United Airlines Holdings Inc (UAL) — Q4 2025 Earnings Call Transcript

Thank you, Colby. Good morning, everyone, and welcome to United's Fourth Quarter and Full Year 2025 Earnings Conference Call. Yesterday, we issued our earnings release which is available on our website at ir.united.com. Information in yesterday's release and the remarks made during this conference call may contain forward-looking statements which represent the company's current expectations and are based upon information currently available to the company. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release, Form 10-K and 10-Q and other reports filed with the SEC by United Airlines Holdings and United Airlines for a more thorough description of these factors. Unless otherwise noted, we will be discussing our financial metrics on a non-GAAP basis on this call, and historical operational metrics will exclude pandemic years of 2020 to 2022. Please refer to the related definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures at the end of our earnings release. Joining us in Houston today to discuss our results and outlook are Chief Executive Officer, Scott Kirby; President, Brett Hart; Executive Vice President and Chief Operations Officer, Toby Enqvist; Executive Vice President and Chief Commercial Officer, Andrew Nocella; and Executive Vice President and Chief Financial Officer, Mike Leskinen. We also have other members of the executive team on the line and available for Q&A. And now I'd like to flip the call over to Scott.

Thank you, Kristina, and thank you to everyone for joining us today. 2025 had more than its fair share of unusual challenges, but the people of United did a truly remarkable job of living our no-excuses culture, focusing on the customers and overcoming obstacles. Last year was really a proof point that the strategy we've had to build a revenue-diverse, brand-loyal airline at United for the last decade is not only working, but it's remarkably resilient in tough times as well. The proof is in the numbers, and we expect to be the only U.S. airline that managed to grow EPS year-over-year despite all the headwinds. The United team truly is the best in global aviation, and I'm very proud of them. They have made today's United a remarkably different airline than it was in the past. Before turning to 2026, I want to wish all the best to a friend and an industry icon, Glen Hauenstein. My first real introduction to what has become modern successful airlines like Delta and United was at Continental in 1994 with Glen and Andrew Nocella as they were dismantling CALight and building the Newark and Houston hubs that we at United are now proud to call our own. I remember Glen once coming into the conference room where I sat and yelled at me for being too loud. Something, by the way, that my wife, Kathleen, wholeheartedly agrees with Glen on. At an airline, I think the most important and impactful job is building a great commercial strategy, and a large modern airline simply cannot succeed without a commercial superstar. Glen and Andrew are simply in a separate league from all the other commercial minds around the globe. And Glen, on a personal level, given the momentum at United, I'll just say that your retirement timing is impeccable. After a solid year in 2025, 2026 sets up as more of the same at United, but with a much better industry backdrop. Our plan has been working for the last decade and while we make minor adjustments to it every year, the core of building a great revenue-diverse, brand-loyal airline remains the same. We've had the right strategy for a long time now and the United team across the board is just better at executing than any other airline in the world. I'm proud of them and excited as we continue to build the best airline in aviation history. On to you, Brett.

Thank you, Scott, and good morning. While 2025 presented a challenging macro backdrop for the industry, we remain laser-focused on the customer experience and on building brand loyalty. Continued investments in the travel experience, communication and reliability helped us navigate disruption and deliver for our customers. Our strong Net Promoter Scores for the year highlight the care and consistency built into the United travel experience. Despite the operational headwinds of the year, we finished 2025 with an almost 3-point increase in our overall Net Promoter Score. And during the month of November, amid an unprecedented government shutdown and real-time flight reductions, we had the best NPS month in the company's history. This is a testament to our customer focus, decisive actions and customer-friendly policies and commitment to transparent communication especially during disruptions. Toby will share in more detail the specific actions we took to produce these customer-friendly results. We've also continued to innovate, and in the fourth quarter, we introduced new features and more personalized updates in our award-winning United app, including enhanced mobile bag tracking, virtual gate, real-time boarding updates and more detailed arrival information. These enhancements are designed to improve transparency, save customers' time and provide clearer real-time communication at key moments of the journey. With more than 85% of customers using the United app on the day of travel, another one of our competitive advantages and we are confident that these investments are meaningfully enhancing the United experience, earning customer trust at every touchpoint and winning brand-loyal customers. On labor, we are currently in active negotiations with 4 of our labor unions. We look forward to reaching industry-leading contracts with these groups, and we'll share more when able. We have a bright 2026 ahead of us, and I want to thank our employees for the important work they do every day. I am proud to say they will be receiving over $700 million in well-deserved profit sharing for 2025. Their resilience and shared commitment to our values and customers are what make United strong. I now hand it over to Toby to discuss our operation.

Thank you, Brett, and I'm happy to join you all on this morning's call. At United, we're proud of our no-excuses culture and last year it was really put to the test as the United operations team confronted a wide array of challenges outside of our control. I'm so proud of how the team responded and delivered for our customers. Capitalizing on investment in our people, new tools and other innovations allowed us to be nimble and react quickly to capacity directives from the FAA and to recover faster and stronger during other irregular operations than ever before. As a result, we had the highest seat completion factor in our history and ranked #1 of the big 3 legacy carriers in 2025. In fact, at O'Hare in 2025, we canceled half the seat rate of our largest competitor. We flew a record 189 million passengers and ranked #1 in STAR D0 for the second year in a row. For the year, United ranked #2 in on-time departures and #2 in cancellations. Our United Express operation delivered 134 days of perfect completion. This is a remarkable performance in the face of the outside challenges that we face at Newark and staffing challenges at the ATC. Beginning in the early November, the FAA directed airlines to temporarily reduce departures at 40 major airports due to staffing and system constraints from the prolonged U.S. government shutdown. We worked closely with FAA leadership to swiftly implement the reductions, and we want to thank them for their partnership. At United, we were intentional with how we made these cuts. From the start, our priority was protecting the integrity of our network. We made a clear decision not to cut long-haul international and hub-to-hub flying. Those flights are the backbone of our network and aided in retaining connectivity and flexibility for our customers. We focused on reductions where we could minimize customer impact, with the majority of cuts concentrated on regional flying and non-hub domestic routes with smaller narrowbody aircraft. In many cases, that meant trimming frequency on routes where there were multiple daily options rather than eliminating connectivity altogether. Where we could, we consolidated flights in fewer departures with larger aircraft to move the same number of customers more efficiently and reduce further disruption. Even with these changes, total cancellations were only approximately 4% of departures during peak periods and had a minimal impact to our capacity in the quarter. Operationally, I'm very proud of how our team managed the rolling schedule changes. We're no strangers to managing through irregular operations and that has contributed to the speed and flexibility in which we respond to these situations. We published cancellations several days in advance to give peace of mind to our customers and directly communicated any changes through our app and website and focused on reaccommodating customers wherever possible as quickly as able. Notably, nearly 60% of our customers whose flights were canceled were rebooked within 4 hours of the original departure time. Any customers traveling during this period could request a refund even if their flight ultimately operated and that included nonrefundable and Basic Economy tickets. It was the right thing to do. Thank you to each United employee who helped us successfully navigate these real-time schedule changes. We closed out the year on a high note. United delivered the best operation in the industry over the holidays, ranking #1 in on-time departures and on-time arrivals. We canceled less than 1% of our flights during the holidays. And following the Caribbean airspace closure in early 2026, we added 10% more seats over a 3-day period to help customers return home, an outstanding way to close out the busy holiday season. 2025 is a year we should all be proud of, especially given the multiple headwinds United and the industry faced. Running a strong operation sets the foundation for delivering on our financial commitments and it helps attract the brand-loyal customers that we speak so much about. Thank you again to our incredible team here at United, and I look forward to building on our momentum in 2026 together. Now to you, Andrew, to speak about the revenue environment.

Thanks, Toby. United's top line revenues increased 4.8% to $15.4 billion in the quarter on a 6.5% increase in capacity year-over-year. Consolidated TRASM for the quarter was down 1.6%. Q4 was United's highest revenue quarter ever. Premium cabins outperformed main cabin once again in the quarter. Premium cabin revenue was up 12% year-over-year on a 7% increase in capacity. PRASM for premium cabins outperformed the main cabin by almost 10 points in Q4. Main cabin revenues were up 1% on a 6% increase in capacity for the quarter. For the year, premium revenues increased approximately 11%, while standard and Basic Economy revenues were down approximately 5%. We did see a nice bounce back in our international flying in Q4 after a challenging Q3. The Pacific and the Atlantic performed well with PRASM turning positive in both regions. Latin America, on the other hand, had yet another challenging quarter. Cargo revenues for 2025 were up 2.1% year-over-year, totaling $1.8 billion. Loyalty revenues for 2025 were up 9%. Remuneration from global co-brands was up 12% for the year and 14% for the quarter. And for the third year in a row, we added over 1 million new co-brand cards. As we look to Q1 2026, we expect to see sequential improvement. The possibility that all regions have positive RASM year-over-year. Last year did start very strong from a bookings perspective but then dropped off sharply towards the back third of January and for the rest of the quarter. Based on what we've seen so far this year, bookings and yields are outpacing the strong start from last year, and we're hopeful that the momentum will continue, which could admittedly cause our guidance to feel a bit conservative. We also expect the domestic capacity environment to be quite favorable for the first half of 2026 with a small but meaningful amount of perennial unprofitable capacity by others leaving the market. However, in Q1, premium revenues continue to lead the way, while standard main cabin seats continue to show some weakness. This main cabin weakness is due to unprofitable capacity offered by other large spill demand U.S. carriers as ULCC capacity becomes less relevant. We also have a tailwind in Newark later this spring with operations running well. We expect Newark to give United a unique RASM tailwind versus the industry considering the events last spring. With the number of flights now limited to what the runways can accommodate, our customers can and are booking in confidence. We did make aggressive Latin capacity adjustments for Q1 to correct underperformance we saw in Q3 and Q4. However, recent geopolitical events are having a measurable negative impact on bookings in the Caribbean. Yet, we still have a chance at positive Latin RASM depending on when concern dissipates. All United hubs were once again profitable in Q4 and for all of 2025. A fully profitable hub framework allows United to invest incremental capacity on a solid foundation. We think we're only one of two large U.S. carriers that can say all their hubs are profitable in 2025, and these same two carriers are expected to represent the bulk of industry profits in the year. We also believe that of the three airline hubs located in Chicago, only United's hub was profitable in 2025, and we expect it will be profitable again once again in 2026. Today, I also wanted to talk about our commercial focus points for 2026 to drive higher RASMs and margins. Our first focus will be new seasonal capacity shaping of our long-haul schedule. Peak demand for international travel has spread from the second and third quarters to other parts of the year. As a result of this shift, we expect the fastest-growing quarter for United's international capacity to be Q1 in 2026 with minimal growth in Q3. Flattening capacity across the quarters would have not been correct in 2019, but it is today. A second focus will be enhanced merchandising of our growing product lineup. We plan to increase segmentation and customer choices with our changes, which we'll announce in early 2026. This effort includes the largest redesign of united.com in a decade. Our third focus will be enhanced connectivity. We will soon approach the connectivity goals we set in 2021 with the United Next Plan by 2027. As a result, 2025 represents United's high watermark on domestic capacity growth as we draw this very successful part of the United Next plan to an end. Our fourth focus will be MileagePlus, enhancing the growth potential in the coming years via drawing a larger distinction between true loyalty programs and reward programs offered by others. We have a legacy contract that continues with our banking partners regarding core economics, but we still have plenty of ideas to boost growth in revenue in the meantime. And premiumization is our fifth focus in 2026. We've had this premium focus for almost eight years now. And while our lead is now being followed by a range of other U.S. carriers, it's United's seven business-centric hubs that dictate this plan and why we expect to be more successful at it. Last spring, we announced our new Elevated interior for our widebody jets, including the new United Polaris Studio suites, Polaris suites with doors, along with countless other upgrades to the soft product. Four Elevated 787s are now being prepared for delivery in the coming weeks, and we expect 16 more for the remainder of 2026. These aircraft, along with other new deliveries will result in our premium capacity growth accounting for more than half our growth in '26. We look forward to another innovative set of products and aircraft announcements in 2026. United is defining what premium means for all customers, no matter where they sit or what they pay. Our United Signature Interior mods and Starlink installs are now moving at pace and will be completed in 2027, creating consistent premium product we hoped for when we announced United Next in 2021. A quick but important preview for 2027 is our long-term focus on gauge. While gauge is not a focus in '26, it will be in '27 and beyond as a much higher percentage of our growth equation. Most of our commercial focus areas in '26, of course, ladder up to decommoditizing our product, providing consumers with more choices and winning a higher share of brand loyal customers. We like our plan. We remain focused on doing more of the same in the coming years. With that, I offer my thanks to the entire United team for a great but challenging 2025 and hand it off to Mike to talk about our financial results.

Thanks, Andrew. We closed out 2025 on a high note and delivered fourth quarter earnings per share of $3.10 within our guidance range of $3 to $3.50 and that's despite a $250 million impact to our pretax earnings from the government shutdown. 2025 was a challenging year for the airline industry. Between macro volatility and idiosyncratic challenges at Newark, each quarter of 2025 experienced a material event that pressured earnings and further widened the performance gap between industry leaders and laggards. Our full year 2025 EPS came in at $10.62 which was slightly up versus 2024 and despite an $0.85 headwind from our challenges at Newark. I expect we will be the only U.S. airline to grow EPS last year. This is an incredible proof point of United's ability to execute through times of elevated uncertainty when most of the industry cannot. An airline with a business anchored by brand-loyal customers isn't only more profitable, it's also more resilient. Our plan is working, and I'd like to thank the entire United team for their hard work in the face of all these challenges. I'd particularly like to thank our frontline flight attendants, pilots and customer service representatives. Through an extraordinarily difficult time during the government shutdown, you served our customers, leading to the highest Net Promoter Scores in United's history. Over the last year, we've invested $1 billion in the customer and, as a result, customers are taking note. From larger clubs to free StarLink Wi-Fi to United product offerings as well as further segmentation continues to attract more and more brand-loyal customers, driving strong top line performance and more durable earnings. The investment in the customer has been enabled by our industry-leading efforts to drive cost efficiencies across the core business. In the fourth quarter, our CASM-ex year-over-year was up only 0.4%, bringing our full year 2025 CASM-ex up to 0.4% as well. We expect this performance to be industry-leading and will continue to drive efficiencies across the business in 2026. Now turning to the outlook. Looking to the first quarter, we expect earnings per share to be between $1 and $1.50, an approximately 37% earnings improvement versus the first quarter of last year at the midpoint and margin expansion year-over-year. Building off a strong quarter, for the full year 2026, we expect earnings per share to be between $12 and $14. At the midpoint, this represents over 20% growth and implies continued margin expansion as we march towards double-digit margins. Turning to the fleet. This year, we expect to take delivery of over 100 narrowbody aircraft and approximately 20 widebody aircraft. Accordingly, we expect our capital expenditures for the year to be less than $8 billion consistent with the $7 billion to $9 billion multiyear CapEx guidance we provided back in 2024. On the balance sheet, becoming investment-grade rated is a major priority of mine, and in 2025, we made meaningful progress towards investment-grade metrics. We paid off $1.9 billion of our high-cost COVID-era debt and brought our total cost of debt down to 4.7%. Our net leverage at the end of the year was 2.2x. As a result of our deleveraging efforts, combined with our earnings power and industry bifurcation, we've received 5 upgrades to our credit ratings across Moody's, S&P and Fitch over the last 13 months. United is now just one notch below investment grade at all 3 agencies, our highest ratings in over 25 years. In 2026, we plan to deleverage further and target net leverage below 2x with the intention of achieving investment-grade metrics by year-end. We're hopeful to achieve investment-grade rating shortly thereafter and are committed to managing our balance sheet to achieve that goal. Free cash flow generation remains a key priority. In 2025, we generated $2.7 billion in free cash flow, and in 2026, we expect to deliver a similar level of free cash flow given higher aircraft deliveries. In the medium term, we expect free cash conversion to remain around 50%. And as we exit the decade, we continue to expect free cash conversion to expand to around 75%. On the buyback, we have $782 million left in authorization from our Board of Directors. We will continue to balance our priority of being investment grade with making opportunistic purchases of our shares when market opportunities present themselves, hopefully less frequently. 2025 proved United could effectively manage through macro volatility and company-specific challenges while also delivering resilient earnings. Our relative margins remain strong and moving forward our focus will be on continued margin expansion and achieving double-digit margins. The industry continues to transform, and competitive dynamics are evolving with United firmly in the lead. Taken together, United Airlines is positioned for another year of growth and success that will drive value to our employees, our customers and our shareholders. Now back to Kristina to kick off the Q&A.

Thank you, Mike. We will now take questions from the analyst community. Please limit yourself to one question and if needed, one brief follow-up question as we hope to get to as many of you as possible. Colby, please describe the procedure to ask a question.

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

Thanks, Conor. I think I agree with your conclusion. 2026 has gotten off to a really strong start. But in particular, business volumes have gotten off and are just really compelling. And the way I look at it is, if you think back to early 2025, we saw actually strong business volumes at first, but those numbers quickly trailed off to be up just very low single digits in February and March. This year, for the same early January week, business revenue is up high single digits and nearly 20% year over year. So if current business volumes simply continue, you'll see year-over-year growth for the last two weeks of January for business, up 12%, 13%, 14%. The further you push this math into February and March, the stronger it potentially gets. So I think I agree with your conclusion. Well, it's still early in the year, but just we're off to a great start from a business point of view.

Okay. Great. I know you have focused on diversifying away from the main cabin and are doing a lot with premium and corporate offerings, but it feels like there are still ongoing issues in the main cabin that you mentioned might carry into 2026. Can you discuss how that segment might improve, and are you anticipating any change in that trend towards positivity later in the year?

Well, look, I think it's inevitable. Premium cabins are really on their fourth year in a row. But I do think it's inevitable that the coach cabin, the main cabin improves. And it's a really simple equation. It's the unprofitable capacity offered by others in the marketplace that continues to fly more than you otherwise expect to fly. So we'll see how that all shakes out. I can't predict the timing, but I do think eventually businesses stop doing unprofitable things. We'll have to see when that happens. But I remain bullish that we are going to see the performance of the main cabin flip at some point in the future. And when it does, that will be enormous fuel to our margin growth and be great for the industry itself. So time will tell, but I remain optimistic that we're on the course for that at some point in the future.

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

Sure, I'll take the question. I think it's a really good and relevant question, obviously. And first, we're in constant contact with Chase on the issue. Obviously, Chase is our largest co-brand partner, and we talk to them all the time on this issue. And what I'd say is while much remains uncertain, of course, United's portfolio would be impacted. But in our view, it would be impacted a lot less than just about everybody else. MileagePlus co-brand holders tend to skew towards higher FICA band ranges, often revolve at a lower rate and have low loss rates. These factors make us different than most non-airline co-brand programs and maybe even a lot different from a lot of other airline co-brand programs. We're going to let the banks sort this out. Interest rates and revolve rates are more their thing. Our focus is on providing amazing benefits via this program that our consumers love. So a lot more to come on this subject, but we feel like we're on top of it and we will be ready for whatever happens in the future.

As a quick follow-up, you mentioned some additional things you might do beyond the existing agreements with your card partners. Can you provide more details about what that entails regarding specific changes or enhancements you can implement in the program soon, aside from renegotiating the contract?

Sure, I'll do my best. But first, I want to welcome Jarad Fisher to the team. Jarad's our new Head of MileagePlus. He has experience in credit cards, strong brands and airlines which make him a perfect fit to lead MileagePlus into the next chapter. Richard and Luc have just done a great job. And as you can see from our new card growth stats that I said earlier in 2025 along with our remuneration growth. I know I often talk about these changes at MileagePlus without a lot of details. But what I'll tell you is Jarad and I will have a lot more to say about this, and we're going to say something within the next 10 weeks to accelerate growth and pull levers that we can pull that are in our control. So just a few more weeks and I'll be able to, I think, answer that question sufficiently for you.

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

Thank you, Sheila. I'm very proud of our cost performance in 2025, which I believe will be industry-leading, as I mentioned earlier. The cost efficiency in the fourth quarter is built on our strong operations, and much of the credit goes to Toby and his team for fostering that. Strong operations translate to cost efficiency. Moreover, we are nurturing a culture of efficiency at United Airlines. For instance, as we invest in a top-tier app, it enhances automation for faster check-in, which delights customers and reduces some variable costs. We've also revamped our global procurement organization. I'm pleased to report that in this first year of the overhaul, we've identified and achieved $150 million in annual savings within procurement, with more savings on the horizon. Lastly, we're utilizing advanced technology to model demand for our tech ops group, resulting in more productive technicians, fewer grounded aircraft, and overall improved fleet productivity. Those are just a few examples of our approach. There's much more to come as we foster a culture of operational efficiency at United, which we reinvest in our customers and it’s contributing to our higher structural profitability. Thank you for the question.

And I just want to add on, mostly to compliment the team, I think this is, from an investor perspective, one of the differentiating points of United versus all the other airlines in the world. We are the best airline in the world at the real core cost efficiency, something we've talked about a little in the past. And credit to Mike, Brett and Jonathan Ireland, who's sitting in this room; Toby Enqvist, our Chief Operating Officer; and Jason Birnbaum, who runs technology for us. We've culturally are great, but we've also made technology investments that I know do not exist at any other airline. And that's the foundation, the culture and the technology that drives core efficiency. We keep doing more and Mike told you a bunch of the tactical things that happened recently, but then we keep finding more. One of my favorite stories was we finished the budget last year and finished the budget, and Toby came forward and said, I think we got chances to drive another $250 million out of that operation in core efficiency. Nothing that impacts the customer, that helps the airline actually run better and saves money. And there's no other Chief Operating Officer in the world that is doing that. They're all begging for more money in their budgets. Like this is real at United, I think we're going to drive costs for years to come that outperform the rest of the industry because what we're doing is real and is not coming at the expense of employees or customers.

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

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

And Sheila, regarding the 100 narrowbody deliveries, it could be a little more. I mean, Boeing and Airbus have been doing a better job of repairing the supply chain that's been damaged from the pandemic. And so production rates are improving. If we get a few more than that, we're going to welcome that on the narrowbody side. That's going to help us up-gauge more quickly and the profitability of those new aircraft is really robust versus the aircraft that we can replace. And on the widebody front, it's a similar story. We expect 20 787s in 2026. I think we'll take about that amount in future years as well. And that modernization of the widebody fleet is not just for growth, but it helps drive better profitability and better returns on capital for United going forward. So I feel really good about the CapEx profile and what it's going to do to the financials.

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

Yes. Clearly, in Q4, the larger hit was domestic. I wouldn't say international is 0 from the government shutdown, but it was mostly domestic. As we look into 2026, we do have this Caribbean situation which is impacting the numbers there. So I'm going to be careful what I say about the Caribbean. We still think it could be positive, but it's going to be close. But we are looking for sequential improvement everywhere. Clearly, the Atlantic is leading the way, which is great to see. We're growing a lot across the Atlantic. A lot of it is Israel, but we're still growing a lot across the Atlantic. And we think we've got the capacity equation really dialed in, in that region. So we're really proud of that. Pacific, I think looks pretty darn good. South Pacific is not as good as the North Pacific. And domestically, it's going to be another improvement. And what I'd say is premium cabins are leading the way, not only domestically, but across the entire network.

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

The way I see it, Scott mentioned something about this last night, which helps clarify our answer a bit. We take great care in crafting our forecasts and our approach is quite consistent. We completed our forecast for 2026 several weeks ago and have been fine-tuning it as we enter the new year, focusing primarily on Q1. We tend to pay less attention to adjustments in Q2 and later because of our established process. So we will see how it unfolds. I'm happy to report that the year has started off very well. Our international operations are performing exceptionally, even in the Caribbean despite the challenges there. We are optimistic, and currently, business demand is looking quite strong, and we will see if that trend continues. If everything remains on track, which we believe it will, and Scott agrees, our forecast may turn out to be more conservative than typical. That's all I have for now, but maybe Mike would like to add something.

Ravi, I'd just say 2025 proved a year. If we talk about acts of God in this industry, we got walloped. The industry got walloped. And I'm incredibly proud of United's full year results. I'm particularly proud of the fourth quarter where we had a government shutdown. Just about every other major airline had to issue 8-Ks to update their guidance and we delivered within our original guide. That is testament to how we guide at United Airlines to make sure that we deliver on our financial commitments even in imperfect times. And 2026 will be no different.

Scott, I was hoping you could revisit your thoughts on the shape of industry structure from here. We've seen M&A announced among some of the smaller carriers. There seems to be an expectation of more. I'm curious what you think equilibrium in the industry looks like. And second, obviously when I think about your history, America West-US Air, US Air-American Airlines, you're no stranger to be a leader in M&A. Is there any scenario where United gets involved in M&A considering you have what seems to be an accommodative DOJ, which isn't always the case?

Well, I'm not good at resisting the bait, but I'm going to resist the M&A bait today. Bob Rivkin is nodding appreciatively at me. I'm not talking about that. But I think the structure of the industry is ultimately going to be low-cost carriers will shrink down to the niche that works for low-cost carriers. That is big leisure markets. And I don't know if they're going to liquidate, if they're going to merge, or if they're just going to all shrink for sure. But they're going to shrink down to the niche that works and that'll be good for them. I think they can have solid margins, but it's a much smaller niche than where they are today. I think there's going to be 2 brand-loyal airlines. That's already the case. I gave you the numbers in Chicago. That game is over. I realize that not everyone knew the game was on. The game is over. And when we have that big of a lead with customers, like you just don't win it back because you'd have to have technology, product, services that were somehow better than United and somehow better than Delta to even start and you're a decade behind. And then I think the rest of it will be sort of finding places where you can get big in other cities, non-hubs of Delta or United, and you can have a network that works and that's a little more commoditized, but you can have a network that works. And so I think that's what the structure. And it's an open question about whether consolidation helps us get to that structure. But that's where the structure is going to end with consolidation or without.

So last quarter, I think you laid out an expectation we should get at least a point of margin improvement a year. I think, Scott, you just said it again. I guess the high end of the guidance range gets you there. The midpoint would be less than a full point. So I don't know, just at the end of the day, like help us think about price, costs this year given the momentum you've got right now, the comps that come in Q2, Q3. Like I would have thought this would have been the year where like it's a pretty clear like point of margin. Like is it just the conservatism that maybe you said a couple times? Or are there other things we should be cognizant of, I don't know, labor, what's going on in Chicago? I don't know. Just help us understand like if this is the year we should be doing the full point of margin.

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

Maybe, Mike, I just wanted to follow up on that question. As you consider unit costs going into 2026, we obviously need to account for labor dynamics. Excluding that, how reliable is 2025 as a benchmark or range for us to reference when thinking about unit costs excluding labor impacts for 2026? Additionally, looking at the bigger picture, it seems you still have plenty of opportunities to improve cost efficiency moving forward. How significant is this aspect beyond 2026?

Yes. Thanks, Chris, for the question. And look, we're not going to give PRASM guidance. We're not going to give CASM guidance. But we've been pretty clear about this is a new culture at United around cost management and discipline and driving efficiency. And let me remind you, we really have not benefited from gauge yet. That gauge benefit is still on the come. So '25 was a great year. We're going to work really hard to make '26 an equally great year from a CASM standpoint. And keep in mind, some of the tailwinds we haven't really started to even benefit from.

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

I'll take that. We're looking forward to it, and I'm sure some of us will attend a few games. The interesting thing we see is that it creates what would normally be countercyclical traffic flows. It generates inbound demand in the U.S. in June, which is typically an outbound period. So, yes, we do expect some positive impact from that. Considering the broader macro trends, I'm not able to specify exactly how much, but we believe this particular sporting event will benefit United. There are other major sporting events that do not have the same effect because they primarily generate leisure traffic while business traffic declines. This is not one of those cases. We anticipate some level of upside, but I want to caution you that given United's size, it may not be all that significant, though it is a positive.

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

We don't use those words, and I won't repeat them because that's not our mindset. The limitation on capacity is not about the aircraft itself; it’s about the engines. Currently, there are around 800 aircraft worldwide that are grounded due to engine issues. We have proactively purchased a significant number of spare engines, yet some will still be grounded this year because of engine problems. In my opinion, engine manufacturers will struggle to keep up with the demand for maintenance, repair, and overhaul replacement engines alongside new aircraft deliveries until sometime in the next decade. Therefore, engines are the bottleneck.

Could you clarify what you meant about the Caribbean? There was an airspace closure at the beginning of the year that is currently affecting bookings in Q1, and you mentioned that the impact is measurable. Can you provide more details on that and estimate the potential costs? Also, I noticed your competitor in Atlanta hinted at some segmentation in the front of the plane. Where does United stand on that? Should we expect a simplified business class or first-class product, perhaps with features like no seat assignment?

Leslie, it's Andrew. Look, on the Caribbean, we're a pretty big airline in the Caribbean and we're a small airline in the Caribbean. I'm just pointing out that there's been a little bit of a book away from the Caribbean. I don't think it's measurable in the grand scheme of things when it comes to United Airlines, to be blunt. But demand has been impacted by the situation in Venezuela to some extent. We expect that to dissipate over time. And in fact, the last few days have been better than the first few weeks of the year. So I think we're in good shape on that front. And look, on cabin segmentation, I'll add that that's been very good for United Airlines over the years as we invested in more premium products and larger array of products out there. So we're going to continue to do that. The only more reasonable hint I'll give you is that we have a large redesign of united.com coming as we seek to do different things on how we sell products. So we'll leave it to that, and we'll talk to you sometime in the first quarter or second quarter about our overall strategies on merchandising.

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

It does.

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

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

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