The operator introduces the United Airlines Holdings Earnings Conference Call for the Fourth Quarter 2023 and Full Year 2023. The call will be recorded and no portion may be recorded without the Company's permission. Kristina Edwards, Managing Director of Investor Relations, will be hosting the call. The call may contain forward-looking statements and will discuss financial metrics on a non-GAAP basis. Listeners can refer to the earnings release for more information.

The Chief Executive Officer of United Airlines, Scott Kirby, discussed the company's successful year in 2023 and their plan for United Next. He thanked the 100,000 employees who worked hard to achieve their goals and mentioned the impact of the MAX 9 grounding on their operations. He also praised their tech ops team for working tirelessly to ensure the safety of the MAX 9 before returning it to service.

The speaker thanks the FAA for their leadership and acknowledges their collaboration in finding a solution to prevent a repeat of a previous incident. They also discuss United's impressive financial performance in 2023 and attribute it to the challenging operating environment, which led to industry capacity changes and cost pressures. The speaker also highlights the improvements in Newark and the impact it had on their business and customers. However, they admit to underestimating the inflationary pressures faced by the industry, particularly in labor, maintenance, and supply chain.

The paragraph discusses the impact of industry-wide cost pressures on United Airlines' CASM-ex and its ability to offset those costs with higher revenues. It also mentions the success of United Next and the challenges the company continues to face, but remains optimistic about future growth.

The United Next plan is expected to lead to growth in earnings and margin. The Boeing 737 MAX 9 aircraft has been grounded, but United is confident in its ability to capitalize on industry trends. The company had a successful year in 2023 and achieved record-breaking operational results, with the lowest cancel rate in December and high NPS scores during the busy holiday season.

In 2023, United Airlines faced challenges with flight delays due to overcrowding in New York airspace. However, the FAA's intervention and United's proactive measures have led to improved reliability and reduced delays. United plans to continue reducing flight activity and hiring skilled employees to maintain operational success. The airline will also be paying their eligible employees a higher profit sharing amount compared to previous years.

The team at the airline has played a crucial role in achieving impressive results. Despite cost pressures, the airline saw healthy revenue trends during the holiday season. Total revenues increased by 9.9%, with a 14.7% increase in capacity. However, consolidated TRASM and PRASM were down for the quarter. Domestic demand was strong and PRASM results improved from the previous quarter. There was a slight demand weakness period in Europe due to the conflict in Israel, but it has now moderated. The airline also increased flying to China and restored capacity to pre-pandemic levels across the Pacific. Latin American unit revenues decreased due to industry capacity levels and fare discounting. Cargo revenues were also lower due to lower yields. For the first quarter, the airline expects TRASM to be flat year-over-year, with positive domestic PRASM and an increase in business traffic volumes.

United Airlines has seen strong yield growth in tickets purchased within a week of departure, as well as for Atlantic fly in early 2024. They expect this trend to continue into the second and third quarters. They plan to resume service to Tel Aviv in February 2024 and have seen an increase in business demand for London Heathrow. They will focus on slow growth across the Atlantic in 2024. Asia Pacific growth remains above normal, but they expect negative RASM in Latin America for the first and second quarters due to capacity limitations. They are prioritizing international growth over domestic at their hubs in Newark and San Francisco, and expect demand to catch up with supply in 2024. Overall, they anticipate strong unit revenue performance for domestic and Atlantic flights, with weaker results in Asia and Latin America. They also expect international flying to have higher margins for United compared to domestic in 2024.

United has a strong commercial model that has diversified their revenue streams and made their product less commoditized compared to other airlines. This has allowed them to overcome inflationary cost pressures and maintain fair levels. Their unique hub system and network have been key to their success and their fleet growth has unlocked the true value of their hubs. They have also seen growth in premium revenue and remain committed to Basic Economy. United plans to continue adding gauge to their domestic flying and focus on their Mid-Con hubs for growth in 2024.

The success of United's United Next plans is attributed to their diversified revenue streams and global network. The company's pretax income for 2023 improved significantly compared to the previous year, and earnings per share were within the initial guidance range. The fourth quarter also saw strong operational performance and revenue trends, with a decrease in fuel prices. Changes in the classification of certain expenses had a minimal impact on net income and cash flow, but will have a slight effect on CASM-ex and RASM in the coming months. Overall, unit costs improved due to strong operational performance.

United Airlines' relative performance on CASM-ex (cost per available seat mile excluding fuel) in 2023 was near the top of the industry compared to 2019. The company's focus on strong cost performance is crucial for the successful execution of United Next. The relationship between industry costs and prices has been evident in jet fuel, labor, and maintenance costs. Despite a 17.8% increase in unit costs compared to 2019, United's margins have significantly improved due to an emerging preference for their product and top-tier operational reliability. However, for the first quarter of 2024, the company expects a loss per share due to several headwinds, including reduced capacity from MAX 9 flight cancellations, contra-revenue reclassification, new labor agreements, and supply chain challenges.

In this paragraph, the speaker discusses the headwinds facing United Airlines, including labor and maintenance costs, which are industry-wide issues. However, they are confident that their costs will remain lower than their competitors. They expect earnings per share to be between $9 to $11 in 2024, and will update their financial targets at an upcoming Investor Day. They plan to focus on earnings per share rather than specific metrics and will continue to provide commentary on business trends. In terms of fleet, they took delivery of 20 Boeing MAX and 4 Airbus A321 aircraft in the fourth quarter and have 107 more scheduled for delivery in 2024, including 31 MAX 9.

In this paragraph, the author discusses the current state of aircraft deliveries and orders, citing potential issues with Boeing's MAX 10 certification and supply chain problems. They also mention a potential decrease in orders and deliveries from Boeing in 2025, which will require a reworking of their fleet plan. The author then moves on to discuss the company's financials, highlighting their liquidity and adjusted net debt to EBITDAR ratio. They state that generating consistent free cash flow will be a top priority for the team in the coming years, as it will help increase the company's valuation. The author also mentions an upcoming Investor Day in May.

The speaker discusses the impact of the MAX grounding on United's growth plans and mentions that they are working on alternate plans due to the uncertainty of the MAX 10's certification. They still hope to achieve their United Next plan, but it may take longer without the MAX 10. Details will be shared at a later time.

The speaker, Andrew Nocella, is responding to a question about the company's performance in Asia. He mentions that they are aiming to rebuild the region with higher margins than before the pandemic. He also notes that China was profitable for them before the pandemic and they expect similar margins across their global network. Nocella expresses optimism about the long-term prospects in Asia post-pandemic and mentions that they have added a lot of capacity and expect it to do well in the coming quarters. The next question is about the growth of Basic Economy, to which Nocella responds that it is largely due to a share shift.

The speaker discusses the development of United's Basic Economy product and its impact on market share. They also mention the importance of loyalty programs, specifically United's MileagePlus, and tease an update on the program at an upcoming Investor Day.

United Airlines is exploring ways to increase market attention and recognition of the value and premium multiple of their earnings. They have discussed potential options and may take action in the future. In regards to the MAX 10, United is considering the A350 as an option for their wide-body fleet in the early 2030s. Basic Economy fares have increased by 20%, a significant decrease from last quarter's 50% increase. This may be due to a more difficult comparison or a deliberate decision to maintain a gap between CASM and RASM.

The speaker, Andrew Nocella, clarifies that United did not pull back on their basic revenue stream due to competition, and instead remains optimistic about it. He also explains that the link between CASM and RASM has changed in the industry, meaning that if an airline's CASM increases while others decrease, the price will still be the lowest common denominator. Nocella also mentions that the company's cost outlook includes accruals for open labor contracts and that there are potential risks involved in their cost plan for 2024.

Catherine O'Brien from Goldman Sachs asks about the cost side of United's labor agreements and how it will impact their CASM-ex guide for the first quarter. Mike Leskinen responds by saying that they include their expectations for labor agreements in their guidance and that there will be continued pressure from labor, a MAX headwind, and a maintenance headwind. He also mentions that they expect to see the MAX aircraft flying again soon, and that the supply chain in aerospace may not be fixed until well beyond 2024.

The speaker discusses the expected labor and maintenance challenges and a possible decrease in CapEx due to lower aircraft deliveries. They also mention that RASM is expected to be positive for the year, but do not provide specific guidance. The domestic market is starting the year strong.

The speaker believes that the trans-Atlantic capacity will remain strong, while the Asia capacity will decrease in Q2 and Q3, leading to a bullish outlook for the year. The domestic and international margins are expected to converge, with domestic showing improvement. The company is working to make Q1 a more profitable quarter and has made changes to improve RASM trends in domestic flights.

In the second quarter and third quarter of 2024, the company's global network is expected to perform exceptionally well. The first quarter may see a bigger loss due to the grounding of the MAX 9. The company plans to update their longer term margin targets at Investor Day, but they are confident in the success of their United Next strategy and expect continued momentum. They also plan to update their targets for adjusted net debt and discuss their financing plans to reach their target leverage over the next one to three years.

Mike Leskinen and Helane discuss the potential impact of delayed deliveries on CapEx and free cash flow. Leskinen expects free cash flow to cover CapEx and for margins to grow into the low double digits, allowing for debt paydown. Duane Pfennigwerth asks about the recovery of international inbound traffic and any specific markets that may see a stronger rebound. Andrew Nocella notes that US outbound has been stronger during the recovery and that Europe, Japan, and Australia are still lagging. He believes that when inbound traffic picks up, it will provide further upside. Duane Pfennigwerth asks about potential bullish recovery in specific markets such as San Francisco and Asia inbound.

Andrew Nocella, an executive at an airline, says that there is a lot of construction happening in San Francisco which is limiting their ability to fly there. However, their international flights are doing well. He also mentions that corporate travel is starting to improve, particularly in January, but it is still behind where it should be. This has resulted in a strong domestic RASM outlook for the airline.

The speaker discusses their strong start to the year and their potential for future free cash flow. They also address concerns about industry trends and assure investors that United is differentiating itself from other airlines.

The speaker discusses how customers are increasingly choosing to fly with certain airlines, leading to revenue growth and cost convergence in the industry. They believe this trend will result in higher and more stable profit margins, but the impact of negative margin capacity being forced out of the industry on fare ladders is uncertain. The speaker also mentions their focus on diversifying revenue through offerings like Polaris and Basic Economy.

The speaker discusses the importance of the Basic Economy for their airline and how they will continue to provide choice for customers. They are pleased with their revenue results and are prepared for a strong summer despite slower growth across the Atlantic. They have tilted their capacity towards Southern Europe in the first quarter.

The speaker discusses the changes in consumer behavior post-pandemic, with destinations in Spain and Italy becoming more year-round destinations. They also mention the shift in capacity from Northern Europe to Southern Europe. The speaker expresses confidence in Boeing's ability to fix their problems and supports them as their biggest cheerleader.

Scott Kirby clarifies that he is not canceling the MAX 10 order, but it is being removed from their internal plans due to Boeing's inability to meet contractual deliveries. The conference call has ended, but further questions can be directed to Investor or Media Relations.

This summary was generated with AI and may contain some inaccuracies.