Q3 2020 United Airlines Holdings Inc Earnings Call

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Following the initial remarks from management, we will open the lines for questions at that time. If you have a question. Please press star followed by one you've touched on this call.

This call is being recorded and is copyrighted. Please note that no portion of the call may be recorded transcribed or rebroadcast without the company's permission. Your participation implies your consent to our recording of this call. If you do not agree with these terms simply drop off the line.

I will now turn the presentation over to your host for today's call Christina Munoz Director of Investor Relations you may begin.

Thanks, Ryan and good morning, everyone.

Good morning, everyone and thanks for clarifying.

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Yesterday, we issued our earnings release, which is available on our website.

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

All forward looking statements are based on information currently available to the company a number of factors could cause actual results to differ materially from our current expectations. Please.

For your earnings release form 10-Q, and other reports about that.

Well thanks.

For a more thorough description of these factors.

During the course of our call we will discuss several non-GAAP financial measures for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. Please refer to the tables at the end of our earnings release.

Joining us on the call today to discuss our results and outlook, our Chief Executive Officer, Scott Kirby President, Brad Our executive Vice President and Chief Commercial Officer.

And executive Vice President and Chief Financial Officer, Gary Loveman. In addition, we have other members of the executive team on the line available to assist with today and now I'd like to turn the call over to our CEO Scott for me.

Thank you Christina good morning, and thank you all for joining us today.

I want to start by saying, how proud I am of the entire United States coal.

Colby continues to challenge, our industry and United with a truly unprecedented crisis.

But we've responded better than anyone in the world and in ways I couldn't have even though Matt.

Our team has been focused on the health and safety of both our employees and our customers remaining flexible with changes to our network and continuing to provide carry service to our customers, which resulted in the highest net promoter scores in our history we've had.

We've had to be innovative creative and very flexible and our team has truly delivered I want to sincerely. Thank all of our employees made the difficult decision to leave United We one of our voluntary separation program and those have reduced their hours to align our staffing with demand in spite of that on October onest admin today as the CEO because.

Right all the incredible work and contributions of our employees, we still need the borough more than 13000 feet.

Along with the entire United leaders.

I remain focused as our number one goal make sure United the strongest most innovative customer focused airline as we come out of this crisis because that's the way to ensure we can welcome all of our team members that.

I also want to recognize and thank our union partner, many of whom stepped up to work or creative deals to get us through the correct.

Reduced the number of impacted employees, where we could and importantly that the airline up for a strong rebound im proud.

I'm proud of the partnership we have with our Union and believe this is a real differentiator for United as we look to the future.

Beginning of the crisis.

The hallmarks of United response has been to maintain an objective in a realistic assessment of the viruses impact on our industry and the plan Accordingly in other words, United Airlines Hope has never been our strategy.

That the best collection of airline professionals in the business have confronted the crisis head on and that approach has enabled an industry, leading act, including leading aren't they.

Mostly aligning capacity with demand cutting costs, and reducing cash burn using innovative approaches to raise over $22 billion in capital pushing it.

Pushing ahead with mystic commercial initiatives that are the cargo operation New route announcements that being the first airline to eliminate change fees of domestic ticket.

Adding industry first digital capabilities like search by mouth and travel destination guidance.

And entering into an industry, leading deal with our pilot.

Back in March we were focused on the three pillars are critical to our ability to survive the correct.

One razen maintain liquidity to reduce cash burn and three variabilize our cost structure on the first point I believe United them more creative than any airline in the world raising over $22 billion on the second point, despite a larger business travel coastal gateway and international exposure on any.

Apple's cash burn basis, we believe United has the lowest cash burn throughout the crisis. So far among network peers, and we expect that will be the first network airlines to return to positive cash flow when the demand environment recovers and finally, we've made huge strides in variabilizing, our cost structure by reaching a landmark deal.

With our pilot in a variety of voluntary programs with our union partner, all of which positions United to bounce back strongly and on short notice.

Having executed on our initial three pillars are focused can and has now shifted squarely what the recovery will look like.

As difficult as the crisis has been have United we've done what we get through the initial phase that will get us to the other spots as Churchill said. This is the end of the beginning.

We were hoping we'd be wrong about the severity of the crime that our back Bay objective approach equipped us to be more realistic and nimble in our response to the virus, we'll stay flexible but increasingly the light at the end of the tunnel is now visible.

The long term and it will have twist and turn we will begin to move back towards normal with what health experts are telling us is a widely available vaccine around the end of next year given.

Given all the team has accomplished in this Craig we're now able to turn to page away from just surviving this squarely focused attention on preparing for the rebound.

The culture that served as well getting through the crowd and leading on financial innovation customer enhancements safety initiatives commercial action and Union partnership is the same culture that we expect will lead to United being the global leader Aviation. When this is over the next.

The next 12 to 15 months are still going to be difficult and the recovery will not be a straight line but.

But we've done what we believe it takes to get through we can see the recovery on the horizon and our attention can now be firmly focus there I want to thank all the people of unite those working fulltime those on voluntary program our pilot ratified a deal where they all agreed to work fewer hours to avoid furloughed all pilots in their seat and possess.

And for a rebound.

And those that were sadly and voluntarily further for you I say that all of that that are still under United are focused.

Our focus on the recovery and has the leader this airline I have no higher priority than bring you back to work now I'd like to turn it over to Greg.

Thanks, Scott, Let me Echo your comments on how proud I am of the United team for their remarkable perseverance through this crisis in the third quarter more than 40000 team members participated in early separation programs voluntary unpaid leave programs for reduced work schedules.

Including about 9000 employees, who took an early retirement package separation package for extended leaves of absence, which directly reduced the number of involuntary furloughs.

These actions by our employees are some of the most meaningful to our company and we all appreciate those who participated we can.

We continue to make hard decisions in the short term to protect United jobs for the long term and were coming.

And we're committed to bringing all of those furloughed employees back just as soon as the recovery of Laos, while we have begun to see a gradual improvement with demand expected to sequentially increase 10 points in the fourth quarter, we still expect to operate at capacity levels around 55% below 2019.

For the remainder of the year.

Because of this we had to make the difficult decision to furlough 13000 team members. While we had hoped to get this number to zero. It is 65% lower than our original estimates due to the voluntary actions we have taken.

Additionally, we are grateful to Congress and the administration for their support on the Cures Act back in March which was vital to preserving airline jobs. We diligently continue to work in close coordination with our Union partners to get Congress to extend the carriers active role support program is.

This extension would allow us to bring back us team members we had to.

We had to furlough upon expiration of the Cures Act support on September Thirtyth.

We will continue to engage leaders on both parties in Congress and in Ministration urge them to act.

As Scott mentioned we.

We have laid the groundwork that enables us to pivot our focus to what's ahead.

Two significant components of preparing for the recovery, our first working with our labor groups flexibility second staying at the forefront on all health and safety related measures.

Last month, we came to an agreement with our pilots to avoid furloughs until at least summer 2021.

The Alpha leadership and the United Management team worked hard to come to an agreement we are.

We are grateful to the Alpha leadership and our pilots for supporting an agreement to save thousands of pilot jobs.

Importantly, they are shared sacrifice positions, United and our pilots for long term success did.

Additionally, we worked with our phase I am IBT Africa, and unite here labor groups on voluntary programs we.

We appreciate their partnership Chris.

Critically all of these programs will enhance united's ability to bounce back strongly and quickly once there is a widely accepted treatment and or vaccine we have.

We've also been at the forefront of health and safety with our approach to the crisis by working closely with our partners at the Cleveland Clinic and Clorox.

We havent just follow consensus views, but weve used real data science and engineering to guide our safety decisions and implement industry leading innovations.

We've continued to lead by supporting rigorous aircraft testing by DARPA aircraft manufacturers and others to understand the air flow dynamics on aircraft and what that means for the safety of those traveling on board.

Recent CDC announcements point to the importance of airflow and ventilation to prevent or reduce the chance of virus transmission.

Our studies confirm that aircraft or a truly unique environment with hair that is re filter every two to three minutes through hep, a great filters and mix with 50% air from the outside.

We have now also identified another safety step to further increase on board safety and one that to our knowledge only United has taken.

Indeed, we are running auxiliary power units before passengers board and until the cleaning is complete maximize the benefits passengers received from the unique airflow and ventilation environment the entire time.

On the airplane.

Not just when it is moving forward in the air.

United was also among the initial us airlines to announce COVID-19 testing for customers. We are working closely with go help and color to provide on site and pre departure testing that meets the Hawaiian government's requirements, starting today customers traveling to Hawaii from San Francisco opt for the testing.

Will be eligible for exemption from the 14 day stay quarantine.

This is the next step in improving customer confidence in air travel and we hope to expand this to other hubs and destinations we are.

We're especially optimistic about the potential that is testing regimen like this has to restart international travel commerce and trade.

When it comes to cleaning United continues to use electrostatic sprayers before nearly every single flight to ensure the aircraft is clean and safe.

We've also been pioneering the use of robot, but applied and visible non toxic anti microbial shield on every surface. So the interior of the aircraft further enhance the safety of everyone on board.

We are take we are making progress on rightsizing the airline to ensure long term success.

Jerry will discuss in more detail, we have 19 billion of available liquidity.

Runway to make sure that when the recovery begins.

It is in a position of strength.

This is still a tremendous there's still a tremendous amount of uncertainty because.

Because we know it won't be a straight line recovery, but as Scott mentioned.

We follow through on the three key pillars that have ensured our survival.

And we will be the foundation for our success with that.

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

Thanks, Brett.

I want to start off by saying, we fully expect United to let it all objective commercial revenue year over year measurements in the quarter, including TRASM RASM target revenue and royalty revenue among our primary peers.

Please.

For our business is starting to recover and it's recovering quicker than others based on a standard and objective measurements.

Third quarter passenger revenue was down 84% and system capacity was down 70% our topline revenue performance of down 78% was in line with our early expectations.

Capacity for Q3 was planned to be down to 65%. However, when demand trends weakened in late June and July revised capacity to be down 70%.

Even with these lean adjustments to Q3 capacity.

Only one point behind our original revenue outlook in the corner cost capacity in revenue trade off and worked well United.

United Clearly has the most conservative capacity plan and that realistic assessment of the math.

And helped us achieve our cash burn targets in the quarter.

Domestic PRASM in Q3 was down 45%, 65% less capacity.

What is up around the globe, our international client had a difficult quarter.

I will ask them are down, 77% and RASM was down 55%.

We operate in over 3000, all cargo the charter flights in the corner, which contributed to a 50% improvement in our carmina revenue versus last year.

Do you see in this unique pandemic environment that permanent structural advantage for United We are now preparing to transport large quantities of the Kobe 19 vaccine, we always say our shared purpose at United just connect people in the United World, but for the near term will be proud to add delivering vaccines and the pandemic.

Demand at United coastal hubs underperformed during the quarter, while our interior how outperform.

Our coastal hubs normally overindex in business traffic and long haul international traffic. So the results are not unexpected coastal hubs are typically a structural advantage for United and we expect that they will be when business traffic restarts and board has come down and quarantines are limited.

Turning to the fourth quarter.

Total revenue to be down around 67% year over year and passenger revenue to fall by 72% consumer.

Consolidated capacity expected to be down approximately 55%.

Solid improvement versus the third quarter revenue performance.

Our fourth quarter capacity will again be conservative.

We anticipate our early 2020 on capacity to be consistent with our Q4 December levels.

We expect our realistic capacity levels to return a cash positive ahead of our other network competitors.

Demand for our coastal hubs for Q4 is still expected to be weak.

Not waver as recently issued by the essay allow time for demand recover prior to us having to initiate our own schedule from Newark income.

Income from incremental capacity, we do add back in the fourth quarter is expected to be tilted towards our Houston and Denver hub with the goal of getting this back on track to our original network objectives building connectivity from our interior hubs and service to smaller communities.

After these also added and not a point to point routes to Florida, which are experiencing quicker rebound in demand in the short run.

The market for United in the long run incremental first quarter warm weather client will allow us to improve our first quarter relative to results.

In the past United simply was under Investor warm weather destinations in the winter.

While we have to take it well the kind of take a pause on many of our international our plan for 2020, we continue to believe that we're well positioned as a leading global carrier to and from the United States, We're taking actions to support a return to clients.

United supports an increase testing regime in the near term to lower borders and remove quarantined for those that can breeze and negative sentiment test within 72 hours of departure, we hope that by spring 2021 testing will be widely available and governments around the world will adopt consistent measures to reduce.

Our eliminate foreign teams for the test negative comments.

On a path is one such initiative being prototype between New York and London.

And as Weve, Brett mentioned earlier, we're trialing.

Thats right now between San Francisco, Hawaii expect a lot more to come.

Last week, we announced United will be the first just carrying a resume nonstop service to China not only does this make playing easier for our customer and by offering nonstop service.

Lowering our costs by eliminating technical shops, I wanted to thank both alpha and the asset as well as the team here at United that figured out a way to return back to non stop kind of service and be the first just carrying to do it.

Creative solutions can get us back to doing what we do best connecting people and uniting the world profit.

We're also excited to announce the addition of Johannesburg, Ghana and legacy we're a leading global network starting next summer.

International gateways are home to that volume in the leisure demand, but also more importantly business demand Africa.

Africa is an opportunity in our network and this new service revenue represents a good chance just.

Further extend our globally, while diversifying our 2021 capacity plan.

United is the only UN carrier operating nonstop service to India, and we will soon begin to new routes for a total of five flights daily not service on our fourth route Chicago's New Delhi begins in December our fifth route and clearly one of the most anticipated ever will.

We will launch in May 2021, roaming in that mid to high tech hubs of San Francisco and Bangalore.

Many of our existing global routes are supported by partner revenue our ability to capture carbon revenue allows the United to return more passenger service to the network at a quicker pace with higher margins than our primary competitors structural advantage that will add to our quick bounce back.

We said last quarter that demand recovery will not be a straight line and ultimately we expect demand to plateau at about 50% until an effective vaccine as widely distributed we haven't changed revenue.

It is clearly should and capacity plans consistent with this view.

Many of our commercial and customer initiatives have also been suspended as we focus on new priorities like clean plus during the pandemic consistent with Scott said about shifting our focus to recovery and are starting to key projects in the near future in August we made the decision to resume work on the Polaris cabin and premium plus having on our 70.

17.

Our commercial priorities Furnico, and we're improving the customer experience and delivering on the promise and better margins and a smaller margin gap to our competitive peers. Our focus today is a return to profitability as soon as possible, but our long term focus remains on achieving the highest margins of our primary competitors to achieve our goals have point, we must be different.

A few weeks ago, we confirmed our willingness to be different by being the first of the legacy airline to eliminate domestic change be keeping the customer focus will of course be a key component of our plants. Thanks to the entire United team.

With my slides team getting back to normal I see your dedication first hand in these difficult times and have more confident than ever will come out of this period strong and with that I will turn it over to Gerry.

Thanks, Andrew Good morning, everyone for the third quarter of Twentytwenty, We reported a pretax loss of $2.3 billion and an adjusted pretax loss of $3 billion.

As we continue to manage our business through the crisis. We are doing everything we can to mitigate our losses and most importantly to preserve liquidity through the.

Through the efforts of the entire United family, We achieved our target in the third quarter of an average daily cash burn of $21 million plus $4 million of debt and severance payments.

During the quarter, we continued to bolster our liquidity, including closing on our 6.8 billion dollar mileage plus financing.

As well as obtaining committed funding through a $5.2 billion secured loan facility under the care that loan program using international routes and related assets as collateral we thank the United States Treasury Department their financial advisors and attorneys for their support and focus to provide significant liquidity.

To the industry. We are currently working.

We are currently working with us treasury to increase the amount available under the facility by an additional $2.3 billion for a total of up to $7.5 billion and available financing under the facility.

In September we borrowed $520 million under the facility and have been come March of next year to take up to the total amount available to us.

Also in the third quarter, we received $639 million under the original cares Act payroll support program for a total of $5.1 billion received under that program.

Earlier in the crisis, we put together a plan to end the third quarter with at least $18 billion of available liquidity.

We more than met this goal having ended the third quarter with available liquidity of $19.4 billion, which includes undrawn capacity under our revolver and the remaining funds currently available to us under the care that ground, but does not include the incremental $2.3 billion I, just discussed which is subject to final.

Documentation.

In the third quarter, we reduced our total operating expenses, excluding special charges by 48% and eliminated most spending other than what was absolutely needed to operate the airline in addition.

In addition to minimizing operating expenses since the beginning of the crisis, we have remained focused on reducing capital expenditures.

Leaving only those projects that are critical to the business forward provide a quick financial return.

We now expect our Twentytwenty adjusted capital expenditures to be approximately $3.9 billion.

With $2 billion already spent before the crisis.

We reduced capital expenditures by over 60% for the last nine months of the year.

Our current guidance does represent an increase of $200 million as compared to our guidance last quarter.

This increase is essentially driven by our decision to purchase 16, Embraer Eone hundred 75 aircraft that we originally planned to have purchased by one of our regional partners.

Purchasing the aircraft directly we were able to finance the aircraft more efficiently with no additional upfront cash and lower interest rates throughout the term.

As usual most of our capital expenditures this year represent purchases of new aircraft.

One of the ways, we have minimized cash burn is to require that any new aircraft. We acquire both this year and for the foreseeable future will be fully finance.

Since the start of the year, we have raised $1.6 billion in new aircraft financing.

Well there are fewer sources of financing today than existed pre crisis, we have found sufficient funding at reasonable rates.

Most recently in September we entered into an agreement with CBD aviation for lease financing of 12, or Boeing deliveries, including 2787 and 10 737.

1787 was delivered in September the second one will be delivered this month and the seven three sevens are scheduled for delivery in 2021.

We continue to remain flexible with our fleet and don't expect to retire any of our mainline aircraft in the near future. In fact, we have returned nearly 150 mainline and regional aircraft back to service since July reducing the number of aircraft temporarily grounded to about 450.

Looking ahead, we expect our fourth quarter total operating expenses, excluding special charges to be down approximately 42% versus the fourth quarter of 2019.

We also expect average daily cash burn for the fourth quarter to be $15 million to $20 million plus $10 million of severance and debt principal payments.

This will bring us by the end of the year to over $16 billion in available liquidity were close to $19 billion. If we include the addition, or $2.3 billion. We expect to have available under the cares Act loan program.

Throughout the crisis, we believe we have led and will continue to lead our network peers on an apples to apples calculation of cash burn.

We also expect to see the first network carried to return to positive cash flow as.

As air travel demand returns and cash burn decline, our focus shifts from merely surviving to maximizing the long term enterprise value of United Airlines.

In closing, we all recognize that this crisis is lasting longer than any of us expected.

And there remains enormous uncertainty with respect to the demand the pace of demand improvement.

However, due to our aggressive and decisive action since the start of the crisis. The preparations we have made to weather the storm and the sacrifices made by the entire United family I am confident that we are well positioned to spring back quickly as we emerge from the crisis and with that.

And with that I will hand, it over to Kristina to start the QNX.

Thanks, Gary will now take questions now please.

Please limit yourself to one question and if needed one follow up question.

Brandon Please check cages.

Thanks, Christy that was I will begin the question and answer session, which will be conducted electronically if you'd like to ask a question. Please press star followed by one on your telephone keypad, if youd like to be removed from the queue. Please press the pound cellular Heskey you showed a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Once you get it to you.

A question. Please press star one on your telephone keypad.

Please hold for a little bit while we assemble a queue.

And from Cowen we have Helen Becker. Please go ahead.

And thanks very much operator, thanks for the time everybody.

No when I read the press release last night, maybe this is for Scott or Brett.

Your tone changed a little bit and that you were maybe less pessimistic when I heard you speak in the past.

Your mum and I was just kind of wondering if.

Yes, that's right [laughter].

Well, thanks, Helane good to hear your voice.

And.

What I would say is.

United All really going all the way back to the last week in February has been focused on be realistic and objective about this crisis.

We were accused by many of being pessimistic early on.

And I pushed back on that notion because we weren't being pessimistic, we're trying very hard to be realistic.

About the crisis and emotions like pessimism optimism hope fear have no place that you are making decisions that involves the lives of tens of thousands of employees in the future have a great airline.

You just have to be objective and realistic.

And today, what we're expressing is not a ship from test visit the optimism as much as it is an expression of confidence in the future there.

Theres, a great quote that I love and I referenced that earlier, but from within Turkey Hill that.

That he said a 1942 over two years before the end of World War II reset after the African campaign and the Brits one in Africa that this is a this is.

This is not the end, it's not even the beginning of the end. It is perhaps the end of the beginning and I think that is the moment we are at now.

I'd Airlines Weve done what it takes to get through the beginning this is the end of the beginning and my second World War. Two there was a long and painful difficult road and a lot of sacrifice Ed. The same is true for us we're now.

We're not getting through this until there is a widely available vaccine, which is probably around the end of next year. So we've got 12 to 15 months.

Pay sacrificing difficulty ahead, but we have done what it takes and the initial phases to have confidence.

Only about confidence on getting through the crisis in to the other side.

And I think we'll look back at today.

At this moment in time we.

We see it today, we were the first to call that.

How severe this would be I think maybe were amongst the first to call. The ultimate recovery, but we'll look back at this is the turning point the light at the end of the tunnel the long way away, but this is the turning point, it's not only what we see in the core business. There are two other coincidental.

Announcements today that I think are really significant perhaps not fully appreciated yet, but really significant one is that.

The testing, that's beginning to Hawaii, United under Brett and Toby leadership have really driven that effort and we United again lot of first.

Lot of first in the pandemic that has been the first was the first to get that done I admit it pushing to view to do more of that to open up international borders and that is the only way there are things that we can do safely.

Even when the pandemic is still going.

But anyway.

Including flying on airplanes, but.

We're going to need testing to make that happen and I think that will expand it you'll see that expand we will look back at the day. It's starting to testing is an important milestone and the other thing is the study that we've known about for months that it.

That has come out that we worked on with United worked on with DARPA and the department of defense.

Which gives more evidence about how truly say it is to be on airplanes, we recognize that even if you're completely say on an airplane you have to have a reason to go.

Disneyland needs to be opened or your client need to be accepting visitors in the office before you can go that's why we think demand is it going to get back.

Well get above 50% until there is a widely available vaccine, but these are two additional important milestones that simply give us confidence.

Does it mean that the next several months aren't going to be difficult because they are but we.

But we have confident.

So if you are hearing the tone change it has and the changes the way. We work. We're now focused on instead of just minimizing tomorrow's cash burn to survive the crisis, but we're focused on even spending money, where we need to invest in testing.

As an example, or Andrew mentioned getting the Polaris model.

Backing going so that were prepared for the recovery to welcome our customers back in 2022, which is where we think the recovery will begin in earnest, but thanks for the question in light and by the way look more to testing the borders.

The two Anda and your husband can get your your trip back to South America, United rescheduled.

Yes. Thank you very much Scott if you could just get that testing to New York I would be on that.

Yes.

Thanks Troy.

Yep.

From Jpmorgan, we have Jamie Baker. Please go ahead.

Hey, Good morning, Scott in your interview. This morning, you talked about the potential return to JFK. If I remember when you initially discussed United to exit there. It was mostly because of the impact on corporate accounts as opposed to any.

Massive share that United walked away from it is that the way to think about your possible return.

A tactical presence in corporate sensitive channels or should we be thinking something more like United Presidents in the Ninety's when there was an actual.

I lost you there I guess.

He said there was an actual hub.

Okay, Yes, certainly on our initial return I think would be coming back into the transcon and.

And perhaps service to our hubs and you're right. It's the ability to service corporate demand.

And we have been we I did say that it seemed.

The MBC, we've been working hard I guess, it hasn't really been profit, but we have been working very very hard.

To to use the pandemic as a way to get that.

To JFK.

And and I have.

Reasonable confidence that we'll be successful the good news is all the work that's happened at JFK in the last few years, neither is actually more pork that not many places in the U.S., where there is additional airport capacity, but there.

It should be more airport capacity, and we will be a new entrant there.

So I look forward to getting back and and competing aggressively and for our customers we want to be able to play in those transcom market we have.

We have our fingers crossed and we're more than that we are working hard.

To restore that service for you.

Okay. That's helpful. Second question also pertaining to the interview this morning.

And I apologize about my call waiting firing when I was asking that was actually the New York quarantine tracing.

Finally, let's call them back. So so you talk you talked about cash burn not being the right metric to look at so I'm reminded of a siem and Mad men. If you don't like the conversation change it so.

So how should that conversation change if cash burn is in the primary.

Metric of focus going forward.

Well I guess I'll start and then I'll look to Jerry.

To pile on the cash burn.

The cash burn is a metric that we use we thought was the most important metric at the start of dependent.

A lot of businesses, where Bible was at stake it was the most important metric not just in most airlines but.

But thats not the issue and we have enough liquidity to get through the crisis.

We've done what it takes so that's no longer the issue and and cash burn is one of those metrics that everyone measures when everyone measures differently.

Two.

We for example, Andrew I mean, this is a huge number but we're we're starting Polaris might begin that shows up in cash for it is the right decision to make for the planning for our customers for our shareholders for our employees for the long term, but if you're just focused on minimizing today's cash burn you wind up with a myopic short.

Explore or both and I think we're getting back to focusing on traditional airline metrics RASM RASM.

Earnings per share margin I think 2022 before those things really become meaningful.

Unfortunately, but we are getting to a world, where we're going to be focused on those and the one thing that I think will be different however.

And probably that the top of that list of focus is something about paying down debt not sure.

Not sure yet what that is but getting our absolute debt down.

From where it will be at the end of the pandemic is going to be priority number one Jerry you want to add to that.

Yes, I'll just reiterate Jamie we do feel bad for all of you having to deal with all of us having different definition of cash burn.

So Scott said ultimately we get back to the more traditional metrics.

But for cash its about liquidity so focusing on.

Where we are at the end of the year on liquidity.

The balance sheet those become more important than trying to figure out each of the components of cash flow in a quarter I'm trying to do that.

Segment that you all have to do because we all kind of describe it a little bit differently.

Okay. That's very helpful. Thank you developed about the take care.

From Wolfe Research, we have Hunter Kate Please go ahead.

Hey, good morning, everybody. Thank you.

If your capacity is going to be down 55% in the fourth quarter, and you're seeing demands not going to get better than down 50% until the end of next year does that mean that you're done adding capacity back for the next few quarters.

Hi, Hunter, it's Andrew.

Clearly looking at it very carefully we will follow the demand trends, but as I said in my opening we expect that our Q1 capacity is going to be very consistent with our Q4.

Capacity, particularly the engine part of the Q4 capacity so it could very well be the case.

Okay. Thanks, Andrew and then.

Looking at your balance sheet of about $10 billion of obligations on they are tied to the air traffic liability and deferred revenue from the loyalty program.

How do we think about that working capital headwind burning down over the next 29 to 12 months as you guys add capacity back and then just broadly want to make that comment about working capital over the next maybe 18 to 24 months Jerry I would really appreciate some color there. Thank you.

Andrew do you want to start on the clear now muted okay. How can you hear me now.

Well, let me start Andrew can can pile on.

Yes, we have factored in when we're looking at our liquidity changing over the.

Over the next year.

Where we think 80 hour.

Is headed it's flattening out only declined one.

1%.

Yeah, we would yes. This is not obviously a normal year, where you would see significant decline in the fourth quarter, but just not going to happen bye.

We are taking into account.

Hcl as we kind of model next year and revenue if they have anything else to say about it.

Sorry.

Thanks Jerry.

As you just mentioned we would normally expenses that are hcl in the quarter would have gone down by 10 or 11% in fact, it is flattish and we normally expect Q4 start.

Start going down a little bit and in fact, we expect it to be flattish.

And is it really I think a sign that we are seeing overall recovery and in short demand patterns are not relevant to that and we're pleased by the progress. We've seen in bookings are pleased by what we see in terms of the Hcl when it normally would otherwise be declining.

Thank you.

From Raymond James Please Savi Syth. Please go ahead.

Hey, good morning.

Yes.

Hi, This is the way the pilot agreement is structured and kind of the fact that you haven't made any major fleet retirement division.

Is it safe to assume that you expect to kind of a return to 2019 levels at some point in 2022 in things that recovery.

Also some of the adjustments made that you've made so far on the cost structure I'm kind of curious what level of minimum capacity, we need to reach to achieve like 2019 level unit costs.

Well I'll start off with the fleet, then I'll hand, it over to Jerry I think we just we don't know we're being flexible we would sure like 22 to be equal to 19, I think thats probably unlikely.

We park a lot of these aircraft in the desert they are ready to fly when we need them to fly.

And we will maintain that agility.

You saw that in Q3, where we thought we were going to be down 1% and then demand weekends. We immediately change is planned to be down 70%. So we'll maintain that agility going forward and.

At least there if we need it but only if we need it Jerry.

Yes, so savi as you know CASM is directly really related to capacity.

And you know, we'll start looking at that traditional metric of CASM X, which is the appropriate way for us to measure.

Unit costs.

And we feel comfortable that we can get.

The CASM ex around flat to 2019 as capacity gets back 2019 level.

So.

Focused on it and we're comfortable we can get there.

And related to that a little bit like you mentioned that kind of demand. It is six victory power by 10 percentage points.

What level of demand is there currently like between leisure and business I'm wondering if that comes more from businesses that comes lots on from leisure.

So I would say right now is I expect that to be more leisure oriented in the fourth quarter and in fact, we've tilted our capacity to reflect that so in fact today is a step up in our Hawaii capacity coordinated obviously to the testing that we have.

How about in San Francisco, and so were expecting in Hawaii to be a part of the increased revenue as we go through the fourth quarter business demand is still down a large percentage it depends on how you measure it but anywhere from 85% to 90%.

Alan is kind of the trajectory that I would tell you is that it has improved a little bit and it has improved more with smaller corporations and larger corporations at this point.

That's helpful. Thank you.

From vertical research, we have Darryl Genovesi. Please go ahead.

Hi, good morning, everybody. Thanks for the time.

Starter or Andrew I appreciate JFK tidbit, but.

You know in broader strokes, perhaps when you think about what the network looks like.

Post recovery.

How is it different from today I mean is it is it more leisure oriented or is it more domestic oriented or just how it has your thought process evolved.

Around around the overall network structure.

Good good question Daryl.

Hi, I'm not going to be able to I think accurately predict today Scott said, we're still early in this process.

Clearly, we're going to be agile in the short to medium term and move capacity around to rich.

To reflect where we're seeing demand today and clearly we're seeing more leisure oriented demand and that reflects how we tilted the capacity going in Q4 with more sunshine capacity more Caribbean capacity more Hawaii capacity, but we fully expect that business travel.

It's going to get back on the road someday when the vaccine is out there and widely distributed we are big believers in that and so.

And so we think this is traffic will rebound is clearly not going to bounce back to 100% on day, one and our network will be different in 2021, and 2022 than what we'd rather wise and plan, but there will be a day in the future and hopefully in the near future where business traffic is back to the new normal.

And clearly the types of trips being taken will be different and as I've said before.

This new remote work environment, I think actually could be.

Stimulus to digital traffic and that workers.

Workers need to return to their corporate office, a few times a month.

To do the work and so just trying to maybe different but we think it will return.

Okay, and then maybe one for Gerry your your your restructuring then.

It's a little lower than what some others have announced can you.

Can you just give us a sense of how you think about sizing the voluntary programs and is there like a particular IR or you're chasing or a particular payback period and then.

And then and then also if you could just comment I think this most recent deal that you did with the pilots gave you some incremental flexibility to do.

Additional early outs.

So do you anticipate another voluntary separation program. This calendar year. So I guess two questions. There. One is just on the framework and then the second is just on.

Whether that's another one coming.

Yeah, I'm not sure that second question is.

For me all I can tell you is that.

That we are doing everything we can.

Overall, variabilize, our cost and to be able to be flexible.

In really every part of the cost structure.

Okay.

Thanks.

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

Yeah. Thanks, good morning.

Scott when you think about the relative importance or unimportance of corporate traffic to United's earnings power pre co, but how important was that what does that suggest for.

It's post co that earnings power. If there is some structural impairment and feel free to speculate on what you think that impairment maybe.

Well I'll, let Andrew.

Answer as well, but I'll start with my personal opinion.

Which is which I recognize not buckets.

We are as you'd be are social creatures and I think that this demand is going to come back I don't think it's kinda back immediately.

I think demand sort of starts to recover and earn it end of next year beginning it at 43 too busy.

Visit demand being back normally I would guess fleet fleet.

But I think it will come back to normal I've been fond of saying the first time someone loses a sale to a competitor who showed up in person is the last time, they try to make a sales call on that.

There's a great commercial from United that over 30 years old you can go Google but.

But it ends with I'm going to see that old friend that.

That was true 30 years ago that will be true in the future because that is what human nature is.

And I.

Fitness travels incredibly important.

And it was our bread and butter before I think it will be our bread and butter in the future it's going to be a few years before it goes back in in earnest.

But one of the things that I think is great. When we talk about United being the leader in global Aviation.

We were headed in that direction before this all started I think we're going to make a decade worth of progress during the dependent and when this emerge when we emerge.

Particularly given what our seven hubs given what our pilots agreed to do but keeping everyone in their seat given.

Giving given everything that we're doing to invest in the customer experience like.

Eliminating change be.

Everything that we're doing with our loyalty program, we're going to emerge as the world number one business South Carolina I guess.

2024 before it all comes back but in that World too I think we will have picked up share frankly its a.

Is it any you'd have to come back for 100%, let the really successful for United.

I will caveat. It every day, we're staying flexible as Andrew said, we've got airplanes that are parked in the desert and we recognize that that's not a certainty what I just described.

If it's wrong.

Yes.

We will go there but.

Thats My guess for Illinois.

Well, it's going to happen that that business travel demand is going to recover.

90 to disproportionately going to win in that in by Andrew.

I think the only thing I'd add to that Scott is that maybe going back to our hubs.

Our hubs or the home to the majority of the business is traffic the global business travel to and from the United States.

Finally, New York, Washington, DC, San Francisco, Los Angeles, and Chicago.

And even some attention.

And those markets.

The business traffic, they're going to our markets are going to bounce back quicker and stronger in our opinion.

Allow us to get back to fly in faster than others. So.

So that's what we're thinking about as we as we go down the road. The other thing I'll say is that the competitive environment is not the same.

I look around the world and the number 747 and Athree 80 that had been grounded is just.

Very very large obviously and so the competitive dynamics in the global Arena for the next few years are simply going to be different. So there is a lot of calculations move in demand is moving.

And our move in.

And how flight survival based on what gateways that apart and will be different in the upcoming couple of years than they were prior to this prices.

And we're prepared to be agile and work around all those things to come out quicker and stronger.

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

Hey, good morning.

Open to your suggestions on if there is a good way to do this but but I was wondering if you could provide some visibility.

Into your cash Opex savings.

Obviously quarter to quarter, it's not easy to do because capacity is moving around and hopefully recovering but can you quantify cash opex savings that are hitting here in the fourth quarter.

And if the fourth quarter is sort of not the best time frame when do you expect to fully hit your stride on that front.

Yeah, I'll take that so.

I would say the fourth quarter is not the best quarter for a number of reasons.

So next year first quarter and through the year will be.

The best way to look at it. So we could give you better color in January the problem with the fourth quarter is there is a lot of noise. There is the you know unfortunately, the severance noise.

There's also noise associated with things that we did in the second and third quarter. For example, when we started this.

This crisis the very first thing we did was okay.

Let's look at cash payments and stock what we can defer or we can and we had terrific support from our suppliers and our vendors. So okay. They can wait a little while but we didnt.

We didn't ask for particularly long extensions, but is probably too.

250 ish million dollars of payments in the fourth quarter that are so.

Our associated with.

Obligations that were deferred from the second and third quarter.

Your maintenance expenses. Another good one you know what I think most everybody in the industry would have done through this.

Through the spring and summer is used up maintenance time on aircraft and light.

In light aircraft than kind of rest for a while before actually putting them into checks that process has to start at some point and for US that process has started in the fourth quarter.

To get ready just for next year, and so we'll see maintenance expense up in the fourth quarter versus the third quarter, which is why next year is going to be better year.

To kind of look at that.

That's super helpful. Jerry and then if I could for my follow up.

Scott can you just give us some perspective on on testing as.

As a solution you brought it up in agree you have had some leadership there, but what are the gating factors, what really needs to happen what are the regulatory bodies, we should be watching is it a function of.

No. We don't have PCR test available on a fast enough basis today or is it just a lack of movement on the part of regulatory bodies. Thanks for taking the questions.

Well I think it's a really important question, but rather than me answer it I'm going to let the real expert teams that have driving to work the breadth and the.

Tobey.

Got it.

Thanks, Scott Dwayne I'll take the first shot and then.

Well, we can step in and offer perspective, as well I think one of the things you have to keep in mind is that.

We're at a point in time, where we have cities we have states we have different.

International regulatory bodies or.

Trying to regulate different standards and different tests.

To open up the markets. So what we're doing in particular with Hawaii and San Francisco is we are trying to lay down a blueprint that we think is replicable in other areas and that will help us.

Open up new markets. So what we expect is that it will demonstrate that we can do this in an official kind of very safe way one of the issues that we do have is it different tests are coming on the market and we have varying levels of availability.

We're working all of those angles to ensure that as we roll out these programs and we hope to open new markets and convince new regulatory.

Regimes.

Around the world to adopt something that is.

Fairly uniform that will be.

That will be able to do that in a very effective way.

I don't know if you want to add anything to that.

No I think you said it perfectly.

Yes.

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

Yes, two questions here just back to the testing Andrew you mentioned that Hawaii capacity is going to be increased in anticipation of increased volume, but I realize it's early what are you seeing with respect to bookings as as following the announcement of the test to Hawaii and are you seeing actually.

Greater pickup in demand in the premium cabin, just given where the price point is that the cash relative to the fair.

Thanks, Mike what I'd tell you is we.

We had planned Hawaii down 54% in Q3, a year over year lead nurturing, sorry, Q3 down 85% year over year in Q4 to be down 54%. It will now be 9% of our domestic Asian Oems versus 4%. So we do anticipate and we have seen the demand recovery to Hawaii.

Ultimately our report out on that in January and let you know how it exactly when but.

But today is our first day of our bigger schedule.

And we have very nice load factors outbound and we.

And we expect it to be a strong holiday season as well. So we're bullish that Hawaii with the testing environment and the quarantine situation with that lifted within with a good test is well on its way and we're excited to have grown.

Kroner capacity and we think we put in the right place at the right time, but again, we will measure our success in January and let you know how we did great.

Great and then just the second one and maybe you are the right person to answer this as well you know obviously kudos to the team on to not have any pilots furloughs and yet.

And yet.

I still see that you. Unfortunately do have to remove six seats from the 76 Seaters, there's been additional sort of language around scope or tightening of scope can you just elaborate on what some of those other elements of the scope are thank you.

Sure, we really have a groundbreaking breaking new agreement when our pilots that allows us to variabilize, our cost structure and bounce back when they are ready to bounce back.

They definitely had some concerns about how.

I would put all together and we work selectively and collaboratively to come up with something that works for both of US the second change.

Change that you are talking about in addition to the 76 Seaters become 70 has related to the ratio of how many block hours, we can fly on our days versus mainline and we agreed to temporarily restrained that number versus what is normally allowed we don't think thats going to happen.

Any impact on our schedules later this year or next year based on the recovery that we have seen right now so.

And we were able to do deep vine.

Some level of comfort to our pilots in overall agreement that we think is a big win for United Airlines and quite unique.

For our business.

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

Hey, great. Thank you everyone.

I just have a quick follow up on on the airport testing rapid testing questions that have been asked on.

And that's really what are your thoughts on who should fund the cost of these testing programs is that something that should be funded by the government by by you or should it be funded by passengers in the form of higher ticket costs.

[music].

Right you take that.

Sure sure.

Look at at at present.

Our customers are covering the cost.

And what what we're going to work really hard to do is to drive down the cost of those tests as we as we move to additional markets and if you look at the different types of tests that are available now you have more traditional tests, which are.

More expensive, but now we have increasingly rapid tests available and those tests are quite reasonable and costs.

And down in $15 range. So we.

We think as more tests become available.

And we're able to provide more options and different markets.

That will get to a point, where this is a cost.

Not adamant overall to travel for our customers.

And we think that it's a cost that can easily at this point in time be absorbed so that.

That is that's that's our perspective at the moment.

Got it. Thank you for that and then just a quick follow up maybe for Jerry on on cost I. Appreciate that the next couple of quarters or are certainly going to be noisy there's going to be a lot of moving pieces, but just longer term I mean, how should we think about that the cost trajectory as you ramp back up in the next few years, what's the stickiness of the costs that you're taking out today.

Structural and just how should the the expense lines recover as capacity and revenue recovers and thanks for the time.

Sure I think as I mentioned as we shift our focus back to more traditional metrics like CASM ex.

We'll use we'll get back to.

Where we left off which was taking 2019 is our baseline.

And managing costs the way, we had pre crisis, which is.

To do everything we can to keep CASM.

CASM ex.

You know flat or better over time.

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

Hi, good morning, everyone. Thanks, so much for the time.

So maybe just one on demand and the combination of all the talk on testing as well. So it seems like from most the pandemic booking trends are very correlated with trends in cases, where at least headlines on cases that.

That's still true today or his spreading the word on cleaning standards more testing have just started to break down that relationship and really just asking in the context of cases globally ticking back up here. Thanks.

Hi, guys arent a standard it's a really good question and I think you've got on something that there is a.

Different trend line now back in June.

When we saw the spacing cases, we saw a really address and negative impact on our bookings that impact in July and August.

But I would say over the last eight weeks or so we didn't mess typically have seen just steady progress even.

Even as headlines sound good our headline sound bad depending on what you read in when you read it I think.

I think domestically, we would describe we've seen steady progress against.

Again focused on leisure demand not on business demand.

The steady progress that divorce of the headlines which is I think from our business perspective nice to see.

Understood and then maybe just one more on business travel. So if this is capital it's going to take longer to recover then leisure or depending if we're talking to potentially not fully recovered to pre cobot levels, what changes to the cost structure or pricing product offering would deny it consider making.

That that change the revenue mix, maybe over the short term or perhaps over the longer term. If it really does end up that we had a structural shift down and just the amount of business travelers traveling in the future.

Any thoughts there would be helpful. Thank you.

I guess I'll start doing what I'd say is we don't think thats going to happen. So.

We actually think the up we have been thinking about it but I think thats probably something that.

Yeah do ourselves at that point in time for.

For an outcome that we don't think is the base case scenario and many of them.

Thank you and we will now take questions from the media as a reminder, if you had a question. Please tell star one does your telephone keypad.

[noise] once again, please hold for a little bit while if we double our Q.

From Bloomberg we have just did back then please go ahead.

Yes, hi, thanks for the time today.

Getting getting back sort of to catch it up Brian's question about the divorce between the headlines and booking trends.

I'm wondering on the corporate side, what are you hearing from from those accounts as far as what they are gating factors are for when some of the larger corporations will get their people back on the road. Thank you.

Hi, Justin it's Andrew and we've actually MSR.

I've asked our sales folks to get back on the road and I was recently in New York talking to some of our clients as well as we try to get back to this new normal and what we hear is one that the policies of no travel have been relaxed. So there is the ability to travel.

Sometimes a little bit more cumbersome than it was in the past in terms of the rules you need to do it but the no travel policy have mostly been eliminated which was good to see.

And then second on traveler sentiment.

That's we track our.

Our people concerned about flying and we've seen material progress in that number in fact, the number in our last reading was.

The best we've seen since really the crisis started in terms of concern about traveling so really great progress on that front, but as Scott said earlier, there needs to be a reason to travel people.

People need to be in their offices are around and that really hasn't happened yet so were anxiously and we're watching for example, the occupancy rate of New York City skyscrapers.

And when that number starts to go up I think.

I think you're going to see business travel start to rebound to there is a reason to travel right now the reason to travel or just not sufficient enough to get business traffic started the once it does start I think it is going to happen in a week.

In a reasonable time period as Scott said earlier.

And.

Travel it really can access and.

Makes a difference on some of those key deals being done around the world and so we fully expected to come back but most important part is the travel policies have now been relaxed so people can travel.

Kick in from Wall Street Journal, we have Ellis insider. Please go ahead.

[noise] question.

Hi.

Allison.

Ellis of Unfortunately your line is dedicated we're not going to be able to take your question. We'll have you start I wanted to get if you're able to hang up adult day care, we're not able to get a quick connection with you. Unfortunately.

I will take from CNBC Leslie Joseph Please go ahead.

Hi ratings, particularly.

[laughter] rated business model.

[laughter] Forever DC.

Yes.

Great and then maybe a little bit it's a little bit.

Yeah.

Hi, Chris.

[noise] extended period of time.

Okay.

Andrew or did you get that.

Hi, Leslie Unfortunately, I couldn't hear something about business models, but I really otherwise could not hear the question there is.

Question is his business and international going to change well our business model has changed as a result.

Okay, well look we started the saying we'd be we'd be agile.

Also added that New York, Washington, San Francisco Chicago. These are the origin points and destination points for a majority of business travel to and from the United States. They also happen to be our hub. So.

So we're quite confident.

That when business traffic rebounds, and whenever she conforming does rebound quicker in our hubs.

And the financial viability of our clients simply better than that of our competitors and in our opinion and in fact that was true recoded.

Well so.

So this is something we're not overly worried about we think we think we're in a very good structural plates.

And we'll react to whatever we see in the world and will be agile, so thats, what we need to do but we.

But we think we're in actually did place in terms of where our hubs are our fleet flexibility and.

How we're evolving the network we have made a number of changes to the network.

Reflecting a diversifying of capacity and really risk.

And for example, we've announced Donna Legos Johannesburg, Bangalore.

As we put our wide body back to use they wont exactly be going to where they were going pre crisis pre coated until they go into a new set of destination with a new distribution to capacity that we think reflects a new world. Obviously, we'll continue to adjusted as necessary.

And from a business insider, we have David Please go ahead.

Good morning, everyone. Thanks for taking the question.

Just curious.

We're talking about granite fleet or contemplated before.

Contemplated before.

Some pretty dramatic seems like it's about to be recertified. I was wondering if you are planning to bring those back into service right away or wait until demand picks up.

We don't know the exact date will be recertified on at this point, we don't have them in the schedule this year.

So likely sometime next year based on based on the schedule here from the Epay unknown.

Thank you.

At this point, we're going to try Allison said, there's light again elsewhere you wouldn't mind.

Yeah I'm here can you hear me, yes, that's much better I think great. Thank you.

Great. Thank you that yeah, I wanted to ask about what if anything you're hearing on the loan.

The local travel restrictions.

Mike kind of come back or come back to greater force, which are up keep surprising is that something you have conversations with state and local officials about.

Hi, Allison this is Brett I'll take that question, we're certainly in close contact with state and local officials and we have an interesting.

Process in that they are all making independent decisions about how to think.

Govern their cities and states so.

There is we think theres, a theres a bit of a wait and see approach.

Approach in most states and cities, but we are working hard.

To understand the direction that they may be going and we're helping them.

Understand what we're seeing.

And the we're certainly talking to them about the safety and health measures that we're putting in place on both in the spaces that we control in the airports and on on our aircraft.

Making sure that they understand.

What we are doing to help.

To help facilitate travel and the importance of travel.

To their cities and states, which which by and large they understand so.

Closely connected we don't I can't speak to what May happen.

In the fall.

But we are we're certainly in constant contact with them.

Great. Thank you.

And from Reuters, we have Tracy risky. Please go ahead.

Hi, good morning.

I was wondering if you could talk a little bit more about the significance of the department of Defense study on cabin air flow and cobot transmission can the results the extrapolated to other aircraft beyond the triple seven and the seven seven.

Yeah. Thanks for the question.

I think the everything that's happened recently this is the most significant announcement that has come out.

And while it will be important to keep doing more testing the reality as those tests are indicative of what happened on every airplane an aircraft is just a remarkably safe environment and even beyond just these tests that you've been reading with the CDC and others have been say recently, they talk about Super Spreader event.

Where it dangerous and it's.

Indoors with poor ventilation and poor air circulation, what these what we demonstrated good the Cody and DARPA is that aircraft because the airflow is from the ceiling to the floor and did not spreading amongst the customers and because the air serv.

Relation to the rig is going is happening every two to three minutes going to help a great building deeper scenario from the outside there is no place in doors that anywhere close to that.

And aircraft through that's why you do I Arctic and say you know your kids are getting hit by lightly it's equivalent to your chances of getting hit by lightly.

Or others that said you did apply.

At the core hours nonstop next to similarly cobot to have it.

Have a reasonable chance catchy aircraft really are a a truly unique we say environment one of the important thing United that however, I would encourage other.

I would encourage other airlines around the world to do for safety is make sure that customers have the benefit of that robust airflow system. The entire time, there on the airplane and you've maximized that by running the auxiliary power units before start boarding pass you're going until you can continue to be planning pastures.

I think the only airline that that is doing that does cost some money.

But it make sure.

That 100% of the type of customers on board an airplane they get the benefit of that robust there.

But it is remarkable we've noticed some of these facts for a while it is encouraging to see more of that coming out into the public sphere. It is remarkable how safe.

You are onboard aircraft.

Thank you we have no further questions at this time.

Thanks for joining the call today, please contact investor and media relations. Thanks for the question, perhaps you have seen us yet.

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

[music].

[music].

[music].

Good morning, and welcome to United Airlines Holdings Earnings Conference call for the third quarter 2020 might spread that did help your conference facilitator today probably.

Following the initial remarks management, we will open the lines for questions.

At that time that you have a question. Please press star followed by one of your Touchtone phone this call.

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I will now turn the presentation over to your host for today's call Christina Yos Director of Investor Relations. Chris You know you may begin.

Thanks, Fred and good morning, everyone and welcome to <unk> third quarter 2020, earning conference call yesterday, we issued our earnings release, which is available on our website at <unk>.

Yeah.

[music] information in Yesterdays release and remarks made during this conference call may contain forward looking statements, which represent the company's current expectations or beliefs concerning future events.

All forward looking statements are based on information currently available to the company a number of factors could cause actual results to differ materially from our current expectations they differ.

Please refer to our earnings release form 10-K, Thank you and other reports filed with the FTC <unk> holdings and United Airlines.

For a more thorough description of these factors.

Also during the course of our call we will discuss several non-GAAP financial measures for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. Please refer to the tables at the end of our earnings release.

Joining us on the call today, just got the results and outlook, our Chief Executive Officer, Scott Beury, President, Brad Our executive Vice President and Chief Commercial Officer Eddie.

And executive Vice President and Chief Financial Officer, Jerry Last night. In addition, we have other members of the executive team on the line they'll watch with interest today and now I'd like to turn the call over to our CEO Scott for me.

Thank you Christina good morning, and thank you all for joining us today.

Let's start by saying how proud I am of the entire United States Cody.

Cobiz continues to challenge, our industry and United with a truly unprecedented crisis.

But we've responded better than anyone in the world and in ways I couldn't have even though Matt.

Our team has been focused on the health and safety of both our employees and our customers remaining flexible with changes to our network and continuing to provide caring service to our customers, which resulted in the highest net promoter scores in our history we've had.

We've had to be innovative creative and very flexible and our team has truly delivered I want to sincerely. Thank all of our employees made the difficult decision to leave the United We one of our voluntary separation program and those have reduced their hours to align our staffing what did they buy.

Why did it on October 1st I'd like to say as a CEO because despite all the incredible work and contributions of our employees, we still need to borrow more than 13000 clean them along.

Along with the entire United leadership team I remain focused as our number one goal make sure United at the strongest most innovative customer focused airline as we come out of this crisis because that's the way to ensure we can welcome all of our team members that.

I also want to recognize and thank our union partner many have heard stepped up to work our creative deal to get us through the correct.

Reduce the number of impacted employees, where we could and importantly that the airline up for a strong rebound abroad.

I'm proud of the partnership we have with our Union and believe this is a real differentiator for United as we look to the future.

The beginning of the crisis, the hallmarks of United response has been to maintain an objective in a realistic assessment of the virus its impact on our industry and the plan Accordingly in other words, the United Airlines Hope has never been our strategy.

That the best collection of airline professionals in the business have confronted the crisis had on that approach has enabled us like industry, leading yacht, including leading on say well.

Closely aligning capacity with demand cutting costs, and reducing cash burn using innovative approaches to raise over $22 billion in capital Fortunately.

Pushing ahead with Mr. Commercial initiatives, what are the cargo operation New route announcements and being the first airline to eliminate change that's correct.

An industry first digital capabilities like search to find out who travel destination guide and entering into an industry leading deal with our pilot.

Back in March we were focused on the retailers are critical to our ability to survive the correct one razen maintain liquidity.

Reduced Casper and three Variabilize our cost structure.

On the first point I believe United has been more creative than any airline in the world raising over $22 billion.

The second point, despite or a larger business travel postal gateway and international exposure on an apples to apples cash burn basis, we believe United had the lowest cash burn throughout the crisis. So far about network for years, and we expect that won't be the first network airlines to return to positive cash flow when the demand environment.

And finally, we've made huge strides in variabilizing, our cost structure by reaching a landmark deal with our pilot in a variety of voluntary programs with our union partner all of which position denied the bounce back strongly and on short notice.

Having executed on our initial three pillar our focus can and has now shifted squarely what the recovery will look like.

Difficult as the crisis has been.

Non it we've done what did we get the initial phase that will get us to the other spot.

Sure Joe what that the end at the beginning we were.

We were hoping we'd be wrong about the severity of the crime that our back Bay objective approach equipped us to be more realistic and nimble in our response to the buyer will stay flexible, but increasingly the light at the end of the tunnel is now visible.

The long tail and that will have weapons or wont begin to move back towards normal what health experts are telling us the widely available back the around the end of next year given.

Given all the team has accomplished in described we're now able to turn to page away from just surviving this squarely focused attention are preparing for the readout.

Culture that served us well getting to the crime and leading on financial innovation customer enhancement safety initiative commercial acting and Union partnership is the same culture that we expect will lead to United being the global leader Aviation when this is over.

The next 12 to 15 month are still going to be difficult and the recovery will not be a straight line.

What we've done what we believe it takes to get there we can see the recovery on the horizon and our attention can now be firmly focused there I want to thank all the people of unite those working fulltime those on voluntary program our pie.

Ratified a deal where they all agreed to work you were hour to avoid furloughed all pilots in their seat and position for a rebound and those that were sadly and voluntarily for you I say that all of that that are younger United are focused on recovery and as the leader. This airline I have no higher price.

I already know bring you back to work now I'd like to turn it over to Greg.

Thanks, Scott, Let me Echo your comments on how proud I am of the United team for their remarkable perseverance through this crisis and that.

Third quarter more than 40000 team members participated in early separation programs voluntary unpaid leave programs or reduced work schedules, including about 9000 employees, who took an early retirement package.

Operation package or extended leave of absence, which directly reduced the number of involuntary furloughs. These.

These actions by our employees are some of the most meaningful to our company and we all appreciate those who participated we can.

We continue to make hard decisions in the short term to protect United jobs for the long term and were coming.

We're committed to bringing all of those furloughed employees back just as soon as the recovery of wells, while we have begun to see a gradual improvement with demand expected to sequentially increase 10 points in the fourth quarter, we still expect to operate at capacity levels around 55% below 2019.

For the remainder of the year.

Because of this we had to make the difficult decision to furlough 13000 team members. While we had hoped to get this number to zero. It is 65% lower than our original estimates due to the voluntary actions we have taken a day.

Additionally, we are grateful to Congress and the administration for their support and the Cures Act back in March which was vital to preserving airline jobs. We diligently continue to work in close coordination with our partners to get Congress to extend the carriers active role support program.

This extension would allow us to bring back to U.S. team members, we had to.

We had to furlough upon expiration of the Cures Act support on September Thirtyth.

We will continue to engage leaders on both parties in Congress and administration urge them to act.

As Scott mentioned we.

We have laid the groundwork that enables us to pivot our focus to what's ahead.

Two significant components of preparing for the recovery, our first working with our labor groups flexibility second staying at the forefront on all health and safety related measures.

Last month, we came to an agreement with our pilots to avoid furloughs until at least summer 2021.

Our leadership and the United Management team worked hard to come to an agreement.

We are grateful to the Alpha leadership and our pilots for supporting an agreement that save thousands of pilot jobs.

Importantly, they are shared sacrifice positions, United and our pilots for long term success.

Additionally, we worked with our Fey I am.

Africa and unite here labor groups on voluntary programs we.

We appreciate their partnership Chris.

Critically all of these programs will enhance united's ability to bounce back strongly and quickly once there is a widely accepted treatment and or vaccine we have.

We've also been at the forefront of health and safety with our approach to the crisis by working closely with our partners at the Cleveland Clinic and Clorox.

We haven't just follow consensus views, we view real data science and engineering to guide our safety decisions and implement industry leading innovations.

We've continued to lead by supporting rigorous aircraft testing by DARPA aircraft manufacturers and others to understand the air flow dynamics on aircraft and what that means for the safety of those traveling on board.

Recent CDC announcements point to the importance of airflow and ventilation to prevent or reduce the chance of virus transmission.

Our studies confirmed aircraft or a truly unique environment with air that is re filter every two to three minutes to help a great filters and mix with 50% air from the outside.

We have now also identified another safety step to further increase onboard safety and one that to our knowledge only United has taken.

We are running auxiliary power units before passengers board and until the claiming that complete maximize the benefits passengers recede from their unique airflow and ventilation environment the entire time.

On the airplane.

Not just when it is moving or in the air.

United was also among the initial us airlines to announce COVID-19 testing for customers. We are working closely with go help and color to provide on site and pre departure testing that meets the Hawaii governments' requirements, starting today customers traveling to Hawaii from San Francisco.

The testing will be eligible for exemption from the 14 day stay quarantine.

This is the next step in improving customer confidence in air travel and we hope to expand this to other hubs and destinations.

Especially optimistic about the potential that testing regimen like the path to restart international travel Commerce and trade.

When it comes to cleaning United continues to use electrostatic sprayers before nearly every single flight to ensure the aircraft is clean and safe we've.

We've also been pioneering the use of robot applied and visible non toxic anti microbial shield on every surface. So the interior of the aircraft further enhance the safety of everyone on board.

We are take we are making progress on rightsizing the airline to ensure long term success.

Jerry will discuss in more detail, we have 19 billion of available liquidity.

That runway to make sure that when the recovery begins.

It is in a position of strength.

So still a tremendous there's still a tremendous amount of uncertainty because.

Because we know it won't be a straight line recovery, but as Scott mentioned.

We have follow through on the three key pillars that have ensured our survival.

And we will be the foundation for our success with that.

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

Thanks, Brett.

I want to start off by saying, we fully expect United to let it all objective commercial revenue year over year measurements in the quarter, including TRASM random target revenue and royalty revenue among our primary peers.

Please.

For our business is starting to recover and it's recovering quicker than others based on a standard and objective measurements.

Third quarter passenger revenue was down 84% and system capacity was down 70% our topline revenue performance of down 78% was in line with our early expectations.

Actually for Q3 was planned to be down 65%. However, when demand trends weakened in late June and July we revised capacity to be down 70%.

Even with these late adjustments to Q3 capacity.

Only one point behind our original revenue outlook in the quarter, a cost capacity in revenue trade off and worked well United.

United Clearly has.

Revenue capacity plan and that realistic assessment of demand helped us achieve our cash burn targets in the quarter.

Domestic PRASM in Q3 was down 45%, 55% less capacity.

What is up around the globe, our international client had a difficult quarter.

Total assets are down, 77% and RASM was down 55%.

We operated over 3000, all cargo charter flights in the corner, which contributed to about 50% improvement in our carbon in revenue versus last year.

Do you see in this unique pandemic environment that permanent structural advantage for United We are now preparing to transport large quantities of the Kobe 19 backing we always say our shared purpose the United just connect people in the United World, but for the near term will be proud to add delivering vaccines and the pandemic.

Demand that United could still have underperformed during the quarter, while our interior outperform.

Our coastal hubs normally over index in business traffic and long haul international traffic. So the results are not unexpected coastal hubs are typically a structural advantage for United and we expect that they will be one visitor traffic restarts and board has come down and quarantines are limited.

Turning to the fourth quarter, we expect total revenue to be down around 67% year over year and passenger revenue to fall by 72% we can solve.

Consolidated capacity expected to be down approximately 55%.

Solid improvement versus the third quarter revenue performance.

Our fourth quarter capacity will again be conservative.

We anticipate our early 2020 on capacity to be consistent with our Q4 December levels.

We expect our realistic capacity levels through trying to cash positive ahead of our other network competitors.

Demand for our coastal hubs for Q4 is still expected to be weak.

Not waver as recently issued by the FAA allow time for demand recover prior to us having to initiate our full schedule from New York income.

Income from incremental capacity, we do add back in the fourth quarter is expected to be tilted towards our Houston and Denver hub with the goal of getting us back on track to our original network objectives of building connectivity for interior hubs and serviced the smaller communities.

After these also added and not a point to point routes to Florida, which are experienced a quick a rebound in demand in the short run.

The market for United in the long run incremental first quarter warm weather client will allow us to improve our first quarter relative to results.

In the past United simply was under Investor warm weather destinations in the winter.

While we have to take it well kind of take a pause on many of our international our plan for 2020, we continue to believe that we're well positioned as a leading global carrier to and from the United States, We're taking actions to support a return to clients.

United supports an increased testing regimes in the near term to lower orders and remove quarantine for those that can breeze and negative test within 72 hours of departure, we hope that by spring 2021 testing will be widely available and governments around the world will adopt consistent measures to reduce.

Our eliminate foreign teams for the test negative comments.

On a path is one such initiative that being prototype between New York and London.

As we mentioned earlier we're trialing.

Thats right now between San Francisco, and Hawaii, We expect a lot more to come.

Last week, we announced it will be the first just curious to resume nonstop service to China not only does this make life easier for our customers by offering nonstop separately, but lowering our costs by eliminating technical stops.

Thanks, both alpha and the FX as well as the team here at United that figured out a way to return back to nonstop service I'd be the first let's turn to do it.

Creative solutions can get us back to doing what we do best connecting people any uniting the world profit.

We're also excited to announce the addition of Johannesburg, Ghana and legacy we're a leading global network starting next summer.

International gateways are home to vast volumes, a leisure demand, but also more importantly business demand Africa.

Africa is an opportunity in our network and this new service revenue represents a good chance to further extend our globally, while diversifying our 2021 capacity plan.

United is the only UN carrier operating nonstop service to India, and we will soon begin to new routes for a total of five flights daily numbers on our fourth route Chicago to New Delhi begins in December our Chris Brown.

One of the most anticipated ever.

Launched in May 2021, homing in that mid to high Tech comps of San Francisco and Bangalore.

Many of our existing global routes are supported by partner revenue our ability to capture carbon revenue to allow the United to return more passenger service to the network at a quicker pace with higher margins than our primary competitors structural advantage that will add to our quick bounce back.

We said last quarter that demand recovery will not be a straight line and ultimately we expect demand to plateau at about 50% until an effective vaccine as widely distributed we havent changed revenue.

United is clearly could and capacity plans consistent with this view many.

Many of our commercial and customer initiatives have also been suspended as we focused on new priorities like clean plus during the pandemic consistent with Scott said about shifting our focus to recovery and restart the key projects in the near future in August we made the decision to resume work on the Polaris cabin and premium plus happen on our seventies.

Currently.

Our commercial priorities Furnico, and we're improving the customer experience and deliver on the promise and better margins in a smaller margin gap to our competitive peers.

Open today is a return to profitability as soon as possible, but our long term focus remains on achieving the highest margins of our primary competitors to achieve our goals have point, we must be different.

A few weeks ago, we confirmed our willingness to be different by being the first of the legacy airlines to eliminate domestic change fees keeping the customer focus will of course, the key component of our plants, thanks to the entire United team.

With my Flyer team getting back to normal I see your dedication first hand in these difficult times and have more confident than ever will come out in a very strong and with that I will turn it over to Gerry.

Thanks, Andrew Good morning, everyone for the third quarter of Twentytwenty, we recorded a pre tax loss of $2.3 billion and adjusted pre tax loss of $3 billion.

As we continue to manage our business through the crisis. We are doing everything we can to mitigate our losses and most importantly to preserve liquidity through the.

Through the efforts of the entire United family, We achieved our target in the third quarter of an average daily cash burn of $21 million plus $4 million of debt and severance payments.

During the quarter, we continued to bolster our liquidity, including closing on our 6.8 billion dollar mileage plus financing.

As well as obtaining committed funding through a $5.2 billion secured loan facility under the care that loan program using international routes and related assets as collateral we thank the United States Treasury Department their financial advisors and attorneys for their support and focus to provide significant liquidity.

To the industry. We are currently working with us treasury to increase the amount available under the facility by an additional $2.3 billion for a total of up to $7.5 billion and available financing under the facility.

In September we borrowed $520 million under the facility and haven't come March of next year to take up to the total amount available to us.

Also in the third quarter, we received $639 million under the original cares Act payroll support program for a total of $5.1 billion received under that program.

Earlier in the crisis, we put together a plan to end the third quarter with at least $18 billion of available liquidity.

We more than met this goal having ended the third quarter with available liquidity of $19.4 billion, which includes undrawn capacity under our revolver and the remaining funds currently available to us under the care that ground, but does not include the incremental $2.3 billion I, just discussed which is subject to find.

Documentation.

In the third quarter, we reduced our total operating expenses, excluding special charges by 48% and eliminated most spending other than what was absolutely needed to operate the airline in addition diminish.

In addition to minimizing operating expenses since the beginning of the crisis, we have remained focused on reducing capital expenditures.

Leaving only those projects that are critical to the business forward provide a quick financial return.

We now expect our Twentytwenty adjusted capital expenditures to be approximately $3.9 billion.

With $2 billion already spent before the crisis.

Reduce capital expenditures by over 60% for the last nine months of the year.

Our current guidance does represent an increase of $200 million as compared to our guidance last quarter.

This increase is essentially driven by our decision to purchase 16, Embraer Eone hundred 75 aircraft that we originally planned to have purchased by one of our regional partners.

Purchasing the aircraft directly we were able to finance the aircraft more efficiently with no additional upfront cash and lower interest rates throughout the term.

As usual most of our capital expenditures this year represent purchases of new aircraft.

In other ways, we have minimized cash burn is to require that any new aircraft. We acquire both this year and for the foreseeable future will be fully finance.

Since the start of the year, we have raised $1.6 billion in new aircraft financing.

Well there are fewer sources of financing today than existed pre crisis, we have found sufficient funding at reasonable rates.

Recently in September we entered into an agreement with CBB aviation from these financing of 12 or Boeing deliveries, including 2787 and 10 737.

1787 was delivered in September the second one will be delivered this month and the 737 are scheduled for delivery in Twentytwenty one.

We continue to remain flexible with our fleet and don't expect to retire any of our mainline aircraft in the near future. In fact, we have returned nearly 150 mainline and regional aircraft back to service since July reducing the number of aircraft temporarily grounded to about 450.

Looking ahead, we expect our fourth quarter total operating expenses, excluding special charges to be down approximately 42% versus the fourth quarter of 2019.

We also expect average daily cash burn for the fourth quarter to be $15 million to $20 million plus $10 million of severance and debt principal payments.

This will bring us by the end of the year to over $16 billion in available liquidity were close to $19 billion. If we include the additional $2.3 billion. We expect to have available under the cares Act loan program.

Throughout the crisis, we believe we have led and will continue to lead our network peers on an apples to apples calculation of cash burn.

We also expect to see the first network carried to return to positive cash flow as.

As air travel demand returns and cash burn decline.

Focus shifts from merely surviving to maximizing the long term enterprise value of United Airlines.

In closing we are recognized that this crisis is lasting longer than any of us expected.

And there remains enormous uncertainty with respect to the demand the pace of demand improvement.

However, due to our aggressive and decisive action since the start of the crisis. The preparations we have made to weather the storm and the sacrifices made by the entire United family I am confident that we are well positioned to spring back quickly as we emerge from the crisis and with that I will hand, it over to Kristina to start the Q and a.

Right.

Thanks, Gary will now take questions now please.

Please limit yourself to one question and if needed one follow up question Brandon Please check behavior.

Thanks, Christy that was I'll begin the question and answer session, which will be conducted electronically if you'd like to ask a question. Please press star followed by one on your telephone keypad, if youd like to be removed from the queue. Please press the pound side or Heskey you showed a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment once again.

A question. Please press star one on your telephone keypad.

Please hold for a moment, while we just have to like Q.

And from Cowen we have laid Becker. Please go ahead.

Thanks, very much operator, thanks for the time everybody.

No when I read the press release last night, maybe this is for Scott or Brett I felt like your tone.

Changed a little bit and that you were maybe less pessimistic than I've heard you speak in the past.

A few months.

I was wondering.

That's right [laughter].

Well, thanks, a lot and good to hear your voice.

And.

What I would say is.

Got it all really going all the way back over the last week in February has been focused on be realistic and objective about this correct.

We were accused by many of being pessimistic early on and I.

And I pushed back on that notion because we weren't being pessimistic, we're trying very hard to be realistic.

About the crisis and emotions like pessimism optimism hope fear have no place that you are making decisions that involves the lives of tens of thousands of employees in the future have a great airline.

And you just have to be objective and realistic.

Add today, what we're expressing is not a shift from test it doesn't the optimism as much as it is an expression of confidence in the future.

There is a great quote that I love and I referenced that earlier, but from Winston Churchill that.

That he said at 942 over two years before the end of World War, two we said that after the African campaign and the Brits one in Africa that this is.

This is not the end, it's not even the beginning of the end. It is perhaps the end of the beginning.

That is the moment we are at now.

United Airlines Weve done what it takes to get through the beginning this is the end of the beginning and my second World War. Two there was a long and painful difficult road and a lot of factors, but at the same is true for us.

We're not getting through this until there is a widely available vaccine, which is probably around the end of next year. So we've got 12 to 15 months.

Hey, sacrificing difficulty ahead, but we have done what it take in the initial phases have confident it's really about confidence on getting through the crisis and to the other side.

And I think we'll look back at today.

At this moment in time.

We see it today, we were the first to call that.

How severe this would be and I think maybe were among the first to call the ultimate recovery.

We'll look back at this is the turning point.

The tunnels long way away, but this is the turning point if not only what we see in the core business. There are two other coincidental.

Announcements today that I think are really significant perhaps not fully appreciated yet that really significant one is.

The testing, that's beginning to Hawaii, United under Brett and Toby leadership have really revenue that effort and Weve added again in a lot of first in the pandemic that has been the first was the first to get that done admitted pushing to view to do more of that open up international borders and that is.

The only way there are things that we can do safely.

Even when the pandemic is still going.

But.

Including flying on airplanes, but.

We're going to need testing to make that happen and I think that will expand and you'll see that expand we'll look back at the day is starting the testing is an important milestone and the other thing is the study that we've known about per month.

That has come out that we worked on with United worked out with DARPA and the department of defense.

Let's get more evidence about how truly say it is to be on airplanes. We recognize that even if you are completely say on an airplane you have to have a reason to go.

Disneyland needs to be open or your clients need to be accepting visitors in the office before you can go that's why we think demand is it going to get back.

Well get about 50%.

Until there is a widely available vaccine, but these are two additional important milestones that simply give us confidence.

Does it mean that the next several months aren't going to be difficult because they are but we.

But we have confident.

So if you're hearing the tone change it has in the changes the way we work. We're now focused on instead of just minimizing tomorrow's cash burn to survive the prices that were focused on even spending money, where we need to invest in testing.

As an example, or Andrew mentioned getting the Polaris month.

Backing going so that were prepared for the recovery. So welcome our customers back and forth 22, which is where we think the recovery will begin in earnest, but thanks for the question the light and by the way look more to testing the borders.

Thank you and your husband can you get your your trip back to South America, United rescheduled.

Yes. Thank you very much Scott if you could just get that testing to New York I would be on that next please.

Yep.

Thanks Ryan.

<unk>.

Yep.

From Jpmorgan, we have Jamie Baker. Please go ahead.

Hey, good morning.

Scott in your interview this morning, you talked about the potential return to JFK. If I remember when you initially discussed United to exit there. It was mostly because of the impact on corporate accounts as opposed to any.

Massive share that United walked away from it is that the way to think about your possible return tactical.

Tactical presence in corporate sensitive channels or should we be thinking something more like United's presidents in the ninety's when there was an actual.

I lost you there I guess as you said there was an actual hub at JFK, Yes, certainly on our initial return I think would be coming back into the trends today, and perhaps service to our hubs and you're right. It's the ability to to service corporate.

And we have been where you did say that I think.

MBC, we've been working hard I guess that hasn't really been pumped with what we have been working very very hard.

To to use the pandemic as a way to get that.

To JFK.

And.

[music].

Reasonable confidence that we'll be successful the good news is all the work that's happened at JFK in the last few years means there is actually more pork faster there's not many places in the U.S., where theres additional airport capacity, but there.

Should be more airport capacity, and we would be a new entrant there so.

So I look forward to getting back and and competing aggressively and for our customers, we want to be able to play in.

Those transcom markets we.

We have our fingers crossed and we're more than that we are working hard.

To restore that service for you.

Okay. That's helpful. Second question also pertaining to the interview this morning.

And I apologize about my call waiting firing what I was asking that was actually the New York quarantine tracing.

Let's call them back. So you talk you talked about cash burn not being the right metric to look at so I'm reminded of a siem and Mad men. If you don't like the conversation change it so.

So how should that conversation change if cash burn is in the primary.

Metric of focus going forward.

Well I guess I'll start and then I'll look to Jerry.

To pile on but cash burn is a metric that we use we thought was the most important metric at the start of the pandemic a lot of businesses, where the Bible was at stake here.

The most important metric not just in most airlines, but.

But that's not the issue we have enough liquidity to get through the crisis.

Weve done what it takes.

No longer the issue and and cash burn is one of those metrics that everyone measures when everyone measures differently.

But to.

We for example, Andrew I mean, this is a huge number but we're we're starting Polaris might begin that shows up in cash for it is the right decision to make for the planning for our customers for our shareholders for our employees for the long term, but if you're just focused on minimizing todays cash burn you wind up with a myopic short.

Explore or both and I think we're getting back to focusing on traditional airline metrics RASM RASM.

Earnings per share margin I think 2022 before those things really become meaningful.

Unfortunately, but we are getting to a world, where we are going to be focused on those and the one thing that I think will be different however.

And probably the top of that list of focus is something about paying down debt.

Not sure yet what that is but getting our absolute debt down.

From where it will be at the end of the pandemic is going to be priority number one Jerry you want to add to that.

Yeah, I would just reiterate Jamie we do feel bad for all of you having to deal with all of us having different definition of cash burn.

So Scott said ultimately we get back to the more traditional metrics.

But for cash its about liquidity so focusing on.

Where we are at the end of the year on liquidity.

The balance sheet those become more important than trying to figure out each of the components of cash flow in the quarter I'm trying to do that.

Segment that you all have to do because we all kind of describe it a little bit differently.

Okay. That's very helpful. Thank you do up to about the take care.

From Wolfe Research, we have Hunter Kate Please go ahead.

Hey, good morning, everybody. Thank you.

If your capacity is going to be down 55% in the fourth quarter, and you're seeing demands not going to get better than down 50% until the end of next year does that mean that you're done adding capacity back for the next few quarters.

Hi, Hunter, it's Andrew.

Clearly looking at it very carefully we will follow the demand trends, but as I said in my opening we expect that our Q what capacity is going to be very consistent with our Q4.

Capacity, particularly the engine part of the Q4 capacity so it could very well be the case.

Okay. Thanks, Andrew and then.

I look at your Balaji about $10 billion of obligations on their tied to the air traffic liability and deferred revenue from the loyalty program.

I always think about that working capital headwind burning down over the next 29 to 12 months as you guys add capacity back and then just broadly you want to make that comment about working capital over the next maybe 18 to 24 months Jerry I would really appreciate some color there. Thank you.

Andrew if you want to start on the clear now muted okay. How can you hear me now.

Well, let me start Andrew can can pile on.

Yes, we have factored in when we're looking at our liquidity changing over the.

Over the next year.

Where we think 80 hour.

Yes. It is headed it's flattening out own declined.

1%.

Yeah, we would yes. This is not obviously a normal year, where you would see significant decline in the fourth quarter, that's just not going to happen bye.

We are taking into account.

Hcl as we kind of model next year and revenue if they have anything else to say about it.

Sorry.

Thanks Jerry.

As you just mentioned we would normally expect that are hcl in the quarter would have gone down by 10 or 11%. In fact, it is flattish and we normally expect Q4 start going down a little bit and in fact, we expect it to be flattish.

And it's really I think a sign that we are seeing overall recovery and is short demand patterns are not relevant to that so we're pleased by the progress we've seen in bookings and are pleased by what we see in terms of the Hcl, what it normally would otherwise be declining.

Thank you.

From Raymond James Please Savi Syth. Please go ahead.

Hey, good morning.

Yes.

Hi, This is the way the pilot agreement is structured and kind of the fact that you haven't made any major fleet with time and Denis Sheahan.

Is it safe to assume that you expect to kind of a return to 2019 levels at some point in 2022 in things that recovery.

Also the adjustments made that you've made so far on the cost structure and kind of curious what level of capacity.

Capacity, we need to reach to achieve like 2019 level.

Yeah.

Well I'll start off with the fleet, then I'll hand, it over to Jerry I think we just we don't know we're being flexible we would sure like 22 to be equal to 19, I think thats probably unlikely.

Partially offsetting these aircraft in the desert there.

Ready to fly when we need them to fly.

And we will maintain that agility.

You saw that in Q3, where we thought we were going to be down 1% and then demand weekend and we immediately changed the plan to be down 70%.

So we'll maintain that agility going forward and.

Fleet, there, if we need it but only if we need it Jerry.

Yes, so obviously CASM is directly really related to capacity.

And you know, we'll start looking at that traditional metric of CASM X, which is the appropriate way for us to measure.

Unit costs.

And we feel comfortable that you know we.

We can get the cash.

The CASM ex around flat to 2019 as capacity gets back 2019 level.

So.

Focused on it and we're comfortable we can get there.

And related to that a little bit like you mentioned that kind of demand is expected to recover by 10 percentage points.

What level of demand is there currently like between leisure and business I'm wondering if that comes more from businesses that comes lots on from leisure.

So I would say right now is I expect that to be more leisure oriented in the fourth quarter and in fact, we've tilted our capacity to reflect that so in fact today is a step up in our Hawaii capacity coordinating obviously to the testing that we have.

How about in San Francisco, and so were expecting in Hawaii to be a part of the increased revenue as we go through the fourth quarter business demand is still down a large percentage it depends on how you measure it but anywhere from 85% to 90%.

Alan is kind of the trajectory of that I would tell you is that it has improved a little bit and it has improved more with smaller corporations and larger corporations at this point.

That's all helpful. Thank you.

From vertical research, we have Darryl Genovesi. Please go ahead.

Hi, good morning, everybody. Thanks for the time.

Starter or Andrew I appreciate JFK tidbit, but one broader.

When broader strokes, perhaps when you think about what the network looks like post.

Post recovery how.

How is it different from today I mean is it is it more leisure oriented or is it more domestic oriented or just how has your thought process evolved.

Around around the overall network structure.

Good good question Daryl.

Yes, I'm not going to be able to I think accurately predict it today as Scott said, we're still early in this process.

Clearly, we're going to be agile in the short to medium term and move capacity around to.

Reflect where we're seeing demand today and clearly we're seeing more leisure oriented demand and that reflects how we tilted the capacity in Q4 with more sunshine capacity more Caribbean capacity for Hawaii capacity, but we fully expect that business travel.

It's going to get back on the road someday when the vaccine is out there and widely distributed we are big believers in that.

And so we think this is traffic will rebound, it's clearly not going to bounce back to 100% on day, one and our network will be different in 2021, and 2022 than what we'd rather wise and plan, but there will be a day in the future and hopefully in the near future where business traffic is back to the new normal.

And clearly the types of trips being taken will be different.

And as I've said before.

This new remote work environment, I think actually it could be.

Stimulus, if it's a traffic and that workers.

Workers need to return to their corporate office, a few times a month.

To do that work and so just trying to maybe different but we think it will return.

Okay, and then maybe one for Gerry your your your restructuring then.

It's a little lower than what some others have announced can you.

Can you just give us a sense of how you think about sizing the voluntary programs and is there like a particular IR, you're chasing or particular payback period and then.

And then and then also if you could just comment I think this most recent deal that you did with the pilots gave you some incremental flexibility to do.

Additional early outs.

So do you anticipate another voluntary separation program. This calendar year. So I guess two questions. There. One is just on the framework and then the second is just on.

Whether that's another one coming.

Yeah, I'm not sure that second question is.

For me all I can tell you is that.

That we are doing everything we can.

Overall, variabilize, our cost and to be able to be flexible.

And really every part of the cost structure.

Okay.

Thanks.

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

Hey, Thanks, good morning.

Scott when you think about the relative importance or unimportance of corporate traffic to United's earnings power pre co, but how important was that what does that suggest for.

Right. Its post coded earnings power. If there is some structural impairment and feel free to speculate on what you think that impairment maybe.

Well I'll, let Andrew.

Answer as well, but.

I'll start with my personal opinion.

Which is.

I recognize that not the case.

But we are as you'd be are social creatures and I think that this demand is going to come back I don't think it's kinda back immediately.

I think demand sort of starts to recover and earn it end of next year beginning of 40 to 42.

The demand being back normally I would guess please.

But I think it will come back to normal I've been fond of saying the first time someone loses its sale to a competitor who showed up in person is the last time, they try to make a sales call on that.

Theres, a great commercial from United that over 30 years old you can go Google but.

That ends with I'm going to see that old friend that.

That was true 30 years ago that will be true in the future because that is what human nature is.

And I.

Fitness travels incredibly important.

And it was our bread and butter before I think it will be our bread and butter in the future is going to be a few years before it goes back in in earnest.

But one of the things that I think is great. When we talk about United being the leader in global Aviation.

We were headed in that direction before this all started I think we're going to make a decade worth the progress during the pandemic and when this emerge when we emerge.

Particularly given what our seven hub given what our pilots agreed to do keeping everyone in their seat given.

Giving given everything that we're doing to invest in the customer experience like.

Eliminate change be.

Everything that we're doing with our loyalty program, we're going to emerge as the world number one business airline I think it.

2024 before it all comes back but in that World too I think we will have picked up share frankly is it didn't.

Is it any you'd have to come back for 100%, let the really successful for United.

I will caveat. It every day, we're staying flexible as Andrew said, we've got airplanes that are parked in the desert and we recognize that that's not a certainty what I just described.

If it's wrong.

Good.

We will go there, but yes.

Thats My guess for what it is.

Although it's going to happen that that business travel demand is going to recover.

Nine it disproportionately get awareness in that in by Andrew.

I think the only thing I'd add to that Scott is that maybe going back to our hubs.

Our hubs are the homes the majority of the business traffic the global business travel to and from the United States.

Thirdly in New York, and Washington, DC, San Francisco, Los Angeles and Chicago.

And even some attention.

And those markets.

The business traffic, they're going to our markets are going to bounce back quicker and stronger in our opinion.

And allow us to get back to fly and.

Faster than others.

So that's what we're thinking about as we as we go down the road. The other thing I'll say is that the competitive environment is not the same.

I look around the world and the number of 747 and Athree 80 that had been grounded is just.

Very very large obviously and so the competitive dynamics in the global Arena for the next few years are simply going to be different. So there is a lot of calculation to move and demand is moving.

And our move in and how flight survival based on what gateways that are will be different in the upcoming couple of years than they were prior to this crisis and.

And we're prepared to be agile and work around all those things to come out quicker and stronger.

From Evercore ISI, we have 20 Pfennigwerth. Please go ahead.

Hey, good morning.

Open to your suggestions on if there is a good way to do this but but I was wondering if you could provide some visibility in.

Into your cash Opex savings.

Obviously quarter to quarter, it's not easy to do because capacity is moving around and hopefully recovering but can you quantify cash opex savings that are hitting gear in the fourth quarter.

And if the fourth quarter is sort of not the best timeframe. When do you expect to fully hit your stride on that front.

Yeah, I'll take that so.

I would say the fourth quarter is not the best quarter for a number of reasons.

So next year first quarter and through the year will be.

Best way to look at it so we.

I could give you better color in January the problem with the fourth quarter.

Is there is a lot of noise there is the.

Fortunately the severance noise.

There's also.

Always associated with things that we did in the second and third quarter. For example, when we started this.

This crisis the very first thing we did was okay.

Let's look at cash payments and stock what we can defer where we can and we had terrific support from our suppliers and our vendors there okay. They can wait a little while but we didnt.

We didnt ask for particularly long extensions, but is probably too.

250 ish million dollars.

Payments in the fourth quarter that.

Our associated with.

Publications that were deferred from the second and third quarter.

Your maintenance expenses. Another good one you know what I think most everybody in the industry would have done.

Through the spring and summer is use that maintenance time on aircraft.

On light aircraft than kind of rest for a while before actually putting them into checks that process has to start at some point and for US that process has started in the fourth quarter.

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