United Airlines Holdings, Inc.

Good morning and welcome to United Airlines Holdings earnings conference call for the second quarter 2021. My name is Brandon and I'll be your conference facilitator today. Following the initial remarks from management, we will open the lines for questions. At that time, if you have a question, please press star followed by one on your touchtone phone. 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, Christina Munoz, Director of Investor Relations. Please go ahead.

Thanks, Brandon. Good morning, everyone, and welcome to United's second quarter 2021 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. Also, during the course of our call, we will discuss several non-GAAP financial measures. For reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to the tables at the end of our earnings release. Joining us on the call today to discuss our results and outlook are Chief Executive Officer Scott Kirby, President Brett Hart, Executive Vice President and Chief Commercial Officer Andrew Nacella, and Executive Vice President and Chief Financial Officer Jerry Laderman. 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, Christina. Good morning, everyone, and thanks for joining us today. It was great to see many of you in person at our United of Next event last month in New York, and personally it's been great to be back out on the road during the quarter, talking to employees and customers and hearing anecdote after anecdote about how great it is to be back traveling. Thank you also to all the people of United Airlines for all that they did to take care of our customers and each other through the crisis, and for all that they're doing now to really and truly change the customer experience at United Airlines. Before I really begin, I thought I'd take a moment to address the most talked-about issue among airline investors recently, the Delta variant. As you'll hear from our bullishness today, we haven't seen any impact at all on bookings, which continue to just get stronger and stronger every week. But, of course, that is backwards-looking data. Since early 2020, however, no airline has been more willing to candidly acknowledge the risks and challenges posed by COVID-19, and importantly, no airline has been quicker to aggressively confront them than United. We've worked hard to protect that operational flexibility. In fact, it's part of why we haven't had the same mass crew cancellation challenges that our competitors have faced as we've ramped our schedule over the last couple of months. That all said, We think the most likely outcome is that the continued recovery and demand continues largely unabated. That's the most likely and logical outcome because the evidence is overwhelming that someone who's vaccinated is highly protected against severe disease, hospitalization, and death. The unvaccinated still face an elevated risk of serious illness and death from COVID-19. In fact, recent reporting says that over 97% of hospitalizations are for unvaccinated people. which implies that you're about 50 times more likely to wind up in the hospital for COVID if you're unvaccinated. But the unvaccinated are also a smaller and shrinking percentage of the general population and an even smaller minority among the most vulnerable groups. And for United Airlines specifically, our customer surveys at the end of June also revealed that 84% of our Mileage Plus members were already fully vaccinated. And so, while we expect case counts to rise, Given the vaccination rates, they will still remain well below the peaks, and hospitalizations and deaths will not rise nearly as much. That leads to the logical outcome that the reopening continues on track. I'd acknowledge that shutting down or continuing the reopening also has a political dimension to it, and that's a lot harder to predict. And so it's possible we'll have a temporary pullback in the reopening. But given the data science around vaccines, that seems like a lower probability outcome. And regardless, it will be temporary even if it does happen. Turning now back to our results. Jerry and Andrew will provide a lot more detail. But if I was going to briefly summarize where things stand right now, I'd say that demand is recovering even faster than we had hoped domestically, both leisure and business demand. And internationally, we see the exact same pattern every time new borders are reopened. And while the U.S. isn't yet open to Europeans, the data and science, including the demonstrated safety of air travel, similar vaccination in case rates, and similar level of variance in Europe and the U.S. support an opening, and we expect it to happen at some point. And when the borders do open, we expect to see the same robust hockey stick increase in demand that we've already seen domestically. On the cost front, we remain on target for the near and long term. And as Jerry will detail, assuming the grounded 777s are back flying, we expect our 2022 CASMX will be lower than 2019. which means we're right on track to deliver chasm exits 4% lower in 2023 and 8% lower in 2026, as we shared at our United Next event last month. Today, with the robust demand trends that we see and our return to profitability, we don't just see the light at the end of the tunnel. We're exiting the tunnel. We're focused on upgaging our hubs, significantly improving the product, and decommoditizing air travel by transforming our customers' onboard experience. This opportunity is unique to United, and it's why we're so confident in our 2023 and 2026 financial targets. As we exit the tunnel, there's still a steep hill to climb to get back to and then exceed our pre-COVID margins. But we also have some important upcoming tailwinds that will benefit United more than others. First, our coastal hubs and our decision, which stands alone among large network carriers, not to retire wide-body aircraft. means that we're ready to capture the pent-up demand for long-haul international travel. Second, our opportunity to up-gauge our fleet while also driving increased connectivity as part of United Next means we can accelerate the margin improvements we saw from investments in the mid-con hubs in 2018 and 2019. And, of course, our confidence in United's future is also fueled by the incredible performance of the United team. Even in the midst of a global pandemic, our NPS scores rocketed up 30 points year-over-year, and our 50-point year-over-year improvement in the J.D. Power Survey was the largest of any U.S. airline. This customer-centric service culture and the influx of nearly 500 new aircraft, along with an unprecedented retrofit of our existing narrowbodies, will transform our customers' experience. It will also usher in an incredible new post-pandemic era for United's customers, employees, and shareholders, creating a new era driven by innovation that makes the travel experience better. and I'm really proud of the work the team did in the second quarter to innovate for the customers and our employees. And with that, I'll turn it to Brett. Thanks, Scott.