Good morning. And welcome to United Airlines Holdings Earnings Conference Call for the First Quarter 2024. My name is Krista, and I will be your conference facilitator today. Following the initial remarks from management, we will open the lines for questions. 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.

Thank you, Krista. Good morning, everyone. And welcome to United's first 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 or beliefs concerning future events and financial performance. All 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 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. 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 release. Joining us on the call today to discuss our results and outlook are our Chief Executive Officer, Scott Kirby; President, Brett Hart; 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. And now, I'd like to turn the call over to Scott.

Thanks Kristina. And good morning to everyone on the call today. Before we dive into our Q1 earnings performance, I want to start by talking about the issue that always comes first at United, safety. Safety is the fundamental pillar of our core for net safe, caring, dependable and efficient, and in that order. Safety is at the core of everything we do at our airline to make United a success. As you've read, the FAA recently began evaluating several elements of our operations to ensure we're doing all we can to drive safety compliance. We welcome the FAA's engagement, and we are embracing this review as an opportunity to take our safety culture standards to an even higher level. As we undergo this review, I have confidence that first we have a strong foundation and a culture of safety here at United, including training, systems, processes and reporting culture, and that's backed up by our strong track record and success of our safety protocols. Second, through the FAA review, I'm confident that we will uncover opportunities to make our airline even safer. At United, we have the best team of airline professionals in the world, and we're committed to embracing this opportunity to make the best airline in the world even better for our customers and employees. Now to our Q1 earnings. We delivered a strong first quarter, and it's clear that United's Next plan continues to put our airline on a bright path. Notably, we saw meaningful year-over-year margin improvement in the first quarter, and if the Boeing MAX 9 hadn't been grounded, we would have been profitable for the quarter. Our United Next plan continued to demonstrate resilience in challenging industry conditions as we faced further significant aircraft delivery delays. These delays are driving temporarily higher costs this year, but we've been able to find ways to offset most of those headwinds. On demand, we see continued positive momentum and bookings across all customer segments from the most price-sensitive customers to domestic road warriors and up to the premium global customer. Our cost management and clear demand for the United product continue to support our confidence in the United Next strategy in full year 2024 EPS of $9 to $11. In conclusion, I'm proud of the United team for delivering top-tier operational and financial results. Thank you for all the work you do that makes us the airline that customers choose to fly. And with that, I'll hand it over to Brett.

Thank you, Scott, and good morning. I'd like to thank our employees for their hard work this quarter as we navigated through the grounding of the Boeing MAX 9 fleet. We recovered well and got our customers to their destinations with limited disruption. As Scott mentioned, together with the FAA, we have begun an in-depth review of our processes and procedures. These reviews are being taken very seriously, and we will see this as an opportunity to further strengthen our commitment to safety. As we work through this safety review with the FAA, certain certifications will be delayed. As a result of this, we expect a small number of aircraft scheduled for delivery in the second quarter to be delayed. We expect this to have a minimal impact on our 2024 capacity plans. I am confident that we will be able to successfully look back on this review process, resulting in an even better airline for our customers, employees, and shareholders. On the employee front, we reached a tentative agreement with the IBT for a four-year extension to their existing contract. We expect to hear if it is ratified by their membership in the next few days. Taking a look at our operation, in the first quarter, we delivered top-tier service to our customers. We had our second-best on-time departure performance in the first quarter in our history, excluding pandemic years. This resulted in being second in the industry in on-time departures for the seventh month in a row. Additionally, our widebody operation had the company's best on-time performance since the pandemic. We accomplished all of this while having the highest seat factor for any first quarter in our history. This is a great testament to the hard work of our team. In addition to strong operational performance, we also continue to make customer enhancements that have driven up our Net Promoter Scores. Some of these include continuing to retrofit our existing mainline fleet with signature interiors that feature larger overhead bins, in-flight entertainment, and Bluetooth connectivity. Signature interior aircraft were 9 points higher on-time NPS compared to the rest of the narrow-body fleet. And we are on track for 50% of our North America fleet to have signature interiors by the end of the year. We were the first U.S. airline to offer MileagePlus pooling, allowing customers to share and use miles with their friends and families. We've also partnered with the TSA to launch TSA PreCheck Touchless ID at O'Hare and LAX, which uses biometrics to enable customers to pass through the TSA line faster and without having to pull out their ID. Running a reliable operation and enhancing the customer experience continues to differentiate United. These encouraging operational results and improved Net Promoter Scores combined with our focus on safety by creating strong momentum for the rest of 2024. I will now turn it over to Andrew to talk about the revenue environment.

Thanks, Brett. United's revenue and financial performance will be top tier in Q1. And as Scott and Brett mentioned, we also had strong operational results. Without the grounding of the MAX 9, we clearly would have produced a profit in the quarter. Looking back at 2023, we did have a great year, particularly in Q2 and Q3. However, United's relative financial performance in Q1 of 2023 did not meet our expectations. Improving United's absolute and relative Q1 margin is something we're very focused on to achieve our long-term financial targets. Q1 has always been our most challenged quarter financially. Post-pandemic Q1 seasonality worsened due to decreases in corporate business. For the first quarter of 2024, we took the lessons from 2023 and carefully refined our commercial plan with encouraging results. A few of our domestic capacity changes in Q1 included Florida capacity increased by 20% with financial results well above our system average. Las Vegas capacity increased by 7%, again, with strong financial results. Margins on off-peak early AM and late PM flights improved by 12 points year-over-year, and margins on off-peak days improved by 11 points, driven by United changes and industry changes. In making these changes to how we deploy capacity in Q1, we sacrificed about 1 point of narrowbody utilization year-over-year. But in exchange, we offered a schedule that was more attractive to passengers with better departure and arrival times and more profitable for United; lower utilization also enhanced our reliability. We believe our Q1 2024 results set United up for producing profitable first quarters in the upcoming years and show our agility in adjusting our plan to meet new challenges. Turning to our overall revenue performance in the first quarter, revenue increased by 9.7% on 9.1% more capacity. Consolidated TRASM was up 0.6% and PRASM was up 1%. Domestic PRASM increased by 6.1%, which we expect to be industry-leading year-over-year; while international PRASM was down 4.2%. Domestic revenue results were also well above our expectations on strong demand and did help offset lower RASM year-over-year from global flying and Latin America. United's domestic RASM gains since 2019 lead the industry even with United having the largest increase in aircraft gauge of any U.S. airline. United's domestic network has been starved of gauge historically. I think our domestic RASM results in Q1 yet again showed that not all industry capacity is created equally, considering the marginal RASM performance of growth ASMs at other airlines versus United. Cargo revenue decreased by 1.8% year-over-year, and we're hopeful that this is the last year-over-year decline we'll see in the near term. MileagePlus had another strong quarter with revenue up 15%. United's premier frequent flyer new members are more engaged than ever by flying and using one of our co-brand credit cards. Managed corporate travel in Q1 was up 14% year-over-year. Yields for managed travel will be faster than non-managed travel due to stronger close-in pricing and refined discounting guidelines. The strength of the business traffic rebound is a nice development for an airline like United. Latin American PRASM was down 12.7%. Weakness was felt in near Latin American markets for the most part versus South America. We are pleased with our capacity growth across the Pacific, where capacity was up 66% and PRASM was down 12.9%. However, we do plan to make capacity adjustments to a small number of underperforming routes later this year. Q1 performance for United's Atlantic line was up with strong PRASM 11% up. We saw a material rebound in London, where Polaris revenues were up 8% on 11% less capacity. We saw weakness in Germany offset by strengths in Southern Europe and Africa, where we increased capacity. United's efforts to build our brand in premium product choices while reducing customer friction is having a noticeable positive impact on our results as we gain share across the network for leisure and business travelers. For our road warrior or frequent flyer business customers, United's elimination of change fees, the functionality of our app to manage their entire travel experience, improvements to MileagePlus, and the steady increase in United Club facilities has resulted in improving share. However, we cannot understate the importance of the elimination of change fees, which is a game changer for how people feel about United. United's focus on premium products has matched well with increased consumer demand for our premium seat choices. We believe this focus has diversified and made our revenues less cyclical in the long run. Premium passenger revenue mix improved by 1.9 points versus Q1 2023 and 3 points versus Q1 2019. In other words, we're seeing near-term acceleration. Premium revenues were up 14% year-over-year on 10% more capacity, and we estimate that United's premium revenue streams lead the industry. While our largest focus is on growing premium revenues, we also believe our rollout of Basic Economy is a critical competitive tool and important to attracting customers of all types in our core geography. Basic Economy sales trends in Q1 were up 35% year-over-year. Basic has clearly changed our competitive stance versus the ULCCs. Larger narrowbody jets are also increasing United’s gates faster with more premium seats than any other U.S. airline. We are absorbing this gauge increase well, which can be easily measured in our continued domestic RASM growth relative to others. We continue to plan for further gauge growth between 2025 and 2027 with our expanded MAX 9 and A321 fleet. Other product innovations are planned with the goal of increasing choice for customers, expanding premium revenue streams, and segmenting demand. United’s gauge growth will also create further cost convergence. More importantly, gauge growth provides consumers a wide range of premium seat choices that they want and that we have proven we can monetize. For Q2, we continue to see strong domestic and Atlantic demand with positive RASM results tempered by the Pacific, where we expect a negative result year-over-year. We also expect Latin America will have a materially negative PRASM result year-over-year in the quarter. As we think about the second half of 2024, we do like the macro setup, particularly for domestic capacity, where we think we can continue RASM growth above industry average. We are focused on building connectivity in our core non-coastal hubs in 2024 with both new mainline jets and with enhanced RJ capabilities. With that, I want to congratulate the entire United team on a job well done and turn it over the call to Mike to discuss our financial results and updated fleet plan.

Thanks, Andrew. And thank you to the United team for the tremendous effort as we work through the grounding of the Boeing MAX 9 fleet and entered the peak spring break travel season. In the first quarter, we produced a pretax loss of $79 million, a $187 million improvement over the first quarter of last year. Our loss per share of $0.15 was better than our guidance and well ahead of consensus expectations, driven by both strong revenue results and disciplined expense management. The grounding of the Boeing MAX 9 fleet negatively impacted our earnings by more than $200 million, and without it, we would have had a profitable quarter. We also generated $1.5 billion in free cash flow, and our adjusted net debt to EBITDAR of 2.7 times is back to pre-pandemic levels. These are strong results in what is our seasonally weakest quarter, and they provide another proof point that our United Next plan is working. Before I turn to the outlook, I'd like to address the changes we made with Boeing and Airbus, to optimize the delivery skyline. Boeing's repeated delivery delays had created an impractical bow wave of aircraft deliveries that both United to address, and we have. In 2024, we now expect to take delivery of 61 narrowbody aircraft and five widebody aircraft. This compares to our contractual deliveries of 183 narrowbody aircraft at year-end and the 101 aircraft we were planning for at the start of the year. Due to these fleet changes, we now expect full year 2024 total capital expenditures to be approximately $6.5 billion, down from $9 billion at the start of the year. We've also made changes to level out our fleet plan for 2025 through 2027. This modified fleet plan allows us to execute on our long-term goals while also smoothing out the pace of deliveries and our annual CapEx spend. We've converted a near-term portion of our MAX 10 deliveries scheduled through 2027 into MAX 9s. Additionally, we have signed letters of intent to lease 35 new Airbus A321neos with CFM engines scheduled for delivery in 2026 and 2027. With these changes, we now anticipate taking delivery of approximately 100 narrowbody aircraft on average each year during this three-year period. This delivery schedule provides fleet renewal, steady growth and addresses the bow wave of aircraft delivery delays that had been building. These changes bring our total adjusted capital expenditures in 2025 through 2027 to the $7 billion to $9 billion range in each of those years. Balancing our United Next growth plan and managing the business towards positive free cash flow remain top priorities. And with the rebalanced skyline, we are targeting positive and growing free cash flow over the next three years. While we will provide an updated long-term earnings target later this year, we are confident we are on a path to higher earnings, better margins, and materially stronger free cash conversion. Now turning to costs. Unit costs trended as expected during the quarter and were up 4.7% year-over-year on 9.1% capacity growth. As I mentioned, it was challenging to re-optimize our expenses with the uncertainty created by the MAX grounding and continued delays to our aircraft deliveries. While our underlying costs are consistent with our forecast at the beginning of the year, it's important to understand that the continued reduction in capacity from delivery delays will continue to temporarily pressure our CASM-ex for all of 2024. As we entered the year, we built a business plan for a larger airline, and deliveries have fallen more than 40 aircraft short of our expectations. We continue to incur most of the expenses as we hired for that capacity despite flying fewer ASMs, and it is driving almost a point of CASM-ex pressure. We are working diligently to reduce these costs as much as possible, and our higher completion factor has helped offset some of it. For the second quarter, we expect CASM-ex to be similar on a year-over-year basis versus the first quarter. Given our expectation for costs and our current outlook for revenue and fuel, we expect second-quarter earnings per share to be between $3.75 and $4.25. We have great momentum. Our United Next plan is working, and the future for United and our industry has never looked brighter. Our margins are already near the top of the industry, and we still have significant and unique network and gauge opportunities in front of us. United has never been in a stronger competitive position. We have developed a wide variety of products that are compelling to a wide variety of customers. And as a result, they are increasingly choosing to fly United. I remain excited about our future and believe we're firmly on track to deliver $9 to $11 in earnings per share this year. With that, I'll pass it over to Kristina to start the Q&A.

Thanks, Mike. We will 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.

Your first question comes from the line of Andrew Didora from Bank of America.

I guess first one is for Mike or Scott. I guess, with your new CapEx forecast that I'm sure are not yet set in stone given there are a lot of moving parts here. It certainly implies much more consistent free cash flow generation over the next few years. How are you thinking about maybe deploying that capital, where do you see the best fit for that going forward?

I'll take that question. Andrew, as I said in my prepared remarks, our net leverage is currently 2.7 times, which puts us back in the range of pre-pandemic levels. In fact, in 2019, we were at 2.5 times, in 2018, we were at 3 times. As we look at the path forward, I expect to see continued deleveraging. We also have some high coupon debt outstanding. A piece of our MileagePlus debt, $1.8 billion becomes prepayable in July; that debt is still yielding over 10%. So that will be my near-term priority, is to take care of that debt. After that, with the way to investment-grade credit metrics, we're going to have tremendous flexibility, and we'll revisit other uses of free cash at that time. But you're going to have to stay tuned.

Just a follow-up question for Andrew. Just on the corporate commentary and the strong transatlantic, I know you cited Heathrow in your prepared remarks. Should we read into that, that corporate was a big driver of the results in Q1 on transatlantic, or any other call-outs that you would have just to get a sense for what's driving the outperformance there?

Corporate performance has been strong overall, not limited to just London Heathrow. We observed robust growth both domestically and internationally. This year, we recorded nine of our top ten corporate booking days in history, which is impressive. The strongest industries contributing to this growth include professional services, technology, and industrials, although almost all sectors showed improvement this year. This trend indicates positive momentum. As mentioned earlier, Q1 corporate performance is crucial for us, and the strengthening of Q1 is promising for our future outlook in subsequent quarters.

Your next question comes from the line of Sheila Kahyaoglu from Jefferies.

I wanted to ask domestic PRASM up 6% year-over-year in Q1 was double that of one of your peers that have reported so far. Curious how you would attribute that to the strong performance across the Mid-Con restoration, corporate, share gains in either premium or basic? You've touched upon that a little bit. But then maybe as a follow-up as well, how are you thinking about that sustaining domestic unit revenues here with industry capacity?

I'm going to start this discussion and then hand it over to Andrew for a more detailed response, but I'll begin with a broader strategic perspective on the question. Over the past few years, we’ve been trying to explain how we see the industry evolving and the strategy behind United Next. Although we've shared our insights, they haven't seemed to resonate fully. So, I’m going to approach it differently today. What's been happening is that the industry has fundamentally changed, and United, alongside a few other airlines, now has a competitive advantage that we didn't have before. This advantage stems from offering a superior proposition for our customers. We have a better product, an improved network, and a more attractive loyalty program, which influences customers' choices to fly with us. What sets us apart is that while other airlines might have parts of these advantages, we combine excellent products, outstanding service, and a global network that is difficult to replicate. We can connect customers to places like Singapore, New Zealand, Australia, Cape Town, Marrakesh, Paris, and many more destinations. We also provide a compelling loyalty program that attracts travelers to be part of it, especially when executed effectively. In the past, we faced two significant challenges. First, there was a substantial group of travelers, particularly small business travelers or domestic road warriors, who prioritized avoiding change fees. When we had those fees and a competitor did not, they often chose that competitor, despite our advantages. It appears that this group is even larger than I initially thought, but we are now successfully attracting them because our strengths are resonating with them. The second challenge was with price-sensitive customers wanting a more itemized pricing structure. Addressing this required us to develop a more appealing Basic Economy product and, more importantly, ensure that we could sell these seats profitably in substantial numbers. We've successfully implemented both of these solutions. These efforts are central to what United Next signifies, highlighting structural changes in our business. Our competitive advantages related to exceptional service, a robust global network, and a strong loyalty program are now permanent. Regarding whether this trend is temporary or will continue, I believe this represents a new normal. There are only a few airlines experiencing this situation, and we are now among the highest margin airlines, a trend that will persist due to these structural changes. Andrew?

Well, it's hard to follow that. I mean, on the tactics, the one that I would bring up at a very high level would be, we went into the quarter not trying to maximize aircraft utilization, particularly in seasonally Q1, which is weaker. We went in trying to maximize our profitability, and I think it works. And I'm really proud of the team for all the changes we made across the network because I think they're incredibly effective.

Your next question comes from the line of Conor Cunningham from Melius Research.

Just going back to the comment on you taking advantage of the number of opportunities in the U.S. domestic market. Can you just maybe elaborate a little bit more on that? You talked a little bit about Florida and Las Vegas. Is there any learnings that you have that you go into peak season or is it more of just a shoulder comment as you kind of take advantage of some of the other issues that some of the other carriers are dealing with in general?

Well, as Scott said, the United Next vision here goes across all quarters. But in Q1, we definitely did see a lot of opportunity to continue to take advantage of things that were in our control. And within our control is the ability to continue to pivot the airline to more sunshine-type markets like Florida and the Caribbean, and we did so, I think, with great success. In Las Vegas, we put in that category as well; our capacity deployed there was incredibly effective. The other thing is we knew off-peak periods in Q1, it's not a time to maximize utilization. And we took this opportunity to reschedule the airline to make sure that we were not offering unproductive capacity, and I think that worked very effectively. Below all that, or above all that, how you look at it, was just the core building of connectivity across our hubs. It's working exactly as we intended to do. We still have ways to go on this front. It will be 2026 or 2027 before the connectivity reaches our desired levels. And so we're pretty bullish on our ability to continue to outpace domestic RASM growth offered up by or competitors.

I understand that you and Delta have moved away from some of your competitors, which is quite clear now. However, your performance compared to Delta is particularly notable. Could you elaborate on what distinguishes United? I believe there is a significant opportunity in the premium sector. While you discuss fleet upgrades, that largely pertains to new aircraft deliveries. I'm interested in how you plan to narrow the gap or further differentiate yourselves from your peers this year.

We continue to drive the United Next strategy. And you're absolutely correct, the aircraft that we'll take delivery of come with a lot more premium seat options. Our premium mix this year is up 1.1 points year-over-year in terms of revenue, which is, I think, a very significant change in a very short period of time. And we are going to continue to push that, but we're also going to continue to push Basic Economy. So our premium mix is up, while our Basic Economy is up, and that's exactly the kind of the recipe we're looking for in our diversified revenue streams. And briefly on the global network, it's second to none. It's number one across the Atlantic and number one across the Pacific. And the changes we've made have just been, I think, pretty productive and efficient and accretive, and there's actually quite a bit more of that to come. So I don't know if that exactly answers your question. But the outlook, I think, is very bright. The premium revenue strategy is working incredibly effectively, and we're going to continue to push it, and we think there's more room to close that gap.

First one, probably for Andrew. I've been following the Polaris press for champagne topic on social media. I must admit, as an analyst, I'm fascinated by the idea of potentially unbundling the forward cabin. The changes in economy class are well documented now, but we haven't seen significant changes in the premium cabin. Currently, the passenger who books last pays the most but has the same experience as the passenger who books early and pays the least, similar to the model in economy class. Should I even be considering this, or is it not worth my time?

I won't dictate how you use your time, Jamie. But what I would say is we continue to believe that there's ways to further diversify our revenue streams and segment them. And we continue to believe that there is more opportunity for premium products that we don't have on board the aircraft today. And those incremental premium products, I'm not going to announce it today, but I can tell you, you have many teams of people working on how to further innovate and provide more choice and monetize that choice on our behalf, obviously, in the future. So I think that headline was just a hint more to come and a lot of people working hard at United to make sure that we can differentiate ourselves not only from our U.S. competitors, but many of our competitors around the globe.

And then second, and whoever wants to take this, but when you initially introduced United Next and its growth plan, aircraft were being delivered on time, the discount model wasn't impaired domestically. So it was pretty easy for us to map out how your capacity share would ramp over time. Obviously, everything has changed since that. My question is on a relative basis to the U.S. industry, so considering these constraints on capacity. Does the new fleet plan keep your relative position on track with the United Next plan? It actually seems to me like you might be somewhat ahead of the plan on market share, but there are quite a few overarching assumptions that I have to make there.

There's a lot of moving pieces. So I'm not going to specifically answer the question. Our market share across every single one of our hubs is obviously improving and improving quicker than our capacity this year. This year, we're domestically, I think the next six months are growing less than our competitors; it's TBD on what our competitors are going to do. But we're focused on delivering the United Next plan we've created and all the value that's being generated from that. Our coastal hubs are second to none as we've talked about a million times. But getting our core Mid-Continent hubs up to their critical connectivity levels is a big focus, and it’s just paying back dividends left and right, and we think it will continue to do so. What exactly our competitors do, I just don’t know. We will continue to face struggles on the delivery schemes from Boeing and Airbus. But hopefully, as Michael talked about, we've built in the appropriate insurance plans for all of that. So you can say we're better on plan…

So speaking of TikTok, Scott, your industry commentary is usually very insightful. So I'd love your thoughts on the current headline risk to the industry from the incidents that may be out there. Kind of is this just a social media phenomenon or is it a pandemic hangover thing, is the lack of new aircraft thing, is the labor thing? What's your view on how the industry is going to assure its customers that flying is as safe as it's going to be?

Safety is the top priority at United, and I believe it is for all our U.S. competitors as well. This is an area where we do not compete with each other. In fact, one of the reasons aviation is significantly safer than other modes of transportation is our commitment to sharing safety data. We learn from each other's incidents and events, which strengthens our industry. At United, we have a strong foundation in training, systems, processes, and a culture of reporting. However, there have been a few unrelated high-profile incidents at United and in the industry that present an opportunity for us to enhance our already high safety standards. We see this as a chance to improve further. We've implemented several initiatives already, and more are on the way as we strive to elevate our safety standards. I'm confident that we can achieve this while maintaining excellent service for our customers, employees, and shareholders. We can excel in all these areas simultaneously and emerge stronger, not just at United but across the entire industry.

And maybe as a follow-up, the pooling miles is a very interesting idea. Can you just unpack that a little bit, kind of what may be launched at this time, kind of what are some of the cost or revenue implications thereof? And what do you think some of the benefits might be to United and our customers as you roll that out?

Well, we're always trying to make MileagePlus miles more useful for our members so they can enjoy the benefits. And there are a number of members that alone couldn't get that trip to Tahiti or wherever they're trying to go and the pooling option allows them a better chance of doing that. I think it comes at a minimal no cost to United, but it definitely enhances the value of the program. It's, I think, pretty unique among the largest airlines, and we look forward to seeing how it goes. So we urge you to pool your family members and see what you can do.

Your next question comes from the line of Duane Pfenningwerth from Evercore ISI.

Just on the longer-term CapEx, certainly appreciate you have to have a plan at a point in time based on the facts available. But how do you think about the path to a pickup in deliveries required to hit that 2025 and beyond, what are the dependencies in your mind? And I guess, what are the odds we enter 2025 the same way we did this year with that 100 or so more of a placeholder than a realistic target?

I want to start by emphasizing the importance of generating free cash over the long term for us at United and for our shareholders. This is something we are managing carefully. We provided a CapEx range of $7 billion to $9 billion acknowledging the uncertainty regarding OEM delivery schedules and production rates. We are focused on maximizing profitability, and we will manage our deliveries in response to the macroeconomic environment at the time. A lot can change in three years, and as I consider the uncertainties for 2025 and 2026 in a stable macro economy, it's crucial to watch both the 787 and 737 production rates and whether Boeing can increase those rates. Our expectations take into account the possibility that production rates may not rise as quickly as Boeing hopes, which introduces both upside and downside risks to CapEx. We will manage within the $7 billion to $9 billion range, and that’s why we wanted to share this information with everyone today.

And then maybe just a quick one for Andrew. And I've asked this before, I'm sorry if it's a little waste of time. But on international inbound or maybe a different way to say it, ex-U.S. point of sale, where does that stand today? And as you think about your entities or geographies, are any of those starting to pick back up in terms of ex-U.S. point of sale, or are you seeing any inflections?

I would say, yes, we are seeing progress. The one place we look to the most is Germany and core Europe, and that's still trailing. So hopefully, that will continue to move forward. But I think we're seeing really progress across the whole globe on rebalancing and being a little bit less dependent on the U.S. consumer to drive the global network.

I was just wondering on that 100 narrowbody aircraft per year. Just what's the thought on the mix of growth versus replacement? And I guess, asked another way, I appreciate Mike, you mentioned kind of taking into account macro realities. But what's the right level of kind of domestic growth as you kind of look over the next three to four years assuming you can get the aircraft delivered?

And for our growth rate in 2025, '26, and '27, you're going to have to wait for Investor Day later in the year. The 100 aircraft, we have the ability to fly some of our older aircraft longer. And given the delays from Boeing and Airbus, I would expect again, macro economy dependent, that we would continue to fly our existing fleet until end of life when they're at heavy checks. But we always have the optionality. If yields are not strong to early retire some of those aircraft, and it's an economic decision when an aircraft is late in its life to early retire some of those aircraft that are less fuel-efficient and very heavy maintenance. So I think of that as flexibility we have in the event of a macro event. But absent a macro event, you should expect us to sweat our assets until end of life.

As a follow-up, Mike, regarding your earlier comment, I appreciate the insights on the second quarter unit costs. Looking at the year from a high-level perspective, I’m curious about the potential year-over-year challenges that may increase or decrease from now. I understand your capacity is easing a bit compared to the first half. Given that you have more time to assess, will you be able to address more of the fixed costs as you move into the second half?

I would say you need to think about labor costs and when we lap and annualize some of those labor costs. So that would be the number one factor you should put into your model around differences quarter-to-quarter. Number two, the CASM ex impact of flying 40 less aircraft than we planned for this calendar year, you should expect those costs to linger. As we get into the back half and particularly in the fourth quarter, some of those costs begin to moderate, but you should think about Q2 and Q3, those costs continuing to weigh us down. Again, we will offset with the great operation we're running as we see completion factors move up; we’ll offset partially. But those costs don't go away overnight. And I'll use this as an opportunity to also talk about some longer-term cost initiatives that we've started since I've taken over in the CFO seat. Number one, tech ops, there are significant opportunities for us to drive efficiency in our tech ops by driving efficiencies in our supply chain by optimizing the volume of parts we purchase and improving the rates we pay for those parts. So we're undergoing a significant initiative there. I think the run rate you'll see from that initiative is more like 2025. We're also undergoing a significant procurement bottoms-up evaluation. We're going to go through waves going through different vendors to make sure we have best pricing in the industry. I think this is going to be in the fullness of time, measured $100 million-plus in cost efficiencies. Again, that's more like '25 and '26. But when I talk about unique United opportunities, I would put this in that category. And then finally, I'll highlight that we've got significant opportunities within our technology organization to help drive efficiencies throughout the full airline. But one that I'll highlight is moving a lot of our mainframe computing into the cloud; that's something that you don't save the cost of moving to the cloud until you shut the mainframe down. So in many cases, we've moved 70%, 80%, 90% to the cloud, but we still have to maintain that mainframe with 10% or 20% of the systems on that mainframe. So there's a little taste. We'll give a lot more fulsome answer at our upcoming Investor Day.

So that was sort of helpful color on back half CASM a little bit. Maybe just a similar thought on back half RASM, comps get easier. Is it fair to assume we see RASM accelerate in the back half of the year, is there any other puts and takes to be thinking about?

Just at a really high level, I would say that the capacity up domestically, I think is rough as in probably Q2, but gets better in Q3 and particularly better in Q4 is our estimate based on what we look at. So I think that is a nice trajectory. Second, we added a considerable amount of Asia Pacific capacity middle to late last year. And so as we lap that capacity, so it's now fully spooled up, we expect the line to improve. And as we make capacity adjustments to unproductive capacity in that region, we also expect that's going to show some improvements. And that follows always through Q1 of next year. Latin America, the capacity picture has been particularly difficult for the first half of this year. As you all know, the second half looks, I think, very different. And so I'm optimistic that Latin is going to turn the quarter in Q3, although Q2 is still a very challenging result. And in Europe, I think we've really sharpened our pencil; we paused growth for the most part this year on purpose. And I'm particularly optimistic based on how we deploy capacity that Europe is going to look fine. So I'm not giving you the exact numbers, but that’s how I look across the globe and see what's happening and think about positive or negative trajectory by region.

And I'm going to answer the question also from a high level. I think we're going to have the opportunity to have a lot of flexibility on our part, and how we choose to budget different things in terms of how we structure our investments. I will give you one more view on this as a lens; you should account for the efficiency of operations as a result of our successful cost initiatives, as well as any operational improvements that we run into, as we progress into '24 and beyond as we work to implement the new strategy.

Mike, I appreciate your insights on free cash flow. Scott, I would like to hear your thoughts on this topic and on CapEx as well. If we find ourselves in six months with Boeing able to deliver many more planes, do you think the $7 billion to $9 billion figure could increase again? Alternatively, is there anything within your control that might suggest that the $7 billion to $9 billion could decrease further?

I believe the range of $7 billion to $9 billion is reasonable. We've placed more orders with airlines than anyone else historically. With the supply chain challenges that Mike mentioned, we expected 40 airplanes to be delivered in 2023, but they were pushed to 2024, and none arrived. An additional 20 that were slated for 2023 were also delayed, resulting in 60 airplanes now set for 2025. This situation not only complicated our planning but also made it difficult to operate our flight training center efficiently, as we had to frequently adjust capacity plans, which impacts decisions about pilot upgrades and planning 18 months ahead. We aimed to stabilize our capacity by adjusting aircraft deliveries to about 100 per year, which should reduce variability. Our orders are now split 60-40 between Boeing and Airbus, adding some diversity to our future plans. I don't anticipate increasing our numbers since doing so complicates operations at the flight training center due to increased workload, which isn't worth it. Moving forward, we plan to incorporate a buffer into our schedule. If we anticipate taking 100 airplanes this year, we might only schedule 90% or an even lower percentage. If everything proceeds as planned, we'll have a few spare planes for a couple of months. While this approach incurs some slight costs, they are far less than overstaffing for 40 airplanes. This strategy will provide us with greater predictability for capital expenditures and enhance operational efficiency overall.

So I have two questions. I think Andrew, you talked about the quality of your product and the network and the loyalty deal and so on in your answer to somebody's question. But when you think about some of your alliance partners, they don't have the same commitment to service and any of the things that you just talked about that you have. So as you think about alliances going forward, and maybe this is a question for Patrick. How do you think about getting everybody on board to the same standard that you're setting so that you don't distress your customers when they have to connect because you're not flying someplace non-stop that they want to go aspirational or they let your customers down?

I'll start by saying that I don't completely agree with your question's premise. Our core partners, such as ANA and Air New Zealand, maintain the highest standards. Lufthansa also has high standards; they've faced several strikes recently, which have been tough for them, their team, and their customers, but I believe they've moved past that now. Our commitments to customer service are aligned, and we're proud to collaborate with each of these airlines in joint ventures. We come together, without lawyers, to tackle challenging issues and discuss how to enhance customer service continuously. However, we come from different countries and cultures, and those differences are significant. They showcase the identity of each airline. We're not trying to standardize every detail of our alliances. Nevertheless, I believe we share a common focus on putting the customer first. Furthermore, I will add that we have the best alliance partners with the leading hubs worldwide, which contributes to our superior network and greater profitability compared to our primary competitors.

And then just for my follow-up question, maybe Mike, as we think about the earnings guidance for the second quarter. How should we think about like the percentage corporate, leisure, domestic, international, are you starting to skew more corporate international in the next six months than you have in the past, or how should we think about that breakdown?

I would just say that domestic leisure has been really strong. Despite historically having less exposure in this area compared to some of our peers, we've accomplished a lot. Business demand is clearly continuing to recover, which positively impacts our performance. As we've mentioned, the current results at United are very strong, but the outlook is even more promising. I feel confident that business will continue to enhance our results.

I'll add one incremental fact, Helane. The growth in Polaris load factors has been pretty significant year-over-year. And the growth in premium load factors across the board at United Airlines, our paid premium load factor was up 9 points year-over-year in the quarter, which is amazing. But as we revenue manage all of that, we kept all of the premium leisure passengers in their seats as we added more corporate into their seats. So we were able to do both. And that is one of the reasons for the great execution in the quarter is that we see corporate rebound in, but we see the desire for premium products by leisure customers continue to be strong.

Your next question comes from the line of Brandon Oglenski from Barclays.

Mike, can you give us some insight on how you're planning for the cost structure in '25 through '27 just given the variability that you gave us on CapEx? And I know it's aspirational to get 100 deliveries every year, and Scott spoke to it as well, maybe you filter in some buffer here on spare aircraft. But how do you think about hiring, especially given that some of these training events might be an 18-month decision?

By leveling our aircraft delivery schedule and stabilizing our operations, we will be able to align our hiring of flight attendants and pilots more effectively. The inefficiencies stemming from having 40 fewer aircraft this year will resolve over time. This is crucial for us. Moreover, considering the inflationary environment we are navigating, the entire industry will continue to face these pressures. However, at United, we benefit from a gauge that will allow us to implement these changes gradually. I am quite optimistic about this situation. And maybe just a very quick one for you, Mike. I know you guys had wanted to do an analyst meeting soon here, and that's going to get pushed back. But any strategic teasers you want to give us on MileagePlus, because I know it's been a focus of yours and the team? I will repeat what I've said in the past. MileagePlus is a crown jewel in the assets we have here at United Airlines. It was a critical source of collateral during the pandemic. But the dream is that it is recognized that the value of that asset, the value of that business, especially as we grow it, is recognized in our equity market cap. It's not there today. You're going to see us continue to give more and more disclosure, more and more transparency to that business. You're going to see us share more and more details on the growth plans we have for the data in that business. And eventually, if we get no value in our market cap, we'll take more aggressive actions. I've been a consistent message on that, and you'll hear even more at our Investor Day.

Thank you. We will now switch to the media portion of the call. Your first question comes from the line of Mary Schlangenstein from Bloomberg.

So I wanted to see if you could give a little bit more detail on the aircraft that were delayed from second quarter to third quarter as part of the FAA review, whether you can tell us how many aircraft, what types of aircraft, and specifically how the FAA resulted in the delays?

I'll try. I don't think we have a definitive answer yet. We have three MAX-9 airplanes scheduled to arrive in the next few months, and we will keep collaborating with the FAA. However, our primary focus is on using this situation as an opportunity to establish a higher safety standard. Throughout this process, there will come a time when we will resume aircraft deliveries, but that is not our main concern at the moment, nor should it be.

They haven't prohibited any aircraft deliveries, right? Is it just the start of using some of those planes, or are the deliveries themselves affected?

It's not the delivery, it's about putting them on the certificate.

And you said it's just three for right now. And my second question was you all talked a lot about the corporate rebound and how that's playing out. But is there anything different that you expect to see in summer travel this season? Like it sounds like there might have been some geographic shifts for some areas that were strong last summer won't be as strong this summer? And do you expect the domestic market to be particularly strong this summer?

As we head into the summer season, we expect strength across the board and in the United network tilt in terms of our best seasonality towards Q2 and Q3 and particularly across the Atlantic, across specific and TransCon within the United States. So we expect all of those entities to perform really strongly this year. And everything we have in terms of data right now, I would say that's where we stand.

Do you expect to set another record for this summer for passenger numbers?

Yes, I think we will, as an airline and as an industry.

Can you exactly what the FAA review prohibits you from doing? And is the change to the fleet plan from this year because of the Boeing delays in production and deliveries or because of the FAA review? And then on just a question on the mechanical issues lately. Have you had to update kind of procedures or anything else for your technicians so that those things don't happen, maybe things that were getting overlooked or not part of checklist prior?

The delivery delays are entirely the issue. The primary focus has been less on changing policies and processes and more on ensuring that everyone prioritizes safety. We have been spending significantly more time with the leadership team discussing this to keep safety at the forefront. We will, of course, collaborate with the FAA and undergo a thorough process, continuously seeking ways to enhance safety across the board. Currently, we are looking for ideas at an elevated level, but this is not something new; we have countless people whose full-time responsibility is to focus on this every day.

And the review prevents you from putting new aircraft into service and then what else, is it captain upgrade, anything else?

No, that's not it. We can do captain upgrades.

So it's just putting new aircraft into service?

That's the primary thing.

When do you expect the review to conclude?

That's, again, the way we would think of this as about going through a process to make it better, using this as an opportunity to create a new higher standard, and it will conclude when it concludes. We're not going to predict the time.

Thanks, Mike. And thanks for everyone joining our great call today. Please contact IR and Media Relations if you have any further questions, and we look forward to talking to you next quarter.

Thank you. Ladies and gentlemen, this concludes today's conference, and you may now disconnect.