarter pre-tax margin of 9.7%, up 3.5 points year-over-year. These strong fourth-quarter results brought our full-year earnings per share to $10.61, above the midpoint of our initial guidance range of $9 to $11. Much of this success is due to the strong revenue performance that Andrew just discussed. But the foundation of our success is a strong operation, and I'm incredibly grateful for the tremendous efforts of our operations team this quarter. Our hubs are in some of the most congested airspace in the world, and still we delivered industry-leading operational performance during the quarter. Importantly, an operation that runs on time and with few cancellations is also a more cost-efficient operation. Finally, I'd like to celebrate our stock performance over the last 12 months. In 2024, we were the fourth best-performing stock in the S&P 500. I've long believed in the potential for stock to re-rate given the structural improvements in our business. It's nice that the market is beginning to recognize the shareholder value we've delivered. For the first quarter of 2025, we expect earnings per share of $0.75 to $1.25, an approximately $400 million improvement from the first quarter of last year at the midpoint, implying an approximately 3.5-point improvement in pre-tax margin. The commercial team has done a great job of continuing to shape the network to match demand in what has historically been our seasonally weakest quarter. Further building off first-quarter momentum, we expect full-year 2025 earnings per share to be between $11.50 and $13.50. At the midpoint, this represents 18% growth in earnings per share versus 2024. We expect a similar pace of earnings growth is sustainable as we march toward low double-digit pre-tax margin. We have decommoditized air travel. Our operation is strong, and the United Next plan continues to deliver both higher and more sustainable profits. Airlines with less competitive offerings are cutting unprofitable routes and frequencies. The industry setup has never been better, and we believe United is uniquely positioned to succeed. On costs, CASM-ex was up 5% on 6.2% capacity growth versus the fourth quarter of last year. As we look ahead to 2025, we are focused on driving efficiency improvements throughout the business, while also improving the experience for our customers and enabling our employees to be more effective at their jobs. For the year, we continue to expect 2 to 3 points of CASM-ex pressure from our labor agreements not yet signed. Shifting gears to the fleet. In the fourth quarter, we took delivery of five Boeing MAX aircraft, 14 Airbus A321neo aircraft, and three Boeing 787s. In 2025, we are planning to take delivery of 71 narrow-body aircraft and 10 wide-body aircraft. Recall, we had been planning for approximately 100 narrow-body aircraft deliveries in 2025. But due to OEM production delays, we are planning for less, which leads to our expected full-year CapEx spend to be below $7 billion. That's below the low end of our $7 billion to $9 billion multi-year guidance. Turning to the balance sheet. We ended the year with $17.4 billion in liquidity, including our undrawn revolver. We generated $3.4 billion of free cash flow. In 2024, we paid down $7.4 billion of debt, $3.6 billion of which we voluntarily prepaid. We've now prepaid or refinanced our remaining high-cost COVID-era debt, bringing our total cost of debt down to 4.6%. Our net leverage was 2.4 times at year-end, an improvement as we make progress to our long-term net leverage target of less than 2 times. On to buybacks. In the quarter, we repurchased $81 million worth of shares, leaving over $1.4 billion left in the authorization. We remain firm believers that United stock is undervalued as we continue to grow earnings and margins year after year with further room for multiple expansion. Finally, I want to reiterate that consistent and growing free cash flow generation remains a top priority. And in 2025, we are targeting free cash flow around the $3.4 billion we delivered in 2024. The future at United Airlines has never looked brighter, and I'm excited to continue to build upon our competitive advantages in 2025 and beyond. Now back to Kristina to start the Q&A.

Thank you, Mike. We will now take questions from the analyst community. Please limit yourself to one question and if needed one follow-up question. Regina, please describe the procedure to ask a question.

Hi, good morning guys. Thanks for taking the question. So Mike, maybe could you talk a little bit about how much of the trend improvement you are seeing in Q1 and how that extends kind of into the full year guide? I'm trying to get a sense for whether the range that you are putting out there for us for the year contemplates things continuing to get better from where we are today or kind of just a reflection of where we are today?

Hi, Thanks, David. I love the question. We've had a long-standing policy of setting guidance with a no-excuses philosophy, and that has served us well. We delivered over three points of margin expansion in Q4, and I expect to deliver 3 to 4 points of margin expansion again in Q1. We'll continue to build a single act of God into our longer-term guidance, so that we deliver even in imperfect conditions. That's kind of a hallmark of our guidance strategy. It is pretty easy, however for us to sit here and think there is opportunity in the back half of the year and that we could do even better than our full year guidance.

All right. Thanks for that. And then just to be clear about the guidance range as well, that includes the incorporation of some potential flight intended deal in the course of the year, correct?

Yes, it does, and it always does.

All right. Thanks very much for the time guys.

Good morning. Congrats, team, on great results. So Mike, maybe this one is for you since you ended your script with the stock is undervalued, but bought back only $81 million in Q4. So great free cash flow in 2024, $3.4 billion. The guide is for 20% earnings growth and CapEx is up less than expected. So it would suggest free cash flow north of $2.5 billion to $3 billion in '25. How are you thinking about your deployment priorities towards your leverage targets with the voluntary prepayments as well versus share repurchases?

Thanks, Sheila. Over the past four years, we have invested $32 billion in our business and our people, which has been key to our success. We saw a significant increase in our valuation right after we announced the share buyback authorization late last year. In this first quarter, we approached the buyback cautiously, which seems reasonable. We need to balance improving our balance sheet while repurchasing shares, and I believe that was the right strategy. We're very pleased to see the stock performing so well; we ranked #4 in the S&P 500 last year, as I mentioned earlier. We will continue to opportunistically repurchase shares as we go through 2025. Currently, we have $1.4 billion in authorization and anticipate continued multiple expansion. We plan to be very intentional about this. Additionally, we expect to achieve a net leverage below 2 times during this calendar year as we continue our deleveraging journey.

Great. Thank you.

Hi, everyone, thank you. Can you discuss Basic Economy? You mentioned in your script that the industry is offering fewer discounts, and there is a noticeable shift towards premium services from low-cost airlines. How do you plan to implement Basic Economy, and is there any evolution in your approach? It seems like the barbell strategy you used in previous years, before the industry underwent significant changes, might evolve in terms of how you handle Basic Economy overall. Thank you.

Thanks, Conor. It's Andrew. I would say as we look out into the next 12 months, we don't intend to change that, that we're incredibly happy with the effectiveness of Basic Economy, particularly as we grow our gauge. As a competitive tool, it's done exactly what we wanted it to do. And it does seem to me that the more of it we do, actually, the better off we are. Obviously, there are points. We are clearly balancing multiple product types in our quiver here and many of it premium, but also basic and we truly believe that a broad spectrum of choice for consumers and being able to offer the lowest possible fare to fly in United where you get a signature interior seatback entertainment, free Wi-Fi is the winning recipe. And we are not going to change that recipe as we go through 2025.

Okay. And then maybe big picture, your relative margin performance obviously speaks to your willingness to adapt to the environment overall. But the United Next Day, we talked a ton about up-gauging. And obviously, there's been a lot of delivery delays and so on. So I'm just trying to understand on your conviction level around the up-gauging strategy. Do you have a lot of that baked into 2025? It just seems like there are still multiple margin points that you have from these uniquely United opportunities that you have going forward. Just any thoughts there. Thank you.

Yes. Look, I think gauge is – it is not a secret weapon, but gauge is really important to us. For 2025, gauge is not moving a lot. The delivery delays have been extensive, and our ability to put RJs back to full utilization proved to be the right decision for 2025. What I can say is, as we look out through the end of the decade, I believe we have the highest gauge possibilities, which is going to be great for the business, great for our unit cost, and great for our customers, because these new aircraft have incredibly high NPS scores as we bring them online. So we think there's an incredible amount of runway related to gauge. We obviously operate in hubs that are gigantic from local population bases, but they are also now gigantic from a connectivity base, allowing us to use these larger gauge aircraft. We are behind on this. I think this summer, we had 12 A321s that seat 200 people. Next summer, we have, I think in the mid-40s. And that's probably still 150 aircraft behind our nearest competitor. And as we said over and over again, the large gauge narrow-body aircraft are the highest-margin aircraft flying in the country, and that is going to be a meaningful tailwind to United's margin acceleration as we head into 2026 and 2027. So 2025 is a bit of a pause year, but we look forward to getting back on the gauge bandwagon in 2026 and beyond.

Hi Brandon, this is Mike. I just want to add an extra point there. As we look into '26 and '27, as Andrew said, the gauge really starts to accelerate. And so it becomes an idiosyncratic CASM-ex benefit for United in '26 and really starts to kick in, in '27. So you're not seeing the benefit of that in any of our guidance for this calendar year, but you will see it in coming years.

Hi, congratulations team, on what was a great year and obviously, a good outlook here. And Mike, maybe just following up on that, I presume with that comment about gauge, looking out years ahead, that's including some expectation that MAX 10 is in the mix?

We are becoming more hopeful that the MAX 10 will be an important gauge for United. We like the MAX 9. The MAX 9 is a great aircraft, but we are with Boeing starting to make some real progress in improving their business. We are becoming more bullish on the MAX 10. That's correct.

I'll just add, whether it's the MAX 9 or 10, our gauge is going to increase a lot. So the 10 would be great. But I'm counting on the 9 and the A321 to do what I described a few minutes ago. If we have the 10 available to us, that only helps us even further.

Well, and Andrew, maybe for my follow-up, on those lines, your domestic capacity growth is a little bit elevated here. What are the priorities in the network as you look in 2025 domestically, especially with those constraints on gauge? And it looks like the solidly positive PRASM comment on domestic is pretty bullish for Q1. So can you elaborate on those?

Sure. We've been working really hard, particularly for off-peak months and quarters like Q1, to readjust how we deploy our capacity, whether it be by day or week or hub. And I think it has been incredibly effective, and you see that in the guidance along with the fact that business traffic is coming back. So we are pretty optimistic that this is moving in the right direction, and we can really close margin gaps by making the off-peak periods better. As we think about 2025 and I've said this in the past and I'll say it again, we are really focused on building connectivity in our bank structures, particularly in Chicago, Houston, and Denver, where our hubs are fantastic, but they lack the same level of connectivity that we see at some of our larger competitor hubs. And so we are going to be able to close that gap materially in 2025, which I think is going to be really good for our relative RASM results as we go forward. So that will be our focus in 2025 at this point.

Thank you.

Great. Thanks good morning everyone. Just a question on Starlink. Obviously, you guys mentioned that a couple of times in your prepared remarks. Any thoughts on kind of rolling that out? How much of a differentiator do you think that will be, what the initial performance has been like and maybe how we can monetize that?

Sure. It is an excellent question. And I have to say this is one of the things we are absolutely most excited about at United. We did a ton of research on this product and all the alternative products and feel, 100% convinced that this is going to be a game changer. Fast and free Wi-Fi available to our customers, including the ability to have games on their personal devices is going to be amazing. But look, I think the big question here is with Kinective, and our ability to grow MileagePlus, and you're going to see us, I think unleash a lot of really unique things on this front. And in particular, I think we see an opportunity maybe where others don't. And I think that comes from a number of factors that are probably unique to United. One is we have advanced screens on the vast majority of our fleet. We need advanced screens to be able to personalize service and deliver content in the way that we are going to be doing in the future, which we can obviously make the service for our customers better, travel with less friction, but also monetize the media sales. Second, with Starlink connectivity, which we'll have, which I don't think any of our major competitors will have, it allows us to do that in a way that really older Wi-Fi services could not do. And then you combine that with the size of MileagePlus, a legacy program size and I think our innovative spirit here at United, it is a very good recipe. I think we need to prove this out as we go forward. But we are very excited to do this. We are very excited that it's United being unique on this front. And we hope to show you in the coming quarters and years what can be made possible with these investments.

That's really helpful. Thank you. For a follow-up, there’s clearly a lot of momentum with the story. The stock is performing well, and everything seems to be aligning nicely. Is there potential for it to improve even further? You hinted last year about possible innovative options with the loyalty program. It’s been a while since you shared details on United Next, and the world has changed significantly since then. Do you have any thoughts on possibly hosting an Investor Day this year? How do you plan to keep us updated on some of those broader topics?

Hi, Ravi, thanks for the question. We still see significant value in the loyalty program, and we will begin to share data on that when it aligns with our business needs. We're currently discussing the timing of an Investor Day. However, we've effectively communicated our message to you during these earnings calls and investor conferences. Unlike other airlines, our investor calls are very close in timing to many Investor Days. We provide long-term guidance and more commentary on free cash flow as well. We approach our earnings calls with the same long-term focus we have for our business. Today's call is a good example of that. So stay tuned. An Investor Day is an important tool, but I have no specific timing updates for you today.

Understood. Thanks Mike.

Hi, good morning everybody. So Andrew, in the past, I think it was last summer you talked about that life cycle for discounted airlines. Obviously, since that time, we've seen a bankruptcy. Domestic capacity has tightened. We are seeing discounters experiment with new LOPAs. Do your original comments still stand? Or has there been enough evolution in that particular business model that maybe the outlook from United's perspective is a little bit brighter than what you articulated last year? Any thoughts on that?

Look, I think it largely still stands. I think as Scott said earlier, we each have our expertise, what we're great at and what we're less great at maybe. At United, we think we are great at a lot of things, but there is a few things we don't do and we don't intend to do. But we manage the complexity of many product types from basic to premium and I think do very well in the premium space. And it's because of generations of investment that came before me and the management team here in the room today. And you just can't snap your fingers and make those generational investments overnight. So I'm a bit surprised by the amount of change, but the effectiveness of that change remains to be seen. The effectiveness of what we've been putting in place for years now has been proven. We're going to do more of it in 2025. So I think that life cycle I went through still holds. And I don't expect that we are going to see airlines compete at the level of United in terms of this broad range of products and experiences anytime soon.

Thank you for that. And then quickly for Scott, it was several years ago, I think it was at a conference, that I asked you if you could clear up one analyst or investor misperception, what would it be? And I don't remember your exact words, but basically, you said that you'd confront the idea that all capacity is created equal, and all capacity is equally bad. You and Mike spend a lot of time in front of clients. I know I have my opinions on this, but where do you think you are in terms of addressing that capacity topic? And would your answer be the same if I had simply asked the question a second time? Thanks.

I’m not sure if my answer would have been the same, but it remains a valid point. What I want to emphasize is that not all capacity is created equal. If you examine total industry capacity in the fourth quarter or the first quarter, you might reach a different conclusion compared to analyzing it by who is experiencing growth. For example, airlines like United and Delta tend to increase service and route frequency because it benefits our customers. We do not focus solely on load factor, and we've been operating with lower load factors while maintaining pricing integrity. This approach allows us to operate at lower loads if necessary, which has a significantly less negative effect on industry Revenue per Available Seat Mile (RASM) compared to growth from carriers that prioritize load factor alone. Thus, not all growth is created equal, and this is reflected in the current results. The outcomes in the fourth quarter and the first quarter validated this perspective. I believe this trend will persist for years to come.

All right, good stuff. Thanks, Scott. Appreciate it.

Hi, good morning everyone. I want to revisit the topic of loyalty. Scott, Andrew, I noticed that revenues increased by double digits in the fourth quarter. Additionally, you are investing several billion dollars each year into your products, including Starlink, Kinective, lounges, and others. This investment exceeds what most airlines spend annually. Could you provide some insight into the growth opportunities over the next few years as these investments begin to take effect? Also, how do you anticipate these changes will enhance the value for travelers and encourage them to join the loyalty program over time? I would appreciate any thoughts you have. Thank you.

I mentioned this earlier, but the foundation of MileagePlus Kinective is very solid. I'm extremely optimistic about the opportunities ahead. It will require some investment in technology, and we are making significant progress. Last year, we achieved a 12% growth in loyalty revenue, which was impressive, and we aim to exceed that percentage this year. We believe we are building momentum now, and we need to demonstrate that as we move into 2025 and beyond. Specifically, for Kinective Media and our media sales, we plan to double our revenue next year and double it again the year after. This presents a lot of opportunities and challenges, and we have a new team in place to execute our strategy. As we enhance personalization in our services, MileagePlus will become even more appealing to our customers. We have a positive cycle with an increasing number of credit card issuances, having issued around 1 million last year, with plans to issue more this year. Everything is progressing very well, and there's much more to come. We look forward to sharing more details at the right time. It's an exciting narrative, and I've highlighted many unique aspects that we are ready to leverage to provide a more personalized experience for our customers, which we believe will reduce friction during air travel, especially while onboard. There's a lot more to discuss about how we will utilize these screens and provide excellent service, and we will communicate that in due time.

I want to add to that briefly. The quality of earnings from MileagePlus is impressive, as they are not only growing quickly but also show stability in being a high-margin business. As we expand this business, it's crucial for you to recognize that distinctive stability, and we will make an effort to emphasize this in our disclosures over time. Thank you for the question.

Great. Thank you.

Hi thanks. Just on seasonality of margins, maybe you can remind us about some of the network changes you've made over the years. Historically, we didn't really think of the first quarter as a breakout quarter for relative margins for United. So what changes have you made? Is it geographies? Is it how you're flying? What's changed versus maybe pre-COVID?

I would say there are many factors at play, and how we operate is significant in that regard. First and foremost, our brand is gaining strength across the board as we invest in various products and experiences. People are increasingly choosing us as their airline, which is a solid foundation we take pride in. Regarding operational details, our schedule has undergone significant changes. We are especially cautious with our utilization strategy. Adding flights solely to increase available seat miles proved to be unwise in the previous year, and we are not following that approach this year. In fact, our utilization rate is likely lower than last year's at this time. We are deliberate in how we deploy our capacity, and I believe we excel in this aspect. This diligence applies not just within a quarter but also on a daily and weekly basis, considering each hub and aircraft type. The adjustments we've made, including increasing sunshine capacity, have been crucial. Additionally, the return of strong corporate traffic in the first quarter, which was absent during and immediately after the pandemic, will benefit business-focused airlines like United. Another point worth mentioning is that Europe is increasingly becoming a year-round destination. Traditionally, travel to Europe would slow down significantly from mid-January to mid-March, but we are now witnessing a shift where travelers are willing to vacation in Southern Europe during this period. This change helps to reduce seasonality for European destinations, and as our connectivity with Lufthansa hubs returns to normal alongside the rebound in business traffic to London Heathrow, we see a lot of positive outcomes. All these factors, some initiated by United's schedule changes and others driven by wider industry trends, have resulted in less seasonality in the first quarter, which has improved our performance. This has been a goal of ours for several years, and while we've made significant progress, there's still more to achieve.

That's really helpful, Andrew. And then just on the path to double-digit margins and which implies a bit of improvement relative to pre-COVID. You touched on in your prepared remarks. Is this really about structurally higher margins in international and maybe holding serve on domestic? Or do you see it more balanced? And again, not necessarily a 2025 answer, but over the next few years. Thanks for taking the questions.

International margins are currently higher, and we believe there is potential for further expansion, especially by improving off-peak periods. We are excited about the opportunities in international markets, but there is also significant potential domestically. Our Mid-Continent hubs have recently achieved a crucial level of connectivity and gauge that we are aiming for. We still have some distance to go regarding gauge, and we consider this year a pause for gauge improvements. However, starting in 2026 and onwards, we will focus heavily on gauge, which is highly efficient and will enhance connectivity in our hubs. I am optimistic about margin growth in the domestic sector due to the structural changes we are implementing and the competitive landscape, which offers substantial upside. While we aim to narrow the gap with international margins, I must acknowledge that international performance is exceptionally strong at this moment. I believe we will reduce some of that gap, although not entirely. In the coming years, international will likely continue to lead. Furthermore, we anticipate a significant supply constraint regarding wide-body aircraft and engines, which we expect to persist through the end of the decade.

Thank you.

Hi, thanks good morning. Scott, on one of the earlier questions, you said that you think the current industry backdrop has years to go. I guess what gives you the confidence in the duration part of the story? I guess what's the risk in your mind that as domestic pricing turns positive and others start maybe making a little bit more money that they start chasing it and adding capacity again?

Well, the short answer is it's just math. And this has been driven by economic reality. As I said in my prepared remarks, I gave some stats on the expense of flying at big airports in New York, like that doesn't mean things won't get a little more positive and people will try to put the smart capacity back one or two quarters. But I just don't see how it's possible to be a low-cost carrier and fly profitably to the New York airports or Chicago or Los Angeles or San Francisco. Like the business model just doesn't work because the governments in those entities have priced low-cost carriers out of the market. And it is just math. Like every airline that has low margins that don't look like Delta and United, has unprofitable capacity. And the only way to solve that is to not fly it. That didn't mean they'll do it overnight. There will be some ups and downs along the way. There'll be ego involved in that. But ultimately, it is math, and it is going to come out because it cannot be profitable.

Okay. And then maybe just, Mike a numbers question. 1Q clearly has RASM outperforming CASM. Does the guidance contemplate that you have a positive spread all year? Or is there something unique about the Q1 strength? And I know you talked about 2 to 3 points from labor. Anything else on the cost side you want to add some color on? Thank you.

Thanks, Scott. For the full year, we expect revenue per available seat mile to exceed cost per available seat mile. We anticipate ongoing margin improvement, continuing into 2026. When considering costs, I categorize them into three groups. First, there are industry-wide inflationary pressures, such as labor, airport expenses, food, and fuel. We will fully pass these costs on to consumers. It's frustrating that these inflationary costs have lingered. We need to ensure we perform at least as well as the industry on these costs, but they shouldn't impact our long-term profitability. The second category involves ways we can enhance operational efficiency as an airline. Our gauge at United will become a key measure of efficiency that will be significant in 2026 and 2027. Additionally, our digital technology team is top-notch, working hard to improve efficiency through our app. We're making great strides in tech operations to drive efficiency, and we expect to perform better than average in this area. The second part of this category includes optimizing our flight schedules during red-eye hours and off-peak times; some competitors are already doing this. While it's effective in reducing costs, it doesn't maximize profits, so United will not take that approach. The third category encompasses our ongoing mission at United, which is to invest in our product and service to set ourselves apart and reduce commoditization. It has become increasingly evident that this strategy is enhancing margins and providing more stability to the business. Therefore, you will see continued investment from United that will impact costs but is also expected to expand margins.

Thank you guys.

Thanks so much for the time. And congrats on the great results. There was a line in the press release that caught my eye on utilizing GenAI to expedite customer search. And I'm wondering if you could update us on other areas you are already deploying GenAI in the business or thinking about and how you are thinking about the impact, whether on the revenue side or in the operations?

We have the top digital team in the industry, evident in our app and various other areas. We have made significant efforts in utilizing GenAI in numerous ways that may not grab headlines but are highly impactful for our airline operations. One aspect I take pride in is our unmatched ability to communicate with customers about delays, explaining situations in clear terms. We are continuously improving in this area, and I believe we are just at the beginning of our journey. We are the only airline actively pursuing this, with no competitors in sight. GenAI plays a crucial role in this advancement. Another interesting application involves our older labor contracts that have accumulated complex provisions over the years. When a pilot, flight attendant, or others call in with unique situations, interpreting these contracts can be challenging, even for seasoned experts. Remarkably, GenAI can analyze these contracts and provide clear answers. This is just one example, but it illustrates how deeply integrated our team is within the organization. This initiative isn't merely a standout project to mention during an earnings call; it is truly embedded throughout the organization and is a key factor in establishing us as the foremost technology innovator among airlines globally.

Thank you very much. That information is really useful. As a follow-up, Andrew, you mentioned that increasing sunshine capacity is key to our success in improving Q1. I'm interested in your thoughts on Florida and the wider domestic network. If opportunities arise to expand in that region, whether it be as a focus city or a potential new hub, I would love to hear your insights. Thanks again for your time.

We have seven great hubs, and throughout my time here, our focus has been on improving them. We have not reached our full potential yet. When you compare our market shares in these hubs to our competitors across the country, you'll see that our shares are still relatively low. As our brand grows, we expect more people to choose to fly with us, which will help improve our market share. Our focus on these hubs remains strong, and while this may not always be the case, there are significant growth opportunities in our hubs for the foreseeable future. This will be essential for increasing our earnings and margins, as Mike mentioned earlier. We will also continue to develop our successful operations in Florida, which have performed exceptionally well, and we are allocating a larger portion of our capacity there. However, for the time being, there are no plans to establish a hub in Southeastern Florida.

Good morning everyone. Thanks for the time. Mike, one for you. While respecting you don't give a CASM guide, and you've already given us your high-level thoughts on the different buckets of costs we should be thinking about over the next couple of years, just was hoping to get some more color on the puts and takes for '25. If you don't have a ratified flight attendant contract, for instance, how does that impact the timing of that 2 to 3 points of labor headwind you've spoken to? And anything else potentially lumpy we should be aware of quarter-to-quarter?

Hi, Catie, thanks for the question. And let me try to expand around the edges. We talked about 2 to 3 points of labor headwind that we expect in 2025. That anticipates a labor deal with the flight attendants, the timing of which we aren't going to discuss today, but it expects that if that timing were to push to the right, there would be less of a headwind. If it pushes to the left, pushes earlier, then we'd have a little bit more of a headwind. I would say we have a 0.5-point to a 1-point of pressure from investments that are driving even more revenue into the business. And so we feel really good about that as well. It does seem like the inflationary pressures overall at the industry level have started to have peaked and have started to abate. But as we sit here, I think that they persist longer than we might have thought 6 months or 12 months ago. So hopefully, that helps.

Yes, it does. Thanks. And Andrew, maybe one for you as well. You talked about managing the complexity of more products and more choices being an area of expertise for the team. Can you help us think through where the opportunities are to lean into this more going forward? Is this adding more cabins? Is this adding more varied soft products to your existing cabins, something else that we haven't even thought of yet? Anything there would be super helpful. Thanks.

Well, that's a really good question, and I'm not going to answer it today. I'm going to say that other than to say, as I said in my opening script, I think product choice has won the day. And it's kind of ironic because if you go back a few years ago, there are people saying the opposite, which I never ever understood. But product choice has won the day. We think we have some innovative ideas to expand on all that, including the merchandise and the product choice, as we go forward. And when I convince Mike to do an Investor Day, hopefully, we'll talk about that more. That was a joke obviously. But the point of all that is we are not going to give it away today, but we are working on a bunch of innovative things that I think are going to be very exciting for our customers. So there is a lot more to come. There's a lot more investment occurring. We wish we could announce it today and bring it to the marketplace even sooner. But these things take time. And I said earlier, I think United has a multigenerational lead. And we've been working over the last few years to make sure that lead expands and accelerates, as we head into the latter part of this decade. So there's quite a bit more to announce, but just not today.

Hi, good morning. The Trump administration has instructed the DOT and the FAA to withdraw their DEI policies and evaluate the performance of individuals in key safety roles. Are you concerned that this could lead to increased employee turnover and exacerbate the existing staffing challenges in air traffic control? Additionally, is United considering eliminating its own DEI policies?

I will speak for United while letting the DOT respond for themselves. We remain optimistic about the DOT and administration and the positive effects they will have on air traffic control. There is significant potential there. At United, we have always prioritized hiring based on merit, and we are fortunate to be a top-quality employer. We actively seek a diverse range of candidates. Last year, we received over 600,000 applications for fewer than 10,000 positions, allowing us to be very selective in our hiring process. We focus on hiring the best individuals, resulting in a naturally diverse workforce. The evidence of our success is clear. Since emerging from COVID, we have outperformed every other airline globally, and having a diverse, highly skilled workforce has been a major factor in us being recognized as the best airline in the world.

And what do you say that there's a ton of upside with the new administration FAA and DOT?

Last year, even on clear days, 68% of our delays were due to air traffic control restrictions, which affected millions of customers. This requires basic attention to detail. When I discuss this with the President, he possesses extensive knowledge about airplanes and airspace and is focused on addressing these issues at his level. I also spoke with Incoming Secretary Duffy this weekend, who shares this focus. I believe they will tackle the fundamental issues, ensuring the FAA has the necessary resources and technology to operate efficiently. The effectiveness of the FAA is more significant for airline customers than all other factors combined. I think we are set to make significant progress on this front.

Hi, thanks for taking my question. I have a two-part question. Scott, some people are calling it the new golden age of U.S. airlines because of the capacity discipline, as well as improved pricing. Do you subscribe to this view? And second, do you see any risk for the industry due to the increasing macro uncertainty, not just from the demand perspective because of high inflation and interest rates, but also from supply perspective because of trade and tariffs? Thank you.

I believe we are currently experiencing a golden age for airline customers, particularly at United. We have made significant investments in our product, service, and loyalty program. The number of customers who are loyal to United is greater than it has ever been, with a diverse range of products available from premium to Basic Economy. This loyalty benefits United Airlines, creating a mutually beneficial relationship. Regarding the supply chain, we are still in the early stages of the Trump administration, so the impact of tariffs remains to be seen. However, I am optimistic about this administration's focus on fostering American innovation and reducing regulatory burdens, which I believe will lead to a strong economy and robust demand for United Airlines.

I will now turn the call back over to Kristina Edwards for closing remarks. Thanks for joining the call today. Please contact Investor Media Relations if you have any further questions, and we look forward to talking to you next quarter. Stay warm.