Thank you, United Airlines, for joining us at the conference today. Scott Kirby, CEO, Christina Munoz from IR, Mike Buskinen is also with us today. I'm dropping everything off the stage. We are going to do a fireside chat format today. If you have questions, you want to put them in through the pigeonhole. I have that device up here, and I can try to work those into the conversation. Before we begin, Christina is going to give us a few required disclaimers, and then I'll hand the mic over to Scott. First of all, thank you guys for joining us, And then I'll hand the mic over to Scott to talk a little bit about the state of the state, and then we'll dig into the Q&A.

Awesome. Thanks, Dave. The remarks made during this fireside chat may contain forward-looking statements, which represent the company's current expectations 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 from our current expectations. Please refer to our most recent filings for further information. Additionally, today's remarks may include non-GAAP financial measures. Please refer to our most recent earnings release for those non-GAAP and GAAP measures. Thank you.

Now that you've been properly disclaimed.

That was the highlight of the day.

I'm not sure if you want to actually say anything given the stock performance today.

Yeah, no kidding. I don't want to screw it up. Well, thanks, everyone, for joining us and to everyone listening online. I'll be brief. I'm sure we'll talk in Q&A about the more near term. Near term, though, is developing much like we thought. Oil prices have been high, as everyone knows. Demand has remained strong, as is well publicized. So we feel pretty good about moving it as oil prices come down, moving to 100% revenue, 100% recovery, probably even sooner than we otherwise would have as oil prices start to come down. So we feel good about the near term. And more importantly, you know, we feel great about the strategy and the execution that we have had at United. We've been on a long-term journey to build a brand-loyal airline that was durable, that had resilience in the revenue, that had diversity in the revenue, multiple revenue streams, not just concentrated in one area. And we thought that that would lead to higher margins in good times and provide a lot more resilience when times were more difficult. And, you know, I think both last year and this year, you know, there's been a lot of curveballs thrown last year and then oil prices this year. Pretty remarkable compared to the history that I've been in in the airline industry, you know, to see how resilient our results have been even in that environment. It really is because, you know, we've won brand loyal customers. I mean, you get the customers wanting to go with you. It leads to much better financial results. Financially, as we look forward, you know, we're, you know, this year's oil prices aside, we remain solidly on pace, you know, to, you know, have 50% conversion, free cash flow conversion, moving towards 75% as we start to taper off the number of aircraft deliveries that we'll take towards the end of the decade. We'll be moving from 50% to 75%, so we feel good about that. We think that there's an awful lot of upside for us, not uniquely, but us, the biggest upside in the loyalty program you know we've got a great partnership with Chase but it's a decade old and you know the other deals have been you know modernized and we're just in the opening innings it's starting to modernize our deal you can see it in for the disclosed financials that there's you know opportunity for us there compared to some of our peers and we look forward to that. We do expect to double the EBITDA in that particular business, double EBITDA, and that particular business provides further upside. So we kind of look forward. We had a really good strategy. The team has done a great job executing, whether it was other commercial initiatives, the operation, financials. We've done a great job executing, even though we've been growing a lot, generating significant free cash flow, and expect those numbers to go up more. as we aren't spending as much on CapEx in the years to come. I'm committed to getting to investment grade, and I hope to do that soon. And those are the things that we are focused on at United, so we feel good.

All right, so you've described United as a decommoditized brand, loyal airline, called the changes at United and in the industry structural, permanent, and irreversible, which, you know, if you don't, if you need a second career after this one, the marketing and the tagline here is great. But for investors and generalists who maybe heard that pitch before from this industry in particular, what do you think is fundamentally different about the market and about United today that would make somebody who's not as familiar with the story that you'd want to kind of emphasize to...

So I got asked by a reporter, they didn't publish it, but a reporter had an interview recently, like what's the biggest change in the last 10 or 15 years in the aviation industry and i said it is the emergence for the first time of true brand loyal airlines uh and and there's two of us um and most of for most of history brand loyal meant your schedule that's the commodity part of the business if you live in in dallas you're probably an american airlines frequent flyer if you live in houston you're probably a united frequent flyer if you live in atlanta you're probably a delta frequent flyer if you live in nashville you're probably a southwest frequent flyer because of the schedule and so there are a lot of customers who the schedule uh drives it but most people in the country live in markets where there's multiple airlines that have similar schedule utility you know you live in smaller cities in chicago live in new york los angeles multiple airlines have scheduled utility is equal so that commodity part of the business is a toss-up. So it's the first time that airlines have differentiated themselves on everything else that matters to customers. And I list four things in that bucket. Technology, product, reliability, and service. And you look at it like technology at United is, we're a clear leader, and I look across the board and around the globe. You can see it in the app, but the app is the tip of the iceberg for everything else that comes underneath it we can just do things we are doing things now that no other airlines that we're working on that no other airlines even thinking about yet so we're way ahead on technology and reliability you know I think we you know about November of last year moved into the point where we're the best operator certainly in the country I don't track every airline around the globe but you know Newark for those of you here in New York Newark is now the most reliable of three New York airports a remarkable chains thank you to the faa for helping us get there on product we're doing more to invest nose to tail uh in the cabins uh than anyone and you could feel it and see it when you get on airplanes whether it's seatback entertainment we're gonna have starlink on our whole fleet by next year we're already close to 500 aircraft with starlink today just across the board on product and when you do all that your people feel great they're proud of the airline and they deliver great customer service. And because of that, we've just won overwhelming market share. You look at competitive market share. I'm not picking on any one airline, but three big hubs where we had a big or have a big competitor. In all three of those hubs in the last five or six years, we've won about 20 points of local market share. Normally, one to two points is a big move in airlines. And when I say it's structural, permanent, and irreversible, what I mean is those customers have switched to United in all of those markets, not just one, in all of those markets. And for someone to switch back, because the schedule utilities, let's call it equal. Ours actually is better in all of them, but let's just call it approximately equal. To switch back, those other airlines have to be better than us. If you're on a scale of 1 to 100 and we're 100 and they're a 50, they get into 75, they don't get 50% of the benefit. They get zero because they still aren't as good. They got to kind of get to 110 before they can switch. And That's like a decade-long process. It assumes we sit still. It's tens of billions of dollars of investment. That's why I say it's structural, permanent, and irreversible. Because you get, in a business like this, you get a big enough lead. The others can't catch up. They just can't. And in those competitive markets, they're forced to be what we call a spill carrier. When we sell out of seats, they sell tickets. But when we're not sold out, they don't sell tickets. And so I do believe it is structural. It is permanent. It is irreversible. You can see it in the financial results. and I realize other airlines might disagree with it, but it is structural, permanent, and irreversible.

All right, thank you for that. So you have talked about this path to double-digit pre-tax margin in 27 and getting free cash flow going from 50 to 75%. Doubling the contribution to the loyalty program gets a long way there, but as you think about the rest of the levers that you have to play with, premium mix, change to the network, efficiencies, investments in technology, What are the other sort of two or three things that really moved the deal that investors should be paying attention to?

Well, you know, it's maybe a boring answer. It's continuing to know what we're doing. You know, if you'd have asked me to make a bet on February 26th, will we be at double-digit pre-tax margins in 2026 or not? I would have bet an awful lot of money that we would. Now, two days later, the war in Iran started, and that upended the fuel prices. But we were almost certainly going to be double-digit margins this year and and so a lot of it is just let it you know play out you know I think you just look at where we are right now like nothing special needs to happen I'm increasingly it's early to give 2027 guidance and stuff can change but I'm increasingly confident that 2027 will be double digit pretext margins all that has to happen is the current environment plays out you don't need anything special for us to be at double-digit margins so I think we're gonna move I think by next you know I think we'll be moving into double-digit margins next year and then I think the path you know I think that sort of call that 12 we get into 12% with no other sort of structural changes in the industry and other structural changes I think is what kind of get us to mid double-digit margins one of those has already happened obviously with with one airline there's still an awful lot of airlines that are break-even or worse if you're break-even or worse as an airline that means you got a bunch of flying that loses money it's simple math it is what's happening and like I don't know when that's going to get fixed but that's upside but for us but I think we're the current steady state pace we're at double-digit margins you know the current performance of business double-digit margins and and just all the core things that we're doing drive more next year I really don't even include the upside from the loyalty program explicitly in that I think that's the core airline I think the double and even die and the loyalty programs probably comes on top of that.

So if you think about that projection into 2027, I'm assuming you're assuming some normalization of the crisis in the Middle East. It feels to me like when I look at consensus, and this is my read, investors have kind of taken the targets we had for 26 and just pushed them into 27. Is that the right way to think about it, or is there more? Well, I might just look optically.

Certainly if oil prices are normalized for 2027, our goal internally will be to make up for 2025 and 2026. And so I would want us to have margins. And our goal has been a point a year. I would want us to have margins that are three point higher than 2024. So if I looked out today, we had a forecast that was less than three points of margin growth compared to 2025 or 2024, sorry. because a lot happened in 2025 what's happened this year I'd be pushing hard to figure out how we get so that's about 11% okay I'm so upside to that that it's not just gonna be a push from 26 right well I don't think it will be yeah I you know and and just I watched the dynamics in the market of what's happening it feels I feel more confident it can't be a hundred percent but I feel more confident about that path than i would have a few even a few months ago and and i'm assuming some of that confidence comes from kind of what you're seeing in terms of the consumer and the demand environment in relation to the the fair increases that the industry's put yeah you know i i have expected more of a elasticity um effect i said there still will be like i mean you can't you know we all took economics you can't expect q uh to not change but the demand environment is pretty strong. But sort of a lot of pricing cleanup, I guess, has happened. We're starting from a structurally better or tactically better base. So we'll probably start to come down.

Have you seen anywhere in the portfolio, leisure, regional, domestic, international, main cabin, whatever, however you want to slice it, where you've seen some demand response in response to higher fuel?

Not really. You know, you always have some markets that are stronger and some that are weaker. But nothing that I think is structural, I think it's just normal noise.

And I think earlier this year, you started out kind of saying you'd be at 100% fuel recapture by Q4. That pace that you laid out pre and the start of the year, is it kind of like the similar?

Are you feeling a little bit more optimistic, Well, I'm feeling, I think the demand and the revenue environment has been spot on with what we were thinking. But oil prices have come down, and so the fuel price. So the hurdle to get to 100% is lower. So I think the 100% ought to be moving closer, you know, moving forward, just because oil prices have come down. The demand environment is very much like we thought it would be.

So one of the $65,000 questions that I continue to get asked is, fares are going up.

Unit revenue is fantastic right now, but at some point oil comes down, fares will then come down with it. how much of this can you keep as much as possible well look we are gonna recover less than we're gonna be a little below 50% in this quarter so we haven't recovered a hundred percent yet so I'll look forward to getting to a hundred percent and as I said earlier you know I'm I'm feeling really you know good about double-digit margins next year I'm not gonna talk about specifics of pricing, but I'm feeling really good about double-digit margins next year. You can interpret that as you will.

But as you think about that, the market normalizing for fuel, what are the things that have changed in the business that should allow you to kind of keep some of that as price?

Well, like I said earlier, I think we're going to be at double-digit margins this year. So not a lot has had to change. Tactically, at United, we've pulled some capacity. There's no point in flights that are going to burn cash just because fuel prices have come up. But we really haven't changed much of anything at United. We've always had confidence. The strategy's been working. Everything we see, the strategy's working. So really, we've stuck to the strategy. And I think we would have been at double digits this year. So it's pretty easy to think you're going to get that plus a little bit next year. You just got to keep executing.

All right. And on that topic of the strategy and product innovation, You guys have done a lot of product announcements in the last sort of 12 months. The Coastliners, the XLRs, LifeLap Polaris, Polaris Studio. Of everything in the pipeline, what are the two or three things that you're kind of most excited about bringing to customers and think have the most potential to move the earnings needle?

Well, Starlink on 100% of the fleet is going to be the biggest. That is going to be a differentiator versus every other airline. We're going to be the first to get there. we're going to be, Southwest is going to get there too, Alaska is going to get there, but everyone else is going to be miles behind. And that by far is going to be the biggest. And then all the other stuff are just, it's the hundreds of little things that we're doing to invest for the customer that make the difference. It's not one or two things. It's a culture of investing for the customer and the hundreds of other things. So I was going to say a second one. It's one we already have, but we've got some cool stuff coming and we've got some really cool ideas. is it's the technology that customers experience, you know, using our app. I mean, you know, anybody that's flown another, like it's the most universal comment I get from people that have flown United and have flown other airlines is how much better the app is than anything that they've ever seen anywhere else. And it's not just the app that really is the tip of the iceberg. It's all the other things that go under the app that make it. And we built a data, we built data, like we spent, you know, the last, We started it 10 years ago, getting off of mainframes, you know, spending money to get on modern technology, not just in the cloud, but getting on modern technology platforms, organizing our data in ways that you could use it. And those are the kind of projects that are hard for airlines to do because there's no immediate ROI. You know, you spent, we probably spent close to a billion dollars, you know, just taking our existing systems, putting them in modern systems that did exactly the same thing as they did before. But once you get it in there, it just opens up all kinds of possibilities. I really think we're the only ones that have done that. And so we have some really cool stuff that we're going to do.

Anything you want to kind of share a little bit? All right. And then I guess as you think about that level of investment going into support premium, I'd be curious to hear how you think about measuring that pace of investment. Because it sounds like, hey, there's just stuff we haven't done. and if we do it, we can get customers to pay us more. How do you think about prioritizing?

It is, you're getting this from a guy who likes math and is good at math and understands math, but this part is an art, not a science because this is a challenge for everyone that has building a brand little airline. Every single individual decision, you say, if I make the decision to spend more on meals, spend more on wine, whatever, hundreds of decisions like that, Every single one of those, if you look at it and say, well, really? Like, we spend an extra $5 million on wine, and you think we're going to get enough people switching airlines because of the wine? And the answer is no. It's always no. And it's correct that the answer is no. And so any one decision saying no, letting the finance department say no, sorry, Mike, letting the finance department say no, which they always want to do, is the right short-term tactical answer. but you string several hundred of those decisions together and all of a sudden the brand is different this about building a brand and so I don't have a perfect formula for it I think of this as you know we have this vision of a brand lowly airlines a mountain off in the distance and we're driving towards it and as long as our results absolute and relative results are there they're mile markers along the way to that mountain and as long as they're good I feel like we're on the right path and if they start to get bad in one way or another then you got a question what you're doing so we just keep putting a little bit more a little bit more in every year we watch what's happening you know with market not just financials we watch as a market share which leads to financials of course watch what's happening with you know different class of traffic and we use all that data to try to you know do a little more art than science what it means but then we have also have all kinds of great anecdotal data that supports you know Starlink is a 90 plus NPS for in-flight service and the rest of our Wi-Fi are surely it's not a 90 plus NPS somebody told me earlier today that just in the past week is load factors are the past weekend for Memorial Day is load factors picked up somebody just went around the analysis because it's heavy load factors that flights with seat back entertainment had a 15-point higher NPS than not it normally it's five or six points but it's 15 points when its flights are full because that amps up the stress and just like all those little so we do a lot of time going through data like that so lots of anecdotal data that informs the judgment of how much is the right amount and how does this affect um the cost profile of the business right obviously running an airline is an inflationary we spend more um we've been on a path really for at least seven or eight years to add about we've about a point of chasm X to our expense base for investing in the customer and that's in the chasm X we're trying to be we've done pretty good job on cost compared to everyone else that that's core efficiency I'd much rather drive real core efficiency in the business and not cut the customer expense I mean the challenge in an airline is it's a lot like the U.S. government budget and entitlements like 90% of our expenses are fixed. It's not 90, 80% of our expenses are fixed. You know, fuel, labor contracts, airport landing fees, all those kinds of things are largely fixed. And so, you know, if you've got 20% of your budget to play with and you want to cut Chasm X by 10%, you got to take 10% out of the customer 10% of the customer and you do that 10 years in a row and holy cow you're way behind that's what's happened to some airlines like they've been great at Kazamax and terrible at Ernie's profile because customers care about that stuff and we've been investing about a point of Kazamax and we don't do it all at once we do kind of a point every year embedded within the Kazamax that we've got at the company and I know the answer to this but I'm gonna ask it anyway because I get asked to buy investors in a time like this when when when your budget's been blown by a factor out of your control with oil.

Is there any temptation from the Department of No to pull back on some of those investments? Or are you just going full board?

No. And, you know, we prepared for times like this. You know, we prepared by, you know, having the best balance sheet we've had in over 30 years. We prepared by being atop of the industry and profit margins. We are confident that this, you know, one way or another will be temporal, that either oil prices will come back down and or capacity will come out of the industry, so we have not pulled back at all.

And as you think about then the outlook for the next level of efficiency coming out of the network, where does it come from? You've gauged up quite a bit. I mean, I think you're getting a little bit more to do in the mid-con hubs.

Gauge, because Boeing and Airbus have both been behind on aircraft deliveries, gauge hasn't happened yet. Gauge is yet to come. So gauge is coming. And we continue to use technology to just get more and more efficient with, you know, whether it's utilizing crews, you know, running the operation better, you know, just across the board, you know, how we schedule and manage maintenance. Like, you know, as good as the app is that you people that customers can see or investors can go see, our underlying technology for how we run the airline, you know, like, you know, we should do a tour someday and let people come out and see what the technology our maintenance technicians work with and you could do a tour at another airline what their maintenance technicians work with. Technology is embedded so deeply in United. I think that's an unheralded unappreciated advantage that we have. I listed it first in those things about brand loyal technology, those four items. I think it's probably an underappreciated advantage that we have at United.

And do you think there's still quite a bit of runway for you?

I absolutely do. And, like, I think a bunch of, you know, AI, I am now a believer. Like, a bunch of the stuff that people do with AI I think is ridiculous. Like, summarize your email. Like, good grief, I want to read my email. But its ability to code and, you know, take your own data and just go experiment. like the revenue management guys like there's things that I wanted to do you know for 20 years but like to experiment with it like would have taken a year each one of those experiments I like 10 experiments each one of them would have taken a year of programming before you could even try and run it and then it might not work like an analyst can do it in a week now yeah can write those right literally you know a good analyst can do it in a week and just run experiments and see which works it's got some really good potential and how are you adopting that and rolling it out in the organization are you changing are you just training these existing people changing the way you're you're programming this I was talking to another company I cover and they've kind of gone away from this old idea of having like a team of developers to come in and think about yeah and just moving we're not doing much more it started with me I hired an AI tutor for programming and I won't tell you but like it turned me around like with a few hours of lessons like amazing what you can do totally on your own and so we're going into the business units and we're creating our own training programs to make people go be coders and experiment and try in a bunch of parts of the company that's

exciting all right so let's see here obviously you guys have been doing great on time departures you know cancel rates very very low operational discipline is is is is a part of that but also obviously some of the changes at newark yeah potential changes in chicago like how much of the differential step up in performance is just because you're you're swimming in a less crowded stream versus you guys are really getting better getting better at doing it done you know newark's big deal Chicago never went up so that's not anything New York's a big deal that you know the FAA finally after you know for ten years of me banging or nine

years me banging my head against that wall you know is is managing the airport to equal the capacity and you know it's just crazy that we schedule more flights than the airport can handle this is like you know when the FIFA World Cup comes here I don't know how many seats how many seats does that stadium set 80,000 let's say 80,000 if it seats 80,000 would you sell a hundred thousand tickets to the game like it's just dumb but that's what we used to do with scheduling at Newark and and so that's been a big really big deal for Newark but I also think I mean part of the we're you know we're a technology focused airline I mean I have it in partly I have it in my blood but the technology that we have to run our airline like we watch what happens with our competitors when their storms come through and like good grief like the next day sometimes two days later like what the hell's going on there um and i mean we know but um we've just and we used to have that like we had hell week three years ago at newark that was really really bad and we thought we had pretty good systems and technology but that was a pivotal wake-up moment for us we can now crew crew is where this happens at airlines like anytime airlines are canceling after the weather's gone through it's crew issues that are you know there's been some other airlines that have had it recently but you know crew issues that can linger some places for days we can now same person can process over 10 times as much crew cancellation issues when there's events so that we can just stay ahead of it so we're literally 10x what we could do we thought we were the best before we're 10x what we could do three years ago and that means we just have automated when weather comes through like kind of push the button let the system run i mean it's harder than that but we're pretty much always the next day up and running and we cancel less during the day of the event because we have so much confidence about the next day we don't have to cancel as much and so we really like, everywhere we fly anytime there's an irregular operation we come through at the best of every airline in our cities.

So I think when we've had this conversation the last couple of years we've at some point in the conversation always talked about constraints whether it's pilot constraints or aerospace constraints, controller constraints that's a little bit moved out of focus given the conflict in the Gulf. I'm assuming they've not moved out of focus for you. Like, what are you worried about in terms of your ability to kind of meet your financial objectives for the airline from a input concern?

Well, I'm not the worrying type, but...

What are you monitoring?

The constraint that is real, and it's not something to worry about, especially if you're an investor, that is real is engines and components of engines, forging and castings in engines. Like, you know, look, I'm sorry, like, there's just not enough, there's still 800 or 900 aircraft around the globe that are grounded for engines, and they're not, that is not getting fixed this decade. And, you know, as rates go up at Boeing and Airbus, like, they're producing gliders, and they're both fighting with the engine manufacturers, there's just not enough engines. Like, supply is going to be constrained around the globe because there are not enough engines. It's not about how many Boeing can produce. It's not about how many Airbus can produce. It is about the engines, and there are not enough engines, and they're not going to be for many, many years.

And what about sort of air traffic and controllers and that kind of issue?

Yes, I think that under this administration and Secretary Duffy and Administrator Bedford, they're going to work to improve. I think we're going to get more capacity into the system. and so it can but most of that will just be to run better so that'll be much better if we do that block times will come down you know there's a bunch of routes that you can go look at that took longer takes longer today than it did 50 years ago to fly the route even though the planes fly a lot faster it's all because of the air traffic control so i think we'll be able to save time so we'll burn less gas you know we'll use the airport more efficiently employees more efficiently Customers will be better. It's less a constraint, mostly on growth. It's going to be more about using the aircraft. It's going to be more about efficiency across the board. We'll burn less fuel, need less employee time, less customer time sitting on airplanes. And I think that we're on a good trajectory to finally make that happen with the FAA.

I mean, I've been doing more research on the FAA component of the airspace management part of it. It seems like there would be some opportunity to optimize the allocation of space, which would then allow you to run faster.

Yeah, they're working on it, but it's an easy problem to describe. In the real world, solving it is not as easy as, you know. Because the world doesn't work as clean as, you know. If it was deterministic, it'd be an easy problem for math minds to solve. But the world is stochastic. And so you can plan great for exactly where every airplane is going to be six hours from now, but, you know, to within 100 feet. but the chances that they're all going to be within 100 feet of where you thought they were six hours earlier is pretty small.

But do you think there's any opportunity?

I think there's tons of opportunity. But we've probably got to experiment with it, take it a step at a time.

Over the horizon still? You know, it depends on where you think the horizon is.

It's close enough to the horizon that we're working on it, working with the FAA, and they're actively working on it.

So let's talk a little bit about structure and sort of the structural change in the industry. Obviously, we've gone through the bankruptcy spirit, which is something that you would have seen in the cards and commented as much. And Southwest changing its business model, right? Obviously, there's been a pretty significant change in the discount space. How is that affecting your business? How is that changing your opportunity set? How is that changing how you're thinking about?

You know, the discount set, particularly the ULCCs, the truth is it's no longer that dramatic. One of the things that happened at the ULCCs is the big airports priced them out of the market. Like, you know, when the New York airports are charging $52 per employment, and Spirit and Frontier's average fare is $58. Like, you know, I'd be a rocket scientist to know that flying to the New York area airport doesn't work. Like, you're spending $52 before you've paid for your gas or your employees or your airplanes or anything else. like it just doesn't work and so I think that that portion of the market is one way or another going to retreat to the niche that works the niche that works is big is leisure markets that don't have competition from big airlines the Allegiant model works and you know there's a market store Orlando and sort of Orlando Vegas maybe a few other beaches but trying to fly in Atlanta is not going to work for any ulcc what about chicago vegas does that work at home it's too expensive yeah it's too expensive for them to fly um and we are now probably we can be we are price competitive um because we've up gauged and we've got basic economy like it did it doesn't work i mean i look at i look at the pnls of um everywhere on i bet that i know the pnls of my competitors better than most of their CEOs know the route-by-route P&Ls. Those routes don't work. I know they love them. Look, there's a golden rule for airlines. Every airline in the world could earn its cost of capital if they would just follow the golden rule. Don't fly places that lose money. Have the discipline to stop flying places that lose money. And I, by the way, have closed three hubs in my career. As much as I like to be aggressive, I've closed three hubs in my career. Delta, by the way, closed three hubs. You cannot be successful if you're dragging around an anchor. And you cannot be successful if you're not willing to pull the losses on places that lose money. Most airlines aren't. It's hard on your ego. For some people, at least, it's hard on the ego. Most airlines aren't. But that's the golden rule of investing. And, you know, Spirit didn't learn it in time. And I don't know if Frontier is going to either.

So what do you think happens prospectively then?

I think they're going to be materially smaller. I don't know if they go bankrupt and shrink, or they just shrink, or somebody goes away. They're going to be materially smaller, because they've got to shrink down to the niche that works. Eventually, they're going to be in a niche that works, that's solidly profitable for them. There's a good, profitable model there. Spirit used to be solidly profitable. When they started to grow outside of their niche, you get out of your niche, you're in trouble. And they got out of their niche. And Chicago Vegas is out of their niche. So is this more organic consolidation, or do you think there's going to be opportunities for large-scale consolidation? are you asking me about consolidation yeah I've been waiting for you to get there well look here's my ears I'll just speak for United instead of others I thought there was I for many years have thought there was that only the kind of big transaction that we tried was the only one that made economic sense and none of the other deals made sense and also knew though that the big transaction required a willing partner, which we clearly don't have. So I don't think that United, at least, is going to participate in any consolidation for any time I can see in the foreseeable future.

So this thesis is out there that was swing big for American, and then maybe it's easier to do a smaller deal?

It's just idiotic. Sorry for anyone that had it. I just don't understand that at all.

You're not going to offend me.

I don't understand that at all. But that was definitely not the plan. I mean, do you think, though, that there would have been room to get that deal done? it's not about room to get the deal done like look i i have immense respect for joanna and her team and what they're trying to do and i wish them luck and by the way we're gonna try to help them um be successful um but i already talked about discipline like i've been disciplined enough to close three hubs the last thing i'm going to do is buy a route network that loses money um and i think for us like i look at that i can do the math too like we got to somehow think we can improve JetBlue's margin by 25 points to make it work like that seems mathematically close to impossible to me like I never understood why everyone

thought we were gonna do it I never said it never hinted at it never understood why everyone thought we were gonna do it it just seems mathematically not doable like I'm pretty good at math so I never understood it all right so you guys have obviously also made a lot of progress on the balance sheet kind of improving the quality of the getting closer to I guess to investment grade rating when you get there what changes anything besides cost of debt or is there gonna be a more formal change in capital return priorities I'm sure there will be we're gonna get there first and then we'll have a good robust discussion it's my confidence in your robust discussion with our board who appropriately want to

be involved in that but let's get there first and you know look 50% free cash flow now and then moving to 75%. By the time we're moving towards the end of the decade, we're going to have a lot of free cash flow I think will be solidly investment grade. And, you know, a huge, a big chunk of that will be some form of capital return to shareholders. Assuming we progress the way we think.

Conversation for the board at a later date. So CapEx, less than $8 billion in 26. It's kind of inside of your multi-year band that you guys have laid out around $7 to $9 billion. the capital hierarchy for within that 8 billion right obviously you've got some some aircraft delivery beyond the aircraft delivery where are you spending the the the the reinvestment what technology technology okay customer facing internally facing both like the the app the connected media but uh it's i mean it's sort of all the above we're spending we're spending on the app we're we're spending we're going to be spending more on we are spending more on ai uh now running experiments we're spending money in revenue management we're spending money in the operation sort of across the board you know we I already

said like we spent close to about eight years getting on them getting our platforms modernized largely modernized and getting them in data lakes where we have easy access to the data they're not in you know crazy you know some of the old you know systems that are a lot of places we also by the way we're sort of this unique we used to be an advantage i've got lucky on this one we're the only airline i think in the world that owns our own reservation system we run on shares um you know we don't have to go through saber we don't go to apollo like they're so difficult to deal with for others i've talked to other airline ceos to try to do stuff like i mean your data is all there like you're kind of stuck so we're just in a better place because we did that now it's doing things to to use all that data, but we're really, we're kind of growing across the board. Our goal is within a year to be also to be twice as productive, 100% increase in productivity for our DT team.

As measured by?

It's hard to measure it for sure, but you could measure it by, you know, lines. I don't know if you measure it by lines of code. I'm sure that's the right metric, but, you know, to double the amount that they do.

Now, as you think about maybe if we drill into the revenue management system some component of that, some talk about whether it's AI within the revenue management process or supporting the revenue management process. You know, your experience with coding and getting large series of regressions done sort of very quickly and being able to kind of do that stuff. As you roll that into the system, should we be expecting that to show up in a better unit revenue outcome, lower cost?

That's a better unit revenue outcome.

Okay, and then what about the extra time that the analysts that would have spent a year building a model that can get it done in a week then?

Well, they didn't spend the year before. To me, the promise of AI is much less what everyone else is talking about, about doing things that people already do faster, efficiency. The promise of AI, and by the way, I don't think you can justify the trillions of investment if all you're going to do is read your email a little bit faster and do that kind of stuff. I think you can justify the trillions of dollars in investment if you're going to do things that nobody thought were possible before and do new things. I'll give you one good example. Every flight's a story at United for customers. The goal is to get to a point where anytime there's a flight delay, we tell customers in clear plain English that we send them text messages. We're going to start to send them videos, like maintenance videos and cool stuff about exactly what's going on with their airplane and why and try to give them really good information. Because generally, if, I mean, most people in here fly, and if you know what's going on, it's the uncertainty that's a killer. You walk up to a gate, and it says your flight's on time, and you're supposed to be boarding, and there's no airplane at the gate. I don't think that happens at United, but that does happen at some airlines. It infuriates you. And so giving people good information. The goal I've set for the team is pretend I'm on the flight, and I've asked what's going on with my flight, what would you tell me? I want to tell all of our customers that. And we've been doing that. We call it every flight's a story. And some of the results, I got some phenomenal statistics when we do it and do it well. But it's really hard to do for 6,000 flights today, especially when there's weather and it's uncertain thunderstorms. Maybe the airport's closing, maybe it's not. You don't know. And so it's really hard to do. And I think we're probably two to three times better than any other airline in the world just because we're the only airline that's really worked on it and tried to do it, we've decided that the current path that we're on is never going to get to the nirvana that we want and we're starting brand, we've started a brand new work path that's built kind of native AI, building the right data so that it doesn't require any human intervention, that AI will be able to tell you about every flight and what's going on with every flight with no human intervention just from all the other data that we have and everything else that it can see about the system. By the way, I think that won't that'll be great for customers it won't only help with customers it'll cause more brand loyal customers to fly you know it'll be unique it'll feel different than any other airline in the world then when we're able to do that but I'm convinced we're gonna find all kinds of ways to run our operation more efficiently when we've built that and that to me is what AI can do when we're building that we're gonna be able to run the airline better a lot better than we could before because we built that infrastructure for every flight story so That's one of my favorite examples of what we're trying to do.

Thank you for sharing that. Question from the audience. If you sort of disaggregate the customer reviews into areas where you are performing and areas where you can still improve, what are the things you're doing to improve those areas where you need to get better from a customer experience standpoint?

Look, we're trying to improve across the board. Like, the nearest term thing that we can do applies to every customer, which is Wi-Fi. You know, like I told you, 90-plus NPS when we have Starlink on the airplane. I actually, like, now the most common complaint, I'm not counting, like, my flight got delayed for whatever reason, but the most common structural complaint that I now get is about Wi-Fi, and partly it's because we've raised the bar on Wi-Fi by getting Starlink on, and the, you know, legacy providers that we have, you know, just aren't, it's dramatically different. And so getting that done as fast as possible is probably number one on my list for customers.

Anywhere else that you are thinking about? We're doing it across the board.

It's not like there's some one magic bullet. This is about running the airline, running the airline well, doing all the hundreds of things well. We have a great team that's doing it. There's not some magic bullet. It's about executing and executing on everything.

And the part of that execution, obviously, is cultural transformation. We talked about this, I think, the last time you were with us. You've gotten the flight attendant agreement done. How's the level of satisfaction, buy-in? How are you thinking about the team?

Our people are great. They're doing a great job. Our flight attendants, by the way, did a great job as we were going through negotiations. A lot of times you've heard airlines and people that have followed along bleed through and lead to bad customer service. It did not happen at United. Our flight attendants were awesome. They're the best in the world. I'm glad they got the industry-leading contract that they deserve. But, you know, you guys go fly, and you decide. But I think the culture at United is great. Our people are proud. I tell our team that I have the easiest job of anyone at United because I really only have one responsibility, create an airline that they're proud of. Because if they're proud, they're going to take care of everything else. And importantly, they're going to want you, the customers, to feel the same way. And I hear that from them all the time. I had someone stop me walking through the hotel here today, just in their civilian clothes, and he's all excited. He's a pilot, United pilot, you know, wanting to stop and take a picture and just excited. I hear it from him, you know, all the time. I was at my daughter's wedding this weekend, which was pretty cool. But there was a, yeah, thank you. I had to get that in somewhere. It's Kalshi Betting Market. No, I'm not. um but uh there was a retired united pilot that retired two years ago you know he was there like he was just bragging to everyone like oh united is the greatest like it's the best like i hate that i had to retire and he's married to a captain for another airline uh and um anyway she she was well you'll know who it was if i tell you everything but anyway she was wishes it was like that her airline um but um it's just great i hear it from them all the time i see it in the customer satisfaction score I see in our NPS scores like across the board they're doing a great job and you know momentum is great like you get momentum that's another reason by the way to make the kind of product investments like I really look at the product investment it's through the lens of how our employees are going to feel about this and like you know I don't want our employees in a position where they have to apologize if they're having to apologize for something they're behind the eight ball and like Wi-Fi was the last structural thing that people had to apologize for. And God, it can't get fixed fast enough. It can't get started 100% fast enough.

Sounds like the employee buy-in is there. The product innovation is rolling. You've got a group of generalist investors, and obviously investors on the webcast listening today. What's the bull case? Why is United the right place to put an incremental dollar of capital to work? And what's the one thing you think the market doesn't understand about the story?

You know, first, I think we had a great strategy, and we've executed it really well, and we're gonna continue we have a no excuses mantra at United like we got all kinds of stuff happen that we come make excuses but you know our chief operating officer I use no excuses because I went to the Air Force Academy our chief operating officer Toby and Fist says especially talking about the weather it may not be our fault but it is our responsibility and that matters to how you behave on everything but it also matters how you take care of customers and winning brand loyal customers really like we've proven the last two years Like, you know, this was close to a recessionary environment for many airlines. You can look across the results that we have resilience. And when times are good, we do even better. We outperform when times are good even more. And we retain more of the revenue when times are bad. And, you know, we've been investing a lot, growing and buying aircraft. But, you know, as we've said all along, that starts to taper towards the end of the decade. So if you care about free cash flow, which we do, that number is starting to go up. and you're getting it at just a remarkable multiple I do not think that airlines like United or Delta by the way are gonna trade at you know eight nine multiples once we've proven you know durability sustainability of earnings high free cash flow conversion in the years to come and so I think you're getting a pretty screaming bargain now know what's gonna happen with stock tomorrow I don't know what's gonna happen straight to horror moves tomorrow a lot volatility. I wish there was less volatility. But if you're a long-term investor, it's hard to come up with much better to me.

All right. With that, I think we're going to close it down. Thank you, Scott. Thank you to the United team for coming out and joining us.

Thanks, everybody.

Thank you all for supporting the SDC. Enjoy the rest of the conference.