The operator welcomes participants to the United Airlines Holdings Earnings Conference Call for the first quarter of 2024. The call is being recorded and participants' consent to this is implied by their participation. The host, Kristina Edwards, then introduces the call and mentions that the company's remarks may contain forward-looking statements. She also notes that the company will be discussing financial metrics on a non-GAAP basis and provides a reference for reconciliations to GAAP measures.

The CEO of United Airlines, Scott Kirby, begins the earnings call by discussing the company's commitment to safety. He mentions the FAA's review of their operations and expresses confidence in their safety protocols. He then moves on to discuss the company's strong first quarter performance and credits it to their United's Next plan.

In the third paragraph, the speaker discusses the impact of the Boeing MAX 9 grounding on the company's financial results and operations. They mention that the company would have been profitable if not for the grounding and highlight the resilience of their United Next plan. The speaker also acknowledges the higher costs and delays caused by the grounding but expresses confidence in their cost management and customer demand. They conclude by thanking the United team and handing over to another speaker who discusses the safety review with the FAA and potential delays in aircraft deliveries.

In the first quarter, United Airlines reached a tentative agreement with the IBT for a contract extension, achieved top-tier service and on-time departure performance, and made customer enhancements such as retrofitting aircraft with signature interiors and offering MileagePlus pooling. They also launched TSA PreCheck Touchless ID at O'Hare and LAX. These efforts have resulted in improved Net Promoter Scores and strong momentum for the rest of 2024.

Andrew Nocella discusses United's strong revenue and financial performance in Q1, despite challenges with the MAX 9. He acknowledges that Q1 has historically been a challenging quarter for the company but mentions that they have learned from 2023 and made adjustments to their commercial plan for 2024, resulting in improved margins and profitability. United's overall revenue increased by 9.7% on 9.1% more capacity, with TRASM and PRASM also showing growth.

In the first quarter, United Airlines saw an increase in domestic PRASM and revenue, which helped offset lower RASM from global and Latin American flights. Their domestic network has historically been restricted, but their recent RASM results show that not all industry capacity is equal. Cargo revenue decreased, but United is hopeful for an improvement in the near future. Their loyalty program, MileagePlus, had a strong quarter, and there was an increase in managed corporate travel. Latin American PRASM was down, but there was growth in the Pacific and Atlantic regions. United plans to make capacity adjustments on underperforming routes.

United is seeing positive results from their efforts to build their brand and improve the customer experience, particularly for business travelers. The elimination of change fees and focus on premium products has resulted in increased revenue and market share. Basic Economy has also been successful in attracting customers and competing with low-cost carriers. United plans to continue expanding their fleet and introducing new products to further increase revenue and meet customer demand.

United's gauge growth will lead to cost convergence and provide consumers with a variety of premium seat options. The second quarter is expected to see strong domestic and Atlantic demand, but a negative result in the Pacific and Latin America. However, the company is optimistic about the second half of 2024 and plans to focus on building connectivity in non-coastal hubs. In the first quarter, United saw a pretax loss of $79 million due to the grounding of the Boeing MAX 9 fleet, but still had strong revenue and disciplined expense management. The company generated $1.5 billion in free cash flow and its adjusted net debt to EBITDAR is back to pre-pandemic levels, showing that their United. Next plan is successful.

United Airlines has made changes to its delivery schedule with Boeing and Airbus in order to address delays and optimize its fleet. This includes reducing its expected deliveries for 2024 and smoothing out the pace of deliveries for 2025-2027. These changes are expected to result in positive and growing free cash flow for the company over the next three years. United remains focused on achieving higher earnings, better margins, and stronger free cash conversion in the long term.

In this paragraph, the speaker discusses the costs of the company and how they have trended as expected during the quarter. The uncertainty caused by the MAX grounding and delays in aircraft deliveries has made it challenging to optimize expenses. Due to these factors, the company's CASM-ex has been temporarily pressured, and they are working to reduce costs. They expect second quarter earnings per share to be between $3.75 and $4.25. Despite these challenges, the company remains optimistic about their future and their United Next plan. They believe they are on track to deliver $9 to $11 in earnings per share this year. The speaker then hands it over to Kristina to start the Q&A session.

Andrew Didora from Bank of America asks one question about United Airlines' plans for their increased free cash flow generation. Mike Leskinen answers by stating that their net leverage is currently 2.7 times and they plan to continue deleveraging and paying off high coupon debt. After that, they will have flexibility to revisit other uses of free cash. Andrew then asks a follow-up question about the strong corporate performance in the transatlantic market, to which Andrew Nocella responds that corporate was strong across the board, not just in London Heathrow.

The speaker discusses the strong performance of domestic PRASM in the first quarter and attributes it to various factors such as the Mid-Con restoration, corporate bookings, and share gains. They also mention the strategic approach of United Next and how the industry has changed, giving United and another airline a competitive advantage due to their better proposition for customers.

The speaker explains that their airline has a better product, network, and loyalty program, making it unique and difficult for competitors to replicate. However, in the past, they faced two challenges: losing customers who prioritize change fees and not having a competitive product for price-sensitive customers. These issues have now been addressed through the creation of a great Basic Economy product and increasing the number of profitable seats, which was a major focus of United Next.

The speaker discusses the success of their airline's moat, global network, and loyalty program, stating that these are permanent structural changes which have led to them becoming the highest margin airline. They also mention a tactic of maximizing profitability rather than aircraft utilization, which has been effective. They then address opportunities in the US domestic market, specifically in Florida and Las Vegas, and mention their United Next vision for the future.

In the first quarter, United Airlines focused on optimizing its utilization and rescheduling flights to improve productivity. The airline also worked on building connectivity across its hubs, a process that will continue until 2026 or 2027. This has helped United outpace domestic RASM growth compared to its competitors. The United Next strategy, which includes upgauging and increasing premium seat options, has contributed to a 1.1 point increase in premium mix and a focus on both premium and Basic Economy revenue streams. The global network is also a strong asset for United.

The speaker discusses the success of their premium revenue strategy and their plans to continue pushing it. They also mention potential future opportunities for further diversifying their revenue streams and offering more premium products. They do not provide specific details but state that their teams are working on innovative ways to monetize these options.

The speaker discusses United's efforts to differentiate themselves from their competitors and how their market share is improving across all hubs. They also mention the challenges they face with aircraft delivery and the need to focus on their core Mid-Continent hubs. The speaker is unsure of their competitors' plans but is confident in the United Next plan and its potential for success.

The speaker discusses the current state of the airline industry and how safety is the top priority for all competitors. They mention recent incidents at United and in the industry as an opportunity to further improve safety standards.

United Airlines is taking advantage of the current situation as an opportunity to improve their high standards even further. They plan to do this while still running a great airline for their customers, employees, and shareholders. One way they are doing this is by introducing the option to pool miles for their MileagePlus program, which will enhance its value at minimal cost to the company. When it comes to their longer term CapEx plan, they understand that it may change based on future factors and they are aware of the possibility of entering 2025 with a different delivery target than initially planned.

Mike Leskinen and Andrew Nocella discuss United's focus on generating free cash over the long term and managing their deliveries to maximize profitability. They mention the uncertainty around OEM delivery schedules and production rates, and how they will be watching closely for any changes. They also mention the progress in international inbound sales, with Germany and core Europe still trailing behind.

The speaker discusses the progress being made in reducing dependence on US consumers for global growth. They also mention plans for 100 narrowbody aircraft per year, with the flexibility to fly older aircraft longer or retire them early if needed. The speaker also mentions potential challenges and cost considerations for the rest of the year.

Mike Leskinen, CFO of United Airlines, discusses the impact of labor costs and the decrease in planned aircraft on the company's second and third quarter results. He also mentions long-term cost initiatives, such as improving efficiency in tech operations and supply chain, procurement evaluations, and moving mainframe computing to the cloud, which will result in significant cost savings in the future.

The speaker discusses the progress made in moving systems to the cloud, but notes that a small percentage still needs to be maintained on the mainframe. They mention that more information will be provided at an upcoming Investor Day. The next question asks about the back half CASM and RASM, to which the speaker responds with a high-level overview of the expected trajectory for each region. They also mention that they have paused growth in Europe but are optimistic about the region's performance. The speaker concludes by acknowledging a question about free cash flow.

The speaker asks for Scott's opinion on the discussion about CapEx and whether the $7-9 billion estimate will change in the next six months. Scott believes this is a good estimate and explains that the supply chain challenges have caused delays in aircraft deliveries, making it difficult to plan effectively. They have now leveled out the deliveries and will not increase the estimate, but will build a hedge into their schedule.

The speaker discusses the importance of maintaining a high level of service and customer loyalty in their airline, and mentions that they prioritize this in their partnerships with other airlines. They refute the idea that some of their alliance partners do not have the same commitment to service, and highlight the strong partnerships they have with ANA, Air New Zealand, and Lufthansa. They also mention recent strikes at Lufthansa, but express confidence in the airline's commitment to customer service.

The company values customer service and works together to improve it. They acknowledge cultural differences but still prioritize customer satisfaction. They have a strong alliance and a profitable global network. The second quarter earnings guidance will be influenced by a mix of corporate, leisure, domestic, and international travel. Domestic leisure has been strong and business demand is picking up. The future looks bright for the company.

In the quarter, there was a significant year-over-year growth in Polaris and premium load factors at United Airlines. This was due to effective revenue management, which allowed for both corporate and leisure passengers to be accommodated. The decrease in premium load factors during the pandemic also helped to balance demand. Looking ahead, United is focused on level loading their aircraft delivery schedule to better match hiring needs for flight attendants and pilots. This will help to address any inefficiencies caused by the reduced number of aircraft deliveries this year.

The speaker discusses the impact of inflation on the airline industry and mentions United's gauge benefit. The speaker also mentions the upcoming analyst meeting and teases potential updates on MileagePlus. The call then transitions to the media portion, where the first question asks for more details on aircraft delays due to the FAA review. The speaker is unable to provide specific information at this time.

The speaker discusses the upcoming delivery of three MAX-9 aircraft and emphasizes that their focus is on improving safety standards rather than receiving deliveries. They clarify that the FAA has not prohibited deliveries, but rather the use of the planes. The speaker also mentions the expected strength of summer travel, particularly in the domestic market and across the Atlantic and TransCon routes. They anticipate setting a new record for passenger numbers this summer.

Leslie Josephs from CNBC asks about the FAA review and its impact on the fleet plan and recent mechanical issues. Scott Kirby explains that delivery delays are the main issue and safety remains a top priority. The review primarily affects putting new aircraft into service, but captain upgrades are still allowed. The timeline for the review's conclusion is uncertain.

Kristina Edwards thanks Krista and the participants for joining the call. She encourages anyone with further questions to contact IR and Media Relations. The call concludes and the operator ends the conference.

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