The paragraph introduces United Airlines Holdings' earnings conference call for the first quarter of 2025, facilitated by Sarah. Kristina Edwards, the Managing Director of Investor Relations, welcomes participants and notes that the earnings release is available on United's website. The discussion will include forward-looking statements based on current expectations, with potential for actual results to differ due to various factors outlined in their SEC filings. Financial metrics will mostly be discussed on a non-GAAP basis, with reconciliations available in the press release.

In this earnings call, United Airlines' CEO, Scott Kirby, discusses the company's performance in the first quarter of 2025 amidst a challenging macroeconomic environment. He highlights that United has succeeded in gaining brand loyalty, leading to strong financial performance even when market demand is soft. United achieved its highest first-quarter pretax margins since the onset of COVID-19 and expects to be one of only two profitable airlines in the quarter. If economic conditions remain weak but stable, the company anticipates staying within its full-year financial guidance. Despite the risk of a potential downturn in bookings, United projects full-year earnings of $7 to $9 per share. Scott emphasizes a lasting shift in the airline's brand loyalty, claiming United as the leader in six of its seven hubs and tied in Los Angeles.

The paragraph discusses the company's strategy to maintain and grow its brand loyal customer base amid a weaker economic environment. Despite the economic challenges, the company is committed to expanding its operations, including opening new clubs and enhancing services like installing fast Wi-Fi on planes. The focus remains on attracting and retaining brand loyal customers, which provides a competitive advantage and better margins. The company is also being cautious with expenses and capacity management. Ultimately, the goal is to solidify its position as the preferred airline, as opposed to being a "spill airline" that relies on lower prices to attract customers.

The paragraph discusses how United Airlines benefits from brand loyalty, especially in tough economic times, by having more seats to sell at competitive prices, which adversely affects its competitors. It highlights how Southwest Airlines historically had strong brand loyalty by focusing on secondary cities and avoiding change or bag fees, which made it the highest-margin airline during good times. However, as Southwest expanded into larger hubs, it lost these advantages, allowing United and another airline to become leaders in brand loyalty. The paragraph emphasizes that United's current strategy, UnitedNext, is proving successful and places the airline in a strong competitive position, benefiting customers, employees, and shareholders despite a challenging macroeconomic environment.

The paragraph discusses the impact of global trade policies on aircraft pricing, noting that tariffs are unlikely to affect United's purchases due to their order distribution between Boeing and Airbus. United highlights their strong quarterly performance, achieving top rankings in customer service metrics, including on-time departures and low cancellation rates. They emphasize a commitment to safety through investments in pilot training and technology. Additionally, United progresses with the deployment of Starlink technology on their aircraft, completing an installation and obtaining FAA certification for part of their fleet.

The paragraph discusses United Airlines' progress and expectations regarding its adoption of Starlink for in-flight Wi-Fi, highlighting a planned regional flight this spring and a fully retrofitted regional fleet by year-end, with mainline aircraft to follow by the end of 2025. Andrew Nocella reports a record Q1 revenue increase of 5.4% to $13.2 billion, despite a downturn in demand post-January affecting main cabin revenues, particularly during off-peak flights. Consequently, the airline is reducing off-peak flights and utilization. Offsetting this decline, the premium cabin revenues were up, with international and premium plus segments performing well. The company emphasizes its strategy of expanding premium capacity and customer options, which was beneficial amid weaker main cabin demand. Business traffic trends moderated later in the quarter.

In the first quarter, United's loan business revenue grew by 7%, a decrease from 15% in the previous quarter, while contracted business sales for future travel saw a slight year-over-year increase, down from early-year double-digit growth. Loyalty and co-brand spend revenues rose by 9%. Despite lower-than-expected Q2 customer demand, United anticipates a positive top-line revenue growth and has adjusted revenue management strategies to attract lower-yielding passengers and reduce traffic spill to competitors. These adjustments have stabilized bookings, which are slightly ahead of the previous year. United's strategic focus on its hubs, such as Chicago and Denver, has increased its market share lead over competitors since previous years. The airline plans to reduce narrow-body aircraft utilization, decreasing domestic capacity by 2% in upcoming quarters.

In recent weeks, United Airlines has decreased its domestic capacity for the summer and plans further reductions. Despite operating with comparatively low aircraft utilization, United finds this approach beneficial. The airline is assessing the need for additional changes in its domestic schedule, while its international business is performing well, primarily driven by US-origin traffic. There is a noted decline in non-US origin passengers, notably from Europe and Canada, but an increase in US-origin demand has offset these declines. United's revenue has become less reliant on business traffic compared to pre-pandemic levels, and economic uncertainty appears to impact budget travelers more than high-end consumers. Premium revenue remains strong internationally and stable domestically for Q2 bookings.

United has maintained a successful strategy for brand loyalty that benefits investors by suggesting sustained margin outperformance. In the first quarter, United surpassed earnings expectations with a pre-tax margin improvement, showcasing the success of their United Next plan despite a dip in government-related travel. The company managed costs and benefited from reduced fuel expenses to meet financial goals, demonstrating resilience. Looking forward, United projects strong second-quarter earnings and is adapting by reducing less profitable flights and retiring older aircraft to better align with market demands.

The airline anticipates a reduction in domestic capacity due to decreased demand from US government spending cuts, with a cautiously optimistic outlook for earnings per share (EPS) within the guidance range of $11.50 to $13.50, assuming stability in demand and lower fuel costs. Despite the potential recession risk, the company has plans to further cut capacity and projects a full-year EPS between $7 and $9 if revenue decreases by five points per quarter. This scenario would mark the first time United remains profitable during a recession, pointing to its financial resilience and competitive position. The company has $18.3 billion in liquidity, including an undrawn revolver.

In the past twelve months, the company generated over $5 billion in free cash flow, exceeding its net income by 130%, and reduced its net leverage ratio to 2.0. Fitch upgraded its rating to BBB with a positive outlook. The company has repurchased 5.6 million shares in 2025, worth approximately $80 each, with $1 billion remaining in buyback authorization. Despite market fluctuations, the company is optimistic about its financial resilience and plans to continue share repurchases while the stock is undervalued. The company prioritizes generating free cash flow and anticipates its strong business fundamentals will drive share price recovery.

The paragraph captures a Q&A session during an analyst call, where Jamie Baker from JPMorgan asks about United's 2026 earnings forecast in a potential recession scenario. Scott Kirby responds, suggesting that while the timing could vary, if the economy returns to normality by 2026, United's margins would be higher. He highlights United's long-term strategy focused on building brand loyalty and enhancing their competitive position, which they have been emphasizing over the past five years.

The paragraph discusses UnitedX's post-COVID strategy, focusing on cost convergence, revenue diversity, and solving price-sensitive travel issues through economy class options. It highlights the shift in the airline industry towards operating primarily in areas where airlines have competitive advantages, reducing unprofitable flying and overall capacity. This shift is expected to lead to higher margins for United Airlines, potentially reaching double-digit figures within a year after the current economic period.

In the paragraph, Jamie Baker questions Mike Leskinen about their company's decision to actively buy back stock until April 10th despite aiming to de-risk the balance sheet and achieve investment-grade ratings. Mike explains that the strategy is to optimize their overall cost of capital by purchasing shares when their market price is lower than the intrinsic value. This approach, combined with their focus on deleveraging and maintaining a net leverage below two times using free cash flow rather than debt, aligns with their long-term financial goals. Mike expresses confidence in the future and views the current low share prices as a buying opportunity. Jamie then thanks Scott and Mike for their responses, and the operator introduces Andrew Didora from Bank of America.

In this discussion, Mike Leskinen addresses questions from Andrew Didora about United Airlines' cost performance in the first quarter. Leskinen emphasizes their focus on maintaining a cost-effective culture by investing in customer experience and operational efficiency, such as improving procurement and utilizing technology. He acknowledges some first-quarter maintenance costs have shifted to the second quarter, suggesting that 1Q CASM (Cost per Available Seat Mile, excluding fuel) may be the year's best performance. Nonetheless, they anticipate improved CASM x for the full year by optimizing efficiencies. Didora also inquires about United's revenue expectations in a recession scenario and the rationale behind projected EPS figures.

The paragraph discusses a projected reduction in revenue by five points compared to expectations from earlier in the year, with an additional five-point reduction anticipated if a recession occurs, likely starting in the third quarter. This leads to an overall ten-point reduction in the expected run rate. The duration and depth of the recession remain uncertain. Mike Leskinen clarifies that the ten-point reduction scenario would begin in April. Conor Cunningham from Melius Research asks about strategies to eliminate spill traffic from hub markets, questioning whether this is in line with United Airlines' approach to base economy. Scott Kirby responds that their focus remains on building a strong airline for their customers, and their plan has remained consistent over the past five years.

The paragraph discusses United Airlines' strategy and financial outlook. The company is making tactical adjustments to improve utilization and enhance customer experience, aiming to set itself apart from competitors. Despite not intentionally trying to stand out, their efforts create a noticeable gap with other airlines. Conor Cunningham questions the airline's projected improved performance in the second half of the year despite the challenging economic environment. Mike Leskinen explains that their full-year guidance relies on steady booking trends, effective cost management, lower fuel costs in the second half compared to the first, and strategic capacity cuts to maximize profits.

In the paragraph, Scott Kirby from United Airlines discusses the company's approach to achieving its full-year financial guidance of $11.50 to $13.50, noting that while there was initially some contingency in these figures, it no longer exists. The conversation highlights the company's "no excuses" philosophy, emphasizing their commitment to meeting targets despite a challenging economic environment. Kirby reassures stakeholders that the company believes they still have a real chance to meet these goals and reinforces the importance of effort and determination. Mike Leskinen underscores that the full-year guidance lacks any remaining contingency, underscoring the company's commitment to hitting the target.

The article paragraph discusses United Airlines' approach to balancing its significant margin advantage in the industry. Scott Kirby emphasizes that there isn't a tension between taking market share and maintaining margins, as brand loyal airlines in the United States have historically led in terms of margins and performance during recessions. United Airlines' strategy has remained consistent over the last five years, with increased confidence that it will achieve brand loyalty and outperform competitors.

The paragraph discusses United Airlines' confidence in its business strategy, emphasizing their focus on brand loyalty. They mention that they don't need to significantly adjust their strategy based on competitors' actions due to their strong customer base. The company acknowledges the trend in the airline industry towards improved customer experience, such as better Wi-Fi and loyalty programs. However, they believe that maintaining their leadership in brand loyalty will primarily come down to effective execution and continuous innovation. Andrew Nocella highlights United's commitment to constantly improving and innovating as part of their corporate culture.

The paragraph discusses United's strong position and plans for future growth. The speaker highlights that United's strategy is successfully allowing for significant investment in customer services, with numerous announcements planned over the next eighteen months. They emphasize that United's long-term investments in areas like building clubs, updating aircraft, and enhancing Wi-Fi technology have set them apart from competitors, who they believe are lagging behind. The conversation then shifts to a question from Catherine O'Brien of Goldman Sachs, who asks about factors impacting revenue and earnings projections. Mike Leskinen responds, indicating that lower fuel costs have been the most significant positive factor in maintaining their original earnings per share (EPS) range despite revenue challenges.

The paragraph discusses the impact of various factors on the airline industry's financial performance. It outlines that fuel hedging may not be sensible as revenue typically declines simultaneously with fuel prices. Cost management has been significant in driving savings, with early retirement of aircraft reducing maintenance expenses. In terms of performance, Andrew Nocella expects international markets to perform well in the second quarter, with positive Revenue per Available Seat Mile (RASM), particularly strong in the Pacific region. However, domestic demand, especially in the main cabin, remains challenging, resulting in a negative RASM environment for domestic flights in Q2.

In the paragraph, Andrew Nocella discusses United Airlines' positive outlook on the international market, emphasizing its strength and potential for growth compared to the domestic market. He notes that international travel continues to accelerate and become more lucrative, with outstanding results in Q1 and expectations for continued outperformance in Q2. Nocella acknowledges potential geopolitical risks but remains optimistic, citing the flexibility in their aircraft fleet to adapt to changes. He concludes by highlighting United's commitment to expanding internationally, supported by their order book and strategic adjustments. Scott Kirby is about to add more insights to the discussion.

The paragraph discusses two major structural supply constraints that will cause international markets to outperform over time: aircraft shortages, due to retirements during COVID and ongoing supply chain challenges, and airport capacity restrictions, exemplified by difficulties in securing slots in Manila. The speaker is confident in betting on international markets long-term due to these constraints. Additionally, Tom Fitzgerald inquires about the integration of Starlink in the mainline fleet and its potential for market share gains. Andrew Nocella expresses excitement about Starlink's benefits for customer connectivity and highlights its role in fostering brand loyalty, along with other investments.

The paragraph discusses the dynamics of international traffic, noting a decline in non-U.S. origin volumes from Europe and Canada but an increase in U.S.-originated international traffic. Andrew Nocella mentions correcting misleading data and acknowledges a modest decline in foreign origin business, accounting for about 20% of their international activity. This decline is offset by U.S. demand. The Pacific region, particularly Japan and the South Pacific, is performing strongly, and the Atlantic region, particularly Germany, also showed strong results in the first quarter.

In this paragraph, the discussion revolves around the attractiveness of Southern Europe as a vacation spot for US consumers, particularly during off-peak times. It mentions that despite some setbacks in international business origins, United remains optimistic about the international market's potential for profit. Sheila Kahyaoglu asks Mike Leskinen about the implications for operating margins and free cash flow in a recession scenario with fuel prices between seven to nine dollars. Mike indicates that free cash flow would still be positive, although CapEx changes might not occur within the calendar year. Tom Wadewitz inquires about the impact of an economic downturn on union agreements, particularly for flight attendants. Scott Kirby responds by highlighting the role of United's employees in maintaining strong customer relations and brand loyalty, even in challenging times.

The paragraph discusses the resilience of the airline industry, particularly in a recessionary environment. Despite economic challenges, the employees, from flight attendants to captains, maintain positive interactions with customers, contributing to the airline's success. The conversation includes a question about United Airlines' market position and whether high-end consumers might contribute to the resilience of international travel. Andrew Nocella emphasizes that international travel has been resilient, but different consumer types experience varying pressures, with discretionary consumers being less likely to travel internationally during tough economic times.

In the paragraph, the conversation focuses on the high-end consumer market and its impact on United's business. Mike Leskinen notes a shift at United, where there is an increase in premium leisure travelers compared to corporate ones, which has positively affected their business. Tom Wadewitz expresses appreciation for the insights, and Duane Fenigwerth from Evercore ISI asks about a book called "Capital Returns," which discusses investing in sectors with low industry returns and firms with lower asset growth. Scott Kirby appreciates the interest and mentions another book recommendation related to physics.

The paragraph discusses the importance of thinking against the consensus in business decisions, particularly in relation to capital returns and supply management. The speaker shares an example of investing in airplanes during the COVID-19 pandemic when others were hesitant, highlighting the focus on supply rather than demand fluctuations, as demand tends to grow over time. They express optimism about international markets due to anticipated supply constraints. The speaker also mentions frustration with delays in receiving aircraft from Boeing, which hindered their investment strategy's potential. The passage concludes with a recommendation to read a certain book on capital returns, noting its rarity and value in learning these lessons.

The paragraph emphasizes the importance of disciplined investment in aircraft, given their long-term nature and the need to ensure returns exceed the cost of capital. The speaker highlights replacing older aircraft for better returns and the need for strategic thinking contrary to market trends. The text also discusses the opportunistic nature of share buybacks, suggesting they should occur when the market is undervalued, but can pivot to dividends if necessary, all while maintaining balance sheet goals. Andrew Nocella adds that despite increased GDP and demand, there's a challenge in expanding airport infrastructure, which limits schedule expansions, especially in major global and U.S. cities.

In the paragraph, Mike Linenberg from Deutsche Bank inquires about the current percentage of basic economy revenue and whether increased competition in the lower fare segment is driving higher volumes. Andrew Nocella responds by indicating that in Q2, the company plans to be more competitive at the lower end of the fare structure, which should create higher volumes. He notes that in Q1, a rapid decline in demand resulted in a drop in domestic load factors because there wasn't enough time to adjust. However, by opening up their inventory system to accommodate more low-yield customers, they expect less competition from other airlines, which will help manage load factors better. Lastly, Linenberg queries about the potential impact of the Real ID deadline for travel, suggesting it might not significantly affect the airline's cash flow due to their international operations where passports are common among passengers.

In the paragraph, Andrew Nocella discusses the importance of brand loyalty and how United Airlines is measuring it. He highlights that market share is increasing in all hub cities, with a particular focus on the origin market share, which reflects local customer loyalty. For example, in Chicago, United's origin share is better than its total share, indicating increased loyalty among local customers. United is also ensuring long-term customer retention by offering co-branded credit cards. Additionally, United assesses loyalty through its share among major global travel agencies.

The paragraph discusses United Airlines' strategy of targeting high-yielding business travelers and increasing its market share and revenue premium. Despite facing a decline in unit revenues domestically in Q1, United plans to grow its domestic capacity in the high single digits for Q2 and the summer schedule. Andrew Nocella emphasizes that the airline focuses on both market share and margin growth, highlighting a proven track record of successful capacity decisions over the past eight years. He believes that focusing on peak times for high-demand clients has strengthened their margins, and they recently announced fleet changes to optimize capacity.

The paragraph discusses United's strategy for navigating potential economic challenges, specifically a consumer recession similar to 2008. The team expresses confidence in their current plans for the spring and summer, focusing on managing market share and financial returns without flying unproductive capacity. They emphasize the resilience and growth potential of their loyalty and co-brand businesses, which showed strength during the COVID pandemic and are expected to continue performing well. The importance of brand loyal customers is highlighted, particularly in increasing membership and credit card penetration in their loyalty program.

In the paragraph, a discussion is taking place during an earnings call. Ravi Shanker asks Mike Leskinen about the company's fuel price assumptions in different full-year scenarios, noting that a recession could lead to lower fuel costs. Mike Leskinen confirms that a decline in revenue could coincide with a drop in fuel prices, which is part of their current assumptions. The operator then transitions the call to media questions. Mary Schlangenstein from Bloomberg News inquires about potential crises in the aerospace industry given China's halt on Boeing deliveries and supply chain issues. Scott Kirby responds by saying that it is too early to declare a crisis, highlighting aerospace as a successful high-tech manufacturing sector in the U.S.

The paragraph discusses the impact of tariffs on the aerospace industry, with Scott Kirby expressing optimism that the U.S. will benefit in the long term. He advises patience and warns against making rash decisions. Kirby highlights that most of their aircraft deliveries come from Boeing, and their Airbus deliveries from Alabama reduce their exposure to tariffs. He sees the situation as an opportunity to strengthen partnerships with Airbus, who has been paying tariffs on imported parts used in U.S.-built planes. Kirby emphasizes a cautious approach, avoiding definitive commitments while the situation evolves.

In the article, Andrew Nocella from United Airlines discusses the addition of six new gates at O'Hare Airport, which aligns with the United Next growth plan. This expansion is part of United's ongoing strategy in Chicago, enhancing their capacity to meet high travel demand during peak periods. Despite concerns about a potential recession, United plans to maintain its current schedule and growth strategy, anticipating a strong economic performance for their Chicago hub. Kristina Edwards concludes the conference call by thanking participants.

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