Andrew Nocella
Executive Vice President and Chief Commercial Officer at United Airlines
Thanks, Brett. I'd like to start-off today by thanking the entire United team for their hard work and dedication and taking care of our customers, particularly during the final week of the quarter. Our financial results provide proof that our United Next plans are working and that the demand environment remains robust. United finished the second quarter with top line record quarterly revenues of $14.2 billion. Total revenues in the quarter were up 17%, ahead of our guidance of 14% to 16%. June was exceptionally strong and was our best revenue month ever. Since the start of June, we've had 13 of our 16 highest flown gross revenue days. TRASM in the quarter was down 0.4% and PRASM was up 2.2% with capacity up 17.5%.
International results were exceptionally strong with passenger revenues up 44% year-over-year. International PRASM increased 13.3% year-over-year. Year-over-year PRASM results were strongest in the Pacific, followed by the Atlantic, and then Latin America. The resurgence of United specific entity has been the most transformative. Margins for our global long-haul flying continue to outpace domestic margins. Our second quarter capacity deployment plans lean into international flying with 27% more capacity year-over-year, which proved advantageous. International ASMs represent 45.4% of United's 2Q capacity, up two points from 2019.
Domestic passenger revenues were up 7.8% on 10.5% more capacity year-over-year, largely in line with our expectations at the start of the quarter. Domestic PRASM was down 2.4%, but that was a fantastic outcome as it compares to an exceptionally strong Q2 of '22. We expect similar or slightly better results for domestic PRASM in the third quarter. Our RM set-up for the quarter proved to be the right one. We held back seats early in the booking curve, saving them for higher yields in close-in bookings and we ended the quarter with record top line results. The business recovery remained stable. Revenue from international travelers flying for business grew 40% year-over-year, with 10% growth in the domestic business travelers. On ticketed basis, business travel revenue continues to trend roughly flat to 2019.
Cargo revenues have normalized post-pandemic. Yields are down 38% versus 2022, but do remain up 29% versus '19. We expect yields in the third quarter to be consistent with Q2. Healthy cargo revenues and yields are helping drive incremental profitability to our global long-haul flying. MileagePlus had another strong quarter with revenue up 11% year-over-year. We broke records this quarter for all key measurements from new card acquisitions to new member enrollment. Ancillary revenue from bags and seats hit a record $1 billion in Q2, up 19% year-over-year. Passenger -- per passenger ancillary revenue increased 8% to $23.79. Replacement of single class RJs with mainline aircraft with multiple types of seat upgrade opportunities is a key driver of our revenue growth. Premium leisure demand remains very strong across the board. Our domestic first-class capacity is up 4% from 2019. The RASM growth in that cabin is 12 points stronger than the main cabin, even with corporate traffic not fully recovered. Our global long-haul Polaris product is also offsetting the loss of corporate business revenue with premium leisure demand and validates the size of the Polaris cabins post-pandemic are correct for United hubs.
For Q3, we expect that total revenue will be up 10% to 13% year-over-year, with capacity up approximately 16%. The demand environment remains strong, and September and October look particularly strong relative to both 2019 and July and August, another sign that seasonality has changed and the summer peak period is more spread-out relative to the past. Once again, Q3 capacity plan focuses on international markets with capacity expected to be up 23% versus 13% for domestic. We believe international revenue will continue to outperform domestic revenue in the third quarter across the globe other than Latin America. Overall, our domestic margins are now back to 2019 levels, while our international margins are trending well above where they were in 2019.
Earlier this week, we announced an expansion of our Pacific flying this fall with new non-stop service from Manila to San Francisco. We also announced a second daily flight from San Francisco to Taipei, a new daily non-stop flight from Los Angeles to Hong Kong. And we'll resume our service between Los Angeles and Narita, as planned. These additions to our key Pacific destinations are in addition to our previously-announced expansion plans to the South Pacific. While international flying remains our focus, we also have plans to improve domestic margins by rebuilds and enhancing connectivity versus 2019, grow and engage faster than any other [Technical Issues] same focus on our existing seven hubs.
Domestic connectivity fell materially in the pandemic because we decided to retire about 300 regional jets, but our connectivity is growing every month as we take United Next deliveries and that will continue to drive PRASM higher each month. Like the period from 2017 to 2019 when we grew RASM and margins by growing connectivity, we'll do it once again, but this time with large mainline jets preferred by our customers. Each[Phonetic] has also been a key gap and opportunity for United. Larger gauge narrow-bodies with 190 or more seats operate with the best single-aisle margins in North America. The introduction of the A321 and MAX 10 are always a key enabler of our United Next gauge growth and margin growth. The potential of these larger jets is proven and further upside to United Airlines when they finally enter the fleet.
I also want to add to Scott and Brett's comments about Newark and our United Next plans. United Next always contemplated that the only way to grow Newark was upgauging from regional to mainline flying. We expected that to lead to higher growth in seats and ASMs at Newark, even though the total number of flights would not be growing. Our growth in Newark has always been contingent upon larger aircraft and not more aircraft. While we need to cut departures -- while we may need to cut departures more than planned, we don't believe these changes will impact our long-term capacity from Newark, due to the use of larger gauge aircraft.
And with that, I will turn it over to Gerry to talk about our financial results. Gerry? Thanks, Andrew, and good morning, everyone. I am pleased to report that, for the second quarter, we delivered the highest quarterly pre-tax earnings in the United's history of $2.2 billion. Our earnings per share of $5.03 was also an all-time record. And in addition, we produced a record second quarter pre-tax margin of 15.3%, three points higher than the second quarter of 2019 and ahead of our expectations. This exceptional performance was driven by stronger-than-expected revenue and lower-than-expected fuel prices. The severe weather at the end of June, which drove multiple consecutive days of strained operation, did lead to a one-point reduction in capacity for the quarter. We also incurred incremental disruption-related costs that weren't anticipated at the timing of our guidance. The capacity loss and added costs led to a CASM-ex impact of approximately 1.5 points for the quarter. Excluding this impact, until June 24th, we were trending below the midpoint of our CASM-ex range for the quarter, an indication that our core costs remain under control. For the rest of the year, the operational and scheduling changes that Brett discussed have reduced our full year capacity plans from our prior expectations, and we now expect full year capacity to be up approximately 18% versus 2022. Additionally, our CASM-ex guidance now incorporates an expectation of additional incremental costs in order to address the operational challenges. Specifically, for the third quarter, we expect CASM-ex to be up 2% to 3% with capacity up approximately 16% both versus the third quarter of last year. When combined with our results for the second quarter and our expectations for the fourth quarter, we now anticipate our full year CASM-ex to be up approximately 1% to 2% versus last year. However, just like the second quarter, outside of the revisions I discussed, our core costs for the rest of the year are trending as expected. Furthermore, our CASM-ex expectation for the year continues to include the impact of our recently-announced agreement with our pilots. Turning to earnings. The strong revenue environment and moderate fuel prices continued to provide strength to our bottom line. For the third quarter, we expect earnings per share to be $3.85 to $4.35 with a fuel price of $2.50 to $2.80. More importantly, given our second quarter performance and third quarter outlook, we are raising our full year earnings per share expectation to the top half of our previous guidance range of $10 to $12. On fleets, we took delivery of 20 Boeing 737 MAX aircraft in the second quarter and paid for 10 of those aircraft with cash. We expect to take delivery of 28 737 MAX aircraft in the third quarter and also look forward to our first Airbus A321neo later this fall. We continue to expect our full year adjusted capital expenditures to be approximately $8.5 billion. Turning to the balance sheet. We ended the quarter with $21 billion in liquidity, including our undrawn revolver. We are comfortable with our current level of liquidity, particularly given the uncertain macroeconomic backdrop. In the second quarter, we opportunistically issued $1.3 billion of Enhanced Equipment Trust Certificate secured by a pool of recently delivered Boeing MAX aircraft with an interest rate of 5.8%, which was attractive in the current interest rate environment. Additionally, we prepaid $1 billion of floating rate debt, which carried a current coupon of over 9%. Our adjusted net debt is now down almost $3 billion since the end of 2022 and $6 billion since the end of 2021. With the reduction in debt and the improvement in earnings, at the end of the second quarter, our trailing 12-month adjusted net debt to EBITDAR ratio improved by a full turn to 2.4 times versus the end of the first quarter, putting us back to where we were prior to the pandemic and ahead of pace to achieve our target of less than 3 times by the end of 2023. We also continue to expect to generate positive free cash flow for the full year, including the impact of our new pilot agreement. In conclusion, we are encouraged by the trends we are seeing and believe we're adequately mitigated against additional operational risk in the back half of the year. I'm extremely proud of the United team for delivering our strong financial results. Six months ago, when we first announced our full year EPS guidance, we were met with skepticism from some of you listening. Now, more than halfway through the year, as we increase our EPS guidance, I hope all of you are as comfortable as we are with the value of the United Next plan, while we continue to march toward meeting our long-term targets and delivering for our customers, employees, and shareholders. And with that, I will turn it over to Kristina to start the Q&A.
