Q2 2020 United Airlines Holdings Inc Earnings Call

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Good morning, welcome to United Airlines Holdings Earnings Conference call. The for the second quarter 2020, but it was branded there'll be a conference facilitator today.

Following the initial remarks for management, we will open the lines your questions at that time. This the other question. Please press star one on your Touchtone phones. This call is being recorded at is copyrighted. Please note that no portion of the call may be recorded transcribed or rebroadcast without the company's permission your.

Your participation implies you can said to a recording of this call. If you do not agree with these terms simply drop off the line.

We'll now turn the presentation over to your host for today's call Kristina Vetoes director of Investor Relations. Please go ahead.

Thank you.

Good morning welcome.

Third quarter earnings Conference call yesterday, we issued our earnings release, which is available on our last IR day added.

Information in Yesterdays release in their remarks made during this conference call may contain forward looking statements, which represents company current expectations or beliefs concerning future events and financial performance.

All forward looking statements are based upon information currently available to the company I never factors could cause actual results to differ materially from our current expectation. Please refer to our earnings release form 10-K. Thank you and other reports filed with the FCC by United Airlines clothing, and United Airlines from more thorough description of these factors also.

During the course of our call who will discuss several non-GAAP financial measure measures reconciliation of these non-GAAP measures to most directly comparable GAAP measures. Please refer to the table at the end of earnings release, joining us on the call today discuss our results and outlook, our Chief Executive Officer, Scott Herbie President Brad Heart Executive.

Vice President and Chief commercial Officer in June.

Executive Vice President and Chief Financial Officer Gerry.

In addition, we have other members of the executive team on the line available to Thats rescuing and now I'd like to turn the call or is that.

Hi, Thanks, Kristina and thank you all for joining our call today.

This obviously was not the environment that I expected close calls.

I've never been more proud I am United I want to thank everyone for their leadership support and dedication to the company that we all love during what is most difficult time any of US the area both for our airline enter family. Our frontline has allowed dramatic reduction in our schedules are headlines about.

Potential carloads or new mask requirement to interfere with their commitment taking care of our customers and each other it back our customer satisfaction scores in June improved nearly 30 points year over year, There's just no better evidence of our determined commitment to care for our customers and keep them say, it's what be United together is all of.

About Brett will talk in more detail about how our core core values have informed our industry leading.

Safety of our customers and employees.

The second quarter of 2020 was historic for the airline industry for all the wrong right.

At the beginning of April we saw the sharpest deepest drop in demand in history far worse than 911, or the great recession or any other stress scenario that you wanted model and near the end of the quarter just as optimism about a recovery was beginning to build we watched demand paid once again at over 90 spiked in the Sun belt.

But when we make three this crisis and I've never been more confident that we will make it through this crisis I think we'll look back on the second quarter of 2020 as an extraordinary three month period build achievement that I wasn't that weren't even sure where possible we started back in April.

We can't control the of course, the pandemic, though we are doing our part and helped by leading with safety.

The United team has been been doing an exceptional job controlling what we can and generating what we expect will be the best or in this case leased bad financial result of any of our network competitors somebody achievement. This quarter included the fastest most realistic and accurate assessment of the demand environment completing the large.

Does that financing in the history of the airline business backed by our loyalty program.

Dramatically, reducing our cost structure and implementing a variety of industry, leading measures designed to protect our customers and employees on the spread of the grown about.

Well some of you have noted the previous street, including our high closer to internationally businessman with great larger headwinds for United Those of you join these calls before will not be surprised to hear that are no excuses philosophy.

Not to spend it just because times are tough.

In fact that philosophy is more important than ever in times of adversity and it has served us well.

Because in spite of what it could have been easily explainable uses.

The United team pulled together overcome them and we expect to deliver the best financial results for the network carrier.

Andrew Jerry will discuss in more detail.

Back that are realistic smart and opportunistic commercial strategy backed by a dynamic and thriving cargo business combined with a with other dramatic cost cutting examples company resulted in the United losses, and daily cash burn being lower than either of our network competitors in the second quarter and that's important because.

As we've discussed before minimizing the depth as a whole we dig in this crisis.

As critical to preparing United to thrive on the other side.

I look forward to the day, we're we're past the pandemics it could stop talking about Casper.

But the country the world and aviation, our where we are right now I remain confident that the virus will be defeated when it is I'm very bullish about our future because I believe the current headwind related to international in business travel will once again, returning to be important and unique strategic advantage for United Airlines and if we can produce.

Leading financial result, even with these larger headwinds right now just imagine what we'll do in a healthier operating environment.

My recap of the second quarter would not be complete if I didnt mention how conversations about confronting systemic racism reverberated through our society, including here United like never before.

As a company well I'm much more to say more importantly, due on this topic in the future, but for now let me reiterate that I'm personally committed to using the input and visibility, but my new role United to put our value, especially our commitment to equity and inclusion into action.

Now I'd be data just how busy Q2 was for United Let me remind you that we also named Brett Heart as our new President.

That's been a trusted colleague valued adviser and a good friends since I joined United almost four years ago. He's been a widely respected leader United for much longer than that it's my honor to introduce him as my partner for the first time on an earnings call in his new role is our president Brett over to you.

Thanks, Scott for that kind introduction I also appreciate your long term commitment that action on diversity pretty unit.

And I'm excited about how our partnership can bring about meaningful lasting change.

I did and then the communities we serve.

We begin by saying how proud I am what our team has accomplished over the last few months.

Thanks, good year year old demand for air travel back in April.

We have a long road ahead of us.

We believe the 16.1 billion of liquidity, we have raised started a crisis.

And our dramatic reduction in pattern.

That's up to not only survived this crisis.

Emerge in a position strength during the recovery.

Crisis.

We have never lost side of the fact is the very first pillar of our core for years and always will be safety.

This guiding principle, we had introduced a number of industry, leading safety measures do our part to reflect the spread in corona virus and to protect our employees and customers including.

Requiring all flight attendants and passengers to wear masks.

Asking all passengers to complete a health assessment during second.

Offering customers the auction detainees flights for free.

It is expected to be at least 70% pool and partnering with core.

Cleveland Clinic, just to name a few.

Along with our unwavering commitment to safety very outside of the pandemic, a former CEO and current chairman Oscar Munoz and Scott made it clear that our number one priority was to reserve as many United jobs as possible for the long term.

To this end very early in the crisis, we began efforts to reduce our non labor expenses and eliminate any discretionary or non essential project spend.

Want to bank over 26000 team members.

All contributed to reducing our expenses too early separation program voluntary unpaid leave programs are reduced work schedule.

Our voluntary separation and retirement program to almost quote.

So far over 6000 employees.

Opted to participate.

Time of unprecedented uncertainty to contributions by our employees for one of the most meaningful action that could be taken.

Unfortunately, this crisis has lasted longer and become worse than most experts anticipated and so these efforts while meaningful and appreciate it.

We are not enough and only get us a small step of the way there.

We are left to make some of the most difficult decisions in the history of United Airlines.

Typically on the size of our workforce.

On October 1st we are planning to be smaller team and airline in response to the depressed demand environment.

Conspiracy and candor and situation like this where no. One is a call is the most call for thing we can do for our team.

We had been in active communications that our union to identify voluntary program that could mitigate furloughs.

This uncertain world, giving our United team members a choice.

And is an important element of our strategy.

The voluntary programs will be balanced offers which reduced labor costs, while providing flexibility to our team and tonight. So the when demand return.

And it will return.

We have the jobs in the people ready to go and can avoid and mini involuntary for those as possible.

While this unprecedented health crisis has changed the way we operate it hasnt changed the commitment our employees have to running a great airline.

Part of the leadership team, we will continue our promise.

Everything in our power to preserve as many jobs, we can put people in the United.

With that I'll turn it over to Andrew to discuss the revenue environment.

Andrew.

Thanks, Brett.

Second quarter was clearly the most difficult quarter United's history, we acted quickly and decisively to confront demand changes.

In fact, our change in total revenue in the quarter down, 87% wind up being consistent with our total capacity being down 88%.

Our network curiously more capacity than United and we believe our careful management capacity pricing and cargo during the quarter is the primary driver of our good results relative to our network peers in terms of absolute losses and cash burn.

We feel as good as we can about these relative results.

In a world of limited demand driving our cash burn down is absolutely a function of the amount of capacity we offer.

We clearly have a long way to go to navigate cobot 19, but we got off to a relatively good start at the start of the pandemic. Many fear at our outsized exposure to business traffic international traffic and our coastal hubs would have been in the drag on performance relative to other network carriers, but this was not the case as we made smart decisions about capacity.

Well not be focused in on market share during the worst financial crisis industry has ever phase instead, our focus is on ending cash burn and returning United to profitability.

As we look towards an eventual recovery international demand will be slower to recover than domestic.

When international demand does recover we believe united's coastal gateway hub rubber who cover quicker than others, a benefit of having the best Qs gateways to start with.

Orders are up around the world now and international revenue is low we believe that United that we have already felt their worst of the international passenger revenue decline impact borders will open Sunday and we believe United is well positioned to experienced the fastest international equity growth when they do.

Corporate traffic, which was down 96% in June will also be slower to come back than leisure, but we believe it well we are social creatures video technology is proved at a reasonable temporary measure, but we do not expected to replace meeting in person over the long term in fact, we have a hypothesis that more work from home.

You May drive increased business travel over the medium term as some people trade. There can you expect bars were less frequent can didn't buy airplane.

From a remote location in short term in the short term, we will make appropriate adjustments to our network to reflect less business traffic by putting a higher proportion ever capacity into leisure and visit in family in relative market.

We expect a recovering demand to be jag. It everyone has a view with the recovery will look like but will not for tend to be able to predict the path to the virus. We do expect that demand recovery with stalled in recent weeks, we'll begin to recover again when new cases start to fall quarantines are lifted and borders or reopened however, we continue.

To believe a full recovery is contingent upon effective therapeutic and a vaccine. Our best guess is demand as measured by revenue will recover overtime to be down approximately 50% and then plateau at that level until a vaccine is widely distributed.

We discovered how disrupted the virus would be to demand very early on in the pandemic and we use those weren't into shape our near term.

Capacity decisions for April and May we reduced capacity approximately 85%. We also temporarily reduced our average seats for departure in May and June by 23%, which lowered our trip cost, helping us conserve cash while the cares act payroll support program supporting the salaries of the United team and.

Each of our mid continent hub it came up at an entirely new schedule, while maintaining the constant comprehensive network and sufficient connectivity.

Domestic PRASM in Q2 is down by 47%, we did see steady progress throughout the quarter as our schedule changes were implemented and demand began to slow but steady rebound.

Domestic PRASM performance in June and proved to be down only 15% reflected improved demand outlook.

Even as we were deploying multiple actions to minimize flights operating above 70% load factors, we upped caves 66 flights per day in June restricted inventory and flights booked above 70% and block certain seats from sale, while we have very high confidence in the safety on border aircraft, we continue to deploy multiple action.

To manage high load factor flights to increase customer confidence.

Our approach for international wide body long haul pipeline has been to leverage our cargo capabilities to partially offset declines in passenger revenue.

For the quarter International Asms are down 92%. So we maintain passenger service throughout the crisis to Australia, Japan, Brazil, and multiple points in Europe, even with increasingly restricted border policies. We also operated over 3800, all cargo charter flights in the quarter, which contributed to our.

Over 36% improvement in cargo revenue in the quarter, while our competitors on a cargo revenue decline the United cargo team clearly at a home run in the quarter and cargo is on track to have another great quarter.

Recent uptick in Cobot cases in late June in early July of temporary stalled demand and permits we were seeing in June.

Third quarter domestic capacity is expected to be down at least 55% domestic RASM results for United in July and August will clearly not be as good as late June given industry dynamics stall demand and our own capacity increases. The United's August schedule is already adjusted downwards. The other week given recent.

Changes in demand and our September schedule is still not finalized.

Domestic load factors in the coming weeks are expected average just below hatful a reduction from the 57% we saw in June.

In the event customers are booked on flights at or above 70%. We will continue to let them know in advance and offer an alternative flight that no additional fee if they'd like to make a change.

We expect a passenger revenue in the third quarter will fall approximately 83% versus Q2 of down 93, and half with consolidated capacity expected to be down approximately 65%.

Just a few weeks ago prior to the case spike we'd expected revenues in the quarter to be down less than 80%.

With the end of the payroll support program, our marginal costs will increase later this year and that will impact how much incremental capacity, we can add in most post summer if any.

However, given to look at industry dynamics, we expect to have the most conservative deployment of third quarter capacity of anyone.

My update on past, earning calls reported on United to progress on array of commercial and commercial customer initiatives.

We can't be sure that every aspect of our past commercial and commercial plans will be relevant in the future.

Our team is agile and we're ready to respond to an ever changing world. We've proven that over the past few years and were pretty good again over the next year.

Thanks to the entire United team your dedication in these difficult times to allow us to come out of this period strong and with that I will turn it over to Jerry Thanks.

Thanks, Andrew for the second quarter of Twentytwenty, we reported a pretax loss of $2 billion and an adjusted pre tax loss of $3.2 billion.

These results represent how this level pandemic continues to materially disrupt our business an unprecedented ways and therefore requires unprecedented responses to ensure we come out of the crisis has strong as possible.

Since the start of the crisis, we focused on aggressive cost cutting to minimize our daily cash burn and aggressively pursuing opportunities to bolster our liquidity position.

Its March we have raised a total of $16.1 billion. Some additional liquidities marching through debt offerings stock issuances and the carriers acts payroll support program ramp at home.

Moving their capital raising actions, whereas the truly first of its kind debt financing using our mileage plus program, which brought in $6.8 billion and liquidity.

Working with Goldman Sachs. Our lead underwriter, we were able to formulate an innovative structure that allowed us to unlock some of the inherent value in the program.

We're able to achieve our key objectives of raising a substantial amount of liquidity at attractive interest rates in a manner, which doesn't impair our flexibility to use mileage quest to support our business going forward.

I certainly appreciate comments made by one of my peers recently recognized that this structure will serve as a model for the use of royalty programs to raise liquidity by the industry in the future.

We continue to target over $18 billion, an available liquidity by the end of the third quarter. We believe this level of liquidity will position us to manage the airline route if the crisis continues to depressed demand foreign to 2021, and even beyond depending on the pace of recovery.

While we view this has enough liquidity should we desire to raise additional liquidity, we have at least $9 billion of available collateral value, excluding both mileage plus and the collateral we expect to hold available for care attack loan.

And is.

Additional collateral we can borrow against subject of course to market conditions.

Having built up a substantial cash cushion we will continue to make every effort to preserve our liquidity until we were at current prices through the hard work of our employees across the business, we reduced our second quarter average daily cash burn to $40 million, including approximately $3 million, a principal payments and severance.

Expenses ending up at the low end of our original second quarter guidance range.

Over the last three months, we've reduced our total operating expenses, excluding special charges by 54% and eliminated all sources of discretionary spend.

What is left is simply what is absolutely needed to operate the airline and nothing more.

We also significantly reduce our adjusted capital expenditure since the crisis began have passed all investments it didnt have an immediate return.

In fact, we now expect our Twentytwenty adjusted capital expenditures to be approximately $3.7 billion down from our previous guidance of less than $4.5 billion and of course down from the $7 billion. We originally forecasted before the crisis.

We continue to take delivery of new aircraft and then when financing is available and we've come to an agreement with Boeing that we will not be taking delivery of delivery of any new aircraft in 2022.

Our team is working tirelessly to examine how we can further variabilize our cost structure to ensure that we come out as a stronger industry player once the pandemic end.

One area. We do continue to look at is our overall firstly, we currently have close to 600 aircraft temporarily grounded where we do not have anything specific to announce on aircraft retirements at this time, our priority is to remain agile.

Looking ahead to the third quarter, we expect our average daily cash burn in the third quarter to be approximately $25 million with $6 million representing debt principal payments and severance expenses. This cash burn estimate assumes passenger revenue is down around 83% for the quarter.

As we look to the fourth quarter in the next year Nobody has good visibility on the pace of demand improvement as a result, our primary focus will continue to be minimizing cash burn for the foreseeable future.

Unfortunately, this means that we will need to bring all of our costs in line with our reduced revenue, including labor costs and this has led to the difficult but necessary decisions to reduce the size of our workforce in the fourth quarter.

We believe that when demand returns based on the work the entire United team has accomplished in cutting costs to respond to the crisis, we were being the best positioned to reach cash burn breakeven.

Which we expect will be in an environment, where did that demand and capacity are down around 60% we.

We will let you all make your own for forecast as to when that will happen.

In closing I will reiterate that there is still a tremendous amount of uncertainty ahead, but we believe that United is in a position of strength to manage through what we expect to be a jacket retire.

And with that I will turn over to Kristina to start the QNX.

Thank you Jerry we will not be questions from analysts team. Please limit yourself to one question if needed one follow up question screening and clean to scratch CJR to ask questions.

Thank you and the question answer session will be conducted electronically if you'd like to ask a question. Please press star followed by one touchtone phone if you'd like to be removed from the Q. Please press the pound sign for the hash key if you're just speakerphone. Please make sure your mute function just turned off without your signal to reach our equipment.

It's a good if you'd like to ask a question. Please press star one of your phone keypad. Please hold for a little bit well, we have simple acute.

And from Bernstein, we have David forwarded. Please go ahead.

Hey, good morning.

I wanted ask you about the headcount point is obviously the 6000 employees that are signed up for the voluntary out is is well below the numbers that have been.

Commented on before in terms of.

Productions that might be required to rightsize the network.

How should we be expecting this to play out over the course of the next couple of months I mean, obviously the care alone.

Post office September or the care provisions anyway.

What can you tell us about sort of the scope of of expected auction fear in the timing on when these announcements like it made.

Hey, David good to talk to you.

I would I'd say is.

6000 voluntary first I'd like to thank everyone at United All the 6000.

And there is another approximately 26000 people who've taken temporary voluntary programs at United So far.

Thanks, all of them for their selfless action.

And doing what they can too.

To help United and their fellow coworkers get through this is a testament to how much people care about this company and doing the right thing, but look I think of it as there's 32000 people. So far we've raised their hand and taken a voluntary program. We are still working with some of our other unions as well so I expect if we go.

Those deals done we will have opportunity to have anymore, but.

At least I think of it as that 32000 numbers, probably the more relevant metric because some of those are temporary and.

And look we know that theres going to be a recovery.

And if we keep people temporarily.

Maybe not on the payroll full time, but engaged connected to the company certified trained and ready to bounce back because about the recovery is going to be quick.

That's a that's really important to us so we feel pretty good we feel really good actually about where we are in voluntary program. So far.

And can you can you comment I know these are difficult discussion.

But as far as kind of the tone in the tenor and their relationship with with with labor.

It can you give us some feel for for the the status of the relationship there or is this the is it capacity as it is a collaborative like how is the tone of the negotiation so far in terms of mitigating furlough actions and maybe getting some some additional help from the from labor side that to get through the.

Look.

I'm not going to comment on the specifics of the of the negotiations, but I would say, we've been transparent and honest with everyone from the beginning including our employees in our labor Union and all of you and that helped set the foundation and this is this a situation where our interests are aligned this is not a tradition.

It all kind of adversarial.

Types of discussion, we all share the goal of getting through what we all know is a temporary crisis.

Again, the other side.

We wish that there was going to be no pain to get through it but we all now recognize.

That this pandemic is deeper and there's going to last longer than we would've hoped and because of that there is going to be okay.

And so the discussions are about how do we minimize that.

In the most humane.

Way jointly with our people.

And.

And I feel good if it really good about where we are.

From Evercore ISI, we have Duane Pfennigwerth. Please go ahead.

Hey, thanks.

Just in terms of the the cash burn improvement sequentially.

Maybe you could provide some detailed our so your capacity is up meaningfully and appreciate those capacity plans have have a downward bias given changes in demand.

But higher capacity up call, it, 190%, which will drive higher variable costs and yet demand feels like it's taken a bit of a step backwards. So is this a function of recovery you expect later in the quarter is this cost driven or is this all working capital driven.

Hey, it's Jerry So short answer this combination of everything and I think you're referring to our prior guidance, which had third quarter cash burn a little higher than what we're currently expecting.

I would say versus when we established that guidance.

Demand has taken a turn.

So a little higher than what we assume back then.

We're also doing a nice job on continuing on savings on cost including.

Well cash cost so including in that would be some capex that we're saving.

So sort of a combination of everything that has driven us to be able to refine our forecast an estimate of lower cash burn that we assumed a few months ago.

For the quarter.

Okay. Thanks, Jerry and then just just for a follow up.

I appreciate the long term commentary about sort of plateaued get down 50.

Until we get a vaccine, but what is the path from down 83 to down 50, how do we get there is it you expect corporate to maybe perk up a little bit as we get beyond.

Summer leisure or what does that path from you know down 83 to down 50 looked like how do we get there thanks for taking the questions.

Yes, Hey, Duane I will try that.

I don't think we know what the exact path will be and will acknowledge that we talked about what the exact path will be.

But what I would say is we've been.

Reasonably accurate very much sooner the fairway and forecasting both the course of the pandemic.

And the impacted demand.

So far and you know we expected it to be jagged like this.

For what it's worth I also think that while we took a step back in the last few weeks as Andrew said that has plateaued.

I think that we as a country into society.

I have learned some lessons about what we should do particularly wearing masks.

And that you will be more up from here.

The kind of demand I think is going to come back, but one also I think.

It's important to people understand and I've said this earlier on TV today that an aircraft actually is a uniquely safe environment.

And that is confusing people because you hear all you hear about being an indoor space isn't that transmission of a virus.

But aircraft are designed to have airflow that goes to the sealy down to the floor and out.

And that area is taken either 50% of the semi back into the Gavin has been re filtered through a have a great filter and 50% is coming from the outside.

And.

That combined with our mass policies and our cleaning policies makes an aircraft that uniquely safe environment. So for people that are wanting to go on a business trip or on a vacation in order to visit family relative one of the safest parts of their journey is going to be on an airplane that's really important.

The United and for the industry to get back to that 50% level I think we're gonna have to get people understanding that flying somewhere instead of getting a car driving for 13 hours you are safer actually flight and I'm very very much believe.

That would be the case and we're taking additional steps announced this week to make sure the whole travel processes, including in the airports or before the engine start on an airplane all of that I think will allow a reasonable recovery and visiting family relative.

A lot of other leisure travel is not going to get back to 100%. My guess is I think did the world's sounds like they're doing a great job, but it's not going to be at 100% Pat.

You know business demand I think we'll start to come back the small kind of group stuff will start to come back, but we're not going to have 180000 people show up at the tumor electronics in Las Vegas. This January like they did last January those kind of maybe just aren't going to happen.

You know companies are not going to have their top 500 salespeople come in every year at the end of the year for a big part into celebration until we're past dependent and there's a widely available that say to you add all that up I think are going to be on a gradual trajectory from today's level of demand up to 50% where will plateau and then.

I think there'll be a rapid recovery once we get that kind of a widespread backstage I'm not sure how long it takes to get the 50, but thats a very expansive answer of how we get the 50 by we think it will be 50, what's important to get there.

It's from both research we have Hunter Kate Please go ahead.

Hi, Hi, everybody. Good morning, Thank you.

So you had 196 wide bodies at year end 19, knowing knowing what we know now which admittedly isn't much do you think you have more or less than 100 in the fleet at the end of 2023.

Andrew I guess I'll take that.

Scott described how how this is going to come back and by the way I think our international gateways are going to come back quicker and I think our internationally could we naturally have a lot of freight.

That other gateways don't have which you see in our numbers. So the answer is more.

More than 100, Okay got it.

And then thank you if you fly the same amount of capacity in the fourth quarters you in the third quarter can you generate more revenue in the fourth quarter than you do in the third quarter, knowing what you know now about like corporate and VSR makes all that stuff.

What I would say on areas, where we're where we did a pretty good job of it in Q2.

Got a little bit ahead of ourselves in July, but that really based on how demand change and.

The pricing environment that we see out there, but I think the answer your question, yes because.

We're going to get better and better at forecast and this and we're now getting results in that we're looking at every day about where were making more and less money, both domestically and overseas and refining the forecast and were tilt in our capacity more towards what we'd say BFR market than leisure market.

Which is also going to help so I think as we optimize repayment schedule. We can continue to push the numbers in there right direction.

Okay, and Hunter I want to take a minute to brag on the commercial team, Andrew maybe not but maybe not going to direct about it.

The airlines that are the whole company.

But led by our commercial team has done a better job.

We can any airline in the entire world.

Be recognizing what the pandemic has meant for demand and taking advantage of opera of opportunities, where they present themselves whether that was per passenger demand Andrew mentioned some of the places internationally with that we're the only airline flight our cargo day led by young from 36% increase in cargo I mean, who would have ever.

We could do something like that.

And I know some of the stuff that they're working on that is creative and I'm confident that the United team uniquely who's going to be able to find opportunities.

More appropriately mass capacity that to demand, but also to uniquely outperformed by finding the pockets of demand where there is real opportunity.

Yes.

In from vertical research partners, we have Darryl Genovesi. Please go ahead.

Hi, Thanks, everybody.

Can you guys.

Youre.

Your Opex was down 54% in second quarter. Please give us a sense of how that number Pete intra quarter and then.

To that end give a sense of how you're thinking about the Q4 cash burn.

Either in your 50% revenue scenario or.

In the scenario, where nothing gets better like the fair market you gave with.

Q1 results.

Jerry.

For the third quarter I would say.

That number is going to be around down 45% just given.

Very our capacity.

Too early to tell.

Going forward until we sort of set capacity.

Beyond the third quarter picked gives you kind of a sense of where we are.

Okay, and then I guess, you're just on the nature of this topic change.

Driven by United or more related to slippage on the Mac we certification.

And does the $700 million you are taking out a point playing now show up in 2021. Thank you.

The answer is now the 700 does not show up in 2021, it's really three things is.

The impact of our agreement to move aircraft are twentytwenty too so instead of taking a fair number.

Max's in 2022.

We're now committed team zero that has an impact on predelivery deposits. There are also couple of aircraft or some number of aircraft that were in the capital.

Expenditure forecasts.

That number 175.

Later this year that we now expect will be taken by regional partner. So thats out of our Capex and then there is also just a little bit of other other work done. So yes, that's what we're probably number down I would point out that have that 3.7 billion. We're now forecasting free for the year.

About a billion of that is actually the present value.

Aircraft lease expense.

We're taking a fair number these new aircraft under operating leases.

That we are accounting has capex the present value of those leases that's about a going to back that out and you.

Remember that 2 billion Capex percents in the first quarter.

So.

Excluding the leases our capex for the not for the last nine months of the year is down to about $700 million.

It from JP Morgan, we have Jamie Baker. Please go ahead.

Hi, Good morning, everybody at Jerry can you give us some more clarity on the air traffic liability right now.

In terms of its composition and whether there has been anyway.

Appreciable increase in refund request following the flattening demanded.

Warranty.

Ill state.

Hi, Jamie it's Andrew.

It just shy of 5 billion.

But the interesting stats are coming in as curse, new revenue and whats coming into to redemption to ptcs and other instruments like that and it's about two thirds, new revenue and one third redemption.

Previous ticket.

Refunds as we get further and further into the pandemic.

Less and less of the booking curve was are booked obviously in the past.

Thats effectiveness NASA, the refund rates are coming down.

And those numbers I think are all kind of move in the right direction, but yes, roughly a two third one third split and just shy of 5 billion right now for a deal okay. Perfect second question.

And probably for Jerry now that loyalty has been successfully monetize can you share the collateral that youve pledged or leave you will pledge.

Event that you draw a treasury loan and also with the remaining unencumbered asset pool looks like.

Draw that loan.

Sure I expect that.

I would use as collateral for the carryback loan if we choose to take it and draw down on it available root slots and gate.

And so I mentioned that the remaining collateral.

Hi, knock high mileage plus for the pool groups that were going to home available for us Treasury.

These 9 billion and that's a combination.

Remaining routes hard assets equipment and alike as well as equity.

In.

Assets that are encumbered by credit availability of secondly, I should point out that does not include some other assets that other airlines have actually used successfully as collateral for example, United brand itself has value. It does not include the brand it does not have.

The value of the domestic hub network those are things that have real value. We have not included those yet.

But we do know that since other airlines abuse those assets.

That would be available on top of the 9 billion I just described.

And from call. It we have Helane Becker. Please go ahead.

Oh, thanks, very much operator, hi, everybody and.

Thank you very much for the time, so I have two questions. My first question is when you're looking at your bookings and people who are actually flying I know.

Scott I think you said that there wasn't a lot of corporate travel, but are you seeing that your high.

Value loyalty customers are flying or is it just.

More one off to customers, who may not be as.

Tied to the airline because they're not loyal members have you know mileage plan.

Hi Lane, it's Andrew that actually the good news on that front is we are seeing.

An ever increasing rate of our premier members in the frequent Flyer program planned again, maybe not business, but for personal reasons, so they're getting back on airplanes.

Obviously, if you go way back to April that that number was incredibly low but we are we're seeing really nice progress in that front. So it's all moving in the right direction is it back to where it was before the crisis in terms of percentages no.

We do have a higher percentage of non members on board than we used to.

But that that number to me it looks like its recovering very nicely as people get more comfortable offline on airplanes.

And I'm wondering if you're able to convert some of those non members to members.

We we always we always work at that and also to get them to hold our credit card obviously.

Which is done extraordinarily well during the crisis as well.

The card situation is completely divorce at this point Mark passenger revenue situation.

So that's gone well, but we will continue to work to convert them.

But it definitely is a different makeup the passengers.

As we look back in time, but as we look forward in time, it seems to be moving back towards normal, but again normal won't be achieved until I think theres a vaccine.

From Stifel, We have Joseph Denardi. Please go ahead.

Thanks, Good morning.

Scott is luke's compensation is budget for talent and the level of investment into mileage plus consistent with it being a 25 billion dollar asset.

I'm not going to talk about loops compensation on a political but Luke and his team has done a truly phenomenal job.

Not just what they've done on what they and Michael asking and in the whole.

Financial legal team they are getting them out what's holding deal done.

But we do a great negotiation collaborative negotiations with chase, which we announced.

Like literally two days before the Italy news.

So really good timing on our renewed deal with chasing the they understood that's been a partnership it's working really well.

And and Lukas.

A great asset in his whole team for United We make sure they get the resources they need to keep growing that business and we also appreciate the partnership with JP Morgan Chase.

We invest a lot and also growing this partnership.

How do you use the organizational structure and the commercial agreement you've established between the airline and the loyalty program to build a competitive advantage relative to your peers more appropriately allocate capital and then maybe most importantly improve the profitability of the core airlines that earns an adequate return on cash.

Capital post so that's.

Well I'll, let Andrew add to this if we want.

Got it really 100 sure what you're getting out, but what I would say as you know we were already kind of working down the road to.

More.

Broke greatly at least internally split out the financials and understand the real economics of the card core airlines. They do go together they are not incepted, they're not separable.

In the sense that you could have one without the other they are.

The mutually support each other.

In a positive and a good way.

But we accelerated that effort obviously, they went through the pandemic and I don't know it all the answers are going to be yet, but I think that separation and that even clearer delineation.

We will create new opportunities for Luke Andrew and their teams.

Due to push on the non airline side.

Which will also help the airline side. So you know it's a symbiotic relationship Andrew do you have anything to add.

The only thing I would add is that the transparency that others now see we always thought internally we always recognized.

The enormous value there and we'll continue to push it.

Luke is the right back to the job and has a lot of creative ideas, we've seen that over the last year and we'll see even more of it going forward and I'm sure.

It will be talking about as compensation with me right. After this call. So thanks a lot.

Hi Tech CB as we speak by the way [laughter].

Yes from Raymond James We have Savi sites. Please go ahead.

Hi, good morning.

Just on the average daily cash Brian.

Could help me kind of walk through as you got from Threeq to Fourq you what some of the key component do I understand a portion of that is pipes is there and also what revenue does seem to kind of take away that component I think in the last call those kind of a discussion on maybe that coming down about 20 million from.

The level that we saw back then just on some of the cost coming out this money. She could help me understand how that progresses.

So savi I always try and probably will give you. The answer you want which is I'll start by say.

Yes.

Not correct to try to disaggregate the various.

Components, whether its cost.

Capacity demand.

As separate variable because they're not independent variables, there combined and what we think will happen moving from the third quarter into the fourth quarter is we'll continue to make progress.

On costs, which will be a little bit of a tailwind.

And we think a net effect of capacity and our cost efficiency. The net effective capacity in demand is going to continue to get better. We don't know that nobody can really get an accurate forecast it will be flexible, but if we just had to guess if I had to guess on what cash burns is going to be for the fourth quarter I guess, it's going to average in the fifth.

$18 million to $20 million range, a little bit added costs, but mostly about in an improving demand environment and an improving demand environment relative to the amount of capacity you have to deploy to generate the demand, but you know if demand is stronger there'll be more capacity and therefore more cost if demand is weaker there'll be less capacity.

Less cost.

Actually I have higher degree of confidence our ability to.

Forecast or maybe even too stronger word, but haven't expectation of cash burns and I do the other variable.

And you know if I had to make a best today I'd bet on somewhere in the $15 million to $20 million rights for the fourth quarter.

That makes something Super helpful. Just on the Capex I'm. Just curious just 2021 22 is based on what you kind of thinking today.

How does that level look like from a kind of gross capex standpoint, and I'm guessing from a cash capex, it's small mom.

Yes, Sir you know in any given year cash capex. When you take into account aircraft financing is always going to be pretty small.

Relative to the total number since most of our Capex has historically been for new aircraft and those are always finance.

2022 is just too far out to speculate right now I.

I can tell you though that.

For the next few years.

Capex is going to be lower than where historically has been.

Because we have other priorities.

As we come out of this crisis, principally restoring our balance sheet before we make significant investments.

Our next year, because we still have aircraft, where the Neville was effectively being caught on this man. This crisis started we will take delivery of.

It's still going to be a couple of million dollars.

2 billion ish is our target right now.

And we'll have more clarity on that over the next few months.

[noise] from credit Suisse, we have Joe capital. Please go ahead.

Hey, Thanks, very much good morning.

The first a quick question for Jerry just a clarification you actually do you still have the ability to borrow more against mileage plus or is that exhausted. The source of collateral and can you talk about the relative attractiveness of doing more of that versus taking the federal loan that youre approved.

Yes, So we were able to as you may remember in that transaction upsize.

The transaction from what we originally once the market with which basically used up the availability of the.

The first thing capacity way that deal structures, though.

Because it is amortizing starting in year three as it Amortizes, we're able to re borrow.

Against that collateral so it becomes a facility if we want that we can continue.

Hi, its borrow against in the future.

Got it okay. Thanks for that color.

Second question is equivalent for for Andrew.

Cargo revenue clearly a bright spot good job pivoting to go capture that in the second quarter can you just talked about the outlook for that in the third quarter and what sort of a sustainable run rate do you have to pivot back away from cargo as you add back more passenger service just your thoughts there. Thank you.

Well first what I would say is that we did have an advantage in that cargo tends to go to and from our hubs. So we'd have a well established network what are people in our distributors and that just was was really.

Really come in.

I would say in the other thing I'll point out is that our cargo revenue in the second quarter.

In the first month was actually kind of flattish. So you can use imagine what may and June looked like they were just really off the charts.

Cargo revenue does come in rather close to departure time so.

A little bit more difficult to predict.

But we expect it to have another great quarter.

And it really as long as the global fleet a wide bodies is not plan like it normally is industrywide.

We think cargo is going to be pretty strong in terms of the yield production, which it is and our ability to do cargo only charters, but again not big thanks to our team and again really this is one of the advantages of our hub the system because cargo wants to go from our.

Our gateways to around the world and move so we can easily take advantage of it and we did so expect more of that in the third quarter, whether it's at the levels of to Q.

I think it's a little bit early to tell but it would definitely will outperform year over year based on what we're seeing here in July already.

From Goldman Sachs, We have Catherine O'brien. Please go ahead.

Hey, good morning, everyone. Thanks for the time.

One quick clarification for Jerry for on the down 45%.

Hi.

That is that all in adjusted operating costs are.

Yes.

Yeah, that's at all and ex special yes.

Great and and so you know it sounds like maybe too early nailed down for two cost given the uncertainty around the.

The outlook, but how should we think about possible sequentially from that.

5% level.

In the queue. If we just assume capacity today's level with August as you're currently expecting you know I'm, assuming that changes here Labor force I mean really quickly essentially.

Lower imports.

Or are there other cost buckets that you cut spending temporarily that maybe come back and not that that labor.

Thanks.

Katy actually.

I'm not focused so much on on those customers as I have my cash burn I think in terms of cash burn more than anything else, but.

To try to answer your question I would say that with your assumptions I would say that costs are going to be about the same is what we're seeing now.

Basically that decline is flat going to the fourth quarter.

The two things I've mentioned by the way about the fourth quarter on cash burn we do have.

In addition to our normal that amortization.

300 million dollar maturity in the quarter, so principal payments in the fourth quarter will be higher than for instance, in the third quarter and of course, there wouldn't be some onetime costs.

As we right size the labor force that will also having fourth quarter.

From Deutsche Bank, we have Mike Linenberg. Please go ahead.

Yeah, Hey, good morning, everyone. Just two quick ones here, Jerry the 15.2 billion liquidity as of July Twentyth does that include the last PSP installment I think thats like 500 million or so is that in that number now no that that typically would come at the end of the month.

Okay, Great and then just.

Great and then just my second question and this is probably to Andrew when you look at some of the I added data they talk about tickets purchase within three days I think for the month of made it was over 40% a year ago was probably closer to like 15% to 18% or you guys seeing numbers that are similar at least maybe in may or June.

And our those numbers starting to normalize for they feel very high closed 10, and I'm sure. That's obviously, having some impact on your ability to plan. Maybe you can just provide some color. Thank you.

Yes, Mike I would say forecasting is that a little bit more challenge in these days than the normal we definitely saw very high closed in demand.

In May in particular and early June.

So it's nice to see.

Got the load factors in revenue moving into right direction, I will say that tapered off a bit.

As the quarantine it.

In New York City, and then Chicago and elsewhere and border got even more restricted.

So.

I don't know where it is on the on the realm and normalcy, but it was very high in May and late or early early June.

It's lower now.

That these events that happened and once once things start to get back on the road to recovery I do expect that the booking curve will have moved closer end.

And all that to say, it's really difficult to.

You know predict revenue at this point and get the capacity equation.

Optimized like we'd like to but I think you're getting a better and better added at as we go forward.

But that's kind of where we are so that that is what we're seeing what I've told you and I think thats consistent although in recent weeks that's changed.

It from Barclays. We have miscue whiskey. Please go ahead.

Hi, Thanks for taking my question just wanted to come back to the fleet real quickly.

Appreciate the flexibility on making decision, but they're point in time, you can you would need to make a decision or no essentially how long can you push off differing kind of making decision on delaying or retiring aircraft type.

Maybe maybe I'll start and Jerry can can add on but you know it it's difficult to predict the virus path. We've put a lot of aircraft into some type of storage, whether it be temporary long term storage or short term storage.

And we are moving aircraft in an atom storage based on maintenance cycle and engine time, and all kinds of things, though when we went into this a you know we didnt have a planned it necessarily retire any fleet type a and we're going to hesitate to make final decisions on that until we kind of better understand.

The lenten duration and of the of the situation to be honest too.

There are token number are very very old to my seven that had threatened with the engines on them.

Aircraft have definitely been permanently retired because they were they are part of our retirement plan, but we are definitely trying to keep our powder dry on on the rest deplete until we have better visibility of what's going on but more importantly for use in that fleet really effectively with Brean time for both airframe and engine.

To make sure that we do what's right for cash burn and long term requirements. The so I hesitate to make a decision today to retire fleets.

When we just don't need to so that Thats my perspective on where we are today and Jerry do you want to add anything to that.

Yeah, I mean is that a couple of things one even a frac Howard seven five sevens, which if you look at what our original expectation was on their retirement is probable.

Probably likely that they're not going to come back by.

Yes, even those aircraft would be available if there was a rapid recovery just our expectations are.

Those are the first the first to go.

And just in terms the amount of time, we have plenty of time measured in years.

Aircraft are.

Being cared for properly store and.

Can be pulled out of the desert.

When and if we need them.

Okay. Great. Thanks, that's helpful. Just other quick questions, while it's probably a little early to be talking about international traffic too much but.

Maybe you could quickly touch on kind of the conversations you're having with some of your international cares if there is.

Certain concerted effort to be disciplined on capacity eventually or what that could look like when demand does return.

Well, we're definitely not having that conversation because it would be illegal.

But will you have been talking to people about is ways too.

Get people flying again increased demand then it back at yesterday.

Airlines was a was proud to sign along with Lufthansa ICICI at American Airlines, a letter that went to governments on both sides of the Atlantic asking that they consider.

Allowing people to begin traveling back and forth between Europe and.

And the U.S.

If they get a negative cobot test as a way to start reopening borders.

And way to safely.

Reengaging in travel so.

That's our focus as we've talked international has been about how to.

Get consumers flying again.

Thank you and we will now take questions from the media. Once again, if you have a question. Please press star one on your telephone keypad.

[music].

Please hold for a moment, while we assemble are cute will be just to book.

And from Bloomberg, we have Justin Bachman. Please go ahead.

Hi, Thanks for the time today. This this question is for Scott Scott I wanted to follow up.

On your previous comments about the revenue recovery of about 50% and then a plateau ahead of any virus vaccine, what what sort of timeframe do you think that would be does that does that anticipate going into middle or late next year for that for that level.

No I I'm not an expert on went up by by vaccine is going to be available widely distributed but I've been reading a lot about it.

It seems pretty clear it's going to also require multiple back the.

Well, we're talking about a vaccine needs to be a vaccine that Ben.

Tested found to be effective manufactured distributed given to a wipes as the population.

So you know.

I think thats probably longer than what is in some of the media hub I certainly hope it sooner, but well let you go to other experts to find what it is at United though where at least.

Planning as a scenario.

That it takes until.

Late next year before that really happen.

And we hope it's better than that.

Okay. Thank you.

From writers, we have Tracy Rusedski. Please go ahead.

Hi, good morning.

Ask about that letter that.

But you have another.

Yes, Thank you and the White house.

Program to test Stephens, Inc.

Have you seen any feedback from maybe central government.

And how do the international calories checks and evolving in the coming months.

Brett do you want to save me about anything that we know what we've seen so far.

For heard if we have.

Hi, this is quite hard yet today, we don't have any formal responses, but what we do expect to have productive discussions and we're opening.

In fact to be able to too.

Core on this policy, we think it's in everyone's best interest obviously.

Various companies, including the United States.

So we're hopeful.

We have strong support.

Across our industry. Both you also outside the us.

And.

And then.

With that.

All of our collective concrete.

Our industry. So so we're hopeful.

It can be associated press, we have David coding. Please go ahead.

Yeah, Hi, Scott and the company.

Your press release today on the expanded face mask policy highlights the update you've done to reduce the number of passengers per flight and I just wondered if your regretting not having started out that blocking some seems like some of your competitors because it seems like your policy would be easier to explain to customers and any progress on that.

So look at.

We as we said have been taking significant action to increase consumer confidence and we ran I think a 35% load factor is the second quarter, we're projecting a 45% load factor in July.

And importantly.

But that's about confidence we have incredible competent to the safety of the airplane, but.

But that's about consumer confidence importantly, it to that and we're also notifying customer who we have a 70% load factor or higher.

And giving them the option to switch to another flight yeah, if they don't feel comfortable and today, you're the 1% of our customers are taking us up on.

Earlier in the call I talked about why an airplane is safe and we have high confidence in the safety of an aircraft. It is not the same as be in another indoor space. It's not the same as being in a restaurant, it's not the same as being an office building or even a hospital because the air comes in from the Sealy It goes pass.

The customer down to the floorboard.

Back into the ventilation system, and then as either filter to help a greater filters or 50% of the air resort going into the cabin is from the outside.

And that is a uniquely safe environment that exists nowhere other than on aircraft.

And you combine that with our mass policy and our cleaning protocols.

And it really is one of the favorites places you can be if you're going to leave your house.

We have high high confidence in that and.

Other steps that we take because we have.

Copies of the safety the other steps, we're taking our about consumers and giving consumers confidence.

So that's why our policy has been with what it has been we kept load factors low intentionally to help build confidence help explain the story that aircraft or state.

It from New York Times, we have Niraj Chuck sheet. Please go ahead.

Your Ross your line is open.

Hey, sorry about that thanks for taking the.

Just wanted to ask about the mask policy I guess I was curious to hear.

How uptake on that as Dan can you guys, Hey, how many people have.

Going forward from future flight, how thats going.

So the vast majority of our employees and customers are already follow the math policy because they recognize it's the right thing to do for the safety of everyone. So we have very high compliant.

Mass policies in place, we carried into millions of customers and we've had fewer than 30 that we have I've had the actually take actually got so the vast majority of people are compliant agree. Appreciate it is a distinctly small minority that or do they don't want to wear masks and.

And look we'll welcome them back when this is all over.

That's not required.

But they're not going to be plan on United during dependent.

Uh huh.

Thank you well now turn to picture Kristina Bhutto's for closing remarks.

Thanks.

Joining the call today, please contact Investor Relations you have any further questions and we look forward to Taski net okay.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for joining you may now disconnect.

[noise].

[music].

[music].

Good morning buckets, you did or like Holdings earnings conference call for the second quarter 2020.

Spread that there'll be a conference facilitator today.

The additional <unk> management, we will open the lines your question.

At that time, if you have to question. Please press star one and you touched on.

This call is being recorded that is copyrighted. Please note that no portion of the called maybe recorded transcribed or rebroadcast without the company's provision.

Our participation implies your gets it to our recording this call. If you do not agree with these terms simply drop off the line I.

I would not turn the presentation over to your host for today's call. Christina you don't <unk> director of Investor Relations. Please go ahead.

Thank you operator, good morning, everyone and welcome to <unk> second quarter, two <unk> earnings Conference call yesterday, we issued our earnings release, which is available on our website <unk> IR that United.

Information yesterday is really an remarks made during this conference call may contain forward looking statement, which represents the company's current expectations or beliefs concerning future events and financial performance.

All forward looking statements are based upon information currently available to the company I never factors could cause actual results could differ materially from our current expectation.

We refer to our earnings release form 10-K, and thank you and other reports filed with the FTC by United Airlines clothing, and United Airlines from more thorough description of these factors also during the course of our call. We will discuss several non-GAAP financial measures reconciliation of these non-GAAP measures most directly comparable GAAP measures. Please.

Your first to the tables at the end of earnings release, joining us on the call today, that's our results and outlook, our Chief Executive Officer, Scott Herbie President Reinhart Executive Vice President and Chief Commercial Officer injury is not an executive Vice President and Chief Financial Officer journey.

In addition, we have other members of the executive team on the line a bit watches it should that trend.

And now I'd like to trying to call or Scott.

Hi, Thanks, Kristina and thank you all for joining our call today.

This is not the environment that I expected for my first call it.

But I'd say that I've never been more proud.

The team United I want to thank everyone for their leadership support and dedication to the company that we all love during what is the most difficult <unk> any of it the area.

Both for airline enter families are bright line hasn't allowed dramatic reduction in our schedules are headlines about potential carloads or new basket requirement the interfere with their commitment taking care of our customers and each other.

Back our customer satisfaction scores in June improved nearly 30 points year over year, there's no better evidence of our determine commitment to care for our customers and keep them say, it's well be United together is all about and Brett will talk in more detail about how our core core values have informed our industry leading.

Safety of our customers and employees.

The second quarter 2020 was historic where the airline industry for all the wrong right.

At the beginning of April we saw the sharpest deepest drop in demand in history far worse than 911, or the great recession or any other stress scenario that anyone at model and near the ended the quarter Justice optimism about a recovery was beginning to build we watch the man's paid once again at GOGAS Nike spiked in the Sun belt.

But when we make during this crisis and I've never been more confident that we will make it through this crisis I think we'll look back on the second quarter of 2020 as an extraordinary three month period gold achievement that I wasn't that weren't even sure where possible we started back in April.

We can't control the of course, the pandemic, though we are doing our part to help by leading with safety.

The United team has been been doing an exceptional job controlling what we can and generating what we expect will be the bad or in this case leased bad financial result of any of our network competitors. So many achievements. This quarter included the fast it most realistic and accurate assessment of the demand environment completing a large.

This debt financing in the history of the airline business back by our loyalty program.

American reducing our cost structure and implementing a variety of interesting any measures designed to protect those customers and employees on the spread of the crowing about.

Well some of you have noted that breguet strength, including our high closer to internationally business man with great larger headwinds for United Those of you join these calls well before will not be surprised to hear that are no excuses philosophy.

Not to spend it just because times are tough.

Pat that philosophy is more important than ever in times of adversity.

Served us well.

Because in spite of what it could have been easily explainable uses.

The United Kingdom altogether overcome them and we expect to deliver the best financial results the network carrier.

Andrew Jerry will discuss in more detail.

Back that are realistic smart and opportunistic commercial strategy that by dynamic in thriving cargo business combined with a with other dramatic cost cutting across our company resulted in the United losses, and daily cash burn being lower than either of our network competitors in the second quarter and that's important because.

As we've discussed before minimizing the depth as a whole we dig in this crisis.

As critical to preparing United the thrive on the other side.

I look forward to the day, we're we're past the pandemic <unk> stop talking about Casper, but the country the world and aviation, our where we are right now I remain confident that the virus will be depleted and when it is I'm very bullish about our future because I believe the current headwind related to international in business travel will once again.

Turning to be important and unique strategic advantage for United Airlines, and if we can produce leading financial result, even what these larger headwinds right now just imagine what we'll do in a healthier operating environment.

My recap in second quarter would not be complete if I didnt mention how conversations about confronting systemic racism reverberated through our society, including here United like never before.

As a company well I'm much more to say more importantly, due on this topic in the future, but for now let me reiterate that I'm personally committed to using the input and visibility, but my new role United to put our value, especially our commitment the equity an inclusion into action.

Now I think data just how busy Q2 was for United Let me remind you that we also named art as our new President.

That's been a trusted colleague valued adviser and a good friends I joined United almost four years ago. He's been a widely respected leader at United for much longer than that it's my honor introduced them as my partner for the first time on an earnings call him. His new role is our president Brad over to you.

Thanks, Scott for that kind introduction I also appreciate your long term commitment that acting on diversity equity in it.

And I'm excited about how our partnership can bring about meaningful lasting change.

United and then the communities we serve.

Let me begin by saying how proud I am what our team has accomplished over the last few months.

Near zero demand for air travel back in April.

While we have a long road ahead of it we believe the 16.1 billion of liquidity, we have raised as part of the crisis.

And our dramatic reduction in test center.

That's up to not only survived this crisis.

Emerge in a position strength during the recovery.

All right.

We have never lost sight of the fact that the very first pillar of our core for is and always will be safety.

The docking principle, we have introduced a number of industry, leading safety measures do apart Rebecca spreading the corona by risk.

Protect our employees and customers, including.

Require all flight attendants and passengers to wear masks.

Asking all passengers to complete a health assessment bearing checking.

Offering customers the election the change flights.

If their flight is expected to be at least 70% pool and partnering with core.

Cleveland Clinic, just to name a few.

Along with our unwavering commitment to safety.

Very outside of the pandemic, a former CEO and current chairman off the meal and Scott made it clear that our number one priority was to reserve as many United jobs as possible for the long term.

Yes, and very early in the crisis, we began efforts to reduce our non labor expenses and eliminate any discretionary or non essential projects that.

I want to thank over 26000 team members.

All contributed to reducing our expenses early separation program voluntary unpaid new programs, but we do work schedule.

Our voluntary separation and retirement program to almost quote.

So far over 6000 employees.

The to participate.

Time of unprecedented uncertainty to start conditions by our employees for one of the most meaningful action.

Okay.

Unfortunately, this crisis has lasted longer and become worse than most experts anticipated and so these efforts while meaningful and appreciate it.

We are not as you know and only get up to small step of the way there.

We are left to make some of the most difficult decisions in the history of United Airlines.

Great and the size of our workforce.

On October 1st we are planning to be smaller team and airline in response to the depressed demand environment.

Insperity and candor and situation like this where no one is it all the most coal for thing we can do for our team.

We had been an active communication with our unions to identify voluntary program that could mitigate furlough.

So uncertain world, giving our United team members a choice as much as you can is an important element of our strategy.

Voluntary program will be balanced offered.

Reduce labor costs, while providing flexibility to our team and he denied the when demand return.

And it will return.

The jobs and the people ready to go and can avoid and many involuntary furloughs as possible.

Well this unprecedented health crisis has changed the way we operate.

And change the commitment our employees have to running a great airline.

As part of the leadership team will continue our promise.

Anything in our power because as old as many jobs, we can people of United.

With that I'll turn it over to Andrew to discuss the revenue environment.

Andrew.

Thanks, Brett.

Second quarter was clearly the most difficult quarter United's history, we acted quickly and decisively to confront demand changes.

In fact, our change in total revenue in the quarter of down 87% why not being consistent with our total capacity being down 88%.

Our network curiously more capacity than United and we believe our careful management capacity pricing and cargo during the quarter is the primary driver of our good results relative to our network peers in terms of absolute losses and cash burn.

We feel as good as we can about these relative result.

In a world of limited demand driving our cash burn down is absolutely a function of the amount of capacity we offer.

We clearly have a long way to go to navigate covert 19, but we got off to a relatively good start at the start of the Pandemics. Many feared our outsized exposure to business traffic international traffic and our coastal hubs would have been a drag on performance relative to other network carriers.

This was not the case as we made smart decisions about capacity.

I will not be focusing on market share during the worst financial crisis. The industry has ever phase instead, our focus is on ending cash burn and return to United to profitability.

As we look towards an eventual recovery international demand will be slower to recover than domestic.

When international demand does recover we believe united's coastal gateway hub required who cover quicker than others, a benefit of having the best Qs gateways to start with.

Orders are up around the world now and international revenue is low we believe that United that we have already felt their worst of the international passenger revenue decline impact borders will open someday and we believe United is well positioned to experienced the fastest international already growth when they do.

Corporate traffic, which was down 96% in June will also be slower to come back then leave here, but we believe it well we are social creatures video technology is treated as a reasonable temporary measure, but we do not expected to replace meeting in person over the long term in fact, we have identified that more work from home.

May drive increased business travel over the medium term as some people trade there commute spike bars less frequent can didn't buy airplane.

From a remote location.

In short term in the short term, we will make appropriate adjustments to our network to reflect less business traffic by putting a higher proportion never capacity into leisure and visit in family and relative market.

We expect the recovering demand to be jag it everyone as a view the recovery will look like but will not for tend to be able to predict the path to the virus. We do expect that demand recovery would stalled in recent weeks, we'll begin to recover again when new cases start to fall quarantines are lifted and borders or reopened however, we continue.

I believe a full recovery is contingent upon effective therapeutic and a vaccine.

Best guess is demand as measured by revenue will recover overtime to be down approximately 50% and then plateau at that level until a vaccine is widely distributed.

We discovered how disrupted the buyers would be to demand very early on and pandemic and we use the lorne into shape our near term.

Capacity decisions.

For April and May we reduced capacity approximately 85%. We also temporarily reduced our average seats for departure in May and June by 23%, which lowered our trip cost, helping us conserve cash while the care, Jack Hey will support program supporting the salaries of the United team.

In each of our mid continent hub, we came up at an entirely new schedule, while maintaining the contract comprehensive network and sufficient connectivity.

Domestic PRASM in Q2 is down by 47%, we did see steady progress throughout the quarter as our schedule changes were implemented and demand began at slow but steady rebound.

Domestic PRASM performance in June and proved to be down only 15% reflected improved demand outlook.

Even as we were deploying multiple actions to minimise flights operating above 70% load factors. We update 66 flights per day in June restricted inventory inflates booked above 70% and block certain seats from sale, while we have very high confidence in the safety on border aircraft, we continue to deploy multiple action.

The managed high load factor flights to increase customer confidence.

Our approach for international wide body long haul flying has been to leverage on cargo capabilities to partially offset declines in passenger revenues.

For the quarter international ask them for down 92%, but we maintain passenger service throughout the crisis to Australia, Japan, Brazil, and multiple sites in Europe, even though it increasingly restricted border policy. We also operated over 3800, all cargo charter flights in the quarter, which contributed to our.

Over 36% improvement in cargo revenue in the quarter, while competitors on a cargo revenue declined the United cargo team clearly at a home run in the quarter and cargo is on track to have another great quarter.

Recent uptick in Cobot cases in late June in early July of temporary stalled demanded permits we were seeing in gen.

Third quarter domestic capacity is expected to be down at least 55% domestic RASM results for United in July and August will clearly not be as good as late June given industry dynamics stall demand and our own capacity increases United's August schedule is already adjusted downwards. The other week given recent.

Changes in demand and our September schedule is still not finalized.

Domestic load factors in the coming weeks are expected to average get below half fall a reduction from the 57% we saw in June.

In the event customers are booked on flights that are above 70%. We will continue to let them know in advance and offer an alternative flight that node is healthy if they'd like to make a chain.

We expect a passenger revenue in the third quarter will fall approximately 83% versus Q2 of down 93, and half with consolidated capacity expected to be down approximately 65%.

Just a few weeks ago prior to the case by we'd expected revenues in the quarter to be down less than 80%.

With the end of the payroll support program, our marginal costs will increase later this year and that will impact how much incremental capacity, we can add in most post summer if any.

Never given a look at industry dynamics, we expect to have the most conservative deployment of third quarter capacity of anyone.

My update on past, earning calls reported on United progress on array of commercial and from a customer initiatives.

We can't be shared that every aspect of our past commercial and commercial plans will be relevant in the future.

Our team is agile ever ready to respond to an ever changing world.

We've proven that over the past few years and will prove it again over the next few.

Thanks to the entire United team your dedication in these difficult times to allow us to come out of this period strong and with that I will turn it over to Jerry Thanks.

Thanks, Andrew for the second quarter Twentytwenty, we reported a pretax loss of $2 billion and an adjusted pre tax loss of $3.2 billion.

These results represent how this global pandemic continues to materially disrupt our business and unprecedented ways and therefore requires unprecedented responses to ensure we kind of out of the crisis as strong as possible.

Since the start of the crisis, we focused on aggressive cost cutting to minimize our daily cash burn and aggressively pursuing opportunities to bolster our liquidity position.

As March we have raised a total of $16.1 billion from additional liquidity marching through debt offerings stock issuances and the carry backs payroll support program Grant and Hong.

And our capital raising actions, whereas the truly first of its kind debt financing using our mileage plus program, which brought and $6.8 billion and liquidity.

Working with Goldman Sachs, our lead underwriter.

Finally in innovative structure that allowed us to unlock some of the inherent value in the program.

We're able to achieve our key objective of raising a substantial amount of liquidity at attractive interest rate in a manner, which doesn't impair our flexibility to use mileage quest to support our business going forward.

I certainly appreciate comments made by one of my peers recently recognized that this structure will serve as a model for the use of royalty programs to raise liquidity by the industry in the future.

We continue to target over $18 billion and available liquidity by the end of the third quarter. We believe this level of liquidity will position us to manage the airline well get the crisis continues to depressed demand part of Twentytwenty wine and even beyond depending on the pace of recovery.

We view this has enough liquidity should we desire to raise additional liquidity, we have at least $9 billion of available collateral value, excluding both mileage plan and the collateral we expect to old available for Carryback clown.

And as additional collateral we can bar again subject of course to market conditions.

Having gone up it's a substantial cash cushion we will continue to make every effort to preserve our liquidity until we were at current prices through the hard work of our employees across the business, we reduced second quarter average daily cash burn to $40 million, including approximately $3 million principal payments and several.

<unk> expenses ending up at the low end of our original second quarter guidance range.

Over the last three months, we've reduced our total operating expenses, excluding special charges by 54% and eliminated all sources of discretionary fat.

Last essentially what is absolutely needed operate the airline and nothing more.

The office significantly reduced our adjusted capital expenditures since the crisis began have passed all investments that didnt happen immediate return.

We now expect our Twentytwenty adjusted capital expenditures to be approximately $3.7 billion down from our previous guidance of less than $4.5 billion and of course down from the $7 billion. We originally forecasted before the crisis.

We continue to take delivery of new aircraft owning one financing is available and we've come to an agreement with borrowing that we will not be taking your delivery of any new aircraft and twentytwenty too.

Our team is working tirelessly to examine how we can further variabilize our cost structure to ensure that we come out as a stronger industry player once the pandemic ends.

One area. We do continue to look at is our overall firstly, we currently have close to 600 aircraft temporarily grounded where we do not have anything specific to announce on aircraft retirements at this time, our priority is to remain agile.

Looking ahead to the third quarter, we expect our average daily cash burn in the third quarter to be approximately $25 million with $6 million representing debt principal payments and severance expenses. This cash burn estimate assumes passenger revenue is down around 83% for the quarter.

As we look to the fourth quarter and next year Nobody has good visibility on the pace of demand improvement.

As a result, our primary focus will continue to be minimizing cash burn for the foreseeable future.

Unfortunately, this means that we will need to bring all of our costs in line with our reduced revenue, including labor cost and this has led to the difficult but necessary decision to reduce the size of our workforce in the fourth quarter.

We believe that when demand returns based on the work the entire United team has accomplished and cutting costs to respond to the prices we were being the best position to reach cash burn breakeven.

Which we expect will be in an environment, where did that demand and capacity are down around 50% we.

We will let you all make you wrong for forecast, that's when that will happen.

In closing I will reiterate that there is still a tremendous amount of uncertainty ahead, but we believe that United is in a position of strength to manage through what we expect to be a jacket retire.

And with that I will turn over to Kristina to start the QNX.

Thank you Jerry will not be questions from analysts.

Please limit yourself to one question if needed one follow up question Brandon clean to scrap CJR.

Thank you and the question answer session will be conducted electronically if you'd like to ask a question. Please press star followed by one died your touchtone phone if you'd like to be removed from the Q. Please press the pound side or the heskey.

Turning to Speakerphone. Please make sure your mute function just turned off without your signal to reach our equipment.

Once again, if you'd like to ask a question. Please press star one of your phone keypad. Please hold for a little bit while we are simple our Q.

And from Bernstein, we have David sorted. Please go ahead.

Hey, good morning.

I wanted to ask you about the headcount plans, obviously, the 6000 poison to sign up for the voluntary out is is well below the numbers that have been.

Commented on before in terms of.

Production was it might be required to right size the network.

How should we be expecting this to play out over the course of the next couple of months I mean, obviously the care loan.

Closed off in September or the kept provisions anyway.

What can you tell us about sort of the scope of of expected auction fear in the timing on when these announcements like the made.

Hey, good to talk to you.

What I'd say is.

6000 voluntary first I'd like to thank everyone at United All the 6000.

Theres another approximately 26000 people who've taken temporary voluntary program at United So far so thanks, all of them for their selfless action and doing what they can too.

United and their fellow coworkers get through this is a testament that how much people care about this company and doing the right thing.

Look I think of it as there's 32000 people so far have raised their hand and taken a voluntary program. We are still working with some of our other unions as well. So I expect if we get those deals done we will have opportunity to have any more but.

At least I think of it at that 32000 numbers, probably the more relevant metric because some of those are temporary and.

Look we know that theres going to be a recovery and if we keep people temporarily.

Maybe not on the payroll full time, but engaged connected to the company certified trained and ready to bounce back because about the recovery is going to be quick.

That's really important to us so we feel pretty good we feel really good actually about where we are in voluntary program. So far.

And can you can you comment all I know these are difficult discussion.

But as far as kind of the tone in the tenor and their relationship with with with labor.

Can you give us some feel for for the the data for the relationship. There is the is it capacity that is a collaborative like how is the tone of the negotiations so far in terms of mitigating furlough actions and maybe getting for there's some additional help from the from labor side to get through the.

Look.

I'm not going to comment on that specific of the of the negotiations, but I'd say, we've been transparent and honest with everyone from the beginning including our employees in our labor Union and all of you and that help.

Foundation and this is this a situation where our interests are aligned.

This is not a traditional kind of adversarial.

Types of discussion, we all share the goal of getting through what we all know is a temporary crisis.

Again, the other side.

We wish that there was going to be no pain to get through it but we all now recognize.

That this pandemic is deeper and it's going to last longer than we would've hoped and because of that there is going to be okay.

And so the discussions are about how do we minimize that.

And the most humane.

Way jointly with our people.

And.

And I feel good if it really good about where we are.

From Evercore ISI, we have Duane Pfennigwerth. Please go ahead.

Hey, thanks.

Just in terms of the the cash burn improvement sequentially.

Maybe you could provide some detailed our so your capacity is up meaningfully and appreciate those capacity plans have a downward bias given changes in demand.

But higher capacity up call, it, 190%, which will drive higher variable costs and yet demand feels like it's taken a bit of a step backwards. So is this a function of recovery you expect later in the quarter is this cost driven or is this all working capital driven.

Hey, Jerry So short answer is a combination of everything I think you're referring to our prior guidance, which had third quarter cash burn a little higher than what we're currently expecting.

I would say versus when we established back guidance.

Demand has taken a turn.

So a little higher than what we assume back that.

We're also doing a nice job continuing on savings on cost including.

Well cash costs, so including in that would be some capex that we're saving.

So the combination of everything that has driven us.

To be able to refine our forecast an estimate of lower cash burn that we assume a few months ago.

For the quarter.

Okay. Thanks, Jerry and then just just for a follow up.

Appreciate the long term commentary about sort of plateaued and get down 50.

Until we get a vaccine, but what is the path from down 83 to down 50, how do we get there is that you expect corporate to maybe perk up a little bit as we get beyond.

Some are leisure or what does that path from.

Down 83 to down 50 look like how do we get there thanks for taking the questions.

Yes, Hey, Duane I will try that.

I think we know what the exact path will be and look knowledge that we talk though at the exact path will be.

But what I would say is we've been.

Reasonably accurate very much sooner the fairway and forecasting both the course of the pandemic.

And the impacted demand.

So far and you know we expected to be jag it like that.

For what it's worth I also think that while we took a step back in the last few weeks as Andrew said that has plateaued.

That we as a country into society.

I have learned some lessons about what we should do particularly wearing masks.

And that you will be more up from here.

The kind of demand I think is going to come back, but one also I think.

It's important to people understand and I've said this earlier on TV today that an aircraft actually.

Equally safe environment.

And that is confusing to people because you hear all you hear about being an indoor space isn't that transmission of a virus.

But aircraft are designed to have airflow that goes through the sealy down to the floor and out.

And that error is taken either 50% of semi back into the Gavin has been re filtered through a have a great filter and 50% is coming from the outside.

And.

That combined with our mass policies and our cleaning policies makes an aircraft that uniquely safe environment. So for people that are wanting to go on a business for on a vacation in order to visit family relative one of the safest parts of their journey is going to be on an airplane that's really important.

The United and for the industry to get back to that 50% level I think we're gonna have to get people understanding that flying somewhere instead of getting the car driving for 13 hours you are safer actually fly and I'm very very much believe.

That would be the case, then we're taking additional steps announced this week to make sure the whole travel processes, including in the airports or before the engine start on an airplane all of that I think will allow a reasonable recovery and visiting family at all that.

A lot of other leisure travel is not going to get back to 100%. My guess is I think that the world sounds like they're doing a great job, but it's not going to be at 100% Beth.

You know.

Business demand I think we'll start to come back the small kind of group stuff will start to come back.

But we're not going to have a 180000 people show up.

Consumer electronics in Las Vegas. This January like they did last January those kind of maybe just aren't going to happen.

You know companies are not going to have their top 500 salespeople come in every year at the end of the year for a big part into celebration until were past dependent and there's a widely available that they you add all that up I think are going to be on a gradual trajectory from today's level of demand up to 50% or will plateau and then.

Think there'll be a rapid recovery once we get that kind of a widespread back they I'm not sure how long it takes to get the 50, but thats a very expansive answer of how we get the 50, why we think it will be 50, what's important to get there.

From both research we have Hunter Kate Please go ahead.

Hi, everybody good morning, Thank you.

[music].

So you had 196 wide bodies at year end 19, knowing knowing what we know now which admittedly is as much do you think you have more or less than 100 in the fleet at the end of 2023.

Andrew I guess I'll take that.

Scott described how how this is going to come back and by the way I think our international gateways are going to come back quicker and I think our internationally could we naturally have a lot of right.

That other gateways don't have would you see in our numbers. So the answer is more.

More than 100, Okay got it.

And then thank you if you fly the same amount of capacity in the fourth quarters you in the third quarter can you generate more revenue in the fourth quarter than you do in the third quarter, knowing what you know now about like corporate and BFR makes and all that stuff.

What I would say on areas, where we're where we did a pretty good job of it in Q2.

Got a little bit ahead of ourselves in July, but thats really based on how demand change and some.

The pricing environment that we see out there, but I think the answered your question, yes because.

We're going to get better and better at forecasting that then we're now getting results in that we're looking at every day about where were making more and less money, both domestically and overseas and refining the forecast anywhere tilson our capacity more toward what we'd say via foreign markets and leisure market.

She is also going to help so I think as we optimize every time that schedule. We can continue to push the numbers into right direction.

Okay, and Hunter I want to take a minute brag on the commercial team, Andrew maybe not but maybe not going to direct about it.

The airlines that are the whole company.

Led by our commercial team has done a better job.

Than any airline in the entire world.

Be recognizing what the pandemic has meant for demand and taking advantage of offer of opportunities where they present themselves whether that was for passenger demand Andrew mentioned some of the places internationally with that we're the only airline flight our cargo day led by young from 36% increasing Fargo.

We would have ever thought we could do something like that.

And I know some of the stuff that they're working on that is creative and I'm confident that the United team uniquely who's going to be able to find opportunities.

To more appropriately match capacity that to demand, but also to uniquely outperform by finding the pockets of demand where there is real opportunity.

In from vertical research partners, we have Darryl Genovesi. Please go ahead.

Hi, Thanks, everybody.

Can you give a sense.

Your your.

Your Opex was down 54% in second quarter.

Give us a sense of how that number eight inch per quarter and then.

To that end.

That's how you're thinking about the Q4 cash burn.

Either in your 50% revenue scenario or.

The scenario, where nothing gets better like the framework that you gave with.

Q1 results.

Jerry.

For the third quarter I would say.

That number is going to be around down 45% just given.

Very our capacity.

Too early to tell.

Going forward until we sort of set capacity.

Beyond the third quarter gives you kind of a sense of where we are.

Okay, and then I guess, you're just given the nature of this topic change.

Driven by United or more related to slippage on the Mac we certification.

And does the 700 million dollar you are taking out a point playing now show up in 2021. Thank you.

Yes. It is now the 700 does not sharpen Twentytwenty Juan it's really three things.

The impact.

Our agreement to move aircraft are twentytwenty too so instead of taking a fair number.

Max's in 2022.

We're now committed taking zero that has an impact upon predelivery deposits. There are also a couple of aircraft.

Some number of aircraft that were in the capital.

Expenditure forecasts.

Remember I want to 75.

Later this year, we now expect will be taken by regional partner, So thats out of our Capex and then there is also just a little bit of other other work done so yes, thats right the number down I would point out.

That have that 3.7 billion, we're now forecasting free for the year.

About 1 billion of that's actually the present value.

Aircraft lease expense.

We're taking a fair number these new aircraft under operating leases.

That we are counting has capex the present value of those leases that's about a going to back that out and you.

Remember that 2 billion capex expense in the first quarter.

So.

Excluding the leases our capex for the not for the last nine months of the year is down to about $700 million.

And from JP Morgan, we have Jamie Baker. Please go ahead.

Hey, good morning, everybody at Jerry can you give us some more clarity on the air traffic liability right now.

In terms of its composition and whether there has been anyway.

Appreciable increase in refund request following the flattening demanded.

Warranty.

During my home state.

Hi, Jamie it's Andrew.

It just shy of 5 billion.

But interesting stats are coming in as curse, new revenue in what's coming into the redemption to VCTS and other instruments like that and it's about two thirds, new revenue and one third redemption.

Obviously ticket refunds as we get further and further into the pandemic.

Less and less of the booking curve was our in booked obviously in the past.

Thats effectiveness NASA, the refund rates are coming down.

And that number is I think are all kind of move in the right direction, but yes, roughly a two third one third split and just shy of 5 billion right now for LTL, Okay. Perfect second question.

And probably for Jerry now that loyalty has been successfully monetize can you share the collateral that youve pledged or leave you will pledge in the event that youre draw Treasury loan and also with the remaining unencumbered asset pool looks like.

Draw that loan.

Sure I expect that.

We would use as collateral for the care that loan if we choose to take it and drawdown.

Available roots Foxconn gate.

And so I mentioned that the remaining collateral.

Hi, knock high mileage plus for the pool groups that were going to whole available for us treasury.

These 9 billion and that's a combination.

The.

Remaining routes hard assets equipment.

And the like as well as equity.

In.

Assets that are encumbered by credit availability of secondly, I should point out that does not include some other asset that other airlines have actually used successfully as collateral for example, United brand itself has value. It does not include the brand it is not enough food.

The value.

Yes that cover network those are things that have real value. We have not included those yet.

But we do know that since other airlines abuse those assets.

That will be available on top of the 9 billion I just described.

And from call. It we have Helane Becker. Please go ahead.

Thanks, very much operator, hi, everybody and.

Thank you very much for the time, so I have two questions. My first question is.

You're looking at your bookings and people who are actually flying no.

Scott I think you said that there wasn't a lot of corporate travel, but are you seeing that your high.

Value loyalty customers are flying or is it just.

More one off customers, who may not be as.

Tied to the airline because they're not loyal members have you know.

Hi.

Hi Lane, it's Andrew.

Actually the good news on that front as we are seeing.

An ever increasing rate of our premier members in the frequent Flyer program slide again, maybe not business, but for personal reasons. So they're getting back on airplanes. Obviously, if you go way back to April that that number was incredibly low but we are we're seeing really nice progress in that front. So it's all moving in the right direction is.

Back to where it was before the crisis in terms of percentages no.

We do have a higher percentage of non members on board than we're used to.

But that that number can meet looks like its recovering very nicely as people get more comfortable offline on airplanes.

And I'm wondering if you're able to convert some of those non members to members.

We always work at that and also to get them to hold our credit card obviously.

Which is done extraordinarily well during the crisis as well.

Our titration.

Completely divorce at this point Mark passenger revenue situation.

So that's gone well, but we will continue to work to convert them.

But it definitely is a different makeup the passengers.

As we look back in time, but as we look forward in time, it seems to be moving back towards normal, but again normal won't be achieved until I think theres a vaccine.

From Stifel that we have Joseph Denardi. Please go ahead.

Thanks, Good morning.

Scott is luke's compensation budget for talent and the level of investment into mileage plus consistent with it being a 25 billion dollar asset.

I'm not going to talk about loops compensation on Republic goal, but Luke and is saving done actually phenomenal job.

Not just what they've done.

What they and Mike less going in and the whole.

Finance illegal paved getting the might pause holdings deal done.

But.

Great negotiation collaborative negotiations with chase, which we announced.

Like literally two days before the Italy news, so really good timing on our renewed deal with chase him as Andrew said, that's been a partnership it's worked really well.

And and Lukas.

Hi, great asset in his whole team for United We make sure they get the resources they need to keep growing that business and we also appreciate the partnership with JP Morgan Chase.

Invest a lot and also growing this partnership.

How do you use the organizational structure and the commercial agreement you've established between the airline and the loyalty program to build a competitive advantage relative to your peers more appropriately allocate capital and then maybe most importantly improve the profitability to the core airlines that earns an adequate return on.

Capital Postoperative.

Well I'll, let Andrew add to this if we want.

Got it really 100% sure what you're getting out, but what I would say is.

We were already kind of working down the road to.

[music].

More appropriately at least internally split out the financials and understand the real economics of the card core airlines. They do go together they are not incepted, they're not separable.

In the sense that you could have one without the other they are.

The mutually support each other.

In a positive and a good way.

But we accelerated that effort obviously the went through the pandemic and I don't know it all the answers are going to be yet, but I think that separation and that even clearer delineation.

We'll create new opportunities for Luke Andrew and their teams.

Due to push on the non airline side.

Which will also help the airline side so.

It's a symbiotic relationship Andrew do you have anything to add.

The only thing I would add is that the transparency that others now see we always thought internally we always recognized.

In order to value there and we'll continue to push it.

Luke is the right guys the job and has a lot of creative ideas, we've seen that over the last year, and we'll see even more that going forward and I'm sure.

We'll be talking about as compensation with me right. After this call. So thanks a lot.

Hey, Texting me as we speak by the way [laughter].

Yes from Raymond James We have Savi site. Please go ahead.

Hi, good morning.

On the average daily cash Brian maybe she can help me walk through as you got from Threeq to full Q, what some of the key components do I understand a portion of that is pike variable. So what revenue does seem to kind of take away that component I think in the last call those kind of a discussion on maybe that's coming down about 20 million.

From.

The level that we saw back then just on some of the cost coming out I'm. Just wondering if you could help me understand how that progresses.

So savi I always try.

I will give you the answer you want which is I'll start by say I.

I think it.

Not correct to try to disaggregate the various.

Components, whether its cost.

Capacity demand.

As separate variable because they're not independent variables there combined.

And what we think will happen moving from the third quarter into the fourth quarter is we'll continue to make progress.

On costs, which will be a little bit of a tailwind.

And we think the net effect of capacity and cost efficiency. The net effective capacity in demand is going to continue to get better.

We don't know that nobody can really get an accurate forecast it will be flexible, but if we just had to guess if I had to guess on what cash burn was going to be for the fourth quarter. I guess, it's going to average in the $15 million to $20 million range, a little bit at cost, but mostly about in an improving demand environment and an improving demand environment.

Relative to the amount of capacity you have to deploy to generate the demand.

But if demand is stronger there'll be more capacity and therefore more cost if demand is weaker there'll be less capacity and less cost.

But I actually have higher degree of confidence in our ability to.

Forecast or maybe even too stronger word, but have an expectation of cash burn I do the other variable.

And if I had to make a best today I'd bet on somewhere in the $15 million to $20 million right.

Okay.

That makes sense and Super helpful. Just on the Capex I May Mr., Jerry just 2021 22 based on what you've kind of thinking today.

How does that level look like from a kind of gross capex standpoint, I'm guessing from the cash Capex small loan.

Yes, Sir in any given year cash capex when you take into account aircraft financing is always going to be pretty small.

Relative to the total number since most of our Capex has historically been for new aircraft and those are always finance.

20, frankly was just too far out to speculate right now I can tell you though that.

For the next few years.

Capex is going to be lower than where historically has been.

Because we have other priorities.

As we come out of this crisis, principally restoring our balance sheet before we make significant investments.

For next year, because we still have aircraft, where the metal was effectively being caught in this man. This crisis started we will take delivery are.

It's still going to be a couple of million dollars.

$2 billion ish is our target right now.

More clarity on that over the next few months.

From credit Suisse, we have Joe Colorado. Please go ahead.

Hey, Thanks, very much good morning.

First a quick question for Jerry just a clarification you actually do you still have the ability to borrow more against mileage plus or is that exhausted or the source of collateral and can you talk about the relative attractiveness of doing more of that versus taking the federal loan that you are approved.

Yes, So we were able to as you may remember in that transaction upsize.

The transaction from what we originally once the market with which basically use up the availability of.

The first thing capacity way that structure so.

Because it is amortizing starting in year three.

As it Amortizes, we're able to re borrow against that collateral. So it becomes a facility. If we want that we can continue.

Bargains in the future.

Got it okay. Thanks for that color.

Good question, just a quick one for for Andrew.

Cargo revenue clearly a bright spot job pivoting to go capture that in the second quarter can you just talked about the outlook for that in the third quarter and what sort of a sustainable run rate do you have to pivot back away from cargo as you add back more passenger service just your thoughts there. Thank you.

Well first what I would say is that.

We did have an advantage in that cargo tends to go to and from our hubs. So we'd have a well established network.

Our people in our distributors and that just was was really.

Really come in.

I would say in the other thing I'll point out is that our cargo revenue in the second quarter.

In the first month was actually kind of flattish. So you can use imagine what may and June looked like they were just really off the charts.

Cargo revenue does come in rather close to departure time so.

A little bit more difficult to predict.

But we expect it to have another great quarter.

And really as long as the global fleet a wide bodies is not plan like it normally is industrywide.

We think cargo is going to be pretty strong in terms of the yield production, which it is and our ability to do cargo only charters, but again big thanks to our team and again really this is one of the advantages of our hub assistant because cargo wants to go from our.

Our gateways to around the world and so we can easily take advantage of that and we did so expect more of that in the third quarter, whether it's at the levels of to Q.

I think it's a little bit early to tell but it would definitely will outperform year over year based on what we're seeing here in July already.

From Goldman Sachs, we have catch renal Brian. Please go ahead.

Hey, good morning, everyone. Thanks for the time.

One quick clarification for Jerry Barag.

On the down 45%.

[music].

That is that all in adjusted operating costs are.

Yes.

Yes, that's at all and ex special Yep.

Great.

And so it sounds like maybe too early nailed down for two cost given the uncertainty around demand the outlook, but how should we think about possible sequentially from that.

With that level.

And re queue. If we just assume capacity today's level with August as you're currently expecting.

Im assuming that changes here labor force will be reports to me essentially.

Great.

Or are there other cost buckets that you cut spending temporarily that maybe come back and all that that labor.

Thanks.

Katy actually.

I'm not focused so much on on those cost numbers I am a cash burn I think in terms of cash burn more than anything else, but.

To try to answer your question I would say that with your assumptions I would say that costs are going to be about the same is what we're seeing now.

Basically that decline is flat going to the fourth quarter.

The two things I've mentioned by the way about that fourth quarter on cash burn we do have.

In addition to our normal that amortization.

800 million dollar maturity in the quarter, so principal payments in the fourth quarter will be higher than for instance, in the third quarter and of course, there wouldn't be some onetime costs.

As we right size the labor force that will also have fourth quarter.

From Deutsche Bank, we have some Mike Linenberg. Please go ahead.

Hey, good morning, everyone. Just two quick ones here, Jerry the 15.2 billion liquidity as of July 20th does that include the last PSP installment I think thats like 500 million or so is that in that number now no that typically would come at the end of them on.

Okay, Great and then just.

Great and then just my second question and this is probably to Andrew when you look at some of the I added data they talk about tickets purchase within three days I think for the month of May It was over 40% a year ago is probably closer to like 15% to 18% or you guys seeing numbers that are similar at least maybe in may or June.

And our those numbers starting to normalize for today.

Hi, close and then I'm sure that's obviously, having some impact on your ability to plan.

Can you provide some color. Thank you.

Yes, Mike I would say forecasting is.

A little bit more challenge in these days than than normal.

We definitely saw very high closed end demand.

In May and particular in early June.

This concludes nice to see.

Got the load factors in revenue moving into right direction, I will say that tapered off a bit.

As the quarantine hit.

In New York City, and then Chicago and elsewhere and border got even more restrictive.

So.

I don't know where it is on the on the realm and normalcy, but it was very high in May and late or early early June it's lower now.

That these events that happened and once once things start to get back on the road to recovery I do expect that the booking curve will have moved closer end.

All that to say, it's really difficult to.

Predict revenue at this point and get the capacity equation.

Optimized like we'd like to but I think are doing a better and better added at as we go forward.

But that's kind of where we are so that is what we're seeing what I've told you and I think thats consistent although in recent weeks Thats changed.

It from Barclays. We have miscue whiskey. Please go ahead.

Hi, Thanks for taking my question just wanted to come back to the fleet real quickly.

Appreciate the flexibility on making decision, but they're point in time.

You can you will need to make a decision or no essentially how long can you push off differing kind of making decision on delaying or retiring aircraft type.

Maybe maybe I'll start and Jerry can can add on but you know it's difficult to predict the virus path. We've put a lot of aircraft into some type of storage, whether it be temporary long term storage or short term storage.

And we are moving aircraft in an outage storage based on maintenance cycle and engine time, and all kinds of things, though when we went into this.

We didnt have a plan to necessarily retire any fleet side.

And we're going to hesitate to make final decisions on that until we kind of better understand.

The lenten duration and of the of the situation to be honest so.

There are token number are very very old said lets Evans that had creditworthy engines on him.

Those aircraft have definitely been permanently retired because they were they are part of our retirement plan, but we are definitely trying to keep our powder dry on.

On the rest deplete until you have better visibility of what's going on but more importantly, we're using that fleet really effectively with Brean time for both airframe and engine.

To make sure that we do what's right for cash burn and long term requirements. So I hesitate to make a decision today to retire fleets.

And we just don't need to so Thats my perspective, where we are today and Jerry do you want add anything to that.

Yes, I mean, just add a couple of things one even the craft powered seven five sevens, which if you look at what our original expectation was on their retirement is probable.

Robert Lee likely that they're not going to come back by.

Yes, even those aircraft would be available if there was a rapid recovery just our expectations are.

Those are the first the first ago.

And just in terms the amount of time, we have plenty of time measured in years.

Aircraft are being care or properly store and.

Can be pulled out of the desert.

When and if we need them.

Okay. Great. Thanks. That's helpful. Just another quick question globs, probably a little early to be talking about international traffic too much but.

Maybe you could quickly touch on kind of the conversations you're having with some of your international cares. If there is concern concerted effort to be disciplined on capacity eventually or what that could look like when demand does return.

Well, we're definitely not having that conversation because it would be illegal.

But when we have been talking to people about is ways too.

Yes people flying again increased demand then it back yesterday, United Airlines was was proud to sign along with.

Tons I see at American Airlines.

A letter that went to governments on both sides of the Atlantic asking that they consider.

Allowing people to begin traveling back and forth between Europe.

And the U.S.

If they get a negative cobot task as a way to start reopening borders and way to safely.

Reengaging in travel so.

Our focus as we've talked international has been about how to.

Get consumers flying again.

Thank you and we will now take questions from the media once you get a few other question. Please press star one on your telephone keypad.

Please hold for a moment, while we a simpler will be just to book.

And from Bloomberg, we have Justin Bachman. Please go ahead.

Hi, Thanks for the time today.

This question is for Scott Scott I wanted to follow up.

On your previous comments about the revenue recovery of about 50% and then a plateau ahead of any virus vaccine.

What's sort of timeframe do you think that would be does that does that anticipate going into middle or late next year for that for that level.

Look no.

Im not an expert on went up by by vaccine is going to be available widely distributed.

But I've been reading a lot about it.

It seems pretty clear it's going to also require multiple back the.

Well, we're talking about a vaccine it needs to be a vaccine that Ben.

Tested found to be effective manufactured distributed given to a wide percentage of the population.

So.

I think thats probably longer than what is in some of the media hub I certainly hope it sooner, but well let you go to other experts defined.

It is at United, though where at least.

Planning as a scenario.

That it takes until.

Late next year before that really happen.

And we hope it's better than that.

Okay. Thank you.

From writers, we have Tracy Rozycki. Please go ahead.

Hi, good morning.

Ask about that.

Did that.

Thank you another.

Yes.

Right.

Program.

Has happened.

Have you received any feedback from maybe central government.

And how do you see.

And that's not salary checks and evolving in the coming online.

Brett you want to say about anything that we know what we've seen so far.

Or heard if we have.

Hi, this graph are yet to date.