Q2 2021 United Airlines Holdings Inc Earnings Call

July 21, 2021

[music].

Good morning, and welcome to United Airlines Holdings' Earnings Conference call and for the second quarter 2020, what my day.

And as Brandon and I'll be your conference facilitator today. Following the initial remarks for management and we will open the lines for questions.

And at that time, if you have a question.

Star followed by 1 on your Touchtone phone.

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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 <unk> Director of Investor Relations. Please go ahead.

Thanks, Brandon Good morning, everyone and welcome to United <unk> Second quarter 2021 earnings Conference call yesterday, we issued our earnings release, which is available on our website at IR Dot United Dot Com information in yesterday's release and the 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 refer to our earnings release form 10-K, and 10-Q and other reports filed with the SEC by United Airlines Holdings, and United Airlines for more thorough description of these factors also during the course of our call.

We'll 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 and joining us on the call today to discuss our results and outlook are Chief Executive Officer, Scott Kirby, President and Bret Hart Executive Vice President and Chief Commercial officer, Adrian and seller and <unk>.

<unk>, Vice President and Chief Financial Officer, Jerry Letterman and edition, we have other members of the executive team on the line available to assist with the Q&A and now I'd like to turn the call over to Scott. Thanks, Kristina and good morning, everyone and thanks for joining US today. It was great to see many of you in person at our United and of next event last month, and New York and personally it's been great to be back out on the road.

During the quarter talking to employees and customers and hearing anecdote after anecdote about how great. It is to be back traveling. Thank you also to all the people of United Airlines for all that they did to take care of our customers and each other through the crisis and for all that they're doing now to really and truly change the customer experience non at airlines.

Before I really begin I thought I'd take a moment to address the most talked about issue among airline investors recently the delta variance.

As you will hear from our bullishness today, we haven't seen any impact at all on bookings, which continue to just get stronger and stronger every week, but of course that is backwards looking data.

Since early 2020, however, no airline has been more willing to candidly acknowledged the risks and challenges posed by COVID-19, and importantly, no airline has been quicker to aggressively confront them than United.

And we've worked hard to protect that operational flexibility and fact, it's part of why we haven't had the same mass group cancellation challenges that our competitors and space as we've ramped our schedule over the last couple of months that all set.

Thank the most likely outcome is that the continued recovery and demand continued largely unabated.

And that's the most likely and logical outcome because the evidence is overwhelming that someone who's vaccinated is highly protected against severe disease hospitalization and deaths.

And that the unvaccinated still face and elevated risk of serious illness and death from COVID-19, and fact recent reporting says at over 97% of hospitalization or per unvaccinated people, which implies that youre about 50 times more likely for wind up and the hospital for Covid, if youre and vaccinated.

But the other vaccinated or also a smaller and shrinking percentage of the general population and an even smaller minority among the most vulnerable groups and for United Airlines, specifically, our customer surveys at the end of June also revealed that 84% of our mileage plus members were already fully vaccinated and.

So while we expect case sales to rise.

Given the vaccination rates.

They will still remain well below the peaks and hospitalizations and deaths will not rise nearly as much that leads to the logical outcome that the reopening and continues on track and acknowledged that shutting down on continuing the reopening also has a political dimension to it and that's a lot harder to predict and so its possible we will have a temporary pullback and.

Our reopening, but given the data science around vaccines that seems like a lower probability outcome and regardless it will be temporary even if it does happen.

Turning now back to our results Jerry and Andrew will provide a lot more detail, but if I was going to briefly summarize where things stand right now I would say the demand is recovering even faster and we had hoped domestically both leisure and business demand and internationally. We see the exact same pattern every time, new borders have reopened and while the U S isn't yet open to <unk>.

European and the data and science, including the demonstrated safety of air travel similar vaccination and case rates and similar level of variance in Europe, and the U S support and opening and we expect it to happen at some point and when the borders do open and we expect to see the same robust hockey stick increase and demand that we've already seen domestically.

On the cost front and we remain on target for the near and long term and as Jerry will detail, assuming the ground and Triple Sevens or bank line. We expect our 2022 CASM ex will be lower than 2019, which means we're right on track to deliver CASM ex is 4% lower in 2023 and 8% lower in 2026 as we shared it on.

Our United next event last month.

Today with the robust demand trends that we see and a return to profitability. We don't just see the light at the end of the tunnel and we're exiting the tunnel and we're focused on up gauging, our hub significantly improving the product and day Commoditizing air travel by transforming our customers onboard experience.

This opportunity is unique to United and it's why we're so confident and our 2023 and 2026 financial targets as we exited the tunnel Theres still a steep hill to climb to get back to and then exceed our pre COVID-19 margins, but we also have some important upcoming tailwind will benefit united more than others.

And our coastal hubs and our decision which stands alone among network large network carriers not to retire wide body aircrafts means that we are ready to capture the pent up demand for long haul international travel.

And our opportunity to up gauge our fleet, while also driving increased connectivity as part of United net means we can accelerate the margin improvements we saw from investments and the midcon hubs and 2018 and 19.

And of course, our confidence and United future is also fueled by the incredible performance of the United team.

Even in the midst of a global pandemic, our NPS scores rocketed up 30 points year over year, and our 50 point year over year improvement that J D. Power survey was the largest of any U S airline.

This customer centric service culture, and influx of nearly 500, new aircrafts, along with an unprecedented retrofit of our existing narrow body will transform our customers experience. It will also Austria and an incredible new post pandemic era for United for customers employees and shareholders, creating a new era, driven by innovation that make the travel experience better.

And I'm really proud of the work team did and the second quarter to innovate with customers and our employees and with that I'll turn it to Brett.

Thanks, Scott and I want to start by congratulating the entire United family on our expected return to profitability and the second half of this year.

And the United team has worked towards this milestone of achieving positive adjusted pre tax income for over a year and we could not be more proud.

During the second quarter, United continued our work to make the travel experience safer and more convenient for our customers. We recently made new enhancements to our already industry, leading app to allow customers to schedule and COVID-19 tests and have results directly verified through the travel ready center platform within the United App.

And May we announced a first of its current collaboration to use Abbott's COVID-19 and home test.

And app to enable our customers for self administer for rapid antigen tests and use the verified and negative test result to board and international flight to the United States as borders continue to open.

Working to make the return to international travel as convenient as possible for our customers.

These initiatives and make us uniquely ready to facilitate and international travel and further.

Our position as a leading international airline and the U S. And addition.

We recently launched our your shot to fly sweepstakes working effectively with the federal government to creatively encourage people to get vaccinated and ultimately get back on planes again.

We feel optimistic from the recent progress among European countries, allowing U S tourists to enter the various effects to enter with various vaccine and testing requirements countries, such as Iceland, Croatia, Greece, Italy, France, and Spain have all begun accepting U S travelers for the summer tourist season.

And we look forward to more destination for options for our customers and the coming months.

We continue to encourage by the administration to open up international travel and a free.

<unk>, Brian Ferguson as well as industry support for ease international travel restrictions.

And Andrew will detail further the demand surge as we've seen 2 countries. Once restrictions are loosened and gives us even greater confidence regarding the long term outlook for international travel on.

And the domestic side nearly all states have reopened and local economies and remove travel restrictions and enabling the surge and domestic leisure travel for currently see.

We remain focused on United is transformation and be the airline customers choose to fly we have already eliminated change fees and with our new aircraft order, we will improve the customer experience, we're adding seatback entertainment all of our aircraft and improving Wi Fi and innovative and customer friendly technology like for like connection safer, which saved.

Over $140 and connections and the second quarter.

News from Washington D. C continues to be a focal point for United and we are encouraged by the bipartisan efforts to make needed investments and our nation's infrastructure.

Infrastructure is the backbone of our economy and it must be robust sustainable and resilient to meet the needs of today and tomorrow.

Support and modernizing our nation's air traffic control system, and advancing sustainable aviation fuel as important and aviation and infrastructure investments, but also reduce industry admissions.

Moving on to other highlights within our global network.

At United We continue to be a proud partner for our communities throughout the quarter, we expanded efforts to support those impacted by COVID-19 prices and India United remains the only U S carrier.

And the distinction we hold to date and <unk>.

Transport more than 300000 pounds of critical medical supplies and regenerate and <unk>.

Additionally, and launched the fund raising effort to enable our customers to donate.

Partners.

And the quarter, we announced the new initiatives with multiple partners to advance our sustainable goals across the United States. These partnerships cover a range of sustainable initiatives, including de carbonization, and sustainable aviation fuel and sustainable agriculture.

During the quarter, we also announced a new order with boom supersonic for the overture for.

Large commercial aircraft optimized to run on 100% sustainable aviation fuel.

We also announced our latest investment under United Airlines, and ventures, and heart Aerospace and <unk>.

Electric aircraft startup developing and.

Aircrafts that has the potential for flight customers up to 250 miles before the end of this decade.

United continues to lead the industry with a multi pronged approach to our commitment to reducing our greenhouse gas emissions by 100% by 2050 without relying on traditional offsets and we look forward to more to come on this front and.

And with that I will turn it over to Andrew.

Thanks, Brett I'm going to start off today by thanking the best commercial team and the business, our combined efforts and agility over the last 18 months led us to this moment today announcing a generally positive trends and PRASM and yield outlook for the second half of 2021, something hard to imagine just 12 months ago. The revenue outlook has allowed for a.

Much improved and profitable financial results on an adjusted pretax basis for the second half of the year and Jerry I'll talk about that and just a bit.

On a realistic view of the pandemic impact on our business and industry with sometimes questioned however, our realistic assessment from day, 1 combined with capacity correspond into real demand.

What we hope demand would be for the keys and prepared us for what comes next.

FX guide us the entire way and I'm pleased to report today that <unk> point to a strong recovery of our business across all segments as Scott said, we're coming out of the tunnel. We now have a clearer path not only to profitability and the near term, but a path to higher long term margins, even in an environment with elevated industry domestic capacity.

During the crisis, we were pleased with our trials and performance and and the second quarter, our trials and was down 11% versus 2019.

Our performance in Q2, as well ahead of our original guidance, but largely consistent with our updated mid quarter expectations International long haul demand business demand and yields just improve faster than expected 3 months ago, we still face significant headwind for the second half with borders being closed and business traffic not fully back.

But ultimately we expect these headwinds will transition to town.

Our ability to adjust our global network to transport record amounts of cargo was 1 of our proudest accomplishment and a clear differentiator versus others. In fact during the quarter, United generated $606 million and cargo revenues are highest cargo revenue quarter ever up 105% from <unk> 2019.

And with long haul passenger demand.

Now increase and we will see most of these cargo only flights for the remainder of 2021, although we continue to project strong cargo yields for the remainder of this year.

During the crisis, we also carefully planned and collaborated across divisions and execute a bounce back plan for the second half of 2000.2021, our summer capacity planned continued a measured phase and of that capacity for Q3, we expect the system capacity to down 26% versus Q3, and 2019 are up about.

39% versus capacity flow in in Q2, we expect domestic capacity BB on about 20% versus Q3, 2019 and up 43% versus Q2.

Business travel, which was down over 90% versus 2019 for most of Q2 has inflected sharply in June and is currently down about 60% versus pre pandemic levels. We expect 2 more inflection 0.3 and business demand first at the end of the summer and second the new budget cycle beginning in January we expect business demand to <unk>.

Proved by the ended the third quarter to be down about 40% to 45% versus 2019.

A recent survey and business customers now indicate over 90% plan to return to travel, including international travel and the second half of 'twenty, 1 that is up from around 55% earlier this year.

On our last conference call, we talked about the fantastic. The fact that domestic yields for United will be positive this summer and that we still expect it to be.

We still expect that to be the case overall domestic yields are still likely to be slightly negative and the quarter due to business traffic slower recovery.

To give you some color on yields Q3, right now book domestic yields today are running ahead of 2019 that higher yield is also match with higher book load factors relative to 2019, we really set ourselves up from an RM perspective, very well international.

International demand is also recovering, but as we as we anticipated and a slower rate for.

For Q3, we expect international and capacity to be down 36% versus 2019 relative to down 53% and Q2.

The demand bounce back does differ considerably by cabin and by region and even within the region dependent on travel restrictions while business demand is down and we view special incentives to get our mileage plus members back on board with better access to Polaris seats via awards and upgrades.

Asia was the first region to be impacted by Covid and continues to be the slowest to recover the largest number of border restrictions. It will likely be 2023 at least until we see a normal scheduled to Asia and the meantime, our global network already includes new service to India and Africa to compensate for reduced Asian line.

Our European scheduled this summary is quickly ramping back up however, with continued restrictions on Europeans from entering the U S and on U S travelers from entering key countries and the in Europe, including the U K.

We anticipate that it'll be the spring of 2020.2 prior to resume and a normal schedule. We expect our summer Atlantic load factors to be around 70% in 2021.16 points lower than 2019 have to add that we think for summer 2022 across the Atlantic has the potential to be our best season ever with pent.

Up demand and eastern border restrictions.

We continue to see structural changes and global long haul flying that we believe will create tailwind for United as borders continue to open we expect to have 30 incremental wide body jets available to schedule and the summer of 2022 versus 2019, which is why our recent aircraft order. We are focused on narrow body aircrafts only we can.

Continue to operate our 767 and fleet, which we use just a few weeks ago to begin service to Croatia. The optimal planed for this type of emission.

Overall, we expect that our travelers for Q3 will be positive.

Premier members of the mileage plus program are rapidly returning to flying on United a great sign for 2022 businessmen year to date 3 quarters of our top premier members have already flown with us or have book to flight.

Of the Premier members that have not planned to flight yet our research shows that they tend to be flyer and focus largely on global long haul markets that simply have and opened up yet.

Many of our Premier members are also maintained and after the spend on 1 of our credit cards, increasing the level of program engagement and in 2021, among our top members to more than 90% on.

Chase co brand card programs are driving our June 2021, new accounts domestic sales and account retention metrics all exceed June 2019 figures.

And just wanted to also spend a few moments today talking about United next United and <unk> is simply our acceleration of many of our pre pandemic strategies.

And as a plan to close his short gaps and our commercial strategies customer focus and passenger amenities. Most importantly, our plan is for gauge to increase by 30% by 2026.50 seat RJ is allows United to growth scheduled depth as we built on mid con hubs, but it's now time to replace many of these jets with modern more fuel efficient.

730, Sevens, and <unk> hundred 20 ones and lowering our unit costs and increase in profits while at the same time, increasing and our product quality with amenities such as seatback entertainment at every seat and larger overhead bins and.

Most importantly, United next is not about increase and seat density and plains, reducing comfort lower and onboard amenities are reducing the number of first class our economy, plus extra legroom seats as others have done and in fact, our premium seat counts will increase by 75% and North America per departure by <unk>.

<unk> 26.

Versus 2019 and of course, that's aligned with the revenue potential of our United hubs, United and ex will allow us to differentiate and de commoditize, Our network segment, our products and put customers first but also maintain fair converted units with low cost competitors offer and a superior product we're.

We're excited to come out the other side of this tunnel and plan for and amazing and bright future.

Like to thank the entire United team for their efforts as well together, we've made and amazing difference with that I'll turn it over to Gerry and he'll talk about our financial results for Q2 and the outlook for Q3 Gary.

Thanks, Andrew Good morning, everyone.

For the second quarter of 2021, we reported a pretax losses of $600 million and and adjusted pre tax loss of $1.6 billion.

Our adjusted EBITDA margin for the second quarter ended down 10, 7% in line with our prior guidance with our adjusted EBITDA margin a positive 9% for the month of June.

Our adjusted operating expenses for the second quarter ended down 32% versus the second quarter of 2019, which was slightly worse than prior guidance of down 33%. The entire difference, though is attributable to greater fuel consumption and higher fuel prices as compared to what we anticipated when we.

Provided second quarter guidance.

All of our other costs came in as we expected, giving us continuing confidence and our ability to achieve our near term and long term cost targets.

As previously noted has the demand environment continues to improve we expect to generate positive adjusted pretax income and the month of July and fact, as we've said we expect to generate positive adjusted pre tax income for both the third quarter and fourth quarter of this year.

<unk> business and long haul international demand and not being fully recovered. We are pleased that our return to profitability is expected to occur well before our prior expectation and we anticipate another step function improvement once business and international demand until they return.

Turning to our outlook on cost.

We expect our third quarter CASM ex to be up approximately 17% versus the same period and 2019 with capacity down 26% versus 2019.

To put the CASM ex number and perspective, while capacity may be down 26%. We are not simply declined 26% less of the same network given our current.

Current international and domestic mix, where we are currently flying more short haul domestic flights and combined with the temporary grounding of our fleet of Pratt powered triple 7 wide body aircraft and this has created an incremental 6 point headwind to our CASM ex because of lower stage lengths and lower gauge versus 2019.

Our cost outlook. Additionally includes investments necessary for future flying such as training and maintenance costs.

On the positive side embedded in this outlook is also the early success from our $2 billion structural cost savings plan.

We expect CASM ex fuel.

Better represent our true cost performance once our capacity reverts back to 2019 level and when the network begins to be reshaped without United net plan and we achieved the full implementation of our cost initiatives.

We are currently and our 2022 planning process and we won't share details today, we feel confident that our 2022 CASM ex will be lower than 2019, we expect that our 2022 outlook demonstrates substantial progress towards hitting our long term term CASM ex target.

Of down, 4% and 2023 and down 8% and 2026 versus 2019.

In addition to the structural cost reductions, how United and next targets are enabled by our recently announced order for 270, new narrow body aircraft, which when added to our existing order book provide on with 500 narrow body aircraft on firm order.

We expect 191 of these aircraft to be delivered through the end of 2020.3.

And for those of you on the aircraft financing community. This includes 13.737, Max 8 through the remainder of this year 20, Max 8 and 20, Max Nines and 2022 and.

56, Max 816, Max 950, Max and and 16, <unk> hundred 21, Nicos and 2023.

Regarding capital expenditures. This year, we currently expect adjusted Capex for the full year to run about $4.5 billion.

This assumes we take delivery of all 8 and 787 Dash 10 aircraft scheduled for later this year.

With Boeing's recent announcement regarding delays and delivering 787. It is possible that some of these aircraft and the related Capex may slip into next year.

In closing our expectation for adjusted pretax profitability and both the third and first and fourth quarters represent a milestone at the entire United family has worked towards the beginning of the pandemic gone are the days of talking about empty aircraft cash burn and job losses, we have now shifted our focus.

It's fully towards the long term path for United Airlines, and the United and next plan, we believe our achievements throughout the crisis fully prepared us to execute on our plan to both maximize earnings power and the airline that customers choose to fly and with that I'll hand, it over to Kristina to start the Q&A.

Gary will now take analyst questions. Please limit yourself to 1 question if needed 1 follow up question Brandon. Please describe the procedure to ask a question.

Thanks for taking other question and answer session will be conducted electronically if you'd like to ask a question. Please press star followed by 1 on your touched on Poland, if you'd like to be removed from the queue. Please present on site.

Your line or the hedge.

If youre using a speakerphone. Please thank you for your mute function is turned off without your signals for which our equipment. Once again, if you'd like to ask a question. Please press star 1 on your phone.

Please hold for a moment, while we use similar.

And from Raymond James We have Savi. Please.

Please go ahead.

Hey, good morning, everyone.

On your <unk> revenue guidance is very strong and both relative to Q2 and compared to 1 of your peers. I was wondering what factors are driving that strengthen and.

Assumptions Youre building and for that business demand recovery.

Hi, Savi, it's Andrew good morning.

What I'd say about our guide is that and.

And I've said this I think over the last few conference calls that in particular, our coastal hubs are really <unk>.

During the pandemic traffic was down and those hubs a lot more than mid cons and small community, our mid con hubs and small communities around the country.

And we really see an acceleration and demand now out of those hubs.

And leisure and business for business for domestic in particular, which is really great to see and it goes to say again that those headwinds which were so significant during the crisis are going to flip to tailwind for United and provide us I think a lot of opportunity kind of going forward a little more color for exam.

Paul Newark, and Q2 of the here and it was really our worst performing revenue hub and we expect Newark, and Q3 to be 1 of our best to give you to give me a little bit more color on what we're seeing there. So there's a lot more to come I think I'm really excited about this because these headwinds were just so significant during the <unk>.

Rice's and I think there'll be <unk>.

<unk> as we come out of the crisis.

And then just a follow up to just it seems like you did.

And then a Joseph also add.

And kind of tilting towards leisure and VFR.

Lately, maybe not at some other airlines.

Just wondering what mix of those new markets and Orca.

Pasty.

Remain on as and statements normalize and.

We really try and understand if there's an opportunity here and it changed the seasonality of the network.

Excellent question and thank you for the vote of confidence there I'm sure our schedule and Thats really appreciate it and we did as I would say tilt our capacity towards more leisure oriented markets during the crisis and we continue to do so.

And we will do so for at least the rest of this year and.

And tilt and others ASM towards more leisure oriented markets I think has helped us during this recovery.

To the extent, we did that better than others, I think our revenue forecast will be better than others and.

So we're pretty proud of that we do intend to keep a bigger footprint and these leisure markets going forward, and particular, Florida, where United was undersized and that undersized and had led to Q1 results.

For United that.

Seasonally trail, others, and we're hopeful that.

On the other side of this crisis and rebuild the airline and we rebuild the network, we're going to build it better.

And we're going to be a bigger player in the leisure oriented markets and the Q1 time period than we have historically been.

And from Bank of America, we have Andrew <unk>. Please go ahead.

Hi, Good morning, everyone, just really kind of a follow on to <unk> question on on revenues, maybe up and you can maybe talk about how.

The booking curve.

<unk> over the course of <unk> now and into <unk> I would assume you have a lot more visibility today in terms of your <unk> revenue outlook compared to back and back in April and is there any color you can maybe give us in terms of what percentage of your anticipated <unk> revenues are already booked right now and how that compares to normal periods.

Sure everything is starting to return to normal which is great to see so right now about 60% of our revenue for Q3 is on the books.

And we have obviously I think really good visibility and July and August and in particular, I'd say August looks really.

Quite good.

In September we have less visibility into but.

But we still feel very bullish about that.

Business traffic returned so overall things are returning to normal.

Booking curve is and exactly normal yet, but it is quickly getting there.

Particularly from the domestic point of view.

So hopefully that takes share your question, but again about 16% is booked and I'll also add.

We do expect positive PRASM.

And all 3 months for the domestic entity.

For the quarter.

Got it that's all.

Helpful and.

And then maybe Jerry you called out the CASM impact from the stage and gauge differential here and.

Re queue on the 6 points and should we think about that a similar impact on <unk> as well.

Yes.

Stage and and and.

<unk>, obviously impact all of those staff.

So there is going to be some impact as well on travel.

And I'll add there is you.

You bet.

And the dilemma, we face from a capacity point of view is the triple 7 aircraft that are grounded on our large capacity domestic movers and we use those for Hawaii and hub to hub and so right now we're.

And we're flying well below where we'd like to be in Hawaii, and it goes without saying that Hawaii and incredibly strong part of our network and so we would have absorbed that and I think we would have still done very well and Hawaii, even with those extra seats and we're really disappointed they are missing.

And then domestically within the continental United States on the hub to hub missions.

Where our load factors are just off the charts.

For the simple way to describe it is like clogging the system, because we don't have enough engaged between our hubs.

And to flow the appropriate number of passengers over them. So we really want those aircraft back and we think those aircrafts are really important to our CASM, but he also unlock at least right now and Hawaii better results and the unlocked a lot more connect and traffic through our domestic system.

And hopefully that gives you color as to how we think it impacts CASM as well as travel.

And from Jpmorgan, we have Jamie Baker. Please go ahead. Please go ahead.

Hey, good morning, everybody on so Scott and kind of a follow up to a question I ask you in New York.

Event couple of weeks ago noted that bad things seem to happen and the industry every 10 years or so.

So as it relates to the 2026th guide it looks like we're probably in the clear.

Anyhow.

Definitely and glass half full perspective.

Yeah.

So you have these financial targets.

You have your largest aircraft order and history.

We do hit some sort of a speed bump do you sacrifice the targets.

Or do you adjust the capex and the delivery schedule basically is the order book Sacred.

Or is it a lever you can pull to protect the financial targets just trying to better understand the priority there.

Well I'll actually let Jerry start.

Hey.

Yeah, Jamie Yeah, as we said at that.

Event.

And certainly starting in 2024.

We have enough flexibility and the order book to be able to.

And just based on what the macro environment with dictate.

So and Thats a decision we can make as we approach for later years of it.

Yeah.

And I'd just add also that we.

And I think we've created a track record and is certainly true that.

We are committed to target and we put targets out there we're committed.

And to achieving those targets and we're going to achieve our 2023 and 2026 targets.

And if that requires adjustments and the plan 1 way or in other we'll make adjustments to make sure that we achieve those targets.

And Jamie you know 1 of the nice things about.

This order as well as our fleet that has.

Some aircraft as you know that our aging simply replacing those aircraft and not doing anything else helps us with gauge, which helps us with those targets.

Hmm.

Okay. That's helpful. Thank you both and then just a bit of a modeling question. You know there wasn't a huge change in fuel efficiency, just looking at ASM per gallon from the first quarter and second quarter, I mean, a little bit of and improvement but.

With more international turning on and the current quarter can you can you give us some consumption guidance fourth quarter as well if you happen to have it.

Yeah.

Okay.

Jim and I'm sure I can give you a precise number right now, but keep in mind, just given the mix with a higher proportion of regional flying by definition as.

And then wide bodies come back and become a.

Revert back to normal that will help fuel efficiency.

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

Good morning, everyone and thanks for the time.

And so maybe 1 more on cost as we move to unit cost being down for 2019 levels next year.

Outside of capacity what are the other talent there should be thinking about I know you called out the 6 point impact from gauge and the triple 7 grounding, but but outside of that or are there. Some ramp up headwinds today that we should think about it abating as we move into the fourth quarter, and 2022 and and just any color on the size of that impact.

I think the most significant tailwind actually aside from.

On gauge and stage length kind of reverting back is the ramp up of the structural cost savings.

So.

If you want to model something right now and we'll give you some more color.

As we finalize and 22, but right now you could model that about half of those savings are and our numbers for the rest of this year and then starting in 2020 too early and the year first quarter lets say thats, 80% ramp ramping up to 100% by mid year. So that's probably the most significant tailwind I can.

And think of.

As we can.

Normalized for the business.

Okay, Great that's really helpful and then.

And then 1 maybe for Andrew.

Throwing it back to 2020 and February 2020, when you've got the Chase expansion you entered into I believe at the time and the announcement, you noted and drive $400 million increase and annual cash and and we are about to get some more details on that and then COVID-19 hit so we didn't really.

And remember getting a timeframe for when you would have thought.

And I'm guessing the pandemic, maybe hit pause on the ramp up but can you just give us some color on on what portion of that uplift.

Seen flow through your P&L today, and how you expect that to try and over the next year or 2.

Yeah, it's definitely everything's been inter.

Interrupted by the pandemic, although we have seen recently, where our numbers are now equal to or greater than 2019, So we're ready.

And excited about that and our new agreement.

With Chase, who is effective then and it's impacted and are everything we do here and our financials already.

But the real I think the real <unk>.

Value and this is our working relationship with Chase is just incredibly good right now and we're coming up at all creative ideas.

New products and Thats fueling the card growth and the new number of cards, we're putting out there and spend on the historic cards.

So that's maybe not every answer to the best new you'd like here, but what I would say is that the relationship is going well, which gives me great faith that we're going to hit the targets and we put out there I don't have the exact timeline as to when that will happen. It was clearly interrupted by the pandemic, but we're back on course.

From Jefferies. We have <unk> Hello. Please go ahead.

Hey, good morning, everyone and thank you.

And then maybe it seems like capacity additions are coming back at a faster rate and I appreciate it and coastal hubs can you maybe provide a little bit and my color around CASM ex allowed 2019 and 2022, what are your assumptions around capacity and maybe mix of international and domestic.

So it's still a little early to give you the capacity guidance, we'll do that on a normal course, but I can tell you just given the size of the free.

As it stands today, we expect 2022 capacity to be higher than 2019, but we'll give you more precise numbers and the normal course.

No Gary.

Alright.

Gary is going to add I think with the incremental wide body jets that we have.

<unk>, along with our expectation about what the Trans Atlantic market is going to look like next year. It wouldn't shock me that we see international growth.

Faster than domestic growth for free.

For next summer.

Yeah, and I guess on that note somewhat related to that big picture.

You mentioned in your prepared remarks on the international value Youre..1 other carriers that have kept your wide body is going for that.

And that supply demand picture might look more attractive as international comes back for domestically and what we're seeing as low cost carriers are doubling their fleet or expanding that pretty substantially as you guys are too and.

And increase and gauge how do you think the supply demand picture plays out.

2026, how do you think United is positioned with that.

Well.

And I'll just go back to our United next plan, where I think we thoughtfully talked about all.

All the details there we are working to make sure that we build our connectivity are scheduled depth.

And most importantly archeage.

And we think those factors along of course with our customer focus are really going to drive our profitability and really unique ways relative to many of our competitors over the next few years and our industry, where we absolutely expect elevated domestic capacity growth.

For everybody over the next few years, so we feel really good that we've.

Identify this we've articulated a way to manage it here at United together from a revenue and a cost perspective, and a customer perspective to make sure that we can meet the targets that as Scott laid out and New York, a few weeks ago and he laid out and just a few minutes ago here.

Uh huh.

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

Hey, good morning.

Do you think that investors Scott you just ratchet down.

Permanent expectations for pricing power for this industry.

No.

Why or why not I mean, it's.

And it's so clear that the market puts multiples on industries that.

And price and the decision to deflate pricing and outrun it with lower CASM.

I, just it's hard to and it's hard to see why that makes sense. When it is such a clear track record for on the synergy works is when they're pushing price and look at what you just did right now with the yield performance and not suggesting you are going to be down 25% forever, but I'm sure it was pretty satisfying and be able to push that price.

Well first I disagree with the premise of the question.

Okay.

And look at 100 and.

I recognize that you've got a perspective.

We respect that.

But.

We had a pretty good track record in 2018.2019, I think it was your research report pointed out we grew EPS by 74%.

This is an and.

And a large degree a continuation of the strategy is working well with the improvement I think that.

We're really focused on de commoditize, the air travel and getting customer choice.

For more than growth, but even to 2018.2019 plan was working.

Is it your research report it seems like the best evidence that we can do this without this inflating I think was the term you used.

I'm confident that we're going to do that I'm, particularly confident that when you take the mix of what the international market is going to look like and the percentage of our revenues.

Combined with I think our ability to de commoditize travel domestically.

That are our targets for 2023, 2 and 26 are arguably conservative and.

And that's going to ultimately be good for our shareholders.

Okay. Yeah. Thanks for the time, Scott I don't want to be disrespectful here I appreciate the conversation.

A quick modeling question for you too I have Jerry should we assume that the S. W. B CASM is going to be in 'twenty, 2 and 'twenty 3 above or below 2019 be willing to help us out with that.

I'll follow up offline Hunter.

Okay Alright.

Alright. Thanks.

Alright, and then we will get to those numbers.

Okay.

From Cowen and company, we have Helane Becker. Please go ahead.

Oh, thanks, very much operator, hi, everybody and thank you very much for your time.

On.

So kind of a different question and.

You have and open contract with your pilots and I know you have for letter agreement.

To agree to the differential so that you're able to ramp that up as the recovery occurs can you just talk about how youre thinking about entering those negotiations again and.

Don't know, whether it's 2021 or 2022, but when should we think about that contract again.

Idling spread higher and how you're doing.

Book.

I think for the.

Underlying.

And your question also points out that we obviously and we've had a really good working relationship with our pilot throughout the pandemic.

And in hand with them.

And at the end of the day and we are confident that will be.

To get to an agreement.

It would be more on the work for our pilots and for the overall company, but as you can I'm sure appreciate.

And we don't get into discussing the specifics.

Our.

Discussions and negotiations or on the timeframe for reaching agreements.

Public or on earnings calls, but I appreciate the question.

Okay. That's helpful. Thank you.

Just the other question is as we think about the improvements that you're talking about any efficiency and.

<unk> for Gerry.

How should we think about it like working through the next 2 and a half.

Or are you just kind of give us guidance every quarter for.

How we should think about those efficiencies.

Number beyond -4% in 2020, 3 that we'll be able to mark too.

Yes.

And that's really.

Yes.

Part of the $2 billion.

Structural cost savings and.

And as I said earlier.

And next summer.

I would expect 100% of those and the numbers and then.

We will continue and we will continue to provide.

Provide guidance keep in mind.

On.

Those are those structural savings include savings that will continue to grow as we grow the airline.

So.

It will come out through our continuing CASM guidance over the next few years.

Yeah.

From Evercore ISI, we have Duane <unk>.

Please go ahead.

Hey, Thanks, guys I really appreciate the time.

Just a couple for me on cargo and Andrew I think you said on <unk>.

No more dedicated freighters.

And I assume this is just a function of passenger demand coming back, but maybe you could just expand on that.

And if we if we think about sort of your cargo capacity in total.

And maybe no more freighters, but but but more.

You no longer haul flights coming back how do you think youre about your cargo capacity and total.

Sure.

Correct, we are not going to be able to do more cargo only flights. We're obviously disappointed by that.

And given where yields currently stand.

The reason for that is the aircraft can be better deployed and.

And passenger markets. However, many of those passenger markets are also not exactly optimal cargo markets. They do have cargo, but theyre not optimal cargo markets.

<unk> 52, Triple Sevens that are grounded means we just have less flexibility on this front and we would otherwise have if those aircraft for fly and we clearly would continue on.

Michigan's because we'd have the ability to do both so then when we when we look at capacity available to fly it still really significant as we put all these passenger planes back on the air and we think we've got this properly accounted for and our forecast and we think we're going to have another great cargo quarter, and Q3, and it's already got enough.

To a really good start that being said you know it's going to be different in the amount of the all cargo flights. So but I would tell you at all and we don't really disclose details, but all the numbers are in there and.

Really we can do a little better on cargo than we are currently planning.

But there is a marked change and our cargo footprint starting today are really starting in a few weeks ago obviously.

And we will see where it goes but we will.

Still very bullish on cargo for the remain and half of this year.

And that's that's Super helpful and I'm just just for my follow up on the on scope scope is something that United talked a lot about in the past, obviously and the recent investor update.

You talked about big up gauge for from 50 theaters, you know but.

But I have to think you know just thinking about high frequency with 50, seaters going fully to mainline maybe that implies less frequency I happen to think there are many more markets, where 70 or 76 seater would be optimal.

How should we be interpreting a kind of a lack of commentary around scope and is it something you know maybe longer term maybe beyond the forecast period that you offered that you think still makes sense.

Book to be clear.

And when we induct, a Max 10, or an <unk> hundred 21, Neo it's not replacement of 50 seat RJ route for route Theres, a cascade that starts at the top that goes all of us down and so 50 Tito routes today will off and go to 76 seater route and the new United next vision. So just just be just the economics of that are a little bit.

And different than maybe you described I'm not 100% sure but.

And we still will do that as we look at our fleet counts and hubs and schedule depth. It is not our intention to reduce service to smaller communities in the United and explain and we've laid this out in great detail that being said, it's also really knock and increase our scheduled depth our size and smaller.

Communities, either we're going to grow by a gauge, which we think is the right way to do it given where our hubs stand, particularly our mid continent hubs, where again most of the growth is gauge here is a little bit of frequency, but most of the growth is gauge.

So hopefully that helps answer the question.

Okay.

From UBS, we have Myles Walton. Please go ahead.

Thanks, Good morning.

And sufficient follow up to <unk> question, you guys, but I'm curious Scott and if you've thought about perhaps using a return on invested capital and efficiency metric to go alongside your pre tax margin and your pre tax income for.

Financial metrics, which govern your long term incentive schemes as a way to sort of answer the question around the efficiency of assets being put on to utilization.

Hey, it's Gerry.

We always look at.

And the return on.

Investments, we want to make and kind of a rule of thumb is kind of mid teens.

To justify making those investments so that's always part of the equation, but I do think at the end of the day.

Pre tax ultimately is the.

And the best way to look at things.

The other components of it just all go into that but we do look at.

Returns on investments, we're making.

Okay.

Okay, but not in the formal incentive scheme, just pretax income as the governing metric.

I think and it's just the 1 that best reflects how well we are we expect to do.

Hey, Mike This is Mike less can and.

I would just add that even if you think about replacing and some of the older aircraft with with new technology to look at the <unk> 77 for the 707 Max aircraft.

Even in that scenario youre getting a mid teen return on invested capital and.

So the return on invested capital the gating item.

Diving pretax margin, but <unk> are well well ahead of our weighted average cost of capital and and.

As a hurdle.

And from Bernstein, We have David Vernon. Please go ahead.

Hey, good morning, guys. Thanks for taking the time so.

So Scott I wanted to talk kind of at a high level here about how investors should think about the upside you see in and de Commoditize and travel you know, we got a little pushback that but this is just.

A buzzword and if you will I'm just wondering if you can and.

Can talk about how much whether this is just about our revenue premium that you can earn for having higher price seats on the departure and if so if there's a way to think about that relative to kind of maybe the revenue you might have earned without the strategy.

And also if you could talk a little bit about whether this is also about limiting how much of the inventory that you put out and the market is actually exposed to low cost competition on a day to day basis, and how that might be changing over the next couple of years as you implement this united and that strategy.

Well I'll start and Andrew can add on and do you want.

On the point about the Commoditizing air travel.

Yes, it's hard to put a precise quantification on it.

Today, but I think customers do care about quality and do care about product if you get on airplanes and talk to customers or just watch airplanes and.

People flying I think that is.

And and escape for conclusion, there's at least 1 airline and the U S that are embarking on this a decade ago and it was quite successful.

And Theres certainly room for 2 of us and the United States, the largest travel market and the country for 2 of us to pursue that strategy and.

Frankly, United has I think the most opportunity because we're in the book our hubs happened to be and the biggest premium market.

And where our 7 hubs are and and so on.

I think theres more upside for us and there is.

For anyone to pursue the strategy and so I don't know for sure how much that.

Turns into in terms of a revenue premium or growth that rat and rather and it's faster than rest of the industry because it's not as easy to quantify some of the work that we do.

But confident that it will.

With the strong results for United.

Yeah, the only thing I would add is.

Fly and approximately 300 single class 50 theaters with no premium products on board. It all up against competitors that add premium products is it just a step change function for United as we take that number down we already saw with the introduction of the <unk> $5.50, which is our 50 seat and do.

Class aircraft really great progress prior to the pandemic on being able to monetize those premium seats, we see our competitors do it all day long and we're simply under represented in this category.

And flying the wrong aircraft into big cities with no premium seats and by the way our hubs have a lot of premium demand.

And we just under index to it and that was wrong and we're gonna corrected and we're going to correct. It really quickly.

From Stifel, We have Joseph de Nardi. Please go ahead.

Thanks, Good morning.

Scott or Gerry can you talk about capex needs on on the wide body side, when do you need to address that with an order and when does the delivery start do you think and and then based on that and what year do you see yourselves getting below $7 billion and Capex.

Actually I'm looking at Andrew who is always going to ask me for aircraft, but.

Keep in mind.

Over the last few years, we've taken.

Some on wide body aircraft, we haven't retired and we have a lot of wide body aircraft, Andrew has talked about that and so the focus right now.

And is really on the narrow bodies and.

Andrew can provide some color, but I can tell you that.

Hum.

It really depends on.

Both the speed of recovery throughout the world and.

And the opportunities that Andrew and his team.

Yes, Jerry I will just add.

I think I've said, but to sell reiterated that.

And because we took delivery of a large number of wide body aircraft.

Are we ordered some bright prior to the pandemic those aircrafts are coming online over the next 12 months and we will have available.

Available to schedule up to 30 incremental widebody jets for the summer of 2022, so that really does provide a lot of growth and possibly for a number of years dependent on market conditions. So we'll watch it carefully the second thing that I said, a few weeks ago that I'll say again is we're carefully looking at.

The lifespan and the economic lifespan of these wide body jets.

And I can tell you prior to the pandemic, we were thinking and many of them, particularly the triple 7 and 767 fleet could go 30 years or more.

And I'll give kudos to our maintenance team for keeping these aircraft and great shape.

To allow us to have that optionality. So we do have optionality to fly these aircraft longer than I think people automatically assume and.

And then the other last thing I'll add is the interiors on all of these aircrafts, including the older ones. We just been describing have been recently a retrofitted we've completed our entire triple 7 fleet and we're close to completing the 767 fleet with brand new interiors from nose to tail to give a great great customer experience on board.

So with that we have a lot of incremental wide bodies that have just arrived and we have a lot of brand new aircraft on the inside that have a long lifespan left and so we have a lot of optionality and to the extent and we want to grow it will be because we have growth opportunities, but we'll monitor for that over the next few years. So that's a lot more details than you probably wanted.

But that and kind of explained where we are from a widebody point of view and I'll, just add and yes, it's fairly straightforward analysis.

To justify that growth that goes back to the financial targets that we just talked about.

That they need to demonstrate that we can hit those those returns.

And which they do.

Per basis.

And I'll add 1 more because.

Sales so passionate about this point the retention of the 767.3 hundreds I think gives us and any other airline that has done that a structural competitive advantage. These aircraft between their size and trip costs CASM and passenger comfort are really amazing machines.

And they enabled as I said earlier this new route to Croatia, and many new routes that were talking about that could otherwise I don't think be flown over the next few years profitably.

Okay.

There's 2025 Capex come back down to the $3 billion to $4 billion range or is it still elevated and then Scott.

You talked I think last call or the call before about doubling loyalty EBITDA and havent heard much on that is that like an aspirational goal that we should kind of discount significantly what are the what are the drivers behind being able to do that thank you.

While it is our goal.

I wouldn't discount it because I think we're going to do it.

But you can choose to if you want and this is 1 of those that until we have something to announce its another 1 of those that were not going to have something to announce until we have something to announce though I saw the team.

Beating earlier this morning on it and they're looking for me later today to get an update so we are doing and theres a lot of activity on it but we're not going to have anything to say publicly and.

Until we are ready to make probably a big announcement.

And hey on Capex, it's too early to really give capex projections for beyond 2023.

Yeah.

Okay.

We will now take questions from the media at this time, if you have a star if you ask a question. Please press star 1 on your Touchtone phone.

Antibody for questions from the media.

Okay.

And please hold for a moment, while we get a simple Archie.

Yeah.

Okay.

Okay from Wall Street Journal, we have Alison Sider. Please go ahead.

Hi.

Regarding your conversations with the government about lists lifting travel restrictions and is there anything on that the administration is asking for from airlines and in terms of contact tracing.

Extending them ask mandate or.

Yeah, and checking vaccine status is there anything that you will have to do it.

And as part of an agreement to lift those restrictions eventually.

Hey Ali.

We are working closely with the government and.

And it's a 2 way conversation, where they're getting input from us.

And for them all of us want to make sure we do this safely.

And confidently.

That when people get back to flying it's not only saves that people feel confident.

And the safety and we certainly haven't advocated for any of those specific policies, but its the government brought those things forward. We've indicated a willingness for example with the.

Vaccine requirements, which are happening and much of the world already.

And as uniquely our digital team has done a pretty amazing job.

Creating and automated way for customers to upload that information and I think it's easier on United.

Deal with vaccine requirements around the world and any airline and the world. So we're doing those kinds of things and we're very open to any requirements that they have but look forward to working with the administration to get it back open.

Got it thanks.

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

Hi, Thanks for the time today on this.

Question is maybe for Andrew or Scott, but it goes back to Scott's comment at the top of the call on.

The Delta variant any impact probably being short and and people are confident and the rebound I'm curious like as far as your your business. Today is this a lot of people who are.

And repeat customers and flying quite a bit compared to during the pandemic or are you seeing people come back who may not have flown since 2018 or 2019, I'm just curious about the mix of who's flying today and and your confidence about those.

And those habits, continuing even if the pandemic takes another turn.

Sure Good morning, Justin.

And we track this pretty carefully, particularly from a mileage plus point of view and particularly from the Premier population and mileage plus and what we can tell you is that while the penetration of mileage plus on the aircraft is still below our historic norms by about 7 or 8 points.

We see that number again and strength each month.

And more and more customers are coming back and our premier members are back to fly and again and using our credit card and the ones that aren't are because they only general flight global long haul and.

And those particular borders are closed or difficult to get into so we do see this return to normal for all the things we look at the other thing I would tell you is as.

And we've kind of gone through this crisis headlines have drove and driven.

Cancellation and no show factors higher.

And I can assure you right now our no show and cancellation factors.

Our completely normal we've seen no change and them over the last few weeks and they are basically.

Slightly above 2019 levels, which they have been for quite some time. So we don't see any any change of course.

I'm, not saying exactly whats going to happened and the future, but I can just tell you right now things look good and we do look like for like demand is recovering and maintain and a strong recovery even with the negative headlines.

Okay. Thanks for the help.

And for writers and we have 3 key results Keith. Please go ahead.

Hi, all.

Also wanted to go back to Scott's comments at the top of the call.

And that you mentioned a potential temporary reopening pulled back can you be more specific on what that pulled back could look like and where and what kinds of scenarios.

Preparing for from a demand perspective.

Well I don't know what it would look like I think it would be something you know gov.

Government related.

There were some new rules or recommendations, which I don't think that which I think is unlikely and I think the most logical and likely outcome is that we largely continue unabated, but if something did happen and we've had a history going really all the way back for the last weekend and February of 2020.

Of reacting quickly realistically nimbly.

And we put a team together last year to deal with kind of the shutdown and March of last year.

That team and has not been disbanded that Steve and continue to exist for.

For managing the vagaries and the ups and downs, because we've known all along that there's going to be ups and downs and theres going to be ups and downs between now and the time that enough for the world and vaccinated this really.

Receipts into the background, which we look forward to but.

There will be ups and downs and we're prepared to deal with whatever those are knowing that we can't precisely forecast exactly what the ups and downs are going to be.

Hey, Gary and I might just add.

So yes, 1 of the things, we learned and the pandemic was the need to be able to be flexible financially.

So as we've begun to invest money and we also build on and off ramps and case, we have 2 bank and 1 direction or the other.

What are you hearing from your corporate from corporations in terms of there.

And the opening plans there where we print yesterday for example that Apple is delaying its return to office by online.

Hi, it's Andrew.

And I did read that and the newspaper overall, we're here and we.

Return to this new normal as the end of the summer occurs and September obviously, some may come back in October or even November, but we're anticipating a return to normalcy and therefore, we're also anticipate and step up and business travel and.

And in September and then once again in January when the new budget season start we've already seen for example, our advanced business bookings for September are now only down I think about 50% and we expect that number to continue to get better and finished the month at around $40 to 45% down.

Based on where we are right now.

Thank you I will now turn it back to Christina <unk> for closing remarks.

And remind everyone here in Chicago, Thanks for joining the call today, Please contact Investor Relations for media Relations. If you have any further questions and we look forward to tuck in and.

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

[music].

Good morning, and welcome to United Airlines Holdings' Earnings Conference call for the second quarter, 2020, 1 and my name is Brandon and I'll be your conference facilitator today. Following the initial remarks for management and we will open the lines for questions.

And at that time, if you ask a question. Please press star followed by 1 on you touched on.

This call is being recorded and is copyrighted. Please note that no portion of the call maybe 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 and I will.

And I'll turn the presentation over to your host for today's call Christina on bureaus director of Investor Relations. Please go ahead.

Thanks, Brandon Good morning, everyone and welcome to United Second quarter, 2021 and earnings conference call yesterday, we issued our earnings release, which is available on our website at IR day at United Dot Com information in yesterday's release and the 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 refer to our earnings release form 10-K, and thank you and other reports filed with SEC for United Airlines Holdings, and United Airlines for more thorough description of these factors also during the course of our call.

And Vice President and Chief Financial Officer, Jerry Letterman and edition, we have other members of the executive team on the line available to assist with Q&A and now I'd like to turn the call over to Scott. Thanks, Christina Good morning, everyone and thanks for joining US today. It was great to see many of you in person at our United and the next event last month, and New York and personally it's been great to be back out on the road.

During the quarter talking to employees and customers and hearing anecdote after anecdotes about how great. It is to be back traveling. Thank you also to all the people of United Airlines for all that they did to take care of our customers and each other through the crisis and for all that they're doing now to really and truly change the customer experience non airlines.

Before I really began I thought I'd take a moment to address for the most talked about issue among airline investors recently the Delta area.

As Youll hear from our bullishness today, we haven't seen any impact at all on bookings, which continue to just get stronger and stronger every week, but of course that is backwards looking data.

And we've worked hard to protect that operational flexibility and fact, it's part of why we haven't had the same mass crude cancellation challenges that our competitors and space as we ramped our schedule over the last couple of months that all said, we think the most likely outcome is that the continued recovery and demand continues largely unabated.

That's the most likely and logical outcome, because the evidence and overwhelming that someone who's vaccinated is highly protected against severe disease hospitalization and death.

And the.

And the unvaccinated still face and elevated risk of serious illness and death from COVID-19, and fact recent reporting so is at over 97% of hospitalization or per unvaccinated people, which implies that you are about 50 times more likely to wind up and the hospital for Covid, if youre and vaccinated.

But the on vaccinated are also a smaller and shrinking percentage of the general population and an even smaller minority among the most vulnerable groups and for United Airlines, specifically, our customer surveys at the end of June also revealed that 84% of our mileage plus members were already fully vaccinated and so while we expect case.

Sales to rise given.

And given the vaccination rates.

They will still remain well below the peaks and hospitalizations and deaths will not rise nearly as much that leads and the logical outcome that the reopening continues on track and acknowledged that shutting down our continuing the reopening also has a political dimension to it and that's a lot harder to predict and so it's possible we will have a temporary pullback and the.

Reopening, but given the data science around vaccines that seems like a lower probability outcome and regardless it will be temporary even if it does happen.

Turning now back to our results Jerry and Andrew will provide a lot more detail, but if I was going to briefly summarize where things stand right now I'd say the demand is recovering even faster and we would hope domestically, both leisure and business demand and internationally. We see the exact same pattern every time, new borders reopened and while the U S isn't yet open to you.

European and the data and science, including the demonstrated safety of air travel similar vaccination and case rates and similar level of variance in Europe, and the U S support and opening and we expect it to happen at some point and when the borders do open we expect to see the same robust hockey stick increase and demand that we've already seen domestically.

And United The next event last month.

Today with the robust demand trends that we see and a return to profitability. We don't just see the light at the end of the tunnel and we're exiting the tunnel and we're focused on up gauging, our hubs significantly improving the product and de Commoditizing air travel by transforming our customers onboard experience.

This opportunity is unique to United and it's why we're so confident and our 2023 and 2026 financial targets as we exited the tunnel Theres still a steep hill to climb to get back to and then exceed our pre COVID-19 margins, but we also had some important upcoming tailwind that will benefit united more than others.

And our coastal hubs and our decision which stands alone among network large network carriers not to retire wide body aircrafts means that we're ready to capture the pent up demand for long haul international travel and second our opportunity to up gauge our fleet. While also driving increased connectivity as part of United next music and accelerate the margin improvements.

We saw from investments and the midcon hubs and 2018 and 19.

And of course, our confidence and United future is also fueled by the incredible performance and the United team.

Even in the midst of a global pandemic, our NPS score rocketed up 30 points year over year, and our 50 point year over year improvement and the J D. Power survey was the largest of any U S airline this.

And this customer centric service culture, and the influx of nearly 500, new aircrafts, along with an unprecedented retrofit of our existing narrow bodies will transform our customers experience. It will also Austria and an incredible new post pandemic era for United and customers employees and shareholders, creating a new era, driven by innovation that make the travel experience better.

And I'm really proud of the work team did and the second quarter to innovate with customers and our employees and with that I'll turn it to breath.

Thanks, Scott I want to start by congratulating the entire United family on our expected return to profitability and the second half of this year.

The United team has worked towards this milestone of achieving positive adjusted pre tax income for over a year and we could not be more proud.

And May we announced a first of its current collaboration to use Abbott's COVID-19 home test.

And app to enable our customers and self administer a rapid antigen tests and use the verified negative test result to board and international flights to the United States as borders continue to open and we're working to make the return to international travel as convenient as possible for our customers.

These initiatives make us uniquely ready to facilitate international travel and further.

Position us as the leading international airline and the U S and addition.

We recently launched our your shot to fly sweepstakes working effectively with the federal government to creatively encourage people to get vaccinated and ultimately get back on planes again.

We feel optimistic from the recent progress among European countries, allowing us to enter the various effects to enter with various vaccine and testing requirements countries, such as Iceland, Croatia, Greece, Italy, France, and Spain have all begun and accepting U S travelers for the summer tourist season.

And we look forward to more destination of options for our customers and the coming months and.

We continue to encourage by the administration to open up international travel and appreciate bipartisan as well as industry support and he's international travel restrictions.

And Andrew will detail further the demand surge as we've seen and countries. Once restrictions are loosened and gives us even greater confidence regarding the long term outlook for international travel.

On the domestic side nearly all states have reopened local economies and removed travel restrictions and enabling the surge and domestic leisure travel for currently see.

We remain focused on United transformation and be the airline customers choose to fly we have already eliminated change fees and with our new aircraft order, we will improve the customer experience, we're adding seatback entertainment all of our aircraft improving Wi Fi and innovating and customer revenue technology license sales by connection safer we saved over 1.

$140 and connections and the second quarter.

Moving from Washington D. C continues to be a focal point for United We are encouraged by the bipartisan efforts to make needed investments and our nation's infrastructure infrastructure.

Infrastructure is the backbone of our economy and it must be robust sustainable and resilience to meet the needs of today and tomorrow.

We support and modernizing our nation's air traffic control system and advancing sustainable aviation fuel is important and aviation and infrastructure investments that also reduce industry admissions.

Moving on to other highlights within our global network at United We continue to be a proud partner for our communities throughout the quarter, we expanded efforts to support those impacted by COVID-19 prices and India United remains the only U S carrier.

On the distinction we hold per day, and help transport more than 300000 pounds and critical medical supplies to the regenerate and.

Additionally, and launched a fund raising effort to enable our customers to donate to partners.

And the quarter, we announced and new initiatives with multiple partners to advance our sustainable goals across the United States. These partnerships cover a range of sustainable initiatives, including de carbonization sustainable aviation fuel and sustainable agriculture.

During the quarter, we also announced a new order with boom supersonic for the overture. The first large commercial aircraft optimized and run on 100% sustainable aviation fuel.

We also announced our latest investment under United Airlines, and ventures, and hard aerospace and electric aircraft startup developing.

Aircraft that has the potential for fly customers up to 250 miles before the end of this decade and.

And I think continues to lead the industry with a multi pronged approach to our commitment to reducing our greenhouse gas emissions by 100% by 2050 without relying on traditional offsets and we look forward to more to come on this front and.

And with that I will turn it over to Andrew.

Thanks, Brett I'm going to start off today, but I think and the best commercial team and the business our combined efforts and agility over the last 18 months led us to this moment today announcing a generally positive trials and PRASM and yield outlook for the second half of 2021, something hard to imagine just 12 months ago. The revenue outlook has allowed for a much improved.

Proved and profitable financial results on an adjusted pre tax basis for the second half of the year and Jerry I'll talk about that and just a bit.

On a realistic view of the pandemic impact on our business and industry with sometimes questioned however, our realistic assessment from day, 1 combined with capacity correspond into real demand not what we hoped demand would be for the keys and prepared us for what comes next.

We will let FX guide us the entire way and I'm pleased to report today that <unk> point to a strong recovery of our business across all segments as Scott said, we're coming out of the tunnel. We now have a clearer path not only to profitability and the near term, but a path to higher long term margins, even in an environment with elevated industry domestic capacity.

During the crisis, we are pleased with our trials and performance and and the second quarter, our trades and was down 11% versus 2019.

Our performance in Q2, as well ahead of our original guidance, but largely consistent with our updated mid quarter expectations International long haul demand business demand and yields just improve faster than expected 3 months ago, we still face significant headwinds for the second half with orders being closed and business traffic not fully back.

But ultimately we expect these headwinds will transition to town.

With long haul passenger demand.

Now increase and we will see most of these cargo only flights for the remainder of 2021, although we continue to project strong cargo yields for the remainder of this year.

During the crisis, we also carefully planned and collaborated across divisions and execute a bounce back plan for the second half of 2022 only on our summer capacity planned continued a measured phase and of that capacity for Q3, we expect the system capacity to down 26% versus Q3 of 2019 are up about.

39% versus capacity flow and in Q2, we expect domestic capacity BB on about 20% versus Q3, 2019 and up 43% versus Q2.

Business travel, which was down over 90% versus 2019 for most of Q2 has inflected sharply in June and is currently down about 60% versus pre pandemic levels. We expect 2 more inflection point and stream business demand first at the end of the summer and second the new budget cycle beginning in January we expect business demand to.

Improved by the ended the third quarter to be down about 40% to 45% versus 2019.

Our recent survey and business customers now indicate over 90% plan to return to travel, including international travel and the second half of 'twenty, 1 that is up from around 55% earlier this year.

On our last conference call, we talked about the fantastic. The fact that domestic yields for United will be positive this summer and that we still expect it to be.

And still expect that to be the case overall domestic yields are still likely to be slightly negative and the quarter due to business traffic slower recovery.

To give you some color on yields Q3, right now book domestic yields today are running ahead of 2019 that higher yield is also match would higher booked load factors relative to 2019, we really set ourselves up from an RM perspective, very well international.

International demand is also recovering but as we as we anticipated at a slower rate for Q3, we expect international and capacity to be down 36% versus 2019 relative to down 53% and Q2.

The demand bounce back does differ considerably by cabin and by region and even within the region dependent on travel restrictions while business demand is down and we've used special incentives to get our mileage plus members back on board with better access to Polaris seats via awards and upgrades.

Asia was the first region to be impacted by Covid and continues to be the slowest to recover the largest number of border restrictions it will likely be 2020.3 at least until we see a normal schedule to Asia and the meantime, our global network already includes new service to India and Africa to compensate for reduced Asian line.

Our European schedule. This summer is quickly ramping back up however, with continued restrictions on Europeans from entering the U S and on U S travelers from entering key countries in the in Europe, including the U K.

We anticipate that it'll be the spring of 2022 prior to resume and a normal schedule, we expect our summer Atlantic load factors to be around 70% in 2021.16 points lower than 2019 apps and that we think that summer 2022 across the Atlantic has the potential to be our best season ever with pent.

Up demand and eastern border restrictions.

We continue to see structural changes and global long haul flying that we believe will create tailwind for United as borders continue to open we expect to have 30 incremental widebody jets available to schedule and the summer of 2022 versus 2019, which is why our recent aircraft order. We are focused on narrow body aircrafts only we can.

Continue to operate our 767 and fleet, which we use just a few weeks ago to begin service to Croatia. The optimal planed for this type of emission.

Overall, we expect that our travelers for Q3 will be positive.

Premier members of the mileage plus program are rapidly returning to flying on United a great sign for 2022 businessmen and year to day 3 quarters of our top premier members have already flown with us or have book to flight.

Of the Premier members that have not planned to flight yet our research shows that they tend to be flared focus largely on global long haul markets that simply have and opened up yet.

Many of our Premier members are also maintain and after the spend on 1 of our credit cards and increasing the level of program engagement and 2021, among our top members to more than 90%.

Our Chase co brand card programs are driving our June 2021, new accounts domestic sales and account retention metrics all exceed June 2019 figures.

And I just want to also spend a few moments today talking about United next United and exited simply our acceleration of many of our pre pandemic strategies. It's a planned to close for a short gaps and our commercial strategies customer focus and passenger amenities. Most importantly, our plan is for engaged to increase by 30% by 2026.56.

<unk> allows united to grow scheduled depth as we built on midcon hubs, but it's now time to replace many of these jets, what modern more fuel efficient.

730, Sevens and <unk> hundred 20 ones, lower and our unit cost and increasing profit while at the same time increased and our product quality wood amenities such as seat back entertainment at every seat and larger overhead bins.

Most importantly, United next is not about increase and seat density and claims reduce income for lower and onboard amenities are reducing the number of first class our economy, plus extra legroom seats as others have done and in fact, our premium seat counts will increase by 75% and North America per departure by 'twenty.

26.

Versus 2019 and of course, that's aligned with the revenue potential of our United hubs, United and X will allow us to differentiate and de Commoditize, Our network segment, our products and put customers first but also maintain fair competitiveness with low cost competitors will offer and a superior product.

We're excited to come out the other side of this tunnel and planned for and amazing and bright future.

Thanks, Andrew Good morning, everyone.

For the second quarter of 2021, we reported a pretax loss of $600 million and and adjusted pre tax loss of $1.6 billion on.

Our adjusted EBITDA margin for the second quarter ended down 10, 7% in line with our prior guidance with our adjusted EBITDA margin a positive 9% for the month of June.

Our adjusted operating expenses for the second quarter ended June 32% versus the second quarter of 2019, which was slightly worse than prior guidance of down 33%. The entire difference, though is attributable to a greater fuel consumption and higher fuel prices as compared to what we anticipated when we.

<unk> second quarter guidance.

All of our other costs came in as we expected, giving us continuing confidence and our ability to achieve our near term and long term cost targets.

As previously noted has the demand environment continues to improve we expect to generate positive adjusted pretax income and the month of July and fact, as we've said we expect to generate positive adjusted pretax income for both the third quarter and fourth quarter of this year.

Despite business and long haul international demand and not being fully recovered. We are pleased that our return to profitability is expected to occur well before our prior expectations and we anticipate another step function improvement once business and international demand until they return.

Turning to our outlook on cost.

We expect our third quarter CASM ex to be up approximately 17% versus the same period and 2019 with capacity down 26% versus 2019.

To put the CASM ex number and perspective, while capacity may be down 26%, we are not simply find 26% less of the same network.

Given our current international and domestic mix, where we are currently flying more short haul domestic flights and combined with the temporary grounding of our fleet of powered triple 7 wide body aircraft and this has created an incremental 6 point headwind to our CASM ex because of lower stage lengths and lower gauge versus 2009.

<unk>.

And our cost outlook. Additionally includes investments necessary for future flying such as training and maintenance costs on.

And on the positive side embedded in this outlook is also the early success from our $2 billion structural cost savings plan.

We expect CASM ex.

Better represent our true cost performance once our capacity reverts back to 2019 level and when the network begins to be reshaped with a United next plan and we achieved the full implementation of our cost initiatives.

We are currently and our 2022 planning process and that we won't share details today, we feel confident that our 2022 CASM ex will be lower than 2019, we expect that our 2022 outlook demonstrates substantial progress towards hitting our long term term CASM ex targets.

Down, 4% and 2023 and down 8% in 2020.6 versus 2019.

In addition to the structural cost reductions.

United next targets are enabled by our recently announced order for 270, new narrow body aircraft, which when added to our existing order book provide on with 500 narrow body aircraft on firm order.

We expect 191 of these aircraft to be delivered through the end of 2020.3.

And for those of you on the aircraft financing community. This include 13.737, Max 8 through the remainder of this year 20, Max 8 and 20, Max Nines and 2022 and.

56, Max 816, Max 950, Max 10, and 16, <unk> hundred 21, <unk> and 2023.

Regarding capital expenditures. This year, we currently expect adjusted Capex for the full year to run about $4.5 billion. This assumes we take delivery of all 8 and 787 Dash 10 aircraft scheduled for later this year.

With Boeing's recent announcement regarding delays and delivering 787 and it is possible that some of these aircraft and the related Capex may slip into next year.

In closing our expectation for adjusted pre tax profitability and both the third and first and fourth quarters.

Represent a milestone that the entire United family has worked towards and the beginning of the pandemic gone are the days of talking about empty aircraft cash burn and job losses, we have now shifted our focus fully towards the long term path for United Airlines, and the United and next plan, we believe our achievements throughout the crisis.

<unk> fully prepared us to execute on our plan to both maximize earnings power and the airline that customers choose to fly and.

With that I'll hand, it over to Kristina to start the Q&A.

Jeremy we will now take analyst questions. Please limit yourself to 1 question if needed 1 follow on question Brandon. Please describe the procedure to ask a question.

Thanks for receipt of other question and answer testing and will be conducted electronically if you'd like to ask a question. Please press star followed by 1 on you touched on the call if you'd like to be booths on the queue. Please press the pound sign or the head.

If you're using a speaker phone. Please. Thank you for your mute function is turned off without your signals for which our equipment. Once again, if you'd like to ask a question. Please press star 1 on yourself and keep it.

Please hold for a moment, while we use civil Archie.

And from Raymond James We have Savi. Please go ahead.

Hey, good morning, everyone.

And your <unk> revenue guidance is very strong and both relative to Q2 and and compared to 1 of your peers.

Wondering what factors and driving that strength and and kind of what assumptions are you building and for that business demand recovery.

Okay.

Hi, Savi, it's Andrew good morning.

What I'd say about our guide is that.

And I've said this I think over the last few conference calls that in particular, our coastal hubs are really suffered during the pandemic traffic was down and those hubs a lot more than mid cons and small community, our mid con hubs and small communities around the country.

And we really see an acceleration and demand now out of those hubs.

And provide us I think a lot of opportunity kind of going forward a little more color for example, Newark and Q2 of the here and it was really our worst performing revenue hub and we expect Newark, and Q3 to be 1 of our best to give you to give me a little bit more color on what we're seeing there. So there's a lot.

More to come I think I'm really excited about this because these headwinds were just so significant during the crisis and I think there'll be <unk>.

Tailwind as we come out of the crisis.

And then just a follow up to just it seems like you did.

A lot better job for us also.

And can it tilting towards leisure and VFR.

Lately, maybe and I'm not seeing all the way yet.

And some other airlines.

And just wondering what mix of those new markets.

Capacity.

And on as as statements normalize and you know just really really try and understand if there's an opportunity here and it changed the seasonality of the network.

Excellent question and thank you for the vote of confidence there I'm sure our schedule and folks really appreciate it we did as I would say tilt our capacity towards more leisure oriented markets. During the crisis and we continue to do so and we'll do so for at least the rest of this year and.

And chills and of those ASM towards more leisure oriented markets. I think has helped us during this recovery.

And to the extent, we did that better than others, I think our revenue forecast will be better than others.

And so we're pretty proud of that we do intend to keep a bigger footprint and these leisure markets going forward, and particular, Florida, where United was undersized and that undersized and had led to Q1 results.

And for United that.

Seasonally trail, others, and we're hopeful that.

And that on the other side of this crisis and rebuild the airline and we rebuild the network, we're going to build it better.

And we're going to be a bigger player in these leisure oriented markets and the Q1 time period than we have historically been.

And from Bank of America, we have Andrew <unk>. Please go ahead.

Hi, Good morning, everyone, just really kind of a follow on for <unk> question on on revenues, maybe Andrew can you maybe talk about how.

The booking curve has really changed over the course of <unk> now and into <unk> I would assume you have a lot more visibility today in terms of your <unk> revenue outlook as compared to the back and back in April and is there any color you can maybe give us in terms of what percentage of your anticipated <unk> revenues are already booked right now.

And how that compares to normal periods.

Sure everything is starting to return to normal which is great to see so right now about 60% of our revenue for Q3 is on the books.

And we have obviously I think really good visibility and July and August and in particular, I would say August looks really.

And quite good.

In September we have less visibility into but we still feel very bullish about that business traffic return and so overall things are returning to normal the booking curve is and exactly normal yet, but it is quickly getting there.

From the domestic point of view.

So hopefully that take share your question, but again about 60% is booked and I'll also add that.

We do expect positive PRASM.

And all 3 months for the domestic entity.

For the quarter.

Got it that's all.

Helpful.

And then maybe Jerry you called out the CASM impact from the stage and gauge differential here and.

Re queue on the 6 point should we think about that a similar impact on <unk> as well.

Yes.

Stage and and.

Gauge, obviously impact all noticed that.

So there is going to be some impact as well on track.

I'll add there is EBIT.

You bet.

And the dilemma, we face from a capacity point of view is the triple 7 aircraft that are grounded on our large capacity domestic movers and we use those for our Hawaii and hub to hub and so right now.

And we're flying well below where we'd like to be in Hawaii and I go.

And without saying that Hawaii, and incredibly strong part of our network and so we would have absorbed that and I think we would have still done very well on Hawaii, even with those extra seats and we're really disappointed they are missing.

And then domestically within the continental United States on the hub to hub missions.

And where our load factors are just off the charts.

For the simple way to describe it is like clogging the system, because we don't have enough engaged between our hubs.

On to flow the appropriate number of passengers over them. So we really want those aircraft back and we think those aircraft are really important to our CASM, but he also unlock and lease right now and Hawaii better results and the unlocked a lot more connecting traffic through our domestic system.

Hopefully that gives you color as to how we think it impacts CASM as well as travel.

And from Jpmorgan, we have Jamie Baker. Please go ahead. Please go ahead.

Hey, good morning, everybody on so Scott and it kind of a follow up to a question I ask you in New York.

The event a couple of weeks ago noted that bad things seem to happen and the industry every 10 years or so.

So as it relates to the 2026th guide it looks like we're probably in the clear.

Anyhow.

And it definitely and glass half full perspective.

Okay.

So you have these financial targets.

You have your largest aircraft order and history.

We do hit some sort of a speed bump do you sacrifice the targets.

Or do you adjust the capex and the delivery schedule basically is the order book Sacred.

Or is it a lever you can pull to protect the financial targets just trying to better understand the priority there.

Well I'll actually let Jerry Storch.

Hey.

Yeah, Jamie Yeah, as we said at that.

For that.

And certainly starting in 2024.

We have.

And non flexibility and the order book to be able to.

Just based on what the macro environment with dictate.

So thats a decision we can make here as we approach for later years of it.

And I would add also that we will.

And I think we've created a track record and it is certainly true that we are committed to targets when we put targets out there and we're committed.

To achieving those targets and we're going to achieve our 2023 and 2026 targets.

And if that requires adjustments and the plan when where and other we'll make adjustments to make sure that we achieve those targets and Jamie 1 of the nice things about.

And this order as well as our fleet that has.

Some aircraft as you know that our aging simply replacing those aircraft and not doing anything al and helps us with gauge, which helps us with those targets.

Okay. That's helpful. Thank you both and then just a bit of a modeling question. You know there wasn't a huge change and fuel efficiency and just looking at day at cents per gallon from the first quarter and second quarter, I mean, a little bit of and improvement but.

And with more international turning on and the current quarter can you can you give us some consumption guidance fourth quarter as well if you happen to have it.

Yes.

Jim and I'm sure I can give you a precise number right now, but keep in mind, just given the mix with a higher proportion of regional flying by definition as.

Yes.

Wide bodies come back and become a.

Yes, revert back to normal that will how can fuel efficient.

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

Good morning, everyone and thanks for the time.

So maybe 1 more on cost as we move to unit cost being down for 2019 levels next year.

Outside of capacity what are the other talent and should be thinking about I know you called out the 6 point impact from gauge and the triple 7 grounding, but but outside of that or are there. Some ramp up headwinds today that we should think about abating as we move into the fourth quarter, and 2022 and and just any color on the size of that impact.

I think the most significant tailwind actually aside from.

Gauge and stage length kind of reverting back is the ramp up of the structural cost savings.

So.

If you want to model something right now and we'll give you some more color.

Think of it.

As we.

Normalized for the business.

Okay, Great that's really helpful and.

And then 1 maybe for Andrew.

Throwing it back to 2020 and February 2020, when you've got the Chase extension you entered into I believe at the time and the announcement you noted a drive for $400 million increase and annual cash and and we are about to get some more details on that and then COVID-19 hit so we didn't really.

I don't remember getting a timeframe for when you would hit that I'm.

And I'm guessing the pandemic, maybe hit pause on the ramp up but can you just give us some color on on what portion of that uplift you've seen flow through your P&L to date, and how you expect that to try and over the next year or 2.

Yes, it's definitely everything had been.

Interrupted by the pandemic, although we have seen recently, where our numbers are now equal to or greater than 2019, So we're pretty.

And excited about that and our new agreement.

With Chase and it was effective then and it's impacted in our everything we do here and our financials already.

But the real I think the real.

And this is our working relationship with Chase is just incredibly good right now and we're coming up at all creative ideas.

New products and Thats fueling the card growth and the new number of cards, we're putting out there and spend on the historic cards.

So.

And maybe not every answer to the best for new you'd like here, but what I would say is.

The relationship is going well, which gives me great faith that we're going to hit the targets. We put out there I don't have the exact timeline as to when that will happen. It was clearly interrupted by the pandemic, but we're back on course.

From Jefferies. We have you looked high on Lu please.

Please go ahead.

Hey, good morning, everyone and thank you.

And then maybe it seems that capacity additions are coming back at a faster rate and I appreciate it.

Can you maybe provide a little bit and my color around CASM ex allowed 2019 and 2022, what are your assumptions around capacity and maybe mix of international and domestic.

So it's still a little early to give you the capacity guidance for do that and our normal course, but I can tell you just given the size of the free.

As it stands today, we expect 2022 capacity to be higher than 2019, but we'll give you more precise numbers and the normal for us.

No Gary.

Alright.

Gary is going to add.

And with the incremental wide body jets that we.

<unk> available along with our expectation about what the Trans Atlantic market is going to look like next year. It wouldn't shock me that we see international growth.

Faster than domestic growth for for next summer.

Yeah, and I guess on that note somewhat related to that big picture.

You mentioned in your prepared remarks on the international side your ear when other carriers that have kept your wide body is going.

And so that supply demand picture might look more attractive as international comes back for domestically and what we're seeing as low cost carriers are doubling their fleet or expanding definitely substantially as you guys are too and increase and gauge how do you think the supply demand picture plays out.

And 26, how do you think United is positioned with that.

Well I'll just go back to our United next plan, where I think we thoughtfully talked about on.

All the details there we are working to make sure that we build our connectivity are scheduled depth.

And most importantly, our gauge and we think those factors along of course with our customer focus are really going to drive our profitability.

And really unique ways relative to many of our competitors over the next few years and our industry, where we absolutely expect elevated domestic capacity growth.

For everybody over the next few years, so we feel really good that we've.

<unk> identified this we've articulated a way to manage it here at United and together from a revenue and a cost perspective, and a customer perspective to make sure that we can meet the targets that as Scott laid out and New York, a few weeks ago and he laid out and just a few minutes ago here.

Okay.

Yeah.

From Wolfe Research, we have Hunter Keay you just go ahead.

Hey, good morning.

Do you see it investors Scott you, just ratchet down our permanent and expectations for pricing power for this industry.

No.

Why why not I mean, you know it.

And it's so clear that the market puts multiples on industries that.

And price and the decision to deflate pricing and outrun it with lower CASM.

I just it's hard to it's hard to see why that makes sense. When it is such a clear track record for and this industry works is when theyre pushing price and look at what you just did right now with the yield performance and not suggesting you are going to be down 25% forever, but I'm sure it was pretty satisfying and be able to push that price.

Well first I disagree with the premise of the question.

Okay.

And look at 100, and I recognize that you've got a perspective.

And respect that.

But.

We had a pretty good track record in 2018.2019, I think it was your research report pointed out we grew EPS by 74%.

This is an and.

And a large degree a continuation of the strategy is working well with the improvement I think that.

We're really focused on de commoditize, the air travel and getting customer choice and bye.

By about far more than growth, but.

But even to 2018.2019 plan was working.

And does your research report it seems like the best evidence that we can do this without this inflating I think was the term you used.

I'm confident that we're going to do that I'm, particularly confident that when you take the mix of what the international market is going to look like and the percentage of our revenues combined with I think our ability to be commoditized travel domestically.

And that.

And our targets for 2023, 2 and 26 are arguably conservative.

And that's going to ultimately be good for our shareholders.

Okay. Yeah. Thanks for the time, Scott I don't want to be disrespectful here and I appreciate the conversation.

A quick modeling question for you too I have you Jerry should we assume that the S. WB CASM is going to be and 22 and 'twenty 3 above or below 2019 be willing to help us out with that.

I'll follow up offline Hunter.

Okay Alright.

Alright. Thanks.

So we will get to those numbers.

Okay.

From Cowen and company, we have Helane Becker. Please go ahead.

Oh, thanks, very much operator, hi, everybody and thank you very much for your time.

On.

So kind of a different question and.

You have and open contract with your pilots and I know you have for letter agreement.

To agree to the differential so that you're able to ramp that up as the recovery occurs can you just talk about how you are thinking about entering those negotiations again and.

I don't know, whether it's 2021 or 2022, but when should we think about that contract again.

Idling and spread her and how you're doing.

Book.

I think for the underlying.

The premise of your question also points out that we obviously, we've had a really good working relationship with our pilot throughout the pandemic.

Sure, Ken and hand with them.

And at the end of the day, we are confident.

We do get to an agreement and it would be more on the work for our pilots and for the overall company, but as you can I'm sure appreciate.

We don't get into discussing the specifics.

Our.

Discussions or negotiations or on the timeframe for Gucci and agreements.

Public or on earnings calls and I appreciate the question.

Okay. That's helpful. Thank you.

And just the other question is as we think about the improvements that you're talking about any efficiency and.

Sure.

Jerry.

How should we think about it like working through the next 2 and a half years or are you just kind of give us guidance every quarter for how we should think about those efficiencies or is there some number beyond -4% in 2020.3 that that we'll be able to mark too.

Yes.

And in Hawaii, and that's really.

The heart of the $2 billion.

Structural cost savings and.

And as I said earlier.

By next summer.

And I would expect 100% of those and the numbers and then.

We will continue and will continue for.

For our guidance keep in mind.

Sure.

The other structural savings and cruise savings that will continue to grow as we grow the airline.

So.

It will come out through our continuing CASM guidance over the next few years.

And.

From Evercore ISI, we have Duane <unk>.

Please go ahead.

Hey, Thanks, I really appreciate the time.

Just a couple for me on cargo and Andrew I think you said on <unk>.

No more dedicated freighters.

And I assume this is just a function of passenger demand coming back, but maybe you could just expand on that.

And if we if we think about sort of your cargo capacity in total.

And maybe no more freighters, but but but more.

You no longer haul flights coming back how do you think youre about your cargo capacity and total.

Sure.

Correct, we are not going to be able to do more cargo only flights. We're obviously disappointed by that.

Given where yields currently stand.

The reason for that is the aircraft can be better deployed and.

And passenger markets. However, many of those passenger markets are also not exactly optimal cargo markets. They do have cargo, but theyre not optimal cargo markets.

52, Triple Sevens that are grounded means we just have less flexibility on this front than we would otherwise have if those aircraft for client and we clearly would continue all kroger missions, because we'd have the ability to do both so then when we when we look at capacity available to fly it still really significant as we put all these passenger per.

Back in the Air and we think we've got this properly accounted for and our forecast and we think we're going to have another great cargo quarter, and Q3, and it's already gotten off to a really good start that being said, it's going to be different in the amount of the all cargo flights. So but I'll tell you at all and we don't really disclose details, but all the numbers on.

And there and hopefully we can do a little better on cargo than we are currently planning.

But there is a marked change and our cargo footprint starting today are really starting a few weeks ago obviously.

And we will see where it goes but we will.

We're still very bullish on cargo for the remain and half of this year.

And that's that's Super helpful and I'm just just for my follow up on on scope scope is something that United talked a lot about in the past, obviously and the recent investor update.

You talked about big up gauge from from 50 theaters you know.

Well to be clear.

And when we induct, a max 10, or and <unk> hundred 21, Neo it's not replacement of 50 seat RJ route for route Theres a cascade. It starts at the top that goes the other is down so 50 Tito route today will often go to a 76 seater route and the new United Index Vision. So just just be just the economics of that are a little.

Different than maybe you described I'm not 100 per cent sure but.

And we still will do that as we look at our fleet counts and hubs and schedule depth. It is not our intention to reduce service to smaller communities in the United Ex plan and we've laid this out in great detail that being said, it's also really knock and increase our scheduled depth our size and smaller.

Communities, either we're going to grow by a gauge, which we think is the right way to do it given where our hubs stand, particularly our mid continent hubs.

And again most of the growth is gauge here is a little bit of frequency, but most of the growth is gauge.

And so hopefully that helps answer the question.

Okay.

From UBS, we have Myles Walton. Please go ahead.

Thanks, Good morning.

It's a bit of a follow up.

200, <unk> question, you guys, but I'm curious Scott and if you've thought about perhaps using a return on invested capital or and efficiency metric to go alongside your pre tax margin and pretax income.

<unk> metrics, which govern your long term incentive schemes as a way to sort of answer the question around the efficiency of other assets being put on to utilization.

Hey, it's Jerry we actually always look at.

The return on.

And.

Investments, we want to make and kind of our rule of thumb is kind of mid teens.

To justify making those investments so that's always part of the equation, but I do think at the end of the day free.

Pre tax ultimately is.

The best way to look at things.

The other components of it all go into that but we do look at.

Returns on investments, we're making.

Okay.

Okay, but not in the formal incentive scheme, just pretax income as the governing metric.

I think it's just the 1 that best.

It reflects how well we are we expect to do.

Hey, Myles this is Mike Lufkin and I would.

Just add that even if you think about replacing and some of the older aircraft with with new technology and you look at the 287 for the 707 Max aircraft.

Even in that scenario youre getting and mid teen return on invested capital.

And so the return on invested capital the gating item for.

Driving pretax margin, but our lessees are well well ahead of our weighted average cost of capital and.

Is it a hurdle.

And from Bernstein, We have David Vernon. Please go ahead.

Hey, good morning, guys. Thanks for taking the time.

So Scott I wanted to talk kind of at a high level here about how investors should think about the upside you see and de commoditize and travel you know we got a little pushback that if this is just a.

And if you will I'm just wondering if you can and.

Well I'll start and Andrew can add on if you want.

On the point about the Commoditizing air travel.

Yes, it's hard to put a precise quantification on it.

Today, but I think customers do care about quality and do care about product if you get on airplanes and talk to customers or just watch airplanes and.

People flying I think that is.

And and escape for conclusion, there's at least 1 airline and the U S that are embarking on this a decade ago and it was quite successful.

There is certainly room for 2 of us and the United States, the largest travel market and the country for <unk>.

2 of us to pursue that strategy and.

Frankly, United has I think the most opportunity because we're in the book our hubs happened to be and the biggest premium market.

And where our 7 hubs are and and.

And so.

I think theres more upside for us and there is.

For anyone to pursue this strategy and so I don't know for sure how much that turns into in terms of a revenue premium or growth that rat and rather and it's faster than the rest of the industry because it's not as easy to quantify some of the work that we do.

But confident that it will.

With the strong results for United.

The only thing I would add is.

That fly and approximately 300 single class 50 theaters with no premium products on board. It all up against competitors that had premium products is it just a step change function for United as we take that number down we already saw with the introduction of the <unk> $5.50, which is our 50 seat and.

Dual class aircraft really great progress prior to the pandemic on being able to monetize those premium seats, we see our competitors do it all day long and we're simply under represented in this category.

And flying the wrong aircraft into big cities with no premium seats and by the way our hubs have a lot of premium demand and we just under index to it and that was wrong and we're going to correct. It and we're going to correct. It really quickly.

From Stifel, We have Joseph de Nardi. Please go ahead.

Oh, Thanks, good morning.

Scott or Gerry can you talk about capex needs on the wide body side, when do you need to address that with an order and when does the deliveries start do you think and then based on that and what year do you see yourselves getting below $7 billion and Capex.

Actually I'm looking at Andrew who is always going to ask me for aircraft, but keep.

Keep in mind.

Yes over the last few years, we've taken.

Some on wide body aircraft, we haven't retired and we have a lot of wide body aircraft, Andrew has talked about that and so the focus right now.

And is really on the narrow bodies and.

Andrew can provide some color, but I can tell you that.

Uh huh.

It really depends on.

Both the speed of recovery throughout the world.

And then the opportunities that Andrew and his team.

Yes, Jerry I will just add.

I think I've said that I reiterated that.

Because we took delivery of a large number of wide body aircraft.

Are we ordered some bright prior to the pandemic those aircrafts are coming online over the next 12 months. So we will have.

Thing that I said, a few weeks ago that I'll say again is we're carefully looking at.

The lifespan and the economic lifespan of these wide body jets.

And I can tell you prior to the pandemic we were thinking.

Many of them, particularly the triple 7 and 767 fleet could go 30 years or more.

And I'll give kudos to our maintenance team for keeping these aircraft and great shape to allow us to have that optionality. So we do have optionality to fly these aircraft longer than I think people automatically assume and.

And then the last thing I'll add is the interiors on all of these aircrafts, including the older ones. We just been describing have been recently a retrofitted we've completed our entire triple 7 fleet and we're close to completing the 767 and fleet with brand new interiors from nose to tail to give a great great customer experience on board.

So with that we have a lot of income out of wide bodies that have just arrived and we have a lot of brand new aircraft on the inside that have a long lifespan left and so we have a lot of optionality and to the extent and we want to grow it will be because we have growth opportunities, but we'll monitor for that over the next few years. So that's a lot more details than you probably wanted.

But that and kind of explained where we are from a wide body point of view and I'll just add a fairly straightforward analysis.

To justify that growth that goes back to the financial targets that we just talked about.

That they need to demonstrate that we can hit those those returns.

Which they do pay per base.

And I'll add 1 more because.

And they enabled as I said earlier this new route to Croatia, and many new routes that were talking about that could otherwise I don't think be flown over the next few years profitably.

Okay.

This 2025, Capex come back down to the $3 billion to $4 billion range or is it still elevated and then Scott.

You talked I think last call or are on the call before about doubling loyalty EBITDA and havent heard much on that is that like an aspirational goal that we should kind of discount significantly what are the what are the drivers behind being able to do that thank you.

And while it's our goal.

I wouldn't discount it because I think we're going to do it but.

But you can choose to if you want.

And this is 1 of those that until we have something to announce its another 1 of those that were not going to have something to announce until we have something to announce so I saw the team.

Beating earlier this morning on it and they're looking for me later today to get an update so we are doing and theres a lot of activity on it but we're not going to have anything to say publicly.

Until we are ready to make probably a big announcement.

And hey on Capex, it's too early to really give capex projections for beyond 2023.

Yeah.

Okay.

We will now take questions from the media at this time, if you have a star if you ask a question. Please press star 1 on your Touchtone phone.

Antibody for questions from the media.

And please hold for a moment, while we assemble our queue.

Okay.

Okay from Wall Street Journal, we have Alison Sider. Please go ahead.

Hi.

And your conversations with the government about list lifting travel restrictions is there anything on that the administration is asking for from airlines and in terms of contact tracing or extending them ask mandate or.

Yeah, and checking vaccine status is there anything that you will have to do.

And it was part of an agreement to lift those restrictions eventually.

Hey Ali.

We are working closely with the government.

And it's a 2 way conversation, where they're getting input from us and for them all of us want to make sure. We do this safely and.

And confidently.

That when people get back to flying it's not only sales that people feel confident.

And the safety and we certainly haven't advocated for any of those specific policies, but if the government brought those things forward. We've indicated a willingness for example, with.

Vaccine requirements, which are happening and much of the world already.

And the United uniquely our digital team has done a pretty amazing job.

Creating and automated way for customers to upload that information I think it's easier on United.

Deal with vaccine requirements around the world any airline and the world. So we're doing those kinds of things and we're very open to and the requirements that they have but look forward to working with the administration to get it back open.

Got it thanks.

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

Hi, Thanks for the time today on this.

Question is maybe for Andrew or Scott, but it goes back to Scott's comment at the top of the call on.

The Delta variant and any impact probably being short and and people are confident and the rebound I'm curious like as far as your your business. Today is this a lot of people who are.

And repeat customers and flying quite a bit compared to during the pandemic or are you seeing people come back who may not have flown and since 2018 or 2019 I'm just curious about the mix of who's flying today and your confidence about those.

And those habits, continuing even if the pandemic takes another turn.

Sure Good morning, Justin.

We see that number again and strength each month.

And more and more customers are coming back and our premier members are back to fly and again and using our credit card and the ones that aren't are because they only general slide global long haul and.

And those particular borders are closed or difficult to get into so we do see this return to normal for all the things we look at the other thing I would tell you is.

And we've kind of gone through this crisis headlines have drove and driven.

Cancellation and no show factors higher.

And I can assure you right now our no show and cancellation factors.

Our completely normal we've seen no change and them over the last few weeks and there basically.

Slightly above 2019 levels, which they have been for quite some time. So we don't see any any change of course.

Im not saying exactly what's going to happen and the future, but I can tell you right now things look good and we do look.

Demand is recovering and.

And maintaining a strong recovery, even with the negative headlines.

Okay. Thanks for the help.

And for writers, we have treated with <unk>. Please go ahead.

Hi, I also wanted to go back to Scott's comments at the top of the call.

On that you mentioned a potential temporary reopening pulled back can you be more specific on what that pullback could look like and where and what kinds of scenarios, you're preparing for astral and demand perspective.

Well I don't know what it would look like I think it would be something.

Government related.

There were some new rules or recommendations, which I don't think it which I think is unlikely and I think the most logical and likely outcome is that we largely continue unabated.

It did happen and we've had a history going all the way back for the last weekend and February of 2020.

Reacting quickly realistically nimbly.

And we put a team together last year to deal with kind of the shutdown and March of last year.

And that team and has not been disbanded that Steve and continues to exist for managing the vagaries and the ups and downs, because we've known all along and there's going to be ups and downs and theres going to be ups and downs between now and the time that enough for the world is vaccinated this really.

Received into the background, which we look forward to but.

There will be ups and downs and we're prepared to deal with with whatever those are knowing that we can't precisely forecast exactly what the ups and downs and theyre going to be.

Hey, Gary and I would just add.

1 of the things, we learned and the pandemic was the need to be able to be flexible financially.

So as we've begun to invest money, we also build on and off ramps and case, we have 2 bank and 1 direction or the other.

What are you hearing from your corporate from corporations in terms of there.

The opening plans there and we print yesterday for example that Apple is delaying its return to office by months.

Hi, it's Andrew.

And I did read that and the newspaper overall, we're here and we.

Return to this new normal as the end of the summer occurs and September obviously, something may come back in October or even November, but we're anticipating a return to normalcy and therefore, we're also anticipate and step up and business travel and.

And in September and then once again in January when the new budget season start we've already seen for example, our advanced business bookings for September and are now only down I think about 50% and we expect that number to continue to get better and finished the month at around 40% to 45% down.

Based on where we are right now.

Thank you I will now turn it back to Christina <unk> for closing remarks.

Remind me on here in Chicago, and thanks for joining the call today, Please contact Investor Relations for media Relations and do you have any further questions and we look for its Chuck.

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

Q2 2021 United Airlines Holdings Inc Earnings Call

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