United Airlines Q3 2024 Earnings Results & Report

United Airlines EPS Results

• Actual EPS: $3.33
• Consensus EPS: $3.10
• Beat/Miss: Beat by +$0.23
• One Year Ago EPS: $3.65
• EPS Beat Rate: 8 of last 8 quarters

United Airlines Revenue Results

• Actual Revenue: $14.84 billion
• Expected Revenue: $14.76 billion
• Beat/Miss: Beat by +$79.21 million
• YoY Revenue Growth: N/A

United Airlines (NASDAQ:UAL) Holdings, Inc. is the parent company of United Airlines, a major U.S. commercial airline headquartered in Chicago, Illinois. The company provides scheduled passenger air transportation and air cargo services, connecting customers across the United States and to international destinations.

United operates a broad network serving North America, Latin America, Europe, Asia, Africa and Oceania. Its operations are supported by hubs in major U.S. cities, including Chicago, Denver, Houston, Los Angeles, Newark, San Francisco and Washington, D.C., as well as an extensive network of regional carriers operating under the United Express brand.

The company offers several travel classes and related services, including premium-cabin seating, onboard amenities, airport lounges and the MileagePlus customer loyalty program. United also transports freight through its cargo business and participates in global airline partnerships, including Star Alliance.

United traces its history to the early development of commercial aviation in the United States and has operated under the United Airlines name for decades. Scott Kirby has served as the company’s chief executive officer since 2020.

United Airlines Q3 2024 Earnings Call Transcript

Key Takeaways

• Domestic inflection point reached as unprofitable capacity exits the market, driving an early rebound in domestic yields and setting the stage for margin expansion.
• $1.5 billion share repurchase program approved by the board, reflecting confidence in free cash flow generation and a commitment to return value to shareholders.
• CASM-ex up 6.5% in Q3 on lower capacity growth and one-time impacts, with expectations for unit cost relief in Q4 and moderated labor headwinds in 2025 despite ongoing OEM delivery delays.
• Corporate demand accelerating, with contracted corporate revenues up 13% in September and reaching 95% of 2019 levels, bolstering high-yield traffic into Q4 and early 2025.
• Asia Pacific yields remain pressured due to normalized China demand, prompting a moderation of Pacific capacity growth to 7% in Q4 and further restraint in 2025.

Presentation

[Operator]

This call is being recorded and is copyrighted. Please note that no portion of the call may be recorded, transcribed, or rebroadcast without the company's permission. Your participation implies your consent to our recording of this call. If you do not agree with these terms, simply drop off the line. I will now turn the presentation over to your host for today's call, Kristina Edwards, Managing Director of Investor Relations. Please go ahead.

[Kristina Edwards, Managing Director of Investor Relations at United Airlines]

Thank you, Krista. Good morning, everyone, and welcome to United's Third Quarter 2024 Earnings Conference Call. Yesterday, we issued our earnings release, which is available on our website at ir.united.com. Information in yesterday's release and the remarks made during this conference call may contain forward-looking statements, which represent the company's current expectations. All forward-looking statements are based upon information currently available to the company. A number of these factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release, Form 10-K and 10-Q, and other reports filed with the SEC by United Airlines Holdings and United Airlines for a 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.

[Kristina Edwards, Managing Director of Investor Relations at United Airlines]

For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to the tables at the end of our earnings release. Joining us on the call today to discuss our results and outlook are Chief Executive Officer Scott Kirby; President Brett Hart; Executive Vice President and Chief Customer Officer Linda Jojo; Executive Vice President and Chief Commercial Officer Andrew Nocella; and Executive Vice President and Chief Financial Officer Mike Leskinen. In addition, we have other members of the executive team on the line available to assist with the Q&A. Now I'd like to turn the call over to Scott.

[Kristina Edwards, Managing Director of Investor Relations at United Airlines]

All right, thanks, Kristina, and good morning, everyone. Before we start, I want to acknowledge the devastation that has occurred in the Southeast due to the severe hurricanes that impacted the region. The United team has been working overtime to get our customers and employees safely in and out of the impacted areas. We've also raised hurricane relief funds and transported humanitarian aid to the region. Turning to the quarter, the inflection we spoke about on our last call has happened, and we're seeing unprofitable capacity begin to exit the market, leading to the expected domestic yield improvement. We once again delivered a solid quarter, and I want to thank the United team for taking care of our customers and producing these strong results, all while strengthening a culture that puts the safety of our customers and employees first.

[Kristina Edwards, Managing Director of Investor Relations at United Airlines]

Today's results are another proof point of what we've been outlining was going to happen on these calls for several years now, both at United and in the industry more broadly. So how have we gotten here? Over the last several years, United has worked hard to improve the customer experience. That starts with a great culture and great people that are proud to be a part of United and want you, our customers, to feel the same way. Over a multi-year period, we've also made significant product investments that are important to our customers, like new aircraft with seatback screens and power in every seat, expanded clubs, and the fastest Wi-Fi in the industry with Starlink. United is also the clear innovation leader in global aviation, and our technology is now, without question, the best of any airline in the world, and by a wide margin.

[Kristina Edwards, Managing Director of Investor Relations at United Airlines]

One of the most common comments I get from customers now is about how much better the United app is than any other airline. But no investment has been more important than the almost $10 billion investment we've made in our people over the last four years. During this time, we also reached industry-leading contracts with four of our five major work groups. We're currently in federal mediation with the AFA. We're committed to reaching the same kind of agreement for our flight attendants. But we knew that doing all of that following COVID would be difficult. We couldn't just hope that the world would revert to pre-COVID norms. That's allowed us to be consistently ahead of the curve and often move opposite to consensus, and we've been consistently right.

[Kristina Edwards, Managing Director of Investor Relations at United Airlines]

All of these actions and investments, combined with our United Next plan, have propelled United to a leadership position operationally, financially, and for our customers and employees. All these actions position United to provide benefits to all of our stakeholders: financially stable, secure careers for our people, improved experience for customers, and now that we've done those two things, we can return value to our shareholders. This success has led to our strong financial results that have facilitated our ability to restore our balance sheet and position us to take the next step in solidifying our leadership position in the industry. Our board of directors has approved a $1.5 billion share repurchase program. Mike will go into the details about our capital allocation framework, but this is a critical next step for United as we work to create value for all of our stakeholders.

[Kristina Edwards, Managing Director of Investor Relations at United Airlines]

We're proud of our current results and excited about the innovation that we have ahead for customers. But we're also glad to see that the industry inflection point, which we've been predicting, has actually happened. We believe that all sets United up to expand margin in the years to come. And with that, I'll hand it to Brett.

[Brett Hart, President at United Airlines]

Thank you, Scott, and good morning. I'd also like to thank the United team for closing out the summer on a high note. This quarter was the busiest third quarter in company history, setting the company records for the most-ever passengers carried for the July Fourth and Labor Day holidays, and for the highest number of customers carried in a day at 552,000 in July. Despite record numbers of passengers and challenging weather across our network, we ranked first in on-time departure and second in on-time arrival amongst major U.S. airlines for the third quarter, with the best on-time departure in the months of August and September. These results are a testament to the investments we have made in our operations, resources, and tools to bolster the durability and resilience of our operation.

[Brett Hart, President at United Airlines]

These investments, along with what we've learned from operating in challenging geographies, has further improved our recovery during weather and irregular operations events. In addition, our safety measures have only become stronger this year with additional investments in our people and technology. This year, we launched training for our pilots focused on safety and professionalism, and more will be rolled out next year. We added additional safety resources across the operation, and we are investing in new technology that will make it easier for employees to engage with our safety programs. Running a safe and reliable operation is the backbone of this airline, and one of the many contributors to the success of our business. Investing in the customer experience has also been key to widening our competitive advantage. Our NPS scores continue to reflect the benefit from these investments.

[Brett Hart, President at United Airlines]

Our third quarter NPS was up five points versus the same period last year, and is up 24 points versus 2019 year to date. These results would not have been possible without the vision and leadership of our Executive Vice President and Chief Customer Officer, Linda Jojo. Last month, Linda shared the news that she will retire at the end of this year. In her ten years, Linda led a team that revolutionized air travel and has enabled so many of our industry-leading customer innovations. These innovations have continued to set United apart and have delivered real value to our brand and our business. But the most lasting element of her legacy is likely to be the impact that she had on our culture. Linda is well known across the company for her commitment to mentoring the next generation of leaders at United, especially women.

[Brett Hart, President at United Airlines]

Countless people, men and women, across the airline, not just on her team, have benefited from Linda's wisdom and her willingness to generously share it. Her leadership will not be easily replaced, but is certainly an example we'll aim to follow. Now that I have thoroughly embarrassed her, let me hand it off to Linda to talk about the changes she has seen at United in her 10 years.

[Linda Jojo, EVP and Chief Customer Officer at United Airlines]

Thanks, Brett. We believe that United has the best hub cities, the best network, and the best people. But to create an airline that customers choose to fly, we need to deliver a great customer experience. That's why over the last decade, we've invested over $14 billion in technology to help our employees work more efficiently and deliver outstanding service. We believe these investments give United a unique competitive advantage, further strengthening our brand and foster a culture of innovation that's hard to match. For example, one of the first decisions we made when I joined United was to issue iPhones to our flight attendants. Once these devices were in our employees' hands, it unlocked a new way of thinking for both our frontline and our digital technology teams.

[Linda Jojo, EVP and Chief Customer Officer at United Airlines]

These devices now help our flight attendants deliver more personalized service, from recognizing someone's birthday, to offering in-the-moment care, to sharing connecting gate information, building a stronger connections with our customers and drive our higher NPS scores along the way. We've also moved to a paperless flight deck, issued iPads to our technicians, upgraded our contact center, crew scheduling, and airport tools, resulting in more efficient aircraft turns and better crew communication, especially during irregular operations. This culture of innovation, combined with our investments in our technology infrastructure, enabled us to launch dozens of industry-first capabilities for our customers and employees. For example, we launched ConnectionSaver more than five years ago, saving the day for over three million customers since then. This is a customer benefit still not copied by other airlines. Like Scott, I'm very proud of our app.

[Linda Jojo, EVP and Chief Customer Officer at United Airlines]

It's used by nearly 90% of our customers on the day of travel, where they can save up to 30 minutes at the airport, and when things don't go as planned, we take steps to automatically rebook you, and we've introduced new features like allowing customers to list standby for earlier flights and access to hotel and meal vouchers. Our self-service success rates in the app have doubled since making these changes, which translates to customers getting on their way faster and our employees freed up to assist those customers who need more help. Our patented Agent on Demand technology gives customers the option to text, talk, or video call a live agent from the United App and enables our teams to collaborate across airports, aligning our people resources to where they're needed most.

[Linda Jojo, EVP and Chief Customer Officer at United Airlines]

During a recent storm in Houston, over seven thousand customers got help from live United airport agents already on duty in other airports who were not impacted by the storm. Our pace of innovation continues. So far this year, we've allowed customers to be automatically moved to a preferred seat, created a flight filter so travelers can confirm an aircraft can accommodate their wheelchair, expanded Live Activities to Apple Watch, and signed the industry's largest deal with Starlink for in-flight Wi-Fi. The Starlink announcement was a full-circle moment for me. Finding a way to improve in-flight Wi-Fi has been a years-long challenge, and like when we gave iPhones to our flight attendants nearly a decade ago, I think this will completely transform the onboard experience in ways we probably can't imagine today, and that's why I can't wait to see what the team will do next.

[Linda Jojo, EVP and Chief Customer Officer at United Airlines]

I'll now hand it over to Andrew to talk about the revenue environment.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

It's been an exciting decade at United. Thank you, Linda. At United, we take great pride in our leading RASM results over the last few years. Our segmentation strategies, multiple product choices from Basic to Polaris, and network capacity deployment decisions have created strong relative margins for United versus others.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

... Elimination of change fees and the swapping out of single-class RJs for mainline jets has been very positive for United and negative for our competitors. Turning to our third quarter revenue results, United's top-line revenue grew 2.5% year-over-year to $14.8 billion, on 4.1% more capacity versus the third quarter of 2023. Consolidated RASM was down 1.6% year-over-year, aligned with our expectations of a challenging domestic industry capacity dynamic in July. As expected, we reached the domestic inflection point. Domestic RASM was slightly positive in August and September year-over-year, which was a material improvement from earlier in the quarter, where it was down 4%. United's domestic capacity in 2024 was shaped with the expectation that the industry would remove unprofitable capacity in earnest in Q4.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

As a result, United expanded slower than most during the first three quarters of the year when capacity dynamics were less favorable. But importantly, our timing was right, tilting our growth to the quarter where the industry conditions would be the best. Network and business model changes due to large financial losses by others are resulting in an improving domestic and near Latin America pricing and yield environment. We expect more of the same in 2025. The timing of our growth push into Europe in 2022 and 2023 proved to be spot on with the recovery in demand post-pandemic. This year, we allowed capacity added in 2022 and 2023 to mature, creating good RASM results. We entered Q4 with momentum across the Atlantic as RASM growth was strongest as we exited Q3 at +4%.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

We've gotten pretty good at knowing when and where to grow, and just as importantly, knowing when and where not to grow. While our Asia Pacific network is solidly profitable, Asia RASM was challenged in the quarter as we continued to face China and South Pacific headwinds, driven by simply returning to a more normalized revenue environment. United expanded Asia capacity by 27% year-over-year from Q3 and 50% in the last 12 months. Pivoting capacity across the network remains a focus as we enter Q4. We're in the process of reallocating underperforming narrow-body capacity in our Guam operation to create new revenue pools and connectivity in Tokyo. United's planned Pacific growth will moderate to 7% in Q4 and further again in 2025. We plan to return to a more typical Pacific growth rate once our post-pandemic network is fully restored.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

With stronger year-over-year performance expected across the Atlantic and Pacific in Q4, United is also seeing a much better global year-over-year RASM outlook versus Q3. We remain bullish about the long-term growth prospects of our global long-haul flying. The structural shift in profitability is evident in two of the three international entities at United so far in 2024. We're optimistic that performance to Latin America will improve in the coming quarters as the region is seeing significant capacity rationalization by low-margin airlines. United's network health remains strong. All United hubs and all four entities produced profits in Q3, produced profits year to date, and produced profits over the last 12 months. Corporate demand acceleration was nice to see in September across all regions and is expected to continue into Q4.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Contracted corporate revenues were up 13% in September, at 95% of 2019 revenues, which is 13 points higher than July and August. United is centered in the largest business markets. As corporate demand expands, we expect a material tailwind. Load factor for managed business was down nearly two and a half points in Q3 still versus 2019, and we look forward to a slow but steady gains as we enter 2025. We've seen eight of the top 10 biggest post-pandemic corporate revenue booking days since the start of September, including the biggest day in United's history. RASM in United's premium cabins was up two percent in Q3. Premium cabin RASMs performed better than main cabin in all entities during the quarter. On the other end of the spectrum, Basic Economy remains an important product, with volumes up 21% year-over-year.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

MileagePlus revenue was up 11%, and our Kinective Media business continues to spool up as we invest in technology and seatback screens to create new high-margin revenue streams. Active membership in MileagePlus is up 13% year-over-year, and holders of our credit card have reached a new penetration record, with credit card spend reaching new records up nine percent year-over-year, showing flyers are increasingly engaged with all United has to offer. I will end with a quick view of the revenue setup for early 2025. Much of the revenue challenges we have seen in Q3 were on weak yields for domestic leisure customers who book travel far out. As we look into Q1, we're selling these very same tickets at yields that are much higher.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

We believe Q1 yield strength will be possible due to the significant schedule changes and business model changes that will continue to be implemented by low-margin airlines. While there's still a bunch of noise in Q4 due to the multiple calendar shifts that make the positive magnitude of the domestic revenue pivot a bit difficult to see for some, the environment is improving rapidly, just as we anticipated. In addition to the positive leisure yields we expect in Q1, we're clearly seeing an acceleration of return-to-office policies, which are driving corporate traffic revenue growth at an accelerated level and creating a great setup for 2025. Further, as I said earlier, Asia unit revenues have clearly pivoted in Q4. Thanks to the entire team for a job well done. With that, I'll turn it over to Mike to discuss our financial results.

[Mike Leskinen, EVP and CFO at United Airlines]

... Thanks, Andrew, and thank you to the United Team for another solid quarter. In the third quarter, we delivered a pre-tax margin of 9.7% and earnings per share of $3.33, above the high end of our guidance range, despite challenges from the CrowdStrike outage and suspension of our flights to Tel Aviv and Amman. Revenue trends improved across most geographies as industry capacity rationalized, all while we saw a relief in fuel prices. Customers continue to choose United as we invest in our hard product, our people, and a resilient operation. Turning to costs in the quarter. CASM-ex was up 6.5% on 4.1% capacity growth versus the third quarter of last year. We expected CASM-ex to be pressured in the quarter with lower capacity growth.

[Mike Leskinen, EVP and CFO at United Airlines]

This was further amplified with an approximately one-point reduction in capacity from CrowdStrike and suspension of Tel Aviv and Amman. As we look to the fourth quarter, we expect some unit cost improvement as labor headwinds moderate and our capacity growth steps back up. We expect that our costs will remain pressured from previous capacity reductions in both our domestic and Atlantic schedules and delivery delays from Airbus and Boeing. As we look ahead to CASM-ex in 2025, we expect to see tailwinds from better utilization and firmer capacity plans, assuming OEM delivery delays moderate. We expect to continue to see pressure from our labor agreements of around two to three points, which should be an industry headwind as well. For the fourth quarter, we expect earnings per share to be between $2.50 and $3.00.

[Mike Leskinen, EVP and CFO at United Airlines]

Turning to the fleet, in the quarter, we took delivery of seventeen Boeing MAX aircraft and three A321neo aircraft. In the fourth quarter, we expect to take delivery of nineteen narrow-body aircraft and three wide-body aircraft. Our estimate accounts for our current assessment of the impact of delays at both Airbus and Boeing. With these deliveries, we now expect full-year adjusted capital expenditures to be less than $6.5 billion. On capital allocation, our United Next plan is working, and the airline industry is in the midst of a positive transformation, a decommoditization where customers are choosing United based on the wide selection of products, from premium international seats to flexible travel for domestic business travelers and Basic Economy for our price-sensitive customers. Our investments have solidified a leading position for us in the industry.

[Mike Leskinen, EVP and CFO at United Airlines]

As our strategy has worked, our relative profitability has improved materially, but our stock hasn't kept up. We believe there's tremendous value in our shares and now have the balance sheet and free cash flow to opportunistically repurchase those shares. Our board of directors has approved a $1.5 billion share repurchase program that we intend to execute beginning this quarter and throughout 2025. This program will be funded by free cash flow generation as we expect our profitability to improve. It's imperative that we balance our priorities of investing in the business and consistently returning value to our shareholders while also deleveraging. Our current net leverage is 2.7x, and we are targeting below 2x in the next few years.

[Mike Leskinen, EVP and CFO at United Airlines]

In parallel with this new buyback authorization, I'm happy to share that we've already repurchased approximately $82 million of shares that were issued when a portion of the warrants originally granted to the U.S. Treasury under the CARES Act and Payroll Support Program were exercised during the quarter. The repurchase of just over 2 million shares fully offsets the dilution associated with these exercised warrants. The shares were purchased at an average price of $39.99. We are delivering on our financial commitments and expect to deliver on our EPS guidance for the second year in a row. We're greatly encouraged by our third quarter performance and the progress we've made to positively differentiate our product, increase TRASM, improve our balance sheet, and now return cash to shareholders. The future at United Airlines is incredibly bright.

[Mike Leskinen, EVP and CFO at United Airlines]

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

[Kristina Edwards, Managing Director of Investor Relations at United Airlines]

Thanks, Mike. We'll now take questions from the analyst community. Please limit yourself to one question and, if needed, one follow-up question. Krista, please describe the procedure to ask a question.

[Operator]

Thank you. The question-and-answer session will be conducted electronically. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue, and if you would like to withdraw that question, again, press star one. Please hold for a moment while we assemble our queue, and the first question comes from Conor Cunningham with Melius Research. Please go ahead.

[Conor Cunningham, Director of Travel and Transports Research at Melius Research]

Hi, everyone. Thank you. A question I get pretty often from investors is just how you plan to, you know, capitalize on an evolving industry backdrop in 2025. You know, many of your competitors are making significant changes to their network and product. But when you take a step back, where do you see the biggest opportunity in the U.S. domestic market next year? Thank you.

[Scott Kirby, CEO at United Airlines]

I'll try to take it. You know, we're focused on United and you know, our outlook and continuing to develop the United Next plan, and so there's a lot of opportunity. You know, I think, first of all, we're gonna continue to build connectivity in our mid-con hubs. We've had that as one of our North Stars for a long time, and we'll continue to do that. But we're also gonna continue to invest in the customer to make our product one that they choose more and more often, and we continue to see market share gains related to that. Then I think the last point I would say is, particularly from a corporate point of view, we see corporate traffic accelerating. That's United's bread and butter.

[Scott Kirby, CEO at United Airlines]

We've been waiting for that to happen for a while. It's particularly important in Q1, and we think it's gonna happen in Q1, and that creates a great setup for us. So we're gonna stay focused-

[Scott Kirby, CEO at United Airlines]

... on building products that customers want to buy. We're going to stay focused on building our high-yield share as we go forward and building connectivity, and of course, building our global network, which has done incredibly well over the last few years.

[Conor Cunningham, Director of Travel and Transports Research at Melius Research]

Okay, great. Thank you. And then maybe just sticking with or going back to United Next. You know, when you first laid that plan out in 2021, obviously, a lot has changed. You were forecasting, you know, a double-digit pre-tax margin by 2026. I was just curious if you could update us on your thought process on how you get to that double-digit margin. You've obviously done a very good job of pivoting and driving margins relative to others, but just any thoughts there would be helpful. Thank you.

[Scott Kirby, CEO at United Airlines]

Sure. For the past couple of years, we've been describing an industry evolution that we were confident would lead to higher margins. We anticipated that we'd reach an inflection point that would kick off a multi-year run that looked a lot like the 2012-2014 for airline earnings and investors. For some history, in 2011, each of Delta, United, and Southwest had pre-tax margins between 3% and 4%. Southwest committed to low growth until their ROIC hit a certain target, and they lived up to that commitment for the next three years. Three years later, their margins had expanded by nine points, and the network carriers had expanded by an average of about eight points. That all happened even while the ULCCs were growing 15%-20% per year.

[Scott Kirby, CEO at United Airlines]

Fast forward to today, Southwest and one other airline, one of the large airlines, start with margins that are actually even lower in absolute than they were in 2011, and relative margins that are significantly worse than they were in 2011. In response, Southwest has once again made a long-term capacity commitment at the same time that the ULCCs may not even survive, much less grow 15%-20%. And while we've been predicting this scenario would happen, it's no longer theoretical. It happened in mid-August. The only question now is how much margins expand compared to what happened in the 2012-2014 time period.

[Scott Kirby, CEO at United Airlines]

I suppose you can have a reasonable debate about whether it'll be the same eight-to-nine points or something less, but regardless, there's likely going to be a meaningful expansion of margins in each of the next three years.

[Operator]

Your next question comes from the line of David Vernon from Bernstein. Please go ahead.

[David Vernon, Managing Director and Senior Analyst at Bernstein]

Hey, good morning. I had a question on sort of the international expansion. This sounds like a differentiated strategy that sort of leans into the idea of wanderlust. Can you talk a little bit about the rationale here and maybe your process for picking, I don't know, Nuuk, Greenland, to add to the system versus any other city? And what kind of impact seasoning some of these newer routes that are kind of undiscovered country may have on results for next year? Thank you.

[Scott Kirby, CEO at United Airlines]

Thanks for the question. You know, we spend a lot of time debating how and where we'll grow. This announcement has clearly caught the attention of a lot of people, most importantly, our customers. I think it's a very exciting announcement. You know, but the backdrop for the announcement is the fact that United Airlines simply has the best global gateways in the business, and those global gateways allow us to fly successfully to a broad range of destinations. You know, we heavily fly into our partner hubs, which is the traditional model in our business, but we're also able to do just as well financially outside of our partner hubs, and so we look across the globe, we look for new destinations, we look for hot destinations, and destinations, most importantly, we can make money in.

[Scott Kirby, CEO at United Airlines]

We have a really good track record of this. Very little of what we've added over the last few years, we have canceled. And so as we look forward, we look for those new destinations. And, you know, at the end of the day, Greenland has got a lot of attention, but it is only two 737s per week. So its impact on our system will be small, but its impact on United, our brand, and our customer profile, and, and, sign-ups for MileagePlus will be great. And, there is so much more possible on this front, than even I thought was possible five or six years ago.

[Scott Kirby, CEO at United Airlines]

As the United Next plan builds the connectivity, as our global hubs are just in these great cities with high volumes of cargo, high volumes of leisure traffic, and most importantly, high volumes of business traffic, we just have a lot to unlock out there. We'll do it very carefully. We'll make sure we're growing profitably, but expect more to come on this front.

[David Vernon, Managing Director and Senior Analyst at Bernstein]

All right. Thanks for that. And then maybe just as a brief follow-up on the wide-body situation. You know, Boeing's announced they're gonna have another delay to the 777X. How do you think that's gonna affect sort of supply and demand as you're looking out the next couple of years, the delays in that production platform for the next generation wide-body?

[Scott Kirby, CEO at United Airlines]

So, you know, we, we've talked about this many times since, right, even in the middle of the pandemic. We, we thought there was a structural shift in global capacity. A lot of A380s and other wide-bodies were grounded, and many of those aircraft remain grounded, although airlines are bringing some back. There's no doubt about that. The fact is that the production lines for wide-body aircraft probably will not keep up with demand over the next three to five years based on everything we see. And that, in turn, I think, creates a better setup for the global long-haul network. We obviously remain bullish on it based on our announcement last week, and we'll do it prudently, but we think the setup is pretty good, and the 777X appears to be delayed yet again.

[Mike Leskinen, EVP and CFO at United Airlines]

Hey, David, and this is Mike. I'll just pile on. You know, we're more focused on the 787 delays, as you might expect us to be, and you know, we're rooting for Boeing, and they are certainly making some smart decisions. We would applaud their, at least the rumored decision to raise some equity in the capital markets to stabilize the business, but as we see delays on the 787s, we would expect that, you know, there's a bias downward in CapEx, if those delivery delays continue.

[Operator]

... Your next question comes from the line of Andrew Didora with Bank of America. Please go ahead.

[Andrew Didora, Senior Equity Research Analyst at Bank of America]

Hi, good morning, everyone. Kind of piggybacking off of that last question, maybe Scott or Mike, I mean, bigger picture, you know, what do you see as the implications across your company from the Boeing strike? And then, Mike, just kind of following up on your last answers, like, is it reasonable to expect something in the lower end of your $7 billion-$9 billion CapEx range next year, just given everything, you know, we know from a production perspective? Thank you.

[Scott Kirby, CEO at United Airlines]

I'll start big picture, and then let Mike give you the CapEx answers. What I care about with Boeing is the long term. You know, we're trying to build the best airline in the history of aviation for the long term, and I'm very focused on the long term. And I am actually encouraged with Boeing. Mike already referenced it, but the challenge at Boeing has, to my view, for decades been a cultural challenge where they focused on short-term profitability and the short-term stock price at the expense of what made Boeing great, which is building great products, great engineering, great quality, reliability, safety that you could count on. And I think Kelly Ortberg is pivoting the company back to their roots.

[Scott Kirby, CEO at United Airlines]

I think all the employees of Boeing will rally around that. To me, the biggest news in the last couple of decades, really, at Boeing is the reported willingness to sell equity. That's making the right long-term decision, regardless of what the street thinks about it in the short term. So I applaud them for doing that as a long-term customer. It's the right thing to do, for their shareholders long term, also. And so I'm encouraged with the changes that they're making. The strike is, in a lot of ways, a cultural legacy, of the same issues that have happened over the past couple of decades. It's tough, but they will get through it. I'm confident they will.

[Scott Kirby, CEO at United Airlines]

I'm certain that all the folks that are out on the picket line now, along with the management team, all share a desire to make Boeing great and be part of, you know, a great company that's one of the most important companies in the world. So they'll ultimately work through this. It's gonna be. You know, we're gonna have fewer airplanes in the near term than we would have been hoping for, but our eye is focused on the long term, wanting to get through it and build a company that can work for the long term. Then I think we have a really good setup.

[Mike Leskinen, EVP and CFO at United Airlines]

Andrew, let me pile on, and let me be clear. The aircraft we have on order with Boeing and Airbus, based on the profitability that you're seeing in our results for the third quarter, based off our forward expectation for profitability, we want those aircraft, and we want them as soon as Boeing can complete them and deliver them. That said, pragmatically, as these delays are unlikely to be resolved quickly, we do have a downward bias to CapEx. I expect it to stay within that range, and we'll give more precise guidance on the January call than we normally would, but you're correct to assume downward bias based on production delays.

[Andrew Didora, Senior Equity Research Analyst at Bank of America]

Great. Thanks for the answers. That's all I had.

[Operator]

Your next question comes from the line of Jamie Baker with JPMorgan. Please go ahead.

[Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan]

Yeah, I'll take it.

[Scott Kirby, CEO at United Airlines]

Hi, James.

[Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan]

So couple for Andrew. You know, looking back at this past summer, the elevated capacity, the associated pressure on yields, I'm sympathetic, I guess, for lack of a better term, that, you know, several of your competitors threw as much capacity at the peak as they could, particularly airlines that are, you know, struggling for even the scantest, you know, taste of profitability. I know a lot can change between now and next summer, but shouldn't we assume that maybe this is the new normal? So, you know, as LMAs continue to struggle, they'll just throw as much capacity at the peaks, so those peaks become a little bit softer, off peaks become firmer, you know, more than the seasonal trends that we've seen in the past. Any thoughts on that?

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

I didn't know you were so sympathetic, Jamie. Nice to hear it.

[Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan]

I just kind of get their logic. I mean, it obviously didn't help, but no, I'm not claiming to be a cherub or anything.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Well, look, you know, I'm not an expert on their business models, other than their business models are clearly struggling, and they are changing them as rapidly as they can. However, it is hard to change your spots that quickly. Of course, they did exactly what you described. I think I went through the stages of grief on what you do-

[Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan]

Yeah

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

in such a position a couple quarters ago, and I think that is one of the stages of grief. You wind up with an airline that has this complete imbalance of utilization, where you have unproductive uses for a majority of your aircraft for six or seven months per year. And I'm not sure that financial model works either. We'll have to wait and see. The point of all that is there's an incredible amount of unprofitable capacity in the United States marketplace. We've seen that exiting at a rapid pace, starting in mid-August, that continues into next year, and my expectation is that will continue. At the same time, that international remains strong, that business traffic, which is our bread and butter, remains strong, and we can march towards higher margins, as, as Scott talked about, as this evolution occurs.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

So, I, I remain bullish that where we are right now is only getting better, and the changes we've seen so far are only actually the tip of the iceberg, 'cause the models just don't work in that way, in my mind, that you could work for six months and not the other six months.

[Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan]

... Right. That's helpful. And then on the twenty, I think you said 21% rise in basic economy volumes. So my ability to track basic economy supply is obviously limited. I'm assuming you track it internally. Can you comment on how your basic economy inventory compares with that of Delta and American? And with growth of this magnitude, I mean, is it United's intent to essentially become the largest supplier of discount capacity, you know, domestically down the road, although, you know, by some measures, perhaps that's already been achieved?

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Look, our intent is to expand our margins, to be really clear. Our intent is to offer a full range of products to customers, particularly in our hubs, that want everything from basic to Polaris, and we will pivot the amount of capacity we offer in all those categories, based on expanding our margins, but we have come to the firm conclusion that offering basic and offered in a substantial amount of volume is good to United, is profitable for United, and is bad for our competitors, and so we are gonna continue to do what's good for United. It expanded. I think it's in the neighborhood of 15%-16% of our domestic passenger volumes right now. As we grow our gauge, with lower marginal costs, I think it could go higher, you know, as we go forward.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

But again, we'll pivot and do what's right for the bottom line at the end of the day. But I would say that the experiment with Basic, which was an experiment seven, eight, or nine years ago, is a solid home run and has changed the business dramatically to our benefit.

[Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan]

Okay. Totally agree. Thank you, everybody. Take care.

[Operator]

Your next question comes from the line of Tom Fitzgerald with TD Cowen. Please go ahead.

[Tom Fitzgerald, Vice President and Equity Research Analyst at TD Cowen]

Hi, everyone. Thanks very much for the time. Would you help us understand the sizing of the contribution from MileagePlus and Kinective Media on margin expansion in 2025?

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

I don't think we're prepared to do that today. You know, MileagePlus is, you know, a jewel in our business and has not been focused on enough over the last few years, and, we, you know, took a different path about a year ago when we hired Richard Nunn. We took a different path as we invest in the technology there. That investment in technology is gonna do a lot of things for our business. First and foremost, it's gonna allow us to personalize service to our customers in a way that I don't think any airline has done. Of course, Starlink is a core, core part of that, which obviously was just recently announced. So we'll have a lot more to say on this, but it is gonna be material. It's gonna spool up, starting next year.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

But I'm gonna have to. I'm not gonna give you the details today on that, but it's, it's pretty substantial.

[Scott Kirby, CEO at United Airlines]

Hey, Tom, I'm gonna give you a little bit of detail, and that is that in 2025, this is an investment phase. It's gonna not be losing money. We'll make a little bit of money on it in 2025, but this really starts to accelerate in 2026 and beyond. So as you think about modeling 2025, though, we've got a ton of momentum in the core business. I wouldn't layer a bunch of MileagePlus Kinective revenue on in 2025. I do expect we'll be giving more and more disclosure, so you can model this on your own. You don't have that information at this time, but I'm committed to getting you more information to allow you to model it for yourself.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

And I'll just bring up one other point.

[Tom Fitzgerald, Vice President and Equity Research Analyst at TD Cowen]

That's really-

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

I was gonna bring up one other point. You know, the program is doing incredibly well, and again, we don't talk about it enough, and we should. But revenue from the Premier population in the quarter was up 9%, and that drove a majority of the revenue growth at the airline. And so our Premier members are heavily engaged with us. As I said earlier, they hold the credit card in record numbers, and they're spending record amounts on their credit card. But the fact that the Premier population base is doing that much more revenue on a base that is actually close to flat because we've made sure that we can deliver benefits to all of our Premier members, and we hold the level of Premier members flat. The program is doing incredibly well.

[Tom Fitzgerald, Vice President and Equity Research Analyst at TD Cowen]

That's all really helpful. Thanks so much for the information. Would you mind just elaborating a little bit on what the customer reaction to Kinective has been, and then maybe some of the early reactions on brands that are advertising on the platform? Thanks again for the time, everyone.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

you know, I think our activities to date have been rather small. There's been no customer reaction that I could speak of.

[Operator]

Your next question comes from the line of Scott Group with Wolfe Research. Please go ahead.

[Scott Group, Managing Director and Senior Analyst at Wolfe Research]

Hey, thanks. Good morning. So when I look at third quarter, CASM-ex is up about six, RASM's down about one. When do you think we see an inflection with RASM up more than CASM? I don't think it's fourth quarter, but if you have any color on Q4? And ultimately, I guess, do you have confidence that we see that in 2025, with RASM up more than CASM?

[Mike Leskinen, EVP and CFO at United Airlines]

Hey, Scott, let me answer that simply. In 2025, we would expect that inflection. We're not going to give you guidance on the, you know, quarter-by-quarter at this time, as we traditionally wouldn't, but we absolutely expect that inflection in the calendar year of 2025. I shared my prepared remarks, the kind of some pacing of CASM-ex, but let me repeat for clarity. Q3, I expect, will be the peak for CASM-ex. We expect CASM-ex to decline into the fourth quarter and to decline further into 2025. We're gonna work aggressively to cut all the costs that we should to run an efficient operation. And so, you know, I'm committed to that personally, and the team's working hard to make sure we run a very, very efficient operation.

[Mike Leskinen, EVP and CFO at United Airlines]

At the same time, we're gonna continue to invest in the customer because we're not focused on CASM-ex as a metric at United. We're focused on driving profitability. And through a no-excuses philosophy, we've been really good at delivering on bottom line earnings per share growth, and we're committed to continuing to do that. And we have the right balance of cutting the costs that are around efficiency, but adding the costs that are driving customers to increasingly choose United.

[Scott Group, Managing Director and Senior Analyst at Wolfe Research]

Helpful. And just a follow-up, maybe just some directional color on your RASM expectations for Q4, positive, negative, flat, and then some of the differences in the regions would be helpful. Thank you.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Well, I won't answer that question, but I will give you another hint. So January. And I'm gonna talk about Q1 because I can. January is currently 77 days from the start of the month and a 107 days from the end of the month. At this same point, domestic yields were down nine percent in July, down two percent in September, and up three percent in January. And so the yield environment is just looking good. We're only booked to a small percentage of our booking curve for January, but I just want to say that Q1 is shaping up well as the pricing environment looks better, capacity's obviously different across the industry, and business traffic continues to rebound.

[Scott Group, Managing Director and Senior Analyst at Wolfe Research]

But, but-

[Operator]

Your next question comes from the line of Duane Pfennigwerth with Evercore ISI. Please go ahead.

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

Hey, thank you. Good morning. Domestically, are there any regions that stick out in terms of recovery, specifically as it relates to corporate? Are you seeing any signs of recovery in lagging West Coast markets like San Francisco?

[Scott Kirby, CEO at United Airlines]

No, it would be the opposite, so the coastal hubs are stronger than the interior hubs. In the corporate bucket, professional services, financial services, and tech are growing fastest, where energy and a few other things are growing slow, but all verticals are growing, and corporate traffic looks good, but the coastal hubs are much stronger than the interior hubs at this point.

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

Great. And then, Mike touched on it, and I think it came up in a couple of questions, but just contrasting the setup, on the kind of step-up in growth in 2025 or the step-up in CapEx in 2025, versus, you know, prior years where it was a little bit of a placeholder given OEM constraints. Does the setup feel different now looking into 2025? I know you recast and, and de-risked some of your deliveries, but is your confidence, you know, higher into 2025 growth or, you know, or, or about the same than it was this time last year into 2024? Thank you.

[Mike Leskinen, EVP and CFO at United Airlines]

Hey, Duane, I think you're asking me about CapEx expectations in 2025?

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

CapEx and really growth, just that it was... You know, in prior years, it was a placeholder at this point in time, given OEM constraints, and you have a better view into how those, you know, work out than we do on the outside. I'm just wondering if the confidence is any higher now into your planned growth than it has been in prior years.

[Mike Leskinen, EVP and CFO at United Airlines]

Let me try to be responsive. We've been very clear about a range of CapEx of $7 billion-$9 billion, and as we sit here today, given the strike at Boeing, given other delays, we'd expect there to be a downward bias within the range for CapEx in 2025. Now, separately, there's a relationship, but separately, thinking about capacity in 2025. We're not going to give guidance for capacity in 2025 at this point, but you can trust us, you should expect, we have earned that trust, that we're going to fly the capacity that maximizes profitability for United.

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

Okay. Thank you.

[Operator]

Your next question comes from the line of Sheila Kahyaoglu with Jefferies. Please go ahead.

[Sheila Kahyaoglu, Managing Director at Jefferies]

Good morning, everyone, and congrats on a great quarter. We touched on this a little bit, but maybe we could parse it a little bit more on the domestic RASM, -0.8 in Q3 from 1.9 in Q2. It doesn't seem like much, but Andrew, I think you just gave a little bit of color on how July was and how August trended. It seems a much bigger step improvement. So maybe can you talk about what drove that? How much was capacity? How much was corporate? How much was share gain and economy? Any details you could provide?

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Well, I'll try. I mean, it was, you know, a lot of things. I will say that September was dramatically better than July. July was clearly the low point for the year in terms of year-over-year RASM. We saw gains, really in all the entities, you know, but September, again, was much better. We expect Pacific market to also improve as we head into Q4. Business traffic, you know, was up, I think, about six percent in the whole quarter, but it was up 13% in September to give you an idea of the spool up. So we exited the quarter with some really, I think, you know, much better performance, and we were hopeful that that performance translates into good quality earnings in Q4 and beyond. Hopefully, that-- Did that answer your question?

[Sheila Kahyaoglu, Managing Director at Jefferies]

A little bit. Maybe I could follow up on the Q1 comments that you made with the bookings being so strong, but only minimally booked. So how do we think about what drove that strength into Q1 and how you're seeing that? Is it, like, where is that strength coming from? Is it different than what you saw in the Q3 September performance?

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

... you know, I don't have it by geography, but, you know, what we are seeing is that there's just a much better pricing environment for leisure yields that book very early in the booking curve, and we attribute that to changes in capacity, the elimination of unprofitable capacity, better business bookings, although very slim at this point, and changes of business models of the low-margin airlines. All of these factors are leading to, you know, what we anticipate will be a much stronger environment in 2025 for United Airlines.

[Sheila Kahyaoglu, Managing Director at Jefferies]

Great. Thank you.

[Operator]

Your next question comes from the line of Brandon Oglenski with Barclays. Please go ahead.

[Brandon Oglenski, Director and Senior Equity Analyst at Barclays]

Hey, good morning, and congrats on retirement, Linda, and congrats to the team on, you know, a pretty strong Q3 outcome here with all the headwinds that you had. Mike, I really like the no-excuses attitude here. The share repurchase, definitely a vote of confidence. I guess, can you help investors? 'Cause we understand the CapEx dynamics next year, but longer term, you know, you guys are gonna be in this range of $7 billion-$9 billion. That is a little elevated compared to others. But how integral is that spending and the investments, maybe even outside of the aircraft fleet, into achieving that double-digit, you know, margin target?

[Mike Leskinen, EVP and CFO at United Airlines]

Hey, Brandon, I appreciate the question. It's something we think about a lot in the finance department these days at United. You know, CapEx is elevated. Refreshing of the fleet, the growth of the fleet has been absolutely integral, though, to the United Next strategy. The gauge increase from the narrow bodies, that's frankly what's driving our ability to provide basic economy, which is creating, a competitive dynamic that is just fundamentally reshaping the industry. So they are intertwined. That said, as the strategy progresses and our margins expand, I am focused on free cash flow conversion, and in the near term, in the next two or three years, we're focused on a free cash flow conversion target of 50%.

[Mike Leskinen, EVP and CFO at United Airlines]

We're not gonna manage perfectly in every individual year, but over the next three years, I would use 50% as a target. Later in the decade, I am aiming higher, I think 70%-75%. Longer term than that, you know, I think there's opportunity. Near term, think about 50%, and later in the decade, think about a target of 75% for free cash conversion.

[Brandon Oglenski, Director and Senior Equity Analyst at Barclays]

Mike, I appreciate that. It's actually very helpful, and that's within the context of that $7 billion-$9 billion outlook on CapEx for the next few years, right?

[Mike Leskinen, EVP and CFO at United Airlines]

$7 billion-$9 billion remains the target for the next few years. We'll give you an update to that, you know, in the future. But for the next few years, $7 billion-$9 billion remains the target, and let me say for the third time, that has a downward bias next year.

[Brandon Oglenski, Director and Senior Equity Analyst at Barclays]

Thank you.

[Operator]

Your next question comes from the line of Mike Linenberg with Deutsche Bank. Please go ahead.

[Mike Linenberg, Managing Director and Senior Airlines Analyst at Deutsche Bank]

Oh, yeah. Hey, good morning, everyone. And, you know, obviously, keeping with your no-excuses mantra, I thought it was interesting that there was nothing in the release as it related to CrowdStrike. I know, Mike, you called out one point CASM, but at the end of the day, you did cancel, I want to say it was like either 2025 or 2026 100 flights on United and its partners. What was the revenue impact, or is it just with your booking tools, your ability to re-accommodate maybe better than others, that the revenue hit maybe was not as much as, you know, even worth reporting?

[Mike Leskinen, EVP and CFO at United Airlines]

Hey, Mike. You know, Scott and Andrew, if they want to provide some detail, obviously they can. But, healthy businesses, healthy industrials, healthy businesses, don't make excuses about CrowdStrike, don't make excuses about weather. We build into our guidance the expectation there will be one act of God in a quarter that -

[Mike Linenberg, Managing Director and Senior Airlines Analyst at Deutsche Bank]

Mm-hmm

[Mike Leskinen, EVP and CFO at United Airlines]

... impacts the business in a negative way. And if that impact ends up not being so large, then we can beat, you know, come in at the high end or beat our guidance. If you have a series of events in a quarter or a massive event, then, of course, you're not always gonna hit your guidance. But, I think it's just basic, a basic setting of targets in a way that expects it not always to be a perfectly sunny day.

[Scott Kirby, CEO at United Airlines]

I'll actually use this to expand on a cultural philosophy that I think is really important here at United. When I was a cadet at the United States Air Force Academy, the best thing I learned was, "No excuses, ma'am. No excuses, sir.

[Mike Linenberg, Managing Director and Senior Airlines Analyst at Deutsche Bank]

Mm-hmm.

[Scott Kirby, CEO at United Airlines]

It's hard. It's easy to point to the things that aren't your fault, that don't feel like they're your fault, but that was one of your basic answers. We have tried to get that philosophy instilled throughout United. What that means is, it forces you to constantly get better. You know, it's easy to have an MBA in a cubicle somewhere, come in at 9:00 A.M. on Monday in an air-conditioned office, and calculate how much some event outside of your control costs. It's right. I mean, it's not that it's wrong, but then that's the end of the story.

[Scott Kirby, CEO at United Airlines]

If you have a no-excuses mantra, and you don't allow people to even go calculate those numbers, it forces people to go find innovation, creative ways, to get better and better and better, so that you can overcome those things, when they happen, and we have said it a few times on this call, we are the innovation leader in the airline industry around the globe, and second place is far behind, and the no-excuses philosophy is a big part of that. It forces us to do things that we wouldn't otherwise do if we let ourselves just look at the calendar or look at the bad things that happened, and write those off, and so I think it's a really important cultural point that the team has on both the revenue side, and the cost side.

[Scott Kirby, CEO at United Airlines]

And I'm proud of the team for taking it to heart. Our Chief Operating Officer is in the room, Toby, and he says it a different way, but great. He says-

[Scott Kirby, CEO at United Airlines]

... We're talking about things like the weather, and, you know, it may not be our fault, but it is our responsibility, and that's the attitude we have here at United.

[Mike Linenberg, Managing Director and Senior Airlines Analyst at Deutsche Bank]

Great. Thanks for that, Scott and Mike. And then just, Andrew, just on, you know, looking more towards the smaller cities in your network during COVID, I wanna say there was probably 30 or 40 markets that you had pulled out of because of the pilot issue. It now feels like that that's been alleviated somewhat. When I think about, you know, your competitive moat and some of those markets you serve, you were the only game in town. I know Mike has mentioned, you know, some RASM, or excuse me, some CASM pressure in 2025, maybe related to some additional regional flying. I suspect that maybe some of those markets are coming back online. Anything that you can add to that? Thanks for taking my questions.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Sure, Mike. Just briefly, you know, the RJ network. Well, first of all, the RJ flying has pulled back up to its new run rate in Q4.

[Mike Linenberg, Managing Director and Senior Airlines Analyst at Deutsche Bank]

Mm-hmm.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

And so that has, you know, it has come back online a little bit quicker than we anticipated at the beginning of the year, and they are smaller aircraft, and they do pressure CASM. We also think they help RASM and profitability, which is, of course, why we've done it. We are back to full utilization on the RJs-

[Mike Linenberg, Managing Director and Senior Airlines Analyst at Deutsche Bank]

Mm-hmm

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

... at our new run rate fleet. We announced a deal, I think last week, for 11 CRJ-550 with SkyWest. That aircraft has been, you know, actually much better than expected for United, so we're glad to be able to expand that, which allows us to better serve these smaller communities. But I also don't think there's a large-scale change coming at United in how we serve these smaller communities. Our plan over the long run is slightly less scheduled depth with lower frequency with aircraft that are bigger, that have lower unit costs. We said that with United Next a number of years ago. We continue down that road and down that philosophy.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

So expect the RJ fleet to still be around and do its thing, but it'll become a smaller and smaller percentage of the business, and we will serve these smaller communities with a mixture of RJs and mainline jets and have the lowest cost possible in those communities.

[Mike Linenberg, Managing Director and Senior Airlines Analyst at Deutsche Bank]

Great. Thank you.

[Operator]

Your next question comes from the line of Stephen Trent with Citi. Please go ahead.

[Stephen Trent, Managing Director and Senior Equity Research Analyst at Citi]

Good morning, everyone, and thanks very much for taking my question. Linda, best wishes to you on your retirement. I wanted to ask, you know, very good trajectory in terms of reduced leverage. Could you give us some high-level view on how this could dovetail with your credit strategy, maybe investment-grade rating on the horizon?

[Mike Leskinen, EVP and CFO at United Airlines]

Hey, Steve. I appreciate that question. As our margin expands, and our leverage decreases, we expect we will have investment-grade metrics, and we're gonna work very hard to earn the trust of the credit rating agencies to get investment-grade ratings to go along with those metrics. But two times less than two times net debt with margins that are double digit, with an industry structure that is more resilient, with United as the leader within that industry, that's an investment-grade company.

[Stephen Trent, Managing Director and Senior Equity Research Analyst at Citi]

That makes a lot of sense, Mike, and appreciate that. And just one other quick question. You know, you guys have some great partnerships with names like Copa and some of your Star Alliance fellows. Do you anticipate, you know, a fair bit of long-term growth coming from these partnerships, or are we really gonna think about, you know, organic drivers to the growth? Thank you.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Sure, I'll take that. You know, our partnerships are incredibly important to us, and we do have the marquee names across the globe with great hubs that we fly into. However, our approach to growth is balanced. You know, as I said earlier, we have the ability to grow profitably in our partner hubs, but we also have the ability to grow just as profitably outside of our partner hubs. We do incredibly well to London Heathrow, for example, which is not a partner hub for us. And so I would expect a balanced approach to this, again, with the idea of expanded margins, but we will look to expand into new regions of the world that I think are uniquely supportable by having hubs that are in New York, in Washington, DC, and San Francisco in particular.

[Andrew Nocella, EVP and Chief Commercial Officer at United Airlines]

Those hubs just simply unlock the ability to fly to places like Marrakech or Greenland, or other places that we've recently added to the map. So international is an important part of United. We're clearly the largest of the big three flying overseas. We expect that to continue, but most importantly, you know, we have really good margins, at least across two of those big entities today, and we look to expand those margins going forward.

[Stephen Trent, Managing Director and Senior Equity Research Analyst at Citi]

Cool. Thank you very much.

[Operator]

We will now switch to the media portion of the call. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. We will pause for a moment to compile this Q&A roster. Your first question comes from the line of Leslie Josephs. Please go ahead.

[Leslie Josephs, Airline Reporter at CNBC]

Hi, good morning, everybody. Just wanted to ask around the election. I know one of your competitors talked about, you know, decline maybe a week before and a week after. Can you talk a little bit about what you're seeing? And then also in this quarter, seeing some really, really low fares to Europe, kind of across the board, across airlines and destinations. And can you talk a little bit about that, what demand trends you're seeing, and if this is just kind of a, maybe a function of a lot of capacity, and maybe people traveled already, or what's at play there? Thanks.

[Scott Kirby, CEO at United Airlines]

In terms of the election, I think what we would say, you know, a presidential election normally has an impact on RASM. You know, fewer people traveled that week for the obvious reasons, and here we are. It's four years later, and we are seeing the same thing, so I don't think it's anything to be surprised by. In terms of Europe, Europe has a very good outlook. You know, we've had a very good nine months so far in Europe. We expect it to be a good one for the rest of the year. If you see a great fare out there, I urge you and all your friends to buy it and take a trip to Europe. It's great in the winter, particularly Southern Europe. Rome is excellent in the winter.

[Operator]

Your next question comes from the line of Mary Schlangenstein with Bloomberg. Please go ahead.

[Mary Schlangenstein, Airline Reporter at Bloomberg]

Hi, thank you. I wanted to see if you could go back a little bit to some of your comments about the outlook for Asia and China and how that might be changing, and whether United plans to add back any additional China-U.S. routes anytime soon.

[Scott Kirby, CEO at United Airlines]

Sure, Mary. You know, I'd say, and I've said this in the past, China is just completely different for United today than it was pre-pandemic. We used to fly, I think, roughly ten flights a day to China, and I think those days are gone. The demand environment is just entirely different. We just recently resumed Los Angeles to Shanghai, and we're bringing that up to daily, so it'll bring us to three daily flights. And I really don't anticipate, based on the demand we're seeing, a lot more than that anytime soon. It's just a completely different world.

[Scott Kirby, CEO at United Airlines]

The situation in terms of the RASM, which I was talking about earlier, is as we've gone back to what is now a full schedule to China, we're back to, you know, what I would describe as normal RASMs. And those RASMs came down significantly from during the pandemic time period. We were just flying a few flights per week, and so that has had a negative impact on our year-over-year RASM results across the Pacific for a number of quarters. However, that comes to an end in Q4 and in Q1 when we lap that completely, and therefore the RASM impact, the negative RASM impact of China will dissipate. And we see this pivot that starts in Q4 and hopefully continues into next year.

[Mary Schlangenstein, Airline Reporter at Bloomberg]

Thanks. And can you give us an idea of the load factor on your China flights?

[Scott Kirby, CEO at United Airlines]

I don't have that in front of me, but not high enough.

[Mary Schlangenstein, Airline Reporter at Bloomberg]

Okay. Thank you.

[Operator]

Your next question comes from the line of Rajesh Singh with Reuters. Please go ahead.

[Rajesh Singh, Senior Analyst at Reuters]

Hi, everyone. I have a question about Boeing's strike. When does it start affecting United's schedule? And secondly, Emirates' President, Tim Clark, recently said that Chapter 11 is looming on the horizon for Boeing. Do you share that view, and have you done any contingency planning around that possibility?

[Scott Kirby, CEO at United Airlines]

It's hard to hear all of that, but we're not anticipating the outcome you described.

[Rajesh Singh, Senior Analyst at Reuters]

And, do you expect... When does the strike start having an impact on your schedule?

[Scott Kirby, CEO at United Airlines]

Oh, it already does. It's that immediate when the aircraft has stopped delivering. But as I said in my earlier comments, we have... We're encouraged that Boeing is focused on the long term. We want them focused on the long term. I talked to Kelly as recently as yesterday, and appreciate his focus on the long term, and that's what we care about. It has a short-term impact, but I think Boeing is positioning themselves for a strong turnaround in the long term.

[Rajesh Singh, Senior Analyst at Reuters]

Thank you.

[Operator]

That concludes our question and answer session, and I will now turn the call back over to Kristina Edwards for closing remarks.

[Kristina Edwards, Managing Director of Investor Relations at United Airlines]

Thanks, Kristina. 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 to you next quarter. Happy Halloween.

[Operator]

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Participants

Executives

• Linda Jojo, EVP and Chief Customer Officer
• Mike Leskinen, EVP and CFO
• Kristina Edwards, Managing Director of Investor Relations
• Andrew Nocella, EVP and Chief Commercial Officer
• Scott Kirby, CEO
• Brett Hart, President

Analysts

• Sheila Kahyaoglu, Managing Director at Jefferies
• Brandon Oglenski, Director and Senior Equity Analyst at Barclays
• Andrew Didora, Senior Equity Research Analyst at Bank of America
• David Vernon, Managing Director and Senior Analyst at Bernstein
• Stephen Trent, Managing Director and Senior Equity Research Analyst at Citi
• Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan
• Rajesh Singh, Senior Analyst at Reuters
• Conor Cunningham, Director of Travel and Transports Research at Melius Research
• Duane Pfennigwerth, Senior Managing Director at Evercore ISI
• Leslie Josephs, Airline Reporter at CNBC
• Mary Schlangenstein, Airline Reporter at Bloomberg
• Scott Group, Managing Director and Senior Analyst at Wolfe Research
• Tom Fitzgerald, Vice President and Equity Research Analyst at TD Cowen
• Mike Linenberg, Managing Director and Senior Airlines Analyst at Deutsche Bank