Q4 2022 United Airlines Holdings Inc Earnings Call

January 18, 2023

Everyone. We are ready to begin today's conference. Please standby there'll be a moment of silence.

Good morning, and welcome to United Airlines Holdings Earnings Conference call for the fourth quarter and full year 2022. My name is Candice and I will be your conference facilitator today. Following the initial remarks from management, we will open the lines for questions at that time, you May press pound too on your telephone keypad.

To enter the queue. 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 I will now.

Turn the presentation over to your host for today's call Christina Munos director of Investor Relations. Please go ahead.

Thank you Candice good morning, everyone and welcome to United <unk> fourth quarter and full year 2022 earnings Conference call yesterday, we issued our earnings release, which is available on our website at IR <unk> com.

[noise] formation in yesterday's release and the remarks made during the conference call may contain forward looking statements, which represent the company's current expectations or beliefs concerning future events and financial performance are forward looking statements are based upon 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.

Really Form 10-K, and thank you and other reports filed with the SEC by United Airlines Holdings, and United Airlines for more thorough description of these factors.

Unless otherwise noted we will be discussing our financial metrics on a non-GAAP basis on this call. Please refer to the related definitions and reconciliations in our press release we're.

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 really joined.

Joining us on the call today to discuss our results and outlook our GC.

Executive Officer, Scott Kirby cheap right.

I gave vice President and Chief operations Officer for the inquest executive Vice.

President and Chief Commercial Officer, Andrew Casella, and Executive Vice President and Chief Financial Officer, Jerry Letterman.

Addition, we have other members of the executive team on the line to assist with Q&A now.

I'd like to turn the call over to Scott.

If people can hear us.

Okay.

It was the question about whether you could hear it as hopefully everyone.

Well, thanks, Kristina and good morning, everyone before we do our normal normal.

All forward stupid.

Well walk you through a short deck that explains the intellectual rationale.

Great and where we think the industry is headed over a longer term horizon and short we think there is ample evidence that there really have been structural changes in the airline industry that set the entire industry up for higher margins that we had pre pandemic first while the specifics of the demand environment will be different we expect it to return to at least.

2019.

It is.

I think it could go higher.

We believe cost convergence among all the airlines as well as supply challenges may drive structurally higher industry margins and finally, denying or is it pretty accurate about the macro outlook impact of Covid and what the recovery would look like going all the way back to February 29, 2020, and based on that United really did take a different and unique approach to the recovery.

At the onset of the pandemic, we acted first and we acted more aggressively than anyone else to protect our airline and the jobs of the people who work at United at the tie it back some said that we were overreacting in the pandemic wouldn't be so bad but.

Confronting that reality and acting quickly our leadership team was able to be the first airline to move forward turning crisis into opportunity and began making plans for big investments in United's futures, while others frankly, we're still in crisis mode.

It is clear we had a head start planning for the recovery and you're already seeing both our absolute results as we've achieved a 9% adjusted pre tax margin ahead of schedule and our relative margin results compared to the rest of the industry. On this next slide you can see what industry revenues look like as a percentage of GDP over time, a few interesting points.

The industry still has about 15% domestic revenue growth left to go just to get back to 2019 level here in 2023 or.

Our base case, 9%, 14% margin target assumes that we just get back to the <unk> 49 ratio and the 1992, thousands however revenue to GDP was even higher and you'll see in the next few slides, we think that cost converted may drive revenues higher than four nine and for what it's worth every single basis point of domestic increase translates into about.

One point of margin for United.

On slide five and six I'll address what I think is the most significant structural change to happen to the industry in a long time for a host of reasons. We believe the industry capacity aspirations for 2023 and beyond are simply Unachievable.

Just like 2022, when the industry capacity was seven points lower than initial guidance and we believe the same thing will happen. This year for the same reason we've talked a lot about the pilot shortage just one of multiple constraints.

Along with Delta American and southwest alone or planning to hire about 8000 pilots this year compared to historical supply in the 6% to 7000 rate pilots or it will remain a significant constraint on capacity.

Post Covid, all companies, including airlines and the FAA need to staff at higher levels lower experience levels combined with take rates that are elevated because of COVID-19 and new state legislation that makes it a lot easier to call in sick, we believe any airline that drives to run at the same staffing levels that it had pre pandemic is bounded.

Fail and likely to tip over to meltdown anytime there are weather or air traffic control stress in the system Oems are behind on aircraft engines on parts across the board there are supply chain constraints that limited the ability of airlines to grow finally, the FAA and most airlines with the exception of the network carriers have.

Outgrown their technology infrastructure and simply cannot operate reliably in this more challenging environment, taking all of the above into consideration, we think at United we need to carry at least 5% more pilots per block hour.

Pandemic in addition to that air traffic control talented mean, our taxi and enroll quite times are elevated and growing so the same number of block hours, probably produces 4% to 5% fewer ASM put.

Put it together you did 10% more pilot and 5% more aircrafts to produce the same number of pre pandemic ASM like it or not that's just the new reality and the new math for all Airlines I think however, we may be the only airline that actually figured this out and likely the only airline that has included this in our 2023 CASM.

<unk> guidance already.

And to be clear all of these issues also impact United the reality is that the airline industry is probably the most complex operationally and district with by far the highest safety and regulatory standards of any industry in the country and Covid hit our industry harder than others all of Us Airlines and the FAA, whilst experienced employed and.

Most didn't invest in the future that means the system simply cannot handle the volume today much less the anticipated growth.

We also missed our capacity target for 2020, we had our own challenges over a year ago during Christmas to 'twenty one.

Ron hit Us all hard but it also showed a spotlight on other strains in the system.

We responded by proactively pulling down capacity. It was the only choice you can't change the engines on an airplane when it's flying we flew a lot less last year than we'd have liked fly, but we did it intentionally because it gave us the breathing room to make even further investments in our technology and infrastructure and to increase our staffing levels and we had a huge start headstart.

Compared to most airlines, because we started with much better technology and infrastructure.

But also importantly, we got to acceptance quickly and didn't spend much time in denial about the structural changes we accepted that the structural changes were real and moved quickly to what to do about at that point I also fully recognized that most or perhaps all of our competitors will get on their call next week and tell you one time of that no big deal.

No change to our capacity plans.

I think theyre just wrong intellectually hard it takes time to get through the denial phase.

What happened over the holidays wasn't a one time event caused by the weather and it wasn't just one airline one airline got the bulk of the media coverage, but the weather was the straw that broke the camel's back for several this keeps happening over and over again and you can see that despite good weather you LCC still hadn't recovered even as we entered the new year the opera.

<unk> difficulties are just the latest among numerous data points proving the systemic challenges that are going to limit the growth in flight as you can see on the data on slide six unites hub locations, meaning that we pretty much always have the worst weather in spite of this we are able to lead the industry because we're doing a lot of things differently than we did historically.

We made significant.

Additional investments in technology and infrastructure, we're running with 5% to 10%.

That means we need more pilot data at its budget and its ramp et cetera to fly the same schedule, we're running at about 25% more spare aircraft than we did pre pandemic and we're flying lower aircraft utilization.

All of those obviously cost money, but it's clearly the right thing to do for our customers at the most among the most important things we can do to win their loyalty and it's turning out. These buffers are much less expensive than the cost of avoiding the otherwise inevitable operational meltdowns.

Therefore, our guidance other airlines are likely to talk about returning to 2019 utilization efficiency et cetera, but we believe that just wrong. Our industry has been changed profoundly by the pandemic and you can't run your airline like it's 2019 or you will fail, but don't take my word for it what's the data United will always have.

The toughest operating environment any app any airline operating meaningfully worse than United is out over their skis and it's simply outgrown their technology infrastructure and resources.

Slide seven transition to the unique set up on the international front. This is one of the most stark examples of what 90 did differently than our competitors or the pandemic. We bet International would return strong post pandemic and because we were the only airline around the world with that view of the recovery. We were also the only airline to make two important strategic decisions.

We didn't retire wide body aircraft and we were the only airline in the world that negotiated a deal with our pilot Union to keep pilots in place and position.

That allowed us to quickly bounce back the decisions that our competitors around the globe made to retire aircraft and downgrade pilots take years to reverse and because of that they simply can't grow and you already see that in this summer's capacity data.

On slide eight I've already hit on the theme so I'll try not to belabor it here, but United had a conscious strategy to use the pandemic to invest in the future. Our large aircraft orders are just the latest example of this new play as your big ticket items that get lots of attention, but other investments we've made in technology infrastructure and people haven't drawn big headlines, even though they too are.

<unk> is central to our success.

Point here is that we really were unique.

It wasn't just one thing and it wasn't just aircrafts. It started with the fact that we always believed that a full recovery and as a result, we invested and invested early.

On slide nine everything about this that hopefully gives investors some comfort on why we have confidence in our margin targets, but I think there is potential for margins to go even higher making slide nine the money slide for this entire deck for me at least.

You can have whatever view you want about capacity, but what really matters is cost converted it it's already happening and I'm pretty sure. It's going to continue I believe a world where you all CDC pay their pilot significantly less than that yes, they can still hire and retain pilots and they can somehow operate with previous staffing utilization levels is just the north.

It's not a realistic scenario and with cost convergence fiber, a betting man and actually I am.

That the revenue to GDP ratio is going back to the mid fives, we will see and again, we expect to hit our margin targets, even at the 0.49 level, but if it is true I believe industry margins will go even higher that's not our official guidance to be clear, but it is certainly possible.

And so to conclude I think the pandemic led to a structural change in the industry. The supply demand dynamics are different than they've ever been in my career I realize theres a lot of investor skepticism on that but every data point keeps demonstrating it over and over again and because United saw this ahead of everyone else, we were able to invest and prepare.

To take advantage of it to be clear I think margins across the board are going to be higher in the airline industry, but because of the unique steps. We took to prepare for exactly this kind of recovery. You are also already seeing United's relative performance is strong and I expect that lead that just expand.

A huge thanks to the entire United team, you're really doing an amazing job and you are making United the biggest and the best airline in the history of aviation and with that I'll hand, it off to Toby who will explain some of these critical investments why there were important to the success of our operation through the most difficult holiday operating environment in my career Tobey.

Thanks, Scott and Hello to everyone tuning in today I first want to thank our employees for their exceptional performance over the holidays, we faced a really challenging operating environment that included some of the busiest days of the year and historical cold weather across most of our hubs in line patients. While you wouldn't know it from the <unk>.

Holiday travel headlines United was actually that most impacted airline from a weather perspective.

6% of all our products we are exposed.

721 fixed.

Fixed more than any other airline in the country.

And even though our loan packages was already high we accommodated thousands of additional customers on short notice when their travel and Andre Airlines was disrupted despite.

Despite these headwinds over the holidays, our team connected 90% of our customers within four hours of their planned arrival.

8 million people 1 million more than we did last year and our operation performed very well, especially consider these tough conditions.

Our airlines with the fewest cancellations during the holidays and we were number one in completion in Denver, San Francisco, Houston and Washington.

We practically eliminated all crew related challenges and cancellations compared to 2021 holiday period.

Do we do it.

As it lies and all the planning and investments we made during the depths of the pandemic instead of just trying to run the airline like we did in 2019, we worked over the last three years to prepare for a different more complex operating environment and a sudden surge in travel demand to prepare specifically for 2022 holiday period, we perfectly built some slack in the schedule and reduced how often we.

Fly during peak times.

We accelerated our hiring and added staffing buffers in key locations.

Rebuilt firewall to prevent an individual weather events was spilling over into broader network and finally, we beefed up our training and every department, including clearing out the pilot training backlog to be resource ready for peak travel demand season.

Again, as Scott said, our work to prepare goes back even further over the last three years, United investing in systems training tools and technology that will empower our employees and benefit our customers.

<unk> modernized crew scheduling system with 800% improvement in performance capacity and security versus 2019.

Smarter scheduling operations coordination to build reliable operable schedule.

Additional spare aircrafts in our fleet upgraded technology infrastructure supporting our network operations Airport operations that make games.

With our industry, leading customer facing technologies like connection savor, an agent on demand both of which now are integrated in our mobile app. Some.

Some of these investments are obviously more marketable than others, but they all make a difference in our performance.

Finally, I want to point out the biggest difference maker for United This holiday season, our frontline teams that worked as one team volunteered to pick up extra trips and work overtime and again break record setting cold temperature. It was the combination of their dedication and the proactive investment in technology and infrastructure that led to our success and with that I'll hand, it over to Andrew to talk about.

The numbers.

Thanks Tobey.

For the fourth quarter finished up 25, 8% in PRASM up 24, 6% versus the same period in 2019 on 95% less capacity.

So similar performance United third quarter result, and above the high end of our <unk> guidance for the quarter.

<unk> growth or non passenger revenue continued to outpace a PRASM in Q4, although that will reverse in 2023.

Reversal is due to cargo revenue decline in year over year to a new post pandemic run rate that remains well above 2019, and co brand credit card revenue growing slower relative to a rate of ASM growth for the year.

PRASM in Q4 was strong across all parts of the network versus 19 with domestic results up 23% up 30% Europe 11 specific up 42 international.

International capacity in the quarter was down 12% in domestic was down eight.

Looking back at our revenue performance for all of 2022, our overall traffic performance comparing to <unk> 19 was up 19, 5% about six points better than our expectation for the rest of the industry on average at this point and three points better than our network competitors during the same time period.

To meet our overall 2023 outlook, we're expecting flattish traveling for the year versus 2022 the.

The impact from cargo and other revenues on Trasimene 23 is a negative 2% to three points year over year, implying PRASM up about two to three points and our outlook.

As we think about the revenue outlook for 2023, we are bullish about global long haul, we expect industry capacity across both the Atlantic and Pacific, We United as the largest carrier to be flattish versus 2019, which provides for an easy setup and positive RASM year over year.

International demand remains incredibly strong and we're looking at the potential for a record profit and margins across our global network.

Asia has traditionally been a margin drag on our global fine, but we've worked diligently to rebuild the network and close this gap and we.

I think 2023 will validate that we accomplish that goal.

Asia is also close to being fully opened allowing United to reestablish the bulk of the specific client outside of China.

Noting that restrictions on the use of Russian aerospace will constrain United from fly in both of our China network in 2023.

This same restriction will also limit our ability to buy the India.

While I would not normally provide revenue details about the months within a quarter I think it's important to share what we're seeing in Q1.

Our unit revenue outlook for February and March is largely consistent with the levels. We've seen in the past three quarters at roughly 25% higher than 19.

I believe January is a negative outlier in Q1 with unit revenues compared to 2019 softer than the months after it we think.

This is primarily due to holiday timing with less demand for incremental we can trim enabled by hybrid work schedules. So soon after the year end holidays, but we expect the second half of February and March two back on trend with good revenue already 30% to 40% above the same period in 2019 and I think this validates our.

<unk> for 2023.

Overall, we expect our Q1 track them to be up approximately 25% year over year.

Another positive catalyst for 2020 revenues is the continued but slow recovery of traditional large corporate business travel.

November and December were low relative to October it's great to see that January is materially better by about five points versus the average for.

January represents the start of a new budget year for most.

Way to start the year and we've heard often budgets in 2022 exhausted early as to why in November and December travel a bit disappointed for large corporate travel.

Talk about the great setup, we seeing global long haul earlier, we also see a nice setup for our domestic operations as constraints across the industry are everywhere, creating a favorable supply demand environment.

United is also now quickly executing under United next plan focused on gauge premium seating revenue segmentation signature interiors and most importantly, restoring and built in connectivity, which suffered during the pandemic. We're opening 17, new mainline gates in Newark, and 20 in Denver in 2023, which will enhance our customer experience.

And improve reliability.

In Denver, the new gates will allow us to grow our most profitable hub at our Newark, New Gatesville allow us to transition more flights to mainline from express consistent with our United next plans.

In addition to games, we opened more United Club space in Newark.

69% more club space in Denver will be up 180% versus 2019, we also have expanded club space in Chicago by 40% with a new club that opened last week and in Dallas by 43%. Most of these club projects will soon be online and we're planned during or prior to the pandemic.

Importantly, there are more projects on the way in the years to come.

Looking beyond 2023, we continue to implement our United next plans, we've adjusted our upward our long term gauge plans. So that by 2026, our north American gauge will be up 25% versus 2022 and 40% versus 2019.

United continues to be undersized engage as we await delivery of our large narrow body planes that are largely absent from our current schedule, creating a margin gap versus our potential versus others that have a significant fleet size in this category.

Activity suffered in 2022 due to a reduction in RJ flying capabilities and delays from Boeing.

Staffing at our regional operators has stabilized since payer changes went into effect essentially match and one of our competitors combined with our <unk> program that provides a four year transition plan for our pilots from an express job to the United mainline Courier regional jet utilization is showing signs of improvement, but we still have a long way to go.

And it'll be until about 2025 or beyond to get to normal.

We have also signed new agreements with Mesa, two expand our large RJ flying in 2023 and associated fall community service, while our relationship with Air Wisconsin comes to a natural end with this change the number of regional partnerships is reduced from six to five and we will eliminate approximately 40 single class 50 seat RJ that were not part of our long term plans and <unk>.

Change, Brad and dual class 70 seat RJ is a clear win for United small communities and our customers.

We build the connectivity will be a key focus in 2023, and 2024 and will be significantly additive to RASM as it was in 2018 and 19, giving us confidence as we do it with optimal gauged this time around.

Thanks to the entire United team and with that I'll turn it over to Gerry to discuss our financial results.

Thanks, Andrew and thank you to the whole United team for closing out the year strong with.

With adjusted pre tax income of $1 $1 billion. We came in ahead of our fourth quarter expectations and not only returned to pre pandemic levels of profitability, but actually exceeded the fourth quarter of 2019 on both an operating and pre tax margin basis.

Even more encouraging in the second half of 2022, we achieved an adjusted pre tax margin of 9%, which matches our margin target for 2023 and puts us well on our way for that same success. This year.

Turning to costs, our CASM ex performance in the second half of 2020 to meaningfully improve versus the start of the year as I mentioned last quarter, a big driver of this success is the return of the grounded triple 7% decline and further improvement in our operational reliability.

We know a well run operation is a more cost efficient operation.

Looking ahead, we expect first quarter 2023, CASM ex to be down between three and 4%.

With capacity up 20% versus the first quarter of 2022.

On a full year basis, we expect 2023, CASM ex to be about flat with capacity up high teens versus 2022.

This full year cost outlook is inclusive of investments in the system that support operation reliability, our current expectations for new labor increases representing about four five points of CASM ex excluding any possible signing bonuses.

And higher inflation outlook for all parts of the business.

On the first 0.1 lesson learned during the pandemic recovery.

That is both economical and profit maximizing to provide cushion to our aircraft utilization.

Instead of pushing utilization to its theoretical limit we are focused on protecting our reliable operation.

This minimizes delays and cancellations, which would otherwise drive higher costs, such as overtime and customary accommodation costs.

Turning to our our expectation on profitability as Andrew mentioned demand remains healthy as a result, and using the January 10th forward curve for fuel prices. We expect our first quarter 2023, adjusted pre tax margin to be around 3%, resulting in an adjusted diluted earnings per share.

<unk> 50 on the dollar. Additionally.

Additionally.

On a successful second half of 2022 and with industry dynamics. Scott described it started the call we feel even more confident about achieving our United next 2023, adjusted pre tax margin target of 9% and expected adjusted diluted earnings per share between 10 and $12 for the full year.

On aircraft. We currently expect to take delivery of 92 Boeing 737, Max is two Boeing 780 Sevens and for Airbus <unk> hundred 21 Neo aircraft in 2023.

Assuming all of these aircraft are delivered we now expect full year 2023, total adjusted capital expenditures to be around $8 $5 billion.

Even with this elevated level of Capex based on the capacity revenue and cost guidance. We've outlined we expect adjusted free cash flow to be positive for the full year.

Looking beyond 2023 last month, we announced an aircraft order with Boeing that included 100 firm 787 aircraft, which will address much of our wide body replacement needs through 2032.

We also received the options for up to a 100 additional 780 sevens that can be used for growth. If there are margin accretive opportunities to do so.

Additionally, the order included 100 incremental 737 aircrafts.

To both meet planned United next targets and start preparing for narrow body replacements in 2027 and beyond.

Our aircraft order book is one of our key assets as it provides us with both cost saving replacement aircraft and the ability to take advantage of profit enhancing growth opportunity.

Cost of the flexibility built into the order book, we can also adjust the delivery timeline as the macro economy dictates.

Moving to the balance sheet, we ended the year with liquidity of $18 billion and reduced our adjusted net debt by $3 3 billion versus year end 2021.

We continue to balance liquidity levels with deleveraging activity and financing opportunities as we expect to end the year, having met our 2023 target of adjusted net debt to EBITDAR of less than three times.

Entering 2023, with a strong foundation and I want to recognize all of the hard work that has gone into running this great airline, we look forward to delivering for our customers employees and investors in 2023 and with that I will turn it over to Christina for the Q&A.

Jay will now take questions now please.

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

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The first question comes from.

Conor Cunningham from Melius research.

Hi, everyone. Thank you for the time.

There's been some pushback on the 'twenty two 'twenty three jet fuel guidance I'm, just trying to get comfortable with the link between costs and revenue so.

<unk> is the highest it's basically ever been and even with the capacity constraints out there industry capacity is now being added. So what gives you the confidence that you might pass along additional cost headwinds on the customers in the current environment.

Hey, Kannan, let me provide a little bit of color on that and maybe Andrew will as well, but first of all.

<unk>.

When we provide our fuel guidance, we did this quarter, what we always do which is we look at the forward curve of about a week ahead of the release.

So last week.

Those numbers as you know can change daily.

In fact, if we had run it more recently, we would've put out fuel numbers.

Essentially 10% to 15% higher.

<unk> is being equal that would represent about a point of margin.

We are we continue to remain confident that there is correlation.

<unk> between revenue and fuel that we've seen.

Historically.

For the first quarter.

Near term we do.

Don't have quite the same ability that we would have during the full year, but even.

For the first quarter, we still have February March and fuel will change daily.

And for the full year, we're still comfortable that.

There is this correlation and in fact had we put a higher fuel number and that probably would have been a different revenue number but let me just give you. An example that gives me some comfort, but keep in mind that for the back half of 2022, where we achieved a 9%.

Margin fuel was $3 68.

So we do have a lot of cushion Andrew has any additional color. Thank.

Thank you you've covered it really well Jerry.

We absolutely still do believe and I've seen constantly over time that fuel is a pass through on both the up and the down.

And the other thing I can tell you is as we as we look at our advanced bookings, particularly starting in the mid February time period out well beyond that and into Q2, we're in a really good strong supply demand equation.

Allowing our RM system is to actively work to do what they do best So I feel fairly confident about the outlook.

Okay, and then just on the United next plan. So when you guys talked about that originally it was all about leading on costs I realize the environment has changed a lot. Since then but as you start to look at our cost structure that includes labor and so on is your expectation at.

The United It becomes a cost story again.

Going forward in 2020 post 2023 world.

Going forward. Thank you.

Yes. There is no question that has been an industry reset on cost and I think Scott did a nice job sort of describing that and the cost convergence ahead.

Yes, if you just look at.

Our guidance, we put out about six months ago.

For 2023, there has been movement. There is no question probably that.

At 9.3.

Three points of that is just the capacity difference between what we thought six months ago versus where.

We're thinking today.

Another three points in the labor numbers, we put in the rest is inflation and buffers.

But what's important for the United next plan is the relative cost.

Story, which remains very intact, so whether it's the mainline gauge benefit we're seeing we will see from the additional aircraft or less reliance on single class 50 seat aircraft that have come out and will continue to come out of.

Of the operation, we're very comfortable in the United next cost story as it's been adjusted for the industry cost impact.

Our next question is from Katie O'brien from Goldman Sachs.

Good morning, everyone. Thanks, so much for the time.

Maybe just coming at the revenue question a little differently.

For Scott or whoever else wants to answer.

How do you think about getting back to airline revenue as a percentage of GDP I think that that makes a lot of sense conceptually, but do you think the industry gets there on pricing.

Liam versus GDP is lower given the capacity constraints, we talked about.

Well I mean, if you go back and look at history.

While load factors have gone up a little I Wouldnt expect a lot of change in load factor and if you went back a few years.

Pricing in real terms.

It was a higher newsday it remains a great value.

Air travel.

Prices are probably 50% lower than they were about 30 years ago in real terms.

And you can still frequently.

Or for your Uber to the airport than you do for your airline ticket, Florida.

And so I think but I think that what this means is the era of $4 prices from Los Angeles to Cabo at $7 from New York to Florida, $9 from Houston to Central America, probably a thing of the past.

And the cost convergence.

Except to other airlines decide how to price the product, but I'm pretty sure it's not up to them, what's happening to their cost structure.

And as that is changing we see it happening already it is what happened.

Last year, it's what changed last year we.

We see that continuing.

To <unk>.

Anders earlier point too.

Data as well and following our revenue management team is doing a great job, but the yield curve for February is higher than January yogurt for March is higher than February .

And the yield curve for the second quarter is higher than March and by the way bookings are ahead in all periods.

So.

I think it's a structural reset I think it is.

But.

Investor store.

Aviation I think it's good for everyone I think it's particularly good for airlines like United that had the sophistication the technology the infrastructure to operate in this more challenging environment.

But it's good for everyone and it's just a structural reset that's reversing what happened over the past couple of decades at least the possibility of it I think it's likely.

I will say that at least a possibility.

Thanks, so much that color and live in New York can definitely confirm on that Uber versus the airfare.

<unk>.

Hum.

<unk>.

Obviously, a lot of change as we just talked about since you originally United next plan, particularly how the capacity bottlenecks you've been talking about have played out how should we think about capacity growth over the next couple of years are you still targeting to be about 40% bigger in 2026 based on that 46% CAGR or help us reset the bar. Thanks, so much.

I'll try that I don't think were going to reset the bar here obviously this.

This is really dynamic and the OEM delivery delays both on engines and aircraft had been really unprecedented so we're not going to we're not going to re guide today to what 2026 looks like other than we're plotting our course and very bumpy skies when it comes to the availability of aircraft.

And there is not a quarter that goes by where I don't get an update with obviously disappointing results from what our what our outlook looks like for aircraft deliveries. So we will continue to monitor that and at the appropriate point in time, we will update the guidance.

But I think the important point is we have real confidence in achieving our 14% margin.

Under <unk>.

All the plausible scenarios or for aircraft deliveries.

Next we have Jamie Baker from Jpmorgan.

Oh, Hey, good morning, everybody I'm Jerry question on the labor cost assumptions the pilots in the 4.45 point headwind.

Do you expect the pilot economics to be backdated to January 1st are you using some other date and also related to this.

The EPS guide do.

Do you also consider deltas profit sharing formula to be market.

Jamie Nice question, but neither one of those.

We're going to be able to talk about on our call youre asking for too much information regarding <unk>.

Potential negotiations.

Okay.

Second question for Scott.

On the topic of cost convergence I think you said.

The ability for discounters to maintain a significant wage arbitrage is narrowing or impaired I didn't quite get your language, but if we look at the spirit and Jetblue Tas.

Yes, they're incrementally expensive, but the resulting wage advantage to let's just go with Delta here. It is.

Still pretty much the same so were you implying that the arbitrage has to narrow even more or did I misunderstand.

Hum.

I'm, saying not implying that I don't think a world where they pay meaningfully less is still higher and successfully Y and complete their schedules I think thats. The null set I don't think they can do it.

One of the other ulc's as.

Really been struggling this year with completion factor.

Which at least had us internally wondering if they had pilot shortage issues because.

System has been really pretty good.

One day FAA outage, but the weather has been good and they've been consistently have a problems.

And then eight or.

Nine days ago, they put out a $50000 signing bonus.

For pilots.

However, you want to calculate it however, you want to look at it.

Yes.

If you're interested I can give you some more real time fact.

Like I've watched the data closely.

And.

It's not happening I mean, what happened over the holidays.

Was it just at one airline.

And at all of the Airlines that have challenged you look at our data that we put out do you want data for what's happening right now I can tell you some more stuff.

But there are a number of airlines, who cannot fly their schedules.

The customers are paying the price they are cancelling a lot of flights.

But they simply cant.

<unk> today, maybe it's pilots maybe its something else, maybe it's technology may be its infrastructure, but what I am confident.

The big three and by the way I think Jetblue has invested in this.

The big three and Jetblue are operating at a different level than everyone else for whatever the reasons are.

Next is Ravi Shanker from Morgan Stanley .

Thanks, Tony.

Got it thanks for that.

I am kind of early intro to the call pretty extraordinary set of facts.

An argument you laid out there.

What does this mean for the industry kind of longer term benefits.

Really unusual to see an industry to your point tried to grow in the face of the restrictions that they have like this.

How does this and I mean, do you think theres going to be like regulatory scrutiny on kind of.

Your line is trying to grow and when they cant and Thats hurting service are what happens next year.

Well.

I think what it's going to lead to one way or another as les has less capacity.

Mathematically possible for all the airlines to achieve their aspirations.

And now I'll just give you the data.

I'm not trying to pick on these two airlines.

But like this seems so blindingly obvious to me and we talked about it a year ago, we were right. All this year with capacity coming in seven points lower.

And I feel even more confident that we are right today and the data I'll give you is.

Snow Storm started pretty big snowstorm started in Denver yesterday afternoon continued through this morning 11 inches of snow. So thats a tough operating environment. There are three large airlines three airlines. So two in addition, deny that big operations there.

Yesterday in Denver, our mainline we had a 100% completion factor so no cancellations.

Hi, This is Laura.

Otherwise the other one canceled 47% of their flight starting off today, we've canceled a little less than 1% each of them have canceled 33% of their quite like this isn't new.

And.

There's like a dozen of the wall Street analysts.

Breathlessly publish a weekly report on industry scheduled capacity you guys are looking at the wrong data.

What.

Forward indicator of what's going to happen with capacity that you should watch completion factor. One of you should start looking at completion factor because of airlines that are running like that it means that you can't fly their schedule and they're going to have to adjust one way or another but thats. My thesis that's what happened last year.

That's what I think is going to happen next year and all of the structural issues are multiyear I mean, all of them are three years at best.

To address and you put all of them together. This is a long term structural issue and I think.

It challenges us to but we just did more to invest for that future.

So it coming earlier than others.

And are better prepared.

To deal with it than everyone else, but it does challenge us too, but really like don't take my word for it don't take the others word for it just watch the data.

So what's happening with completion factor and Thats going to tell you.

Whether we're right again this year or everyone else is right when they say, they're going to achieve their aspirations.

Great. Thanks, a lot I think it can be a good sell side analysts when you decided to do.

At some point.

You guys are way too negative.

DSL butter.

And then maybe one follow up I think you did that.

The point on corporates running out of budgets towards the end of last year was an interesting point do you guys have much data on kind of what 23 corporate budgets look like to avoid a similar situation. This year. Thank you.

I don't what I will tell you is that the reset looks very good as we head into January obviously, so we're really pleased with those numbers October was a really good month for corporate and January is tracking at that or above that.

And so we will see where we go from here, but I.

I will tell you this is.

An important number for United we monitor it a lot and it's.

It's moving in the right direction, and we're highly confident particularly for long haul global that we're going to get back to full strength and that's an enormous tailwind I think for at least airlines that rely a lot on corporate travel.

Okay.

Next question from Duane <unk> from Evercore ISI.

Hey, Thanks, good morning.

Just on the interrelation between fleet and CASM. If we just if we just back up in time.

You announced a big.

Fleet order in June of 2021, I think that's when you unveiled United next.

And your target for this year was down four relative to 19 on CASM ex you updated those views obviously we had.

Less capacity inflation et cetera. So you went from.

Down four to up five.

Another big fleet order in.

In December .

And now the outlook is plus 15 versus 19 versus your initial down four.

So I guess the question is given the constraints that you articulated very well why does this investment rates still makes sense. If you can't grow at the rate that you hope to grow why invest at a rate that assumes a much higher growth outlook at some point.

Well to be clear.

We can grow.

At United I don't think the industry can grow.

For all the reasons that we've said I think at United We can grow.

Clearly, we are clearly able to hire pilots pre pandemic, mostly ever hired was about 900 in the year, we were right at 2500 last year.

Our team our flight training team has done.

Amazing job there was a lot of work to do to get that training machine humming it.

Also help that.

I had enough foresight to build 14, new simulators during the middle of the pandemic when everyone else was pulling back and shrinking.

But.

That part of the that's one of the best one of the probably the most complicated thing that airlines are struggling with.

We have that machine humming here.

Here in Houston at the flight training Center and hired 4000 by the end of this.

This year, we opened a new training center or another investment.

We made last year I mean really the point is we invested.

To be able to grow and I think we can grow we have the other benefit of.

We're taking 300 plus regional jets out of the system. So that creates a natural slack in terms of departures, if you've got FAA issues air traffic control issues.

If you're a single fleet type airline by all <unk> hundred 20 family are all 737 like you don't have anything to take out to give you room, we do have.

300 aircrafts were to take out but really the point is all the investments.

One of the investments that I like.

That speaks to the foresight.

That we had coming into this was.

Clubs, and we increased our club space by 48% during the pandemic like that's always a challenge trying to close clubs when they're full.

Constrained airport environment, its always tough on customers like the pandemic.

And history, but not once in a generation once in history chance to do that with minimal impact because we didn't have nearly as many customers flying in 2020, and 2021 and we're the only ones.

And like there's just stuff like that everywhere.

And it did differently so to be clear.

Well I don't think the industry can grow I think we think United can my guess is because of the deal.

OEM delays.

Our full target that those will be behind we're going to be final lower utilization than we were before and there's going to be less regional so we probably wont be all the way to our target, but I think we can uniquely grow.

And expand margins in this environment when.

Everyone else can't and it's because of all the investments we made to set up for this.

Thanks, Thanks for that Scott and obviously hindsight is 2020, it's been it's been a unique set of circumstances, but I guess the question is.

How would you invest.

We invested at a rate more aligned with your DNA or <unk>.

Where there is real free cash flow to point to here.

How much higher would this CASM outcome have been in other words, if were up mid teens relative to 2019 could you have invested at a much more modest rate and gone through the same outcome and I appreciate your thoughts on it.

I think if we look.

If we would have invested if we had done the same thing everyone else did we'd have the same problems that right now.

Can't say, 1% of our flight stay in Denver, We began some 33% that's higher cost.

Our cost would be higher.

This isn't just investment like.

I think when you get to the end of the year I bet dollars to doughnuts that we have the lowest cost.

Our best CASM performance I recognize other people have better guidance and then maybe they will have better guidance.

But I think in the real world.

We've come to grips with what the real world means.

What you have to do to operate it and you can see it.

The data excuse me operating stats, you can see the financial stats and.

And it's a new world you can't run the airline.

Like you did in 2019, I remember I read all the transcripts.

And I read one of the transcripts and Jamie asked somewhat I don't even remember, which airline it was but as someone when are we going to get back to pre pandemic normal and I don't remember, who it was or even what they said because I immediately thought the answer to that question is never.

And I don't think anyone else has figured that out yet the answer to that question is never is it new environment, It's a new industry.

And that creates our costs. It does but it's also creating higher revenues and I think it's going to lead to across the board higher margins, but particularly for United.

Our next question is from David Vernon from Bernstein.

Hey, Andrew I, just wondered if you could sort of put about what's embedded in the PRASM guide for being flat I know you mentioned PRASM was up two to three cargo down what are you expecting out of the card program in the other revenue line as we think about 'twenty two 'twenty three.

We're still expecting a really strong results.

Yes.

Not keeping up with the ASM growth rates that negative headwind, but our card program is doing really well our partnership with cases, just topnotch new.

New members into the mileage plus program relative to where we were in 2019 I think we're up about 50% at the same time period in 2022. So all of that is moving in the right direction. It's just not it's just not keeping up with ASM growth in 2023, which creates that inversion between PRASM and RASM and obviously you.

I understand that cargo part of that so okay.

Okay.

And then maybe Scott just.

To ask the question.

Just kind of came up as youre talking about the challenges around the industry, having to reset its cost structure do you see any risk that as you're kind of looking out and building. The revenue plan around your own cost structure setting fares at a level, where you can recover that cost pressure.

That the rest of the industry, maybe doesn't it doesn't get there.

I guess.

If the rest of the industry isn't quite recognizing what the cost pressure of operating in the new normal is going to be do you think theyre going to be under pricing.

And potentially creating some problems for you to absorb some of the cost that you're building into the network.

Well, if they're right.

I don't think they are but if they are right and they can return to two.

2019, and utilization and efficiency that we can do that will be.

To just go back to fly.

So no. The short answer is no im not worried about it because if they are right.

We will be really easy for us to just fly the aircraft a little harder.

Because we are growing within a few months just slowed the hiring down and within a few months you'd be back to be clear I think that's extremely unlikely.

To happen, but we could we could adjust our cost structure down.

Yes.

Turns out that we were wrong and thats, the new normal pretty easily.

Next we have Andrew <unk> from Bank of America.

Hi, good morning, everyone.

Just kind of want to go back to fuel for a second just because it has dominated the conversation so far.

When you think about it conceptually looking at your 2023 guide it seems like Youre, assuming fuel is going to $2 70 per gallon in <unk> and Jerry you said fuel is a pass through so I think that's down like at least 30% from from current market. Just how do you underwrite that kind of 2% to 3% PRASM growth in 2010.

<unk> III, if fuel is coming down.

Okay.

Let me, let me start looking at what I would tell you is that.

I do think fuel is a pass through in both directions and that it is dynamic on when we pick the number and we up and we adjust the revenue forecast for it.

But more importantly, where we are in terms of demand and supply.

And cost convergence as Scott spoke about quite a bit of detail.

Just given us I think significant ability to utilize our revenue management system to make sure that the price points are where we need them to be and we did that all through last year and in fact, we did that.

All throughout the entire pandemic, where we led the industry I think 11 out of 12 quarters. So.

Feel really good about where our revenue performance is we feel really good about where our bookings are we feel really great about our Q1 guidance.

And we feel really good about where the RM system is currently managing price points for for Q2 and beyond.

Definitely believe in the CDP relationship. It is converging and is converging for all the reasons that Scott talked about earlier, so we feel really bullish about the outlook and the ability to achieve the revenues that we need to achieve.

Got it understood.

And then Andrew you gave some pretty robust booking figures for February into March and kind of your whole outlook.

Any color that you can provide in terms of how youre thinking about <unk> by by region, which regions might you might you see accelerating which decelerating from here just kind of get a sense, how you're you're seeing the world right now thank you.

Sure I'll go to try I will say that I started with earlier.

Global long haul environment, where capacity ex United is negative and capacity with United is just slightly about 2019 levels relative to where GDP is this year provides us an enormous set.

Set update a homerun on traveling on our global long haul network. So we couldnt be more bullish about that and then simple right supply is flat versus 19 and to prevent city to travel along with the economy and GDP is dramatically higher that sets up a very good opportunity for our RM systems and they are actively working to do that and bookings.

For spring and summer look really strong so.

Europe I, just think it's going to be another record RASM and margin year based on that setup and it looks it looks really good across specific the same exact capacity set up by the way.

Where it's slightly negative without United in about 100% with United relative to 2019 capacity.

And a very similar setup, but we also have the opening of China and.

All three markets, Hong Kong, Beijing, and Shanghai, ultimately and we think theres going to be a significant bounce back in demand like we've seen in Korea, and Australia and other places in the region.

The only I think the thing we're watching carefully is Japan, where the numbers look really good but it's based on U S point of sale at this point and not Japanese point of sale, we expect the Japanese point of sale to kick in later this spring and summer so that that one has it been slower to rebound again U S point of sale just added a new.

<unk>.

I think pent up demand and is ready to fly and its doing status that really covers the number once Japan comes back online.

From our point of sale perspective, I think that further strengthens that as well Latin America near near Latin America is.

The best I've ever seen it from a RASM perspective at this point and deep South America is also very good that it's just not nearly as good as the amazing performance, we're seeing in clips in Latin America. So the setup for our global network I think unbelievably good and it's really very simple math and there is very little <unk>.

City growth out there and a lot of GDP and if you look at our capacity guide, while we haven't given you an international and domestic breakout you can look at what we're selling and you can see how we've leaned into it for 2023 to make sure we maximize the profitability of the airline.

We've done that very well domestically I also want to say Scott talked about this cost convergence, we talked about the capacity constraints with people think they're going to fly in 2023 is not what we'll really be flooding that happened in 2022, we think that's going to happen in 2023, and given where we think.

Total revenue is and ASM will be less than that we think there is a chance for positive RASM domestically as well.

And it's a really good setup so across the globe amazing setup here at home also a very good setup for a positive outlook for the year.

Next is Helane Becker from Cowen.

Thanks, very much operator.

My team and thank you for the time, so just one question here when.

When we look at airfares and we compare.

Say premium economy to wear business class was pre pandemic. It seems like the price points moved to that level right. So you have some economies. There then you have a premium they are an economy that seems to be equal to what business was and you seem to have business.

That is significantly higher.

So a is that observation correct and b, what's your paid load factor in the front of the cabin.

Alright that theres a lot of numbers you put out there.

But I'll try to say is that.

Payload paid first class load factor to briefly here domestically are up a lot there up six points.

So our RASM growth in the first class cabin versus the main cabin domestically is 15 points higher so it's doing incredibly well, which we're excited to see obviously because of our move towards more dual class aircrafts and monetize in the premium cabins on on our global long haul fleet I think it's a little bit different than maybe what you said.

The published price points may be exactly what you said I don't know, but the.

Performance I would say is that Polaris is not back to where we'd like it to be just yet, but the middle cabin the premium plus cabin is and better and the coach cabin is and better.

And so the RASM performance onboard the aircraft is a little bit more tilted towards the back of the aircraft or the middle of the aircrafts on the global long haul fleet then it is the front end.

I'm also particularly excited about this recovery in large corporate traffic is that is how we tend to fill the front of the aircraft and so the trends we see in January .

Look really good and that also has a positive tailwind to the global network as we do a much better job of filling up Polaris with higher quality yield than we did in 2022 and I'm confident when we end 2023, we will be able to report that the players paid load factors in paid yield.

We are much closer to their 2019 baseline.

Then they were in 2022.

Okay that makes perfect sense and then just for my follow up question.

I'm not sure whether you said that's our Scott.

'twenty two.

If nobody flew their capacity.

Original plans in 'twenty, two which they did it and they don't in 'twenty, three and the infrastructure issues and I don't see the government rushing to invest in air traffic control in fact, I see it getting worse.

I don't see the FAA and best day.

As you think about this 20.

<unk> thousand three get worse in 'twenty, two and 'twenty four get worse in 'twenty three.

It doesn't got accelerate to the point where.

You can't.

The industry just huh.

Or because you run out of space.

Pretty close to yes is the answer for near the limit on capacity.

On flight in the system.

There are places that are at the limits.

And we're.

And you can see it like it works fine and you can add more.

Good weather days when absolutely nothing goes wrong something goes wrong every week.

There's weather there's.

Systems issues that happened at the FAA to happen individual airlines their pipeline as we get cut.

For fuel at airports Theres vendors that fuel airplanes at airports that are short staffed or have higher sick calls.

Just the stuff that happens every day.

Air.

The capacity limit.

In terms of total number of lines.

And Scott, we should add to that though what you said earlier that we get we're getting rid of a large number of regional jets. So the departure activity that we're planning from our seven key hubs in 2023 is still materially behind where we were in 2019 from a departure level. The ASM is a whole another story as we've talked about because of what we're doing with gauge.

But we've created the room in our hubs to be able to execute our plan.

We have sufficient runway and gate space to do so.

Yeah.

Our next question is from Scott Group from Wolfe Research.

Hey, Thanks, Good morning, I got one near term and then one bigger picture question, just when I, just look fourth quarter to first quarter.

<unk> guide.

The implied revenue guide just worse than normal seasonality just given everything you were saying about February March bookings, just help square with the with the revenue in RASM Guide. Please.

Yes, what I would say is that we definitely see a different set of numbers for like January six through February 15th then we do beyond that.

And as I think about it it's our hypothesis that we do have a bit of a different type of seasonality post pandemic. Then we did have pre pandemic. So it just depends on the year and the quarter over quarter year that youre looking at.

The trade off with the every weekend as peninsula holiday.

Allowing us hopefully to be able to D peak this summer and run a more constant level of operation from mid February all the way through October that.

It's really exciting and a lot more upside than maybe a few weeks in January that don't look as good as they used to be so I think the trade off is fine, but our hypothesis at this point. It is a different type of seasonality related to a post pandemic environment.

Okay, and then Scott so bigger picture, if youre not getting the unit costs leverage from capacity growth that maybe you thought you would have gotten a year ago, a year ago, I guess why grow so much in risk.

Adding too much capacity to the market in risk pricing and maybe just ask differently. If you didn't grow as much do you think you'd still hit the 9% margin, but at the same time, just generate better free cash flow.

Well to be clear we're focused on margin.

That CASM, we're focused on margin.

Well, we aren't updating upgrading our <unk>.

Guidance, we're already way ahead of the street.

I think everything we had in our deck today and everything we've talked about today certainly creates a plausible case that margins are going to be higher.

For all the reasons, we've talked about if we were not growing.

I think our margins would be lower I mean, clearly it would impact our CASM.

But I think the capacity that we're going to add would be soaked up by someone else.

And I think that.

But I think our margins will be meaningfully less if we werent doing.

We're doing it so.

We're doing it because we think that this is a.

Look I think this is a once in the history of the industry opportunity. This is.

That event, that's never happened before.

I guess that most of you on the sell side disagree.

And I accept that you disagree but.

But I think the world has changed.

And the industry has changed and by the way we do have a lot of flexibility in what I would say you didn't ask this question, but I would say is if we're not if there's some reason that doesn't look like we're going to hit our targets. If we're structurally missing our targets if we're underperforming the industry and missing our targets. We won't do all of this growth we have a ton of flexibility.

To move aircraft around then we won't do it so is it just like.

No.

Damn the torpedoes.

This is.

As long as it's working we're going to keep moving but I will tell you every single data point.

Increases my confidence at least it's working.

With the highest pre tax margins in the fourth quarter of the Big network carriers at least.

We amazingly enough. If you look at actually we had the highest free cash flow.

'twenty two.

With the lowest net debt if you use traditional GAAP accounting with operating leases and include pensions, we had the lowest leverage ratio like.

It's working if you look at our operating results with what's happening in Denver today like it's working so.

So we're not going to change course on something that's working but if it stops working.

Then we absolutely have the flexibility to adjust.

We will now switch to the media portion of the call. If you would like to ask a question. Please press pound Q or hash tag <unk> on your Touchtone phone. Please make sure your devices on muted to allow your signal to reach our equipment pressing pound to a second time remove your line from the queue.

Once again, if you would like to ask a question. Please press <unk> on your phone. Please hold for a moment, we assemble our queue.

[laughter].

Yeah.

First step is Leslie Joseph from CNBC.

Hi, Good morning, Thanks for taking my question I'm, just curious if you're benefiting at all from book away from southwest after the holiday Milltown and also us you're benefiting from pilot attrition.

Coming from southwest and the second question.

Do you see any impacts from the many travelers that are cashing in on their miles this year that they might have built up during the pandemic and does that.

Help or hurt you.

Yeah.

I'll give it a try Leslie it's Andrew I think we're I think we're benefiting from running a world class great Global airline.

When we looked at the data and particularly not over like one week right over our one quarter will be.

At the data over the last year plus.

Our team has been just hidden a homerun.

And the data shows it so I think we're really proud of where we're at we intend to keep that online.

We have the appropriate buffers to make sure. We can continue to deliver for our customers going forward and we shall in terms of your frequent flyer growth.

I can say is the program is incredibly healthy the redemption rates are quite normal.

Given where we are with inventory availability.

And our customers are using their miles to fly all over the world and the largest global network of any U S carrier.

And on the pilot.

As it is.

Amazing change I tried to get out to the training center and see new hire classes of 400 200, a month, then I've started asking where they come from the show of hands. It used to be like any other large any of the large airlines.

<unk> Ltc's Big Airlines.

Hardly any because you had to give up seniority to come.

We now have a high percentage of people in those classes that are coming from all airlines.

And I think the reason is because.

It has if youre a pilot or anyone.

Aspire to occur in aviation United as the place to go.

We're well on our way to be the biggest but also the best Andrew talked about.

The brand the reputation that matters a lot to people our pay rates are going to always be.

Great very depending on the timing of contracts, but all is basically going to be at the top of the industry. I mean, if youre a pilot United has the most growth opportunities the most opportunities.

Fastest path to captain.

Wide bodies of any airline by part of the country like we're the place to go and people are actually giving up their seniority at all of our competitors.

For the opportunity to come and have a future.

That's a testament to where all the people of United.

Have accomplished and how bright future looks.

Next just Alison sider from the Wall Street Journal.

Hi, Thanks, so much just wanted to ask about the FAA outage last week.

And I don't know how you are thinking about that is there a concern that there are other sort of.

Systems that are vulnerable or that you think of a single points of failure.

How youre thinking about it and what kind of conversations you've had with the FDA.

So I.

I think this ought to be a wake up call to for all of us.

Something that many of us in aviation have been saying for a long time that the FAA needs for resources by the way I think they do.

Amazing job during the Christmas.

Struggles with the weather.

A bunch of great things that they did but two in particular, the Watergate a water main break that flooded the tower in Newark, and same thing happened to one of the towers in Chicago.

Really quickly moved into backup facilities.

And kept the operation running I mean, just.

A lot of people jump through a lot of hoops and deserve a lot of credit for that but.

The hard facts are.

<unk> budget in real terms is lower than it was 20 years ago, but the amount of work that they've been asking do significantly higher huge resources devoted to space launches drones.

Thousands of people more working on aircraft certification programs in the aftermath of the Max disaster, and so they've had to Rob Peter to pay Paul.

And they've been asked to do more and they're doing it less money, there's fewer controllers than there were 30 years ago.

And it's people it's technology.

Look here in the United States, we should have.

A world class best.

Aviation system.

The world, we're putting at risk if we don't invest in it and this is infrastructure. It was great that we passed the bipartisan infrastructure built this ought to be bipartisan as well by the way that we passed the bipartisan infrastructure bill, but this isn't a concrete but <unk>.

Modern systems modern technology, and the right number of people for the FAA is in infrastructure investment that will pay dividends.

Many times over.

The country.

So I hope that what this is.

As an opportunity for us to look at this just like we looked at the country at the infrastructure Bill bipartisan way get the agency the resources that they need because we have asked them to do more.

And we will all be better off.

And then if I could ask one more just on restoring place to China or their approvals either.

In China or do you asked at the government level or diplomatic things that need to happen.

Order to ramp that flying back up.

There are at this point United Airlines holds the rights to fly for flights per week to China.

We intend to convert our current one stop service to nonstop sometime in the next few weeks hopefully, but we do not hold rates at this point to increase our service any further and I believe that is an industry wide type situations. So at this point there is no green light to go beyond what were currently.

Fine.

Next is David Shaffer from PR.

Hi, Thanks for taking my call I appreciate guys doing this morning.

A couple of questions that haven't been asked and answered so I'm going to kind of shift gears into something that might be coming out of left field, but combined administration announced.

Last week.

Playing to get transportation Secretary sector down to net zero emissions by the year 2050, I know the aviation industry has that goal as well, but how realistic is that really and what is the cost to an airline like United to try to shift to sustainable aviation fuels to possible hydrogen.

Howard engines that sort of thing.

Well I haven't seen the details of their plan, but I.

Thank you as a global citizen.

Probably the most important thing that our generation needs to accomplish I'm proud at United that we are not we are.

The leading airlines around the globe.

On real sustainability initiatives.

And we are one of the leading corporations.

Sure.

We are focused.

At United, But I think it's the right focus for aviation on number of fronts one on sustainability.

Fueled by the way they build back or the inflation reduction Act.

<unk> has a number of provisions, but regardless of what you think about everything else in the.

The sustainability provisions are meaningful.

Not just for our industry, but for everyone and I think our transformative legislation.

It makes it viable to start making investments and.

And hydrogen in SaaS.

And we've been the leader.

And we've got even more coming but a lot of projects that we're going to be hard to do all of a sudden start to pencil out at least potentially pencil out and so I think it's driving it is driving a lot of investment and you can expect more from us on that.

A lot of excitement.

Electric aircraft, we're working on there.

And while I can't replace everything because it's never going to be big airplanes flying long distance it will be a part of the solution and then finally carbon sequestration.

Climate change.

<unk> and <unk>.

Been for 30 years.

I used to have conversations like this it wasn't too long ago, even just a couple of years ago and I would have to explain what the word sequestration Matt <unk>.

Real progress actually that people know what it is now.

And there is more investment.

We're here in Houston Occidental, as our partner sequestration project. They are a leader on that in that front, but a lot of others are moving into sequestration in the 45 SKU changes that happened in the inflation reduction Act are also really consequential for carbon sequestration. So.

More encouraged today.

I think than I've ever been at the possibilities, but its a lot of hard work ahead and it doesn't happen overnight, but there's not there's not a magic silver bullet.

But I'm also proud that that United is leading.

We partner with everyone that would include the Dod anyone that's interested in doing the right thing and solving this in a real way.

We're happy to be partnered with.

Just a quick follow up what is the cost of all this especially if governments not just the United States and governments globally start imposing.

Mandates to two shifts to alternative fuels that they cost a lot more to to develop it needs.

Well.

I think what we need to do is drive the cost down and so the first half for example, what I like to think about is.

Wind and solar energy, which because I had been a climate change geek for 30 years I followed it.

But it was 20 years ago, certainly 30 years or 20 years ago.

Everyone everything you read or talked about wind and solar was.

Never compete with fossil fuels that could never be economic well guess what.

Pass legislation that had credits a carrot instead of just to stick a carrot that drove massive investment in R&D over economies of scale and today, it's cheaper to produce a megawatt of electricity from wind and solar than it is from fossil fuels.

And the same thing, Ken and I believe will happen with south it is more expensive today.

But we are in the very early.

Phase of the development curve and and.

And that's what's great about the inflation reduction act as it creates those same kind of financial incentives that existed.

Our wind and solar and that is no.

Because we're involved with the company, it's driving investment into this space and that's what is needed right now at this space and that investment is going to lead to breakthroughs is going to lead to economies of scale and I think the costs are going to come down.

Our last question is from Joel Murphy from <unk> Dot com.

Hi, Good morning, I have two quick questions. The first.

Believe it.

Understood Scott previously mentioned.

An unprecedented number of new pilots actually coming to United from other airlines and I understand of course, hiring, especially but not limited to pilots is a big industry constraints. The big effort. So but I'm wondering can you say anything more about that is this an effort specifically involved here now to recruit away from competitors in a way that you haven't in the past and if so how do you.

Go about doing that practically from besides simply.

Positioning the airline is a good place to work.

I would have a follow up.

It's really the latter.

It's not a targeted airline to go after them but.

If you pay attention and United is the best place to work and pilot and want to work at the best place a lot of them are just putting their applications that we don't need to do anything.

More than be the biggest and the best airline in the history of aviation.

That's enough of a selling point.

Okay. So no specific numbers to report on that you've had.

An uptick in that.

Well I don't know what the numbers are.

By anecdote I ask people in.

I would guess that 30% of the people in those classes come from one of the large airlines just Mike.

Following it in the road, but somebody United probably knows the numbers, but I don't have those specific numbers.

I'm just proud of everything the team is doing.

And if I can just follow up here it in previous calls and interviews you've talked about kind.

Kind of changing customer demographics, including things like the rise of work from anywhere at leisure passengers I'm. Just wondering if you have anything more to add to that now in terms of.

How you see that changing structurally in the post pandemic world.

It's a really interesting trend and we saw it again over the Thanksgiving and Christmas holidays for.

For example for Thanksgiving, we saw a lot of people leave dramatically earlier for their.

Vacation.

Then they would normally do.

This year Saturday because he left early Saturday was actually one of our biggest return days.

Display Sunday, which is obviously always the biggest so completely different pattern and we saw that throughout the entire second half of last year, and it's really exciting for our business because it.

How's us GDP things ultimately I run the airline differently and more efficiently.

And remote or well I'm sure it will evolve and adjust over time, which is driving this.

Remote work does seem like a permanent feature in our workplace here in the country.

And so we're optimistic that this continues to be the trend based on everything we've seen.

And it really is just it's a different type of demand, it's a different industry and I think we're well prepared for it and it's very exciting from a capacity and revenue management and customer point of view across the board.

I will now turn the call back over to Kristina Munoz for closing remarks.

Thanks, Candice and thanks for everyone joining the call today, please contact investor or media relations. If you have any further questions and we look forward to talking next quarter.

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

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The phone keypad to enter the queue.

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

Host for today's call Christina <unk> director of Investor Relations. Please go ahead.

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 are forward looking statements are based upon information currently available to the company.

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 the SEC by United Airlines.

And United Airlines for more thorough description of these backups. Unlike unless otherwise noted we will be discussing our financial metrics on a non-GAAP basis.

Please refer to the related definitions and reconciliations in our press release for a reconciliation.

These non-GAAP measure most directly comparable GAAP measures. Please refer to the tables at the end of our earnings Kelly.

Joining us on the call today to discuss our results and outlook.

Chief Executive Officer, Scott Kirby cheap okay.

Vice President and Chief operations Officer.

<unk>.

Executive Vice President and Chief commercial Officer.

I'm executive Vice President and Chief.

Hey, Gary.

In addition, we have other members of the board.

On the line.

I would now.

I'd like to turn the call over to Scott.

If people can hear us okay.

Yes.

Okay.

What was the question about whether you could hear so hopefully everyone.

Thanks, Christina and good morning, everyone before we do our normal normal for Q.

I walk you through a short deck that explains the intellectual rationale.

But growth and where we think the industry is headed over a longer term horizon and short we think there is ample evidence that there really have been structural changes in the airline industry that set the entire industry up for higher margins that we had pre pandemic first while the specifics of the demand environment will be different we expect it to return to at least two.

<unk>.

The only thing level.

It could go higher.

We believe cost divergence among all airlines as well as supply challenges may drive structurally higher industry margins and finally, United has been pretty accurate at about the macro outlooks impact of Covid and what the recovery would look like going all the way back to February 29, 2020, and based on that United really did take a different and unique approach to the recovery.

At the onset of the pandemic, we acted first and we acted more aggressively than anyone else to protect our airline and obviously the people who work at United at the time in fact, some said that we were overreacting in the pandemic wouldn't be so bad but by confronting that reality and acting quickly our leadership team was able to be the first airline to move.

Forward, turning crisis into opportunity and began making plans for big investments in United's futures, while others frankly, we're still in crisis response mode.

Clearly had a head start in planning for the recovery and you're already seeing it.

Our absolute results as we've achieved our nine month adjusted pre tax margin ahead of schedule and on a relative margin results compared to the rest of the industry.

This next slide you can see what industry revenues look like as a percentage of GDP over time, a few interesting point the industry still has about 15% domestic revenue growth left to go just to get back to 2019 level here in 2023.

Our base case, 9% and 14% margin target assumes that we just get back to the <unk> 49 ratio and the 1992, thousands however revenue to GDP was even higher and you'll see in the next few slides, we think that cost converted may drive revenues higher than four nine and for what it's worth every single basis point of domestic increase translates into about <unk>.

One point of margin for United.

On slide five and six I'll address what I think is the most significant structural change to happen to the industry in a long time.

Host of reasons, we believe the industry capacity aspirations for 2023 and beyond are simply Unachievable.

<unk>, along with Delta American and southwest alone or planning to hire about 8000 pilots this year compared to historical supply in the 6% to 7000 right pilots are and will remain a significant constraint on capacity.

Post Covid, all companies, including airlines and the FAA need to staff at higher levels lower experience levels combined with sick rates that are elevated because of COVID-19 and new state legislation that makes it a lot easier to call in sick. We believe any airline that tries to run at the same staffing levels that it had pre pandemic is bounded.

Fail and likely to tip over to meltdown anytime there are weather or air traffic control stress in the system OEM.

Oems are behind on aircraft engines on parts across the board there are supply chain constraints that limited the ability of airlines to grow <unk>.

Finally, the FAA and most airlines with the exception of the network carriers have outgrown their technology infrastructure and simply cannot operate reliably in this more challenging environment, taking all of the above into consideration, we think of United we need to carry at least 5% more pilots per block hour than pre pandemic and in addition to that.

Air traffic control challenges in our taxi and en route flight times are elevated and growing so the same number of block hours, probably produces 4% to 5% fewer asm's put it together and you did 10% more pilot and 5% more aircrafts to produce the same number of pre pandemic ASM like it or not that's just the.

The reality and the new math for all Airlines I think however, we may be the only airline that's actually figured this out and likely the only airline that has included this in our 2023 CASM ex guidance already.

And to be clear all of these issues also impacting on the reality is that the airline industry is probably the most complex operational industry with by far the highest safety and regulatory standards of any industry in the country and COVID-19 hit our industry harder than others all of Us Airlines and the FAA, whilst experienced employed and.

Most didn't invest in the future that means the system simply cannot handle the volume today much less the anticipated growth.

We also missed our capacity target for 2020, we had our own challenges over a year ago during Christmas to 'twenty one.

Cron hit us all hard but it also showed a spotlight on other strains in the system. We responded by proactively pulling down capacity. It was the only choice you can't change the engines on an airplane when it's flying we flew a lot less last year than we would have liked fly, but we did it intentionally because it gave us the breathing room to make even further investments in our technology.

And infrastructure and to increase our staffing levels and we had a huge start head start compared to most airlines because we started with much better technology and infrastructure.

But also importantly, we got to acceptance quickly and didn't spend much time in denial about the structural changes we accepted that the structural changes were real and moved quickly to what to do about it on that point I also fully recognized that most or perhaps all of our competitors will get on their call next week and tell you one time or the no big deal.

No change to our capacity plans.

I think they are just wrong, it's intellectually hard it takes time to get through the denial phase.

So difficulties are just the latest among numerous data points proving the systemic challenges that are going to limit the growth in flight as you can see on the data on slide six unites hub locations, meaning that we pretty much always have the worst weather in <unk>.

Part of this we're able to lead the industry because we're doing a lot of things differently than we did historically.

We made significant.

Additional investments in technology and infrastructure, we're running with 5% to 10%.

Staffing borrowers that means we need more pilot data at its flight attendants ramp et cetera to fly the same schedule, we're running at about 25% more spare aircraft than we did pre pandemic and we're flying lower aircraft utilization all of those obviously cost money, but it is clearly the right thing to do for our customers at the most among the most important things we can do to win their loyalty.

And it's turning out these buffers are much less expensive than the cost of avoiding the otherwise inevitable operational meltdowns.

And therefore, our guidance other airlines are likely to talk about returning to 2019 utilization efficiency et cetera, but we believe that just wrong. Our industry has been changed profoundly by the pandemic and you can't run your airline like it's 2019 or you will fail, but don't take my word for it what's the data.

It will always have the toughest operating environment any app any airline that operated meaningfully worse than United is out over their skis and it's simply outgrown their technology infrastructure and resources.

Slide seven transitions to the unique set up on the international front. This is one of the most stark examples of what 90 differently than our competitors or the pandemic. We bet International would return strong post pandemic and because we're the only airline around the world with that view of the recovery. We were also the only airline to make two important strategic decisions.

We didn't retire wide body aircraft and we were the only airline in the world that negotiated a deal with our pilot Union to keep pilots in place and position that allowed us to quickly bounce back the decisions that our competitors around the globe made to retire aircraft and downgrade pilots take years to reverse and because of that they simply cant.

<unk> and <unk>.

You already see that in this summer's capacity data on.

On slide eight I've already hit on the theme so I'll try not to belabor it here, but United had a conscious strategy to use the pandemic to invest in the future. Our large aircraft orders were just the latest example of this new play as your big ticket items that get lots of attention, but other investments we've made in technology infrastructure and people haven't drawn big headlines, even though they too are.

Central to our success. The point here is that we really were unique.

It wasn't just one thing and it wasn't just aircrafts. It started with the fact that we always believed that a full recovery and as a result, we invested and invested early.

You can have whatever view you want about capacity, but what really matters is cost convergence, it's already happening and I'm pretty sure. It's going to continue I believe a world where you all CDC pay their pilot significantly less to US yes, I think it's still higher than retained pilot and they can somehow operate with previous staffing utilization levels is just the north.

It's not a realistic scenario and with cost convergence fiber, a betting man and actually I am.

So to conclude I think the pandemic led to a structural change in the industry. The supply demand dynamics are different than they've ever been in my career I realize theres a lot of investor skepticism on that but every data point keeps demonstrating over and over again and because United saw this ahead of everyone else, we were able to invest and prepare.

To take advantage of it to be clear I think margins across the board are going to be higher in the airline industry, but because of the unique steps we took to prepare for exactly this kind of recovery.

Also already seeing United's relative performance is strong and I expect that lead to just expand a huge thanks to the entire United team, you're really doing an amazing job and you are making United the biggest and the best airline in the history of aviation and with that I'll hand, it off to Toby who will explain some of these critical investments why there were important to the success of our <unk>.

Operation through the most difficult holiday operating environment in my career Adobe.

Holiday travel headlines United was actually that most impacted airline from a weather perspective.

6% of all our products we are exposed.

720 <unk> fixed.

Fixed more than any other airline in the country and even though our load factors was already high we accommodated thousands of additional customers on short notice when their travel and other airlines was disrupted.

Despite these headwinds over the holidays, our team connect that 90% of our customers within four hours of their planned arrival.

More than 8 million people 1 million more than we did last year and our operation performed very well, especially considering these tough conditions.

United was among our airlines with the fewest cancellations during the holidays and we were number one in completion in Denver, San Francisco, Houston, and Washington, Dulles, and with practically eliminated all crew related challenges and cancellations compared to 2021 holiday period.

So how did we do it.

The answer lies in all of the planning and investment we made during the depths of the pandemic instead of just trying to run their not like we did in 2019, we worked over the last three years to prepare for a different more complex operating environment and a sudden surge in travel demand.

Specifically for 2022 holiday period.

<unk> built some slack in the schedule and reduce our often we fly during peak times.

We accelerated our hiring and added staffing buffers in key locations.

We built firewall also prevented the individual weather events with spilling over into broader network and finally, we beefed up our training and every department, including clearing out the pilot training backlog to be resource ready for peak travel demand season.

Again, as Scott said, our work to prepare goes back even further over the last three years, United invested in systems training tools and technology that will empower our employees and benefit our customers.

Putting a modernized crew scheduling system with 800% improvement in performance capacity and security versus 2019.

A smart scheduling operations coordination to build reliable operable scheduled.

Additional spare aircraft in our fleet upgraded technology infrastructure supporting our network operations Airport operations and make claims.

With our industry, leading customer facing technologies like connection savor, an agent on demand both of which now are integrated in our mobile app.

Some of these investments are obviously more marketable than others, but.

Make a difference in our performance.

Finally, I want to point out the biggest difference maker for United This holiday season, our frontline teams that worked as one team they volunteer to pick up extra trips and work overtime and again <unk> record setting cold temperature. It was the combination of their dedication and the proactive investment in technology and infrastructure that led to our success and with that I'll hand, it over to Andrew to talk.

The numbers.

Thanks Tobey.

RASM for the fourth quarter finished up 25, 8% in PRASM up 24, 6% versus the same period in 2019 on 95% less capacity.

So similar performance to the United <unk> third quarter results and above the high end of our <unk> guidance for the quarter.

RASM growth or non passenger revenue continued to outpace in PRASM in Q4, although that will reverse in 2023.

Reversal is due to cargo revenue decline in year over year, two new post pandemic run rate that remains well above 2019, and co brand credit card revenue growing slower relative to our rate of ASM growth for the year.

PRASM in Q4 was strong across all parts of the network versus 19 with domestic results up 23% up 30% Europe 11 specific up 42.

International capacity in the quarter was down 12% and domestic was down eight.

To meet our overall 2023 outlook, we're expecting flattish traveling for the year versus 2022.

The impact from cargo and other revenues on Trasimene 23 is a negative 2% to three points year over year, implying PRASM up about 2% to three points and our outlook.

As we think about the revenue outlook for 2023, we are bullish about global long haul, we expect industry capacity across both the Atlantic and Pacific We United is the largest carrier to be flattish versus 2019, which provides for an easy setup and positive RASM year over year.

International demand remains incredibly strong and we're looking at the potential for record profits and margins across our global network.

<unk> has traditionally been a margin drag on our global fine, but we've worked diligently to rebuild the network and close this gap.

2023 will validate that we accomplished that goal Asia is also close to being fully opened allowing United to reestablish the bulk of the specific client outside of China, It's worth noting that restrictions on the use of Russian aerospace.

Constrained United from flying both of our China network in 2023.

This same restriction will also limit our ability to buy to India.

While I would not normally provide revenue details about the months within a quarter I think it is important to share what we're seeing in Q1.

Our unit revenue outlook for February and March is largely consistent with the levels. We've seen in the past three quarters at roughly 25% higher than 19.

I believe January is a negative outlier in Q1 with unit revenues compared to 2019 softer than the months after it.

This is primarily due to holiday time and with less demand for incremental weekend trim enabled by hybrid work schedules. So soon after the year end holidays, but we expect the second half of February and March two back on trend with booked revenue already 30% to 40% above the same period in 2019 and I think this validates our.

<unk> for 2023.

Overall, we expect our Q1 <unk> to be up approximately 25% year over year.

Another positive catalyst for 2020 revenues is the continued but slow recovery of traditional large corporate business travel while November November and December were low relative to October it's great to see that January is materially better by about five points versus the average for.

January represents the start of a new budget year for most.

Way to start the year and we've heard often budgets in 2022 exhausted early as to why November and December travel a bit disappointed for large corporate travel.

Talk about the great setup, we seeing global long haul earlier, we also see a nice setup for our domestic operations as constraints across the industry are everywhere for eating a favorable supply demand environment.

United is also now quickly executing under United next plans focused on gauge premium seating revenue segmentation signature interiors and most importantly, restoring and built in connectivity, which suffered during the pandemic.

We're opening 17, new mainline gates in Newark, and 20 in Denver in 2023, which will enhance our customer experience and improve reliability and Denver, the new gates will allow us to grow our most profitable hub and a newark, the new gates will allow us to transition more flights to mainline from express consistent with our United next plans.

In addition to gate, we opened more United Club space and Newark, We have 69% more club space in Denver will be up 180% versus 2019, we also expanded club space in Chicago by 40% with a new club that opened last week in Dallas by 43%. Most of these club projects will soon be online and where.

Plan during our prior to the pandemic importantly.

Importantly, there are more projects on the way in the years to come.

United continues to be undersized engage as we await delivery of our large narrow body planes that are largely absent from our current schedule, creating the margin gap versus our potential versus others that have a significant fleet size in this category.

Activity suffered in 2022 due to a reduction in RJ flying capabilities and delays from Boeing.

Staffing at our regional operators have stabilized since payer changes went into effect essentially match and one of our competitors combined with our Aviate program that provides a four year transition plan for pilot from an express job to the United mainline Courier regional jet utilization is showing signs of improvement, but we still have a long way to go.

And it'll be until about 2025 or beyond to get to normal we will.

We have also signed new agreements to expand our large RJ flying in 2023 and associated small community service, while our relationship with Air Wisconsin comes through a natural end.

This change in number of regional partnerships is reduced from six to five and we will eliminate approximately 40 single class 50 seat RJ that were not part of our long term plans and exchange Brad and dual class 70 seat RJ is a clear win for United small communities and our customers.

We build a connectivity will be a key focus in 2023, and 2024 and will be significantly additive to RASM as it was in 2018 and 19, giving us confidence as we do it with optimal gauged this time around.

Thanks to the entire United team and with that I'll turn it over to Gerry to discuss our financial results.

Thanks, Andrew and thank you to the whole United team for closing out the year strong with.

Even more encouraging in the second half of 2022, we achieved an adjusted pre tax margin of 9%, which matches our margin target for 2023 and puts us well on our way for that same success. This year.

Turning to costs, our CASM ex performance in the second half of 2022 meaningfully improved versus the start of the year as I mentioned last quarter, a big driver of this success is the return of the grounded Triple Sevens flying and further improvement in our operational reliability.

As we know a well run operation is a more cost efficient operation.

Looking ahead, we expect first quarter 2023, CASM ex to be down between three and 4%.

With capacity up 20% versus the first quarter of 2022.

On a full year basis, we expect 2023, CASM ex to be about flat with capacity up high teens versus 2022.

This full year cost outlook is inclusive of investments in the system that support operational reliability, our current expectations for new labor increases representing about four five points of CASM ex excluding any possible signing bonuses.

The higher inflation outlook for all parts of the business.

On the first 0.1 lesson learned during the pandemic recovery.

That is both economical and profit maximizing to provide cushion to our aircraft utilization.

Instead of pushing utilization to its theoretical limit we are focused on protecting our reliable operation.

This minimizes delays and cancellations, which would otherwise drive higher costs, such as overtime and customary accommodation costs.

<unk> 50 on the dollar Additionally, reporting on a successful second half of 2022 and with industry dynamics. Scott described it started the call we feel even more confident about achieving our United next 2023, adjusted pre tax margin targets of 9% kind of expected adjusted.

<unk> earnings per share between 10 and $12 for the full year.

On aircraft. We currently expect to take delivery of 92 Boeing 737, Max is two Boeing 780 Sevens and for Airbus <unk> hundred 21 Neo aircraft in 2023.

Assuming all of these aircrafts are delivered we now expect full year 2023, total adjusted capital expenditures to be around $8 $5 billion.

Even with this elevated level of Capex based on the capacity revenue and cost guidance. We've outlined we expect adjusted free cash flow to be positive for the full year.

Looking beyond 2023 last month, we announced an aircraft order with Boeing that included 100 firm 787 aircraft, which will address much of our wide body replacement needs through 2032.

Also received the options for up to a 100 additional 780 sevens that can be used for growth. If there are margin accretive opportunities to do so.

Additionally, the order included 100 incremental 737 aircrafts to most to <unk>.

Meet planned United next targets and start preparing for narrow body replacement in 2027 and beyond.

Our aircraft order book is one of our key assets as it provides us with both cost saving replacement aircraft and the ability to take advantage of profit enhancing growth opportunity.

Because of the flexibility built into the order book, we can also adjust the delivery timeline as the macro economy dictates.

Moving to the balance sheet, we ended the year with liquidity of $18 billion and reduced our adjusted net debt by $3 3 billion versus year end 2021.

We're entering 2023 with a strong foundation and I want to recognize all of the hard work that has gone into running this great airline, we look forward to delivering for our customers employees and investors in 2023 and with that I will turn it over to Christine or for the Q&A. Thank you Jay will now take questions now please.

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

Please describe the procedure to ask a question. Thank you. The question and answer session will be conducted electronically. If you would like to ask a question. Please press pound two or hash tag to on your Touchtone phone. Please make sure your devices on muted to allow your signal to reach our equipment pressing pound to a second time will remove your lines.

The Q once again, if you would like to ask a question. Please press pound too on your phone. Please hold for a moment, while we assemble our queue.

The first question comes from Conor Cunningham from Melius research.

Hi, everyone. Thank you for the time.

Theres been some pushback on the 'twenty two 'twenty three jump to your guidance I'm, just trying to get comfortable with the link between costs and revenue so.

RASM is the highest it's basically ever been and even with the capacity constraints out there industry capacity is now being added. So what gives you the confidence that you might pass along additional cost headwinds on our customers in the current environment.

Hey, Kannan, let me provide a little bit of color on that and maybe Andrew will as well, but first of all.

<unk>.

When we provide our fuel guidance.

Did this quarter, what we always do which is we look at the forward curve of about a week ahead of the release.

Last week.

Those numbers as you know can change daily as that.

If we had run at more recently, we would've put out fuel numbers.

Essentially 10% to 15% higher.

All things being equal that would represent about a point of margin.

But we are we continue to remain confident that there is.

The correlation between revenue and fuel that we've seen.

Historically.

For the first quarter.

Near term.

We don't have quite the same ability that we would have during the full year, but even.

For the first quarter, we still have February March and fuel will change daily.

And for the full year, we're still comfortable that.

There is this correlation and in fact had we put a higher fuel number and they probably would have been a different revenue number but let me just give you. An example that gives me some comfort, but keep in mind that for the back half of 2022, where we achieved a 9%.

Margin fuel was $3 68.

So we do have a lot of cushion Andrew has any additional color I think you covered it really well Jerry.

We absolutely still do believe and I've seen constantly over time that fuel is a pass through on both the up and the down.

Now on RM system is to actively work to do what they do best So I feel fairly confident about the outlook.

Okay, and then just on the United next plan. So when you guys talked about that originally it was all about leading on costs and I realize the environment has changed a lot. Since then but as you start to look at our cost structure.

<unk> labor and so on is your expectation at United.

United It becomes a cost story again.

Now going forward.

In 2020 post 2023 world.

Going forward. Thank you.

There's no question, there's been an industry reset on cost and I think Scott did a nice job sort of describing that and the cost convergence ahead for.

For us yes.

If you just look at it.

Our guidance, we put out about six months ago.

For 2023, there has been movement Theres no question.

About nine point.

Three points of that is just the capacity difference between what we thought six months ago versus what we're thinking today.

Another three points in the labor numbers, we put in the rest is inflation and buffers.

But what's important for the United next plan is the relative cost.

Of the operation, we're very comfortable in the United next cost story as it's been adjusted for the industry cost impact.

Our next question is from Katie O'brien from Goldman Sachs.

Good morning, everyone. Thanks, so much for the time.

Maybe just coming at the revenue question a little differently.

Maybe for Scott or whoever else wants to answer.

How do you think about getting back to airline revenue as a percentage of GDP I think that that makes a lot of sense conceptually, but do you think the industry gets there on pricing.

Liam versus GDP is lower given the capacity constraints, we talked about.

Well I mean, if you go back and look at history.

While load factors have gone up a little I Wouldnt expect a lot of change in load factor and if you went back a few years pricing.

Pricing in real terms.

Was hired as it remains a great value.

Air travel.

Prices are probably 50% lower than they were about 30 years ago.

Real terms.

And you can still frequently.

Or for your Uber to the airport than you do for your airline ticket, Florida.

And so I think but I think that what this means is the era of $4 prices from Los Angeles to Cabo at $7 from New York to Florida, $9 from Houston to Central America, probably a thing of the past.

And cost convergence.

It's up to other airlines decide how to price the product.

But I'm pretty sure it's not up to them, what's happening to their cost structure.

And as that is changing we see it happening already it is what happened.

Last year, it's what changed last year we.

We see that continuing.

To.

Andrew's earlier point to look at the.

The data as well and following our revenue management team is doing a great job, but the yield curve for February is higher than January yogurt for March is higher than February .

And the yield curve for the second quarter is higher than March and by the way bookings are ahead in all periods.

So.

I think it's a structural reset.

Is.

But.

Investor store.

Our aviation I think it's good for everyone I think.

Particularly good for airlines like United that had the sophistication the technology the infrastructure to operate in this more challenging environment.

But it's good for everyone and it's just a structural reset that's reversing what happened over the past couple of decades at least the possibility of it I think it's likely.

But we will say, it's at least a possibility.

Thanks, so much that color and live in New York can definitely confirm on that.

The airfare.

So.

Hum.

Uh huh.

And.

Obviously, a lot has changed as we just talked about since you. Originally your next plan, particularly how the capacity bottlenecks. We've been talking about have played out how should we be thinking about capacity growth over the next couple of years are you still targeting to be about 40% bigger in 2026 based on that 46% CAGR or help us reset the bar. Thanks, so much.

I'll try that I don't think were going to reset the bar here obviously.

This is really dynamic and the OEM delivery delays both on engines and aircraft have been really unprecedented. So we're not going to we're not going to re guide today to what 2026 it looks like other than we're plotting a course in very bumpy skies when it comes to the availability of aircraft.

But I think the important point is we have real confidence in achieving our 2014% margin.

Under <unk>.

All the plausible scenarios or for aircraft deliveries.

Next we have Jamie Baker from Jpmorgan.

Oh, Hey, good morning, everybody I'm Jerry question on the labor cost assumptions the pilots in the 4.45 point headwind.

Do you expect the pilot economics to be backdated to January 1st are you using some other date and also related to this.

The EPS guide do.

Do you also consider deltas profit sharing formula to be market.

Jamie Nice question, but neither one of those we're.

We're going to be able to talk about on a call you are asking for.

Too much information regarding.

Potential negotiations.

Okay.

Second question for Scott.

On the topic of cost conversions I think you said.

The ability for discounters to maintain a significant wage arbitrage is narrowing or impaired I didn't quite get your language, but if we look at the spirit and Jetblue Tas.

Yes, they're incrementally expensive, but the resulting wage advantage to let's just go with Delta here. It is.

Still pretty much the same so were you implying that the arbitrage has to narrow even more or did I misunderstand.

Hum.

I'm, saying not implying that I don't think a world, where they pay meaningfully less and still higher and successfully Y and complete their schedules I think thats, an offset I don't think they can do it.

One of the other <unk>.

Really been struggling this year with completion factor.

Which at least had us internally wondering.

Wondering if they had pilot shortage issues because.

<unk> been really pretty good.

One day FAA outage, but the weather has been good and they've been consistently have a problems.

And then eight or.

Nine days ago, they put out a $50000 signing bonus.

For our pilots.

However, you want to calculate it however, you want to look at it.

Yes.

If you're interested I can give you some more real time fact.

Like I've watched the data closely.

And.

It's not happening I mean, what happened over the holidays.

It wasn't just one airline.

And at all of the Airlines that have challenged you can look at our data that we put out do you want data for what's happening right now I can tell you some more stuff.

But there are a number of airlines, who cannot fly their schedules.

Customers are paying the price theyre cancelling a lot of flights.

But they simply cant.

<unk> today, maybe it's pilots maybe its something else, maybe it's technology may be its infrastructure, but what I am confident.

The big three and by the way I think Jetblue has invested in this.

The big three and Jetblue are operating at a different level than everyone else for whatever the reasons are.

Next is Ravi Shanker from Morgan Stanley .

Thanks, Good morning, Scott.

Scott Thanks for that.

Kind of early intro to the call pretty extraordinary set of facts.

And argument you laid out there.

What does this mean for the industry kind of longer term kind of it's really unusual to see an industry to your point tried to grow in the face of the restrictions that they have like this I mean.

How does this and I mean, do you think theres going to be like regulatory scrutiny on kind of.

Your line is trying to grow when they cant and Thats hurting service are what happens next year.

Well.

I think what it's going to lead to one way or another is less as well.

Yes capacity.

It's not mathematically possible for all the airlines to achieve their aspirations.

And now I'll just give you the data.

<unk>.

I'm not trying to pick on these two airlines.

But this seems so blindingly obvious to me and we talked about it a year ago, we were right. All this year with capacity coming in seven points lower.

And I feel even more confident that we are right today in the data I'll give you is.

Snow storm started pretty big snowstorm started in Denver.

Yesterday afternoon continued through this morning, 11 inches of snow So thats a tough operating environment. There are three large airlines three airlines. So two in addition, deny that big operations there.

Yesterday in Denver, our mainline we had a 100% completion factor so no cancellation.

None of those are.

12% of their flights the other one canceled 47% of their flight starting off today, we've canceled a little less than 1% each of them have canceled 33% are quite like this isn't new.

And.

There is like a dozen of the wall Street analysts that breathlessly publish a weekly report on industry scheduled capacity you guys are looking at the wrong data.

If you want.

What I think is going to happen next year and all of the structural issues are multiyear I mean, all of them are three years at best.

To address and you put all of them together. This is a long term structural issue and I think.

It challenges us to but we just did more to invest for that future.

Coming earlier than others.

Our better prepared.

To deal with it than everyone else, but it does challenge us too, but really like don't take my word for it don't take the others word for it just watch the data.

What's what's happening with completion factor and Thats going to tell you.

Whether we're right again this year or everyone else is right when they say, they're going to achieve their aspirations.

Great. Thanks, Scott I think you can be a good sell side analysts when you decided to do that at some point.

You guys are way too negative.

The PSL flutter.

And then maybe one follow up I think you did.

The point on corporate running out of budgets towards the end of last year was an interesting point do you guys have much data on kind of what 23 corporate budgets look like to avoid similar situations. This year. Thank you.

So we will see where we go from here, but I will tell you. This is.

An important number for United we monitor it a lot and it's.

Okay.

Next question from Duane <unk> from Evercore ISI.

Hey, Thanks, good morning.

Just on the interrelation between fleet and CASM. If we just if we just back up in time.

You announced a big.

Fleet order in June of 2021, I think that's when you unveiled United next.

And your target for this year was down four relative to 19 on CASM ex you updated those views obviously we had.

Less capacity inflation et cetera. So you went from.

Down four to up five.

Another big fleet order in December .

And now the outlook is plus 15 versus 19 versus your initial down four.

So I guess the question is given the constraints that you articulated very well why does this investment rates still makes sense. If you can't grow at the rate that you hope to grow.

Why invest at a rate that assumes a much higher growth outlook at some point.

Well to be clear I think.

We can grow.

At United I don't think the industry can grow.

For all the reasons that we've said I think at United We can grow.

Clearly, we are clearly able to hire pilots pre pandemic. Most we've ever hired was about 900 in the year, we were right at 2500.

Last year.

Our team our flight training team has done.

Amazing job there was a lot of work to do to get that training machine humming it.

So help that.

I had enough foresight to build 14, new simulators during the middle of the pandemic when everyone else was pulling back and shrinking.

But.

That part of the that's one of the that's one of the probably done most complicated thing that airlines are struggling with and.

And we have that machine humming.

Here in Houston at the flight training Center and hired four.

4000.

This year we.

<unk> opened a new training center or another investment.

We made last year I mean really the point is we invested to be able to grow and I think we can grow we have the other benefit of we're.

We're taking 300 plus regional jets out of the system. So that creates a natural slack in terms of departures, if you've got FAA issues air traffic control issues.

If you're a single fleet type early by all <unk> hundred 20 family are all 737 like you don't have anything to take out to give you. We do have 300 aircrafts were to take out but really the point is all the investments I mean like one of the investments that I like.

That speaks to the fore sight.

That we had coming into this was.

Clubs and we increased our clubs based by 48% during the pandemic like that's always a challenge trying to close clubs when they are full.

The constrained airport environment, it's always tough on customers like the pandemic.

And history, but not once in a generation once in history chance to do that with minimal impact because we didn't have nearly as many customers flying in 2020, and 2021 and we're the only ones.

And like there's just stuff like that everywhere that United did differently so to be clear.

Well I don't think the industry can grow.

We think United can my guess is because of the oil.

OEM delays.

Our full target because those will be behind we're going to be fine a lower utilization than we were before and there's going to be less regional so we probably wont be all the way to our target, but I think we can uniquely grow.

And expand margins in this environment when.

Everyone else can't and it's because of all the investments we made to set up for this.

Thanks, Thanks for that Scott and obviously hindsight is 2020, it's been it's been a unique set of circumstances, but I guess the question is.

How would you invite invest.

We invested at a rate more aligned with your DNA or.

Where there is real free cash flow to point to here.

I think if we can.

Look if we would have invested if we had done the same thing everyone else did we'd have the same problems that right now.

Instead of canceling 1% of our flight stay in Denver, We began from 33% that's higher cost.

Our cost would be higher.

This isn't just investment looks like.

I think when you get to the end of the year I bet dollars to doughnuts that we have the lowest cost.

The best CASM performance I recognize other people have better guidance and then maybe they will have better guidance.

But I think in the real world.

We've come to grips with what the real world means.

Now what you have to do to operate it and you can see it in the data excuse me operating stats you can see the financial steps and.

It's a new world you can't run the airline.

Like you did in 2019, I remember I read all the transcripts.

And I read one of the transcripts and Jamie asked somewhat I don't even remember, which airline it was but as someone.

When are we going to get back to pre pandemic normal and I don't remember, who it was or even what they said because I immediately thought the answer to that question is never.

And I don't think anyone else has figured that out yet the answer to that question is network is it new environment, It's a new industry.

And that creates our costs. It does but it's also creating higher revenues and I think it's going to lead to across the board higher margins, but particularly for United.

Okay.

Our next question is from David Vernon from Bernstein.

Hey, Andrew I, just wondered if you could.

What about what's embedded in the PRASM guide for being flat I know you mentioned PRASM was up two to three cargo down what are you expecting out of the card program in the other revenue line as we think about 'twenty two 'twenty three.

We're still expecting a really strong results but.

It's just it's not keeping up with the ASM growth rate to that negative headwind, but our card program is doing really well the partnership with chase is top notch.

You understand that cargo part of that so.

Okay.

And then maybe Scott just.

To ask the question.

The rest of the industry, maybe doesn't it doesn't get there.

Yes.

If the rest of the industry isn't quite recognizing what the cost pressure of operating in the new normal is going to be do you think theyre going to be under pricing.

And potentially creating some problems for you to absorb some of the cost that you are building into the network.

Well, if they're right.

They are but if they are right and they can return to.

2019 utilization and efficiency that we can do that will be.

To just go back to fly.

So no. The short answer is no im not worried about it because if they are right.

We will be really easy for us to just fly the aircraft a little harder and.

<unk>.

Because we are growing within a few months just slowed the hiring down and within a few months you'd be back to be clear I think that's extremely unlikely.

But we could we could adjust our cost structure down.

If it turns out that we were wrong and thats, the new normal pretty easily.

Next we have Andrew <unk> from Bank of America.

Hi, good morning, everyone.

Just kind of want to go back to it's a fuel for a second just because it has dominated the conversation. So far just why do you think about it conceptually looking at your 2023 guide it seems like Youre, assuming fuel is going to $2 70 per gallon in Q <unk> and Jerry you said fuel is a pass through so I think thats down at least 30%.

From current market, just how do you underwrite that kind of 2% to 3% PRASM growth in 2023, if fuel is coming down.

Yeah.

Let me, let me start looking at what I would tell you is that.

I do think fuel is a pass through in both directions and that it is dynamic on when we pick the number and we up and we adjust the revenue forecast for it but.

But more importantly, where we are in terms of demand and supply.

And cost convergence as Scott spoke about quite a bit of detail.

Just given us.

I think significant ability to utilize our revenue management system to make sure that the price points are where we need them to be and we did that all through last year and in fact, we did that all throughout the entire pandemic, where we led the industry I think 11 out of 12 quarters. So we feel.

Really good about where our revenue performance is we feel really good about where our bookings are we feel really great about our Q1 guidance.

And we feel really good about where the RM system is currently managing price points for for Q2 and beyond.

Got it understood.

Andrew you gave some pretty robust booking figures for February into March and kind of your whole outlook.

Any color that you can provide in terms of how youre thinking about <unk> by by region, which regions might you might you see accelerating which decelerating from here just kind of get a sense. How you are you are seeing the world right now thank you.

Sure I'll go to try I will say that I started with earlier.

All of a long haul environment, where capacity ex United is negative and capacity with United is just slightly about 2019 levels relative to where GDP is this year provides us an enormous set.

Set update a homerun on track on our global long haul network. So we couldnt be more bullish about that and then simple supply is flat versus <unk> 19, and the preventative travel along with the economy and GDP is dramatically higher that sets up a very good opportunity for RM systems and they are actively working to do that and bookings.

For spring and summer look really strong so.

Europe I, just think it's going to be another record RASM and margin year based on that set up and it looks it looks really good across specific the same exact capacity set up by the way.

Where it's slightly negative without United in about 100% with United relative to 2019 capacity.

And a very similar setup, but we also have the opening of China and.

The only I think the thing we're watching carefully is Japan, where the numbers look really good but it's based on U S point of sale at this point and not Japanese point of sale, we expect the Japanese point of sale to kick in later this spring and summer so that that one has been slower to rebound, but again U S point of sale just added.

Ms.

I think pent up demand and is ready to fly and as doing so is that really covers the numbers once Japan comes back online.

From our point of sale perspective, I think that further strengthens that as well Latin America near near Latin America is.

The best I've ever seen it from a transom RASM type perspective at this point and deep South America is also very good that it is just not nearly as good as the amazing performance, we're seeing in clips in Latin America. So the setup for our global network is I think unbelievably good and it's really very simple math and there is very little.

Talking about these cost convergence, we talked about the capacity constraints with people think they're going to fly in 2023 is not what we'll really be flown that happened in 2022, we think that's going to happen in 2023, and given where we think.

Total revenue is and ASM will be less than that we think there is.

For positive RASM domestically as well.

And it's a really good setup so across the globe amazing setup here at home also a very good setup for a positive outlook for the year.

Next is Helane Becker from Cowen.

Thanks, very much operator.

Hi team and thank you for the time.

Just one question here when we.

We look at airfares and we compare.

Say premium economy to where it is.

MS Class was pre pandemic it seems like the price points moved.

Is that level right. So you have some economies. There then you have a premium they are an economy that seems to be equal to what business was and you seem to have business that is significantly higher.

So a is that observation correct.

<unk>.

Sure.

Paid load factor in the front of the cabin.

Alright that there is a lot of numbers you put out there at.

But I'll try to say is that.

Payload paid first class load factors, particularly here domestically are up a lot there up six points.

And so our RASM growth in the first class cabin versus the main cabin domestically is 15 points higher so it's doing incredibly well.

We're excited to see obviously because of our move towards more dual class aircrafts and monetize in the premium cabins on on our global long haul fleet I think it's a little bit different than maybe what you said the public price points may be exactly what you said I don't know, but the performance I would say is that Polaris is not back to.

Where we'd like it to be just yet, but the middle cabin the premium plus cabin is and better and the coach cabin is and better.

So the RASM performance onboard the aircraft is a little bit more tilted towards the back of the aircraft.

The middle of the aircrafts on the global long haul fleet then it is the front.

And I'm also particularly excited about this recovery in large corporate traffic is that is how we tend to fill the front of the aircraft and so the trends we see in January .

Look just really good and that also has a positive tailwind to the global network as we do a much better job of filling up Polaris with higher quality yield than we did in 2022 and I'm confident when we end 2023, we will be able to report that the players paid load factors in paid yield.

Are much closer to their 2019 baseline than they were in 2022.

Okay that makes perfect sense and then just.

For my follow up question.

I'm not sure whether you said that Scott said, but.

'twenty two.

If nobody flew their capacity.

<unk> plans in 'twenty, two which they did it and they don't in 'twenty, three and the infrastructure issues and I don't see the government rushing to invest in air traffic control in fact, I see it getting worse.

I don't see the FAA and EASA.

Are you thinking about this 20.

'twenty three get worse in 'twenty, two and 'twenty four get worse in 'twenty three.

It doesn't kind of accelerate to the point where they.

You can't.

The industry just tough.

More because you run out of space.

Pretty close to yes is the answer.

Near the limit on capacity.

On flight in the system.

There are places that are at the limit.

And.

And you could see it like it works fine and you can add more.

Good weather days when absolutely nothing goes wrong, if something goes wrong every week.

There's weather there's.

Systems issues that happened at the FAA that happened individual airlines their pipeline as we get cut.

Fuel at airports Theres vendors that fuel airplanes at airports that are short staffed or have higher sick calls.

Just stuff that happens every day and we're near.

The capacity limit.

The total number of months.

And Scott, we should add to that though what you said earlier that we got were getting rid of a large number of regional jets. So the departure activity that we're planning from our seven key hubs in 2023 is still materially behind where we were in 2019 from a departure level. The ASM to a whole another story as we've talked about because of what we're doing with gauge.

But we've created the room in our hubs to be able to execute our plan.

Have sufficient runway and gate space to do so.

Yeah.

Our next question is from Scott Group from Wolfe Research.

Hey, Thanks, Good morning, I got one near term and then one bigger picture question, just when I, just look fourth quarter to first quarter. It.

RASM guide.

<unk> revenue guide just worse than normal seasonality just given everything you were saying about February March bookings, just help square with the with the revenue in RASM Guide. Please.

Yes, what I would say is that we definitely see a different set of numbers for like January six through February 15th and we do beyond that.

And as.

As I think about it.

Offices that we do have a bit of a different type of seasonality post pandemic. Then we did have pre pandemic. So.

Depends on the year and the quarter over quarter year that Youre looking at.

The trade off with the every weekend as potentially a holiday.

Allowing us hopefully to be able to D peak this summer and run a more constant level of operation from mid February all the way through October .

That's really exciting and a lot more upside than maybe a few weeks in January that don't look as good as they used to be so I think the trade off is fine, but our hypothesis at this point. It is a different type of seasonality related to a post pandemic environment.

Okay, and then Scott So bigger picture. If you are not getting the unit cost leverage from capacity growth that maybe you thought you would have gotten a year ago or a year ago, I guess why grow so much in risk, adding too much capacity to the market in risk pricing.

And maybe just ask differently.

Didn't grow as much do you think you'd still hit the 9% margin, but at the same time, just generate better free cash flow.

Well to be clear we're focused on margin.

CASM, we're focused on margin.

While we aren't updating upgrading our <unk>.

Margin guidance, we're already way ahead of the street.

I think everything we had in our deck today and everything we've talked about today.

It certainly creates a plausible case that margins are going to be higher.

For all the reasons, we've talked about if we were not growing.

I think our margins would be lower I mean, clearly it would impact our CASM.

But I think the capacity that we're going to add would be soaked up by someone else.

And I think that.

I think our margins will be meaningfully less if we werent doing.

What we're doing and so we.

We're doing it because we think that this is a.

Look I think this is a once in the history of the industry opportunity. This is an event that's never happened before.

I guess that most of you on the sell side disagree.

And I accept that you disagree and.

But I think the world has changed.

To move aircraft around and we won't do it so is it just like.

No.

Damn the torpedoes.

This is.

As long as it's working we're going to keep moving but I will tell you every single data point.

Increases my confidence at least that's working.

With the highest pre tax margins and.

The fourth quarter of the Big network carriers at least.

Amazingly enough. If you look at actually had the highest free cash flow.

'twenty two.

With the lowest net debt if you use traditional GAAP accounting with operating leases and include pensions, we had the lowest leverage ratio like.

It's working if you look at our operating results with what's happening in Denver today like it's working so.

So we're not going to change course on something Thats worth, but if it stops working.

Then we absolutely have the flexibility to adjust.

We will now switch to the media portion of the call. If you would like to ask a question. Please press pound two or hash tag <unk> on your Touchtone phone. Please make sure. Your device is unrelated to allow your signal to reach our equipment pressing pound to a second time remove your line from the queue.

Once again, if you would like to ask a question. Please press <unk> on your phone. Please hold for a moment, how we assemble our queue.

First step is Leslie Joseph from CNBC.

Hi, Good morning, Thanks for taking my question just curious if you're benefiting at all from book away from southwest after the holiday Milltown and also us you're benefiting from pilot attrition.

Coming from southwest and the second question.

Do you see any impacts from the many travelers that are cashing in on their miles this year that they might have built up during the pandemic and does that.

Or hurt you.

I'll give it a try Leslie it's Andrew I think we're I think we're benefiting from running a world class great Global airline.

When we looked at the data and particularly not over like one week right over our one quarter. When we look at the data over the last year plus.

Our team has been just hidden a homerun.

And the data shows it so I think we're really proud of where we're at we intend to keep that online.

We have the appropriate buffers to make sure. We can continue to deliver for our customers going forward and we shall in terms of your frequent flyer growth.

All I can say is the program is incredibly healthy the redemption rates are quite normal.

Given where we are with inventory availability.

And our customers are using their miles to fly all over the world and the largest global network of any U S carrier.

And on the pilot front, what I'd say is it.

It's amazing.

Amazing change I tried to get out to the training center and see new hire classes of were hired 200, a month and I've started asking where they come from the show of hands. It used to be from any of the large any of the large airlines.

Youll Lcc's lcc's.

Big Airlines.

Because you had to give us authority to come.

Now have a high percentage of people in those classes that are coming from all airlines.

And I think the reason is because.

It has if youre a pilot rock or anyone.

Aspire to occur in aviation United as the place to go.

We're well on our way to be the biggest but also the best Andrew talked about.

The brand the reputation that matters a lot to people our pay rates are going to always be.

Okay, very depending on the timing of contracts, but all is basically going to be at the top of the industry I don't know if you're a pilot United has the most growth opportunities. The most of opportunities the fastest path to cap then the most wide bodies of any airline, but part of the country like we're the place to go and people are actually giving up their seniority at all of our competitors.

For the opportunity to come and have a future.

That's a testament to what all the people of United.

Have accomplished and how bright future looks.

Next just Alison sider from the Wall Street Journal.

Hi, Thanks, so much just wanted to ask about the FAA outage last week.

And I don't know how you are thinking about that is there a concern that there are other sort of abuse.

Systems that are vulnerable or that you think of a single points of failure.

How youre thinking about it and what kind of conversations you've had with your basins.

So I.

I think this ought to be a wake up call to for all of us.

Many of US in aviation have been saying for a long time that the FAA needs for resources by the way I think they do.

Amazing job during the Christmas.

Struggles with the weather.

A bunch of great things that they did but two in particular the wider net a water main break that flooded the tower in Newark, and same thing happened to one of the towers in Chicago.

Really quickly moved into backup facilities.

And kept the operation running I mean, just.

A lot of people jump through a lot of hoops and deserve a lot of credit for that but.

The hard facts are.

<unk> budget in real terms is lower than it was 20 years ago, but the amount of work that they've been asking to significantly higher huge resources devoted space launches drones.

Thousands of people more working on aircraft certification programs in the aftermath of the Max disaster, and so they've had to Rob Peter to pay Paul.

And they've been asked to do more and they're doing it less money theres fewer controllers than there were 30 years ago.

And it's people it's technology.

Look here in the United States, we should have.

A world class best.

Aviation system in the World, we're putting at risk if we don't invest in it and this is infrastructure. It was great that we passed the bipartisan infrastructure Bill this ought to be bipartisan as well by the way that we passed the bipartisan infrastructure bill but.

Isn't that a concrete but.

Modern systems modern technology, and the right number of people for the FAA is in infrastructure investment that will pay dividends many times over the country.

And so I hope that what this is.

And we will all be better off.

And then if I could ask one more just on restoring place to China are there like approvals either.

And China or the U S government level or diplomatic things that need to happen in order to ramp that flying back up.

There are at this point United Airlines holds the rights to fly for flights per week to China.

Fine.

Next is David Steven from PR.

Hi, Thanks for taking my call I. Appreciate you guys doing this morning.

A couple of questions that haven't been asked and answered so I'm going to kind of shift gears into something that might be coming out with Brookfield, but combined administrations announced.

Last week.

Play them to get the transportation Secretary sector down to net zero emissions by the year 2050, I know the aviation industry has that goal as well, but how realistic is that really and what is the cost to an airline like United to try to shift to sustainable aviation fuels to possible hydrogen.

Howard engines that sort of thing.

Well I haven't seen the details of their plan, but I.

As a global citizen.

Probably the most important thing that our generation needs to accomplish and I'm proud at United that we are not we are.

The leading airline around the globe.

On real sustainability initiatives.

And we are one of the leading corporations.

Sure.

We are focused.

At United, But I think it's the right focus for aviation on a number of fronts one on sustainably.

Fueled by the way the build back or the inflation reduction Act.

<unk> has a number of provisions, but regardless of what you think about everything else.

Sustainability provisions are meaningful.

Not just for our industry, but for everyone and I think our transformative legislation that.

It makes it viable to start making investments.

And hydrogen in SaaS.

We've been the leader and we've got even more coming but a lot of projects that we're going to be hard to do all of a sudden start to pencil out at least potentially pencil out.

I think it is driving it is driving a lot of investment and you can expect more from us on that.

A lot of excitement.

Electric aircraft, what we're working on there.

Well I can't replace everything because it's never going to be big airplanes flying long distance it will be a part of the solution and then finally carbon sequestration.

Climate change.

And have been for 30 years.

I used to have conversations like this it wasn't too long ago, even just a couple of years ago and I would have to explain what the word sequestration Matt <unk>.

We'll progress actually that people know what it is now.

And there is more investment.

We're here in Houston Occidental, as our partner because of sequestration project, they're a leader on that in that front, but a lot of others are moving into sequestration in the 45 SKU changes that happened in the inflation reduction Act are also really consequential for carbon sequestration. So.

More encouraged today.

I think that I've ever been at the possibilities, but its a lot of hard work ahead and it doesn't happen overnight, but there's not there's not a magic silver bullet.

But I'm also proud that that United is leading.

We partner with everyone that would include the Dod anyone that's interested in doing the right thing and solving this in a real way.

We're happy to be partnered with.

Just a quick follow up what is the cost of all this especially if governments not just the United States governments globally start imposing.

Mandates to two shifts to alternative fuels that they cost a lot more two to develop and use.

Well.

I think what we need to do is drive the cost down and so the first half for example, what I like to think about us.

Wind and solar energy, which because I had been a climate change geek for 30 years I followed it.

But it was 20 years ago, certainly 30 years or 20 years ago.

Everyone everything you read or talked about wind and solar was.

Never compete with fossil fuels that could never be economic well guess what.

<unk> passed legislation that had credits a carrot instead of just to stick a carrot that drove massive investment in R&D over economies of scale and today, it's cheaper to produce a megawatt of electricity from wind and solar than it is from fossil fuels.

And the same thing Ken and I believe will happen with south it is more expensive to that but we are in the very early.

<unk> phase of the development curve and.

And that's what's great about the inflation reduction act as it creates those same kind of financial incentives has existed for wind and solar and that is <unk>.

No it because we're involved with the company, it's driving investment into this space and that's what is needed right now at this space and that investment is going to lead to breakthroughs is going to lead to economies of scale and I think the costs are going to come down.

Our last question is from Joel Murphy from <unk> Dot com.

Hi, Good morning, I have two quick questions. The first.

I believe if I, if I understood Scott previously mentioned.

You go about doing that practically from besides simply.

Positioning the airline is a good place to work and I.

I have a follow up.

It's really the latter.

Not a targeted airline to go after them but.

Pay attention and United is the best place to work and pilot and want to work at the best place a lot of them are just putting their applications that we don't need to do anything.

More than be the biggest and the best airline in the history of aviation and that's.

That's enough of a selling point.

Okay. So no specific numbers to report on that.

An uptick in that.

Well I don't know what the numbers are.

By anecdote I ask people I would guess that 30% of the people in those classes come from one of the large airlines just eyeballing.

Following it in the room, but somebody United probably knows the numbers, but I don't know specific numbers.

I'm just proud of everything the team is doing.

And if I can just follow up here it in previous calls and interviews you've talked about.

Changing customer demographics, including things like the rise of work from anywhere at leisure passengers.

Wonder if you have anything more to add to that now in terms of.

How do you see that changing structurally in the post pandemic world.

It's a really interesting trend and we saw it again over the Thanksgiving and Christmas holidays for.

For example for Thanksgiving, we saw a lot of people leave dramatically earlier for their.

Vacation.

Then they would normally do.

This year Saturday because they left early Saturday was actually one of our biggest return days.

US GDP things ultimately I run the airline differently and more efficiently.

And remote work, while I'm sure it will evolve and adjust over time, which is driving this.

Remote work does seem like a permanent feature in our workplace here in the country.

And so we're optimistic that this continues to be the trend based on everything we've seen.

And it really is just it's a different type of demand, it's a different industry and I think we are well prepared for it and it's very exciting from a capacity and revenue management and customer point of view across the board.

I will now turn the call back over to Kristina Munoz for closing remarks.

Thank you Candice and thanks for everyone joining the call today, please contact investor or media relations. If you have any further questions and we look forward to talking next quarter.

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

Q4 2022 United Airlines Holdings Inc Earnings Call

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