United Airlines Holdings, Inc.

Good morning and welcome to United Airlines Holdings earnings conference call for the third 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 1 on your touch phone 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.

Thank you, Brandon. Good morning, everyone, and welcome to United's third quarter 2021 earnings conference call. Yesterday, we issued our earnings release, which is available on our website at .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 SDC and United Airlines, and United Airlines for a more thorough description of these factors. Also during the course of the call, we'll discuss several non-GAAP financial measures. For reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to the table at the end of our earnings release. Joining us in Chicago today to discuss our results and outlook are Chief Executive Officer Scott Currie, President Bret Hart, Executive Vice President and Chief Commercial Officer Andrew Della, and Executive Vice President and Chief Financial Officer Jerry Letterman. In addition, we have other members of the executive team on the line to assist with Q&A. And now I'd like to turn the call over to Scott.

Good morning, everyone, and thanks for joining us today. I want to start by expressing my thanks to the team at United for taking care of our customers and each other during an eventful summer. And what we've done in the last 19 months stands out even more than in normal times, as we've also been a part of the humanitarian relief efforts around the world, flying over 160 million doses of vaccine, returning thousands of refugees from Afghanistan and delivering thousands of tons of oxygen canisters and medical equipment to India, among many other things. Despite the personal stress and strain from the pandemic, our people have continued to run a reliable operation and deliver phenomenal customer service, avoiding the significant issues that have plagued far too many in the aviation industry. The United team is emerging from COVID as the leader in global aviation, most prominently leading on safety by effectively and efficiently implementing our early vaccine requirements. We kicked off the third quarter with strong momentum as pent up leisure demand soared and business bookings began moving in the right direction, though we obviously knew that the Delta variant was a risk. Andrew will give you more details about the ups and downs of the second half this year, but from my perspective, the long term recovery remains on track with the opening of Europe, Australia and Singapore and an expected inflection point in business demand now anticipated in January. Before we move to the traditional discussion about the near term environment, I want to take a few minutes to at least lay out our view of four big picture trends that we believe make United Airlines the airline investment choice for longer term shareholders. Number one, we will lead on costs. Inflation is high, but within our expectations and we remain on track for TASMX down in 2022, down approximately 4% in 2023 and down approximately 8% in 2026 versus 2019. I know there is a skeptic on this, but it really is just the math of 30% planned gauge growth. But there are also real industry leading unique structural technology and efficiency changes that were implemented at United. I can see it and it just walk through airports or read press comments about hiring struggles at other airlines, something that's not happening at United because we really have become much more efficient during COVID. Number two, geography becomes a competitive advantage. During the pandemic, United's geography has been a greater headwind than any other US airline given our largest business coastal hub and international exposure. Domestic and Latin revenues were United as the smallest in percentage terms have been running in the 70 to 90% range versus 2019. While the Atlantic and Pacific were United as the largest, have been down 20% or more. However, despite those significant geographical headwinds, we've managed to produce results in line with or better than the industry in terms of minimizing losses. But most importantly for investors, we expect those headwinds to become long term tailwind as the supply of international widebody aircraft is significantly different than the domestic narrowbody supply post pandemic. We expect the Atlantic and the Pacific to significantly outperform the domestic market for many years to come, which will turn a current geographic disadvantage during COVID into a sustainable long term advantage for United's global network. Number three, unlocking the power of United next and growing our revenue premium. Higher connectivity, a noticeably improving product and the extraordinary service of the United professionals I mentioned at the top are already driving rapidly improving NPS scores and customer choice. We expect that improvement will accelerate as we take delivery of hundreds of new customer friendly narrowbody aircraft and retrofit all of our remaining narrowbody in the next several years. This will make United airline customers choose to fly and help us drive premium revenue. Number four, ESG. United today is the leader in global aviation with our unique and real, not doing on diversity as exemplified by the United Aviation Academy. And this already matters to customers, employees and regulators. And I think you'll see it reflected in customer choice and perhaps even valuation in the years to come. And all of that leads to our United next financial outflow. We will absolutely get our TASMX target and we remain on track. And on the revenue front, our United next targets assume that it takes all the way until 2026 to return to 2019 rather well. While we're hopeful and actually expect that the trajectory will be stronger than that, that hopefully conservative assumption still leads to an adjusted free tax margin of around 14 percent and adjusted EPS around 20 at our current share count. In closing, COVID appears to be playing out remarkably close to what we expected in May of last year. Our expectation back then was that demand would probably remain depressed until Christmas of 2021 and that business demand wouldn't start in earnest until January of 2022. But we always believe that total demand, including international, would ultimately fully recover. That forecast now looks remarkably pressure. And we found new and successful international markets in India and Africa. We anticipate a robust European recovery and we're just now beginning to see the world's most important economies across the Pacific, starting with Australia and Singapore. United's perspective was singularly unique, both on the depth of the crisis, but also on the ultimate strength of the recovery. That put us in a position to make long term decisions on fleet and permanent changes to our cost structure. And we're now uniquely set up to reap the rewards of those decisions. And with that, I'll hand it over to Brett. Thanks, Scott. I'd also like to thank our employees for their hard work in the order. July was our busiest month since the start of the pandemic. Despite regularly changing mandates, restrictions and new protocols that have been part of commercial air travel in 2021, our team did a fantastic job helping our customers get to their destination as seamlessly as possible, as evidenced by our record high NPS scores here today. We are now past what we believe is the worst of the looking impact from this wave of the Delta variant. And looking ahead, there are some recently announced regulatory changes that are driving momentum in bookings. We were pleased by the announcement that the U.S. entry restrictions on travelers from Europe, the UK, India and other international locations. The so called 212 have restrictions will be lifted by November 8th and replaced by a global proof of vaccination requirement for all international visitors entering the U.S. We look forward to more specific details, including the effective date of the changes to avoid any confusion about the new requirements for our customers and employees. Since the announcement, we have seen a 35 point increase in year over two years system bookings from international point of sale agencies for travel in November and December. This gives us even more confidence in our expectation that summer 2022, particularly over the Atlantic, will be robust. Additionally, we have repeatedly innovated and upgraded our United app, our industry leading tool, which outlines for our customers to travel recommendations and requirements as it relates to quarantines, vaccination or COVID-19 tests. This tool gives United customers an advantage as they navigate the evolving path with the rules and regulations and reduces as much stress as possible at the airport. We are ready for the returning international travelers. Lastly, as Scott mentioned, with the exception of a small number of employees who sought a religious or medical accommodation, more than .7% of our employees chose to get vaccinated. We're committed to providing the safest environment possible. It also means that our customers can book with confidence knowing that United's operation and their travel experience will not be hampered by changes to government vaccine regulations. Speaking of the reliability of our operations, we have been proactive on the hiring front. During the first three quarters of 2021, we have hired nearly 1000 pilots, which is more than we hired in all of 2019 and welcome three new classes of flight attendants. On ESG, in the third quarter, we partnered with MoneyWell to make yet another investment that contributes to our journey to become 100% green by 2050. Last month, we announced the industry's largest sustainable aviation fuel agreement in which we commit to purchase 1.5 billion gallons of SAF over 20 years, making our total commitment more than double the combined total of the rest of the world's airlines' public SAF commitments. Last week, we also became the first airline to fly a flight on 100% sustainable aviation fuel. These are both important steps in our goal of reducing our emissions by 50% on a carbon intensity basis by 2035 and to net zero by 2050. The third quarter was also punctuated by the crisis in Afghanistan. We were called upon to assist the U.S. military in bringing 15,000 Afghans to the U.S. and troops back home. We've operated approximately 40 civil reserve air fleet or craft flights to date. We also converted our maintenance hangar at Dulles Airport to a temporary shelter where travel weary evacuees could rest, get a warm meal, and take a breath after enduring such a remarkable journey. More than 8,000 employees raised their hands to participate in these missions, working as crew members, translators, medics, and more. Many volunteers have personal ties to Afghanistan or our military veterans. I want to take this opportunity to extend my heartfelt thanks for their service. We're also helping Afghans begin their new lives in the U.S. through our partnership with Miles for Migrants, where we have donated 15 million miles and continue to support and incentivize donations from our Mileage Plus members. As you can see, the spirit of innovation at United has not been dimmed by the pandemic. In fact, we've relied on it to adapt to the changing economic and regulatory environment and put our expertise to work to help those in need. That makes me incredibly proud of this company and it gives us all of us more confidence in our ability to meet the financial targets we've laid out. I'll now hand it off to Andrew to describe in more detail how we plan to do that.

Thanks, Fred. Before talking about the third quarter results or the fourth quarter outlook, it's important to acknowledge that the impact of the Delta variant on our business was substantial. However, we expect the worst of this wave is now past. In the last two weeks, we've seen on several of our leading business indicators return to where we were in July or better. Those indicators include number one, passenger cancellation rates are close to 2019 levels and consistent with pre-Delta levels. Two, positive domestic co-brand spend for the quarter, new card acquisitions above 2019 levels, and retention levels better than 2019. Three, passenger bookings for November and beyond travel have been above 2019 levels for the last week, a strong bounce back from a few weeks ago. Four, demand for Atlantic travel is consistent with 2019 levels since the announcement of lower travel restrictions and yesterday was up 19%. Five, domestic business demand has rebounded to pre-Delta levels are better and our largest accounts are now increasing at a similar rate to our smallest. Six, business traffic across the Atlantic is now tracking consistent with or slightly better than domestic business traffic. Seven, Brazilian demand is rebounded quickly matching the strength we've seen in for months in near Latin demand. Eight, book yields for the upcoming holidays are positive as well as early 22 are positive. Nine, award booking levels have exceeded 2019 levels this week for the first time. While we believe these leading indicators are solid evidence of a bright outlook for United, another set of positive indicators we've been tracking in recent months is the relative strength of our premium leisure business during the pandemic. These indicators include one, domestic first class revenue reached 2019 levels this summer with paid load factors five points above. 50% of our revenue in transatlantic leisure markets came from the premium cabins in 2021, a 13 point improvement versus 2019. Three, paid load factors for economy plus increased by 10 points relative to 2019 this summer and four, answer to receipt revenues in Q3 were a record $9.17 per inflamed passenger and that's basically in 2019 levels despite 28% less capacity. Whenever I talk about United Next, our long-term strategy, I tend to focus on domestic gauge growth of 30% and its importance. However, United Next also grows premium seating counts across our domestic fleet. Simply closing gaps we've had to our primary competitors are matching demand in our seven hubs that we've missed in the past few years. This recent trend of increased premium leisure demand is a material incremental revenues for our long-term outlook and has the potential to increase overall leisure yields by two to three points versus our original long-term outlook. While we still believe distance traffic will return in full, our plan will succeed even if it only returns to 85 to 90% of these levels given these leisure yield gains if they prove permanent. Further in our revenue segmentation and premium leisure efforts, we've made the decision to outfit our 14 remain in 727-300s with our new mid-tier premium plus product so that all 767s now include this product. We can also confirm that we'll offer this separate mid-tier cabin on future deliveries of the A321 XLR jet in 2024. Relative to 2019, premium plus performance across Atlantic was our best performing cabin. Our revenue segmentation strategies have always been about offering a range of products customers want to choose from Polaris to premium plus to basic economy. Effective segmentation makes our business model more durable when faced with elevated levels of competition, something we anticipate domestically in the coming years. I'll now turn to my normal update of performance in the quarter and our near-term outlook. I'll also provide an early preview of our internationally focused 2022 capacity blend. Trazen for the third quarter finished down 5% and total revenues were down 32% versus 2019. United did achieve positive -over-two trazen for July as expected. Passenger yields were positive in July and August versus 19 but fell by 10% in September given the large but temporary industry supply demand imbalance caused by the 15-inch is part of the fourth quarter with October performance only marginally better than September. Closed-in bookings continue to track below 2019 levels but are getting better week over week for the last few weeks. Just as in previous quarters, our cargo operation again delivered a record quarter for United. Total cargo revenue was up 84% from 2019 and was the best third quarter on record. United Cargo has once again resumed all cargo flights with available wide-body jets for the remainder of the year which we expect will once again result in leading cargo performance. Turning to our fourth quarter outlook, we now expect total revenue to be down -30% versus 4Q 2019 with November and December at the top end of the range. Though the Delta variant impact on leisure demand is now gone, its impact on business travel and yields in the fourth quarter continues. We expect capacity to be down 23% in the fourth quarter versus 2019, down 13% for domestic and 35% for international. We continue to slowly add that capacity consistent with our capabilities to deliver a consistent operation for our customers while also matching our expectations for demand. By December, we expect domestic capacity will only be down 9% as we prepare for a very strong holiday season. Our fleet of 52 Pratt & Whitney Power 777s are not expected to fly this quarter and we continue to have 57 idle and everybody jets temporarily grounded. We expect most of these grounded jets to return to service by June 2022 in time for a strong summer demand. As I indicated earlier, bookings to Latin America and across the Atlantic have reacted well to the lower order restrictions for travel November 8th and beyond. We remain optimistic that our Latin and Atlantic client will gradually build to 2019 levels and above by summer 2022 and business traffic will accelerate early next year. We currently expect capacity for 2022 to be up approximately 5% versus 2019. Our plans consider our expectations of mapper demand, supply and pricing and focus 100% of our growth in the international markets where we expect capacity to be up about 10% versus 2019. As a result, we expect domestic capacity for 2022 to be approximately flat. We remain agile to move planes around as needed or even ground unneeded widebody jets if conditions warrant. Consistent with our plans international growth for 2022, last week we announced 10 new Atlantic routes that would focus on premium leisure destinations such as Bergen, Deasors in Italy. Most of our new routes have a common theme of premium leisure business as we continue to diversify our global revenue streams which in the past were very business centered. We're also diversifying our geographic scope across the Atlantic to India, Africa and the Middle East. Many of our new routes also have low historic shares by United and our star partners. One additional common feature of all these routes is the potential of our leading gateways in New York and Washington. We have one more significant international network announcements planned for later this month as we work towards finalizing our 2022 outlook. As the leading US airline across the Pacific, we do expect slower demand recovery versus other parts of the world. We've seen some really great news in recent days with the partial opening of Australia and Singapore. Most of our capacity across the Pacific and Q4 is being supported by Harbor revenues. We continue to expect international long-haul flyover to enter a strong period of margin improvement versus the last cycle and we are positioned in our capacity to take advantage of that trend. Not only have many wide-body jets been retired across industry, but we expect that the industry premium seat capacity for the largest Atlantic carriers will be down approximately 10% per departure to 46 seats as many aircraft, including the 747 and 8380s with large premium cabins have been grounded. United's wide-body jets have an average of 46 Fleris seats, approximately the same number as our primary Atlantic competitors. As we rebuild our global network, our Fleris lounges are now set to reopen over the next few months, starting with our brand new club, Washington Dulles tomorrow. Briefly, I wanted to talk about our United Next Signature Interior. We now have taken delivery of 13 Max-8s with the Signature Interior and it's a hit with our team and our customers. Each of these planes has NTS4s materially higher than any other domestic mainline jet we fly and has large economy cabins with seatback monitors at every seat. We will soon begin modifications of the remainder of the narrow-body jets so that by early 2025, the entire mainline fleet has this consistent, superior look and feel. Thanks for indulging me in this rather long explanation of where things stand, but more importantly, where we're taking United. I have to give thanks to the entire United team for delivering this summer in pretty difficult conditions. And with that, I'm going to hand it off to Jerry to discuss our financial results and outlook.

Thanks, Andrew. Good morning, everyone. Andrew, we truly enjoyed your verbose remarks, but everyone can take comfort in the fact that I will be the third quarter. For the third quarter of 2021, we reported pre-tax income of around $600 million and an adjusted pre-tax loss of around $500 million. This was obviously different from our expectations when we spoke to you in July, but as Scott and Andrew discussed, this loss is solely attributable to the impact of the Delta variant on customer travel in the United States. What this continues is that our third quarter Casimax of up 15% was better than our guidance and we are on track for further improvement in the fourth quarter. We currently expect Casimax in the fourth quarter to increase 12 to 14% versus the fourth quarter of 2019 on capacity down around 23% versus the fourth quarter of 2019. Looking beyond this year, we are in the middle of putting together our financial plan for 2022 and expect to share more color with you in January. However, I want to highlight a few items now that give us confidence in our Casimax outlook. First, we are exceeding our target on structural cost savings as we have identified approximately $2.2 billion in initiatives which we expect to fully benefit from by next summer. As a proof point of this success, we estimate that we can fly a schedule 10% larger than 2019 with the same number of employees we needed in 2019. This includes a significant and permanent reduction in management employees. Second, we expect to return all 52 grounded 777s to service in the first half of next year. This allows us to more appropriately match the right aircraft to the right markets which will ultimately drive a step function Casimax improvement as these low-Casim and high-gauge aircraft return to the fleet. Third, our outlook for 2022 includes the higher inflationary pressure we are seeing today across all aspects of our business ranging from vendor wage pressures to supply chain bottlenecks. It is for these three reasons that I am confident that our 2022 outlook of Casimax lower than 2019 is both fair and achievable. Importantly, it also sets a firm foundation for achieving the negative 4% and negative 8% Casimax goals for 2023 and 2026 which we have already discussed. In fact, I feel more confident today about our 2023 and 2026 goals than I did back in June. Importantly, we are committed to achieving these cost targets while also investing in a superior product and experience for our customers. For example, all of our new narrow-body aircraft are being delivered with -the-art interiors including overhead bins that fit everyone's carry-on bags and Bluetooth-enabled seatback entertainment with a long list of choices displayed on large HD quality screens. We are also retrofitting the rest of our fleet to be consistent with these standards. In fact, I was recently on a new 737 Max 8 flying home from Newark to Houston with all those bells and whistles. The flight was completely full and everyone found room for their bags. The flight crew made sure the customers knew about all the amenities as the crew was engaged with everyone from pre-boarding throughout the flight and as the customers deplained. 15 minutes early, by the way. As I strolled through the cabin during the flight, by my count, at least two-thirds of the passengers were enjoying the seatback system and I even noticed several children entertained with our new children's amenity kit. After this flight, I was curious about the net promoter score and sure enough, the NTS for the flight was over 40% higher than system average last year. We will continue to make these types of revenue-enhancing product investments while we continue to reduce unit costs because of our plans for efficient gauge-driven growth as well as our $2.2 billion structural cost savings program. Turning to capital expenditures, we currently expect to take delivery of three 737 Max aircraft and one 787 aircraft through the end of this year in addition to the 24 mainline aircraft already delivered this year. A number of 787 deliveries previously expected this year are now expected to occur next year which results in the related cat bags shifted out of 2021 into 2022. Including this change, we now expect adjusted cat bags to be around $3 billion in 2021. We expect to use a mix of debt financing, leases and cash to fund the acquisition of new aircraft and we'll balance the mix with our United Next financial targets in mind including adjusted total debt to adjusted EBITDA below four times in 2023 and below two and a half times in 2026. As the recovery progresses, we expect economically pursued deleveraging while balancing our capital commitments. In the third quarter, we made a $375 million voluntary contribution to our pension which will drive PVGC premium savings and access to returns on the funds added. While we are not required to make any meaningful contributions to our pensions for several years, we view our pension obligations as just another form of debt. This is effectively the most expensive pre-table debt we currently have and we took the opportunity to pay. In closing, as the impact of the Delta variant appears to be receding, we continue our focus on managing the business efficiently to maximize our earnings power for the long term. Our focus on cost and revenue initiatives will drive improving margin leading to a 2026 adjusted pre-tax margin of around 14% and adjusted EPS of around $20 at current quarter and share count. While we have never expected the recovery from the pandemic to be linear, we are confident that United's best days are ahead as we execute on our United Next Strategy in the coming years. And with that, I'll pass it to Christina to start the Q&A.

Thank you, Jerry. We will not take questions from the analyst community. Please limit yourself to one question and if needed, one follow-up question. Brandon, please describe the procedure to ask a question.

Thank you, Christina. And the question and answer session will be conducted electronically. If you'd like to ask a question, please press star followed by one on your touchtone phone. If you'd like to be removed from the queue, please press the pound sign or hash. If you're on a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, if you'd like to ask a question, please press star one on your touchtone phone. Please hold for a moment while we assemble our queue. And from Barclays, we have Brandon Oklinski. Please go ahead.

Hey, good morning, everyone, and thanks for taking my question. So Jerry, you know, speaking of capex, can you talk to us about what 2022 could look like here? And then maybe a longer-term question for you or Scott. Like, how do you manage, you know, the balance sheet risk here versus, you know, what is a very ambitious outlook and obviously, you know, trying to improve profitability by leveraging those things you put out there?

So we'll have some more detail on 2022 capex in January, but I can tell you that the bulk of the reduction this year is just shifting into next year. Those 787s in particular that caused reduction this year will just be additive for next year. So when you add those to the 48 narrowbodies we have, you'll see a step up in capped back. So I think if you took this year and next year together, blended, you know, it's sort of consistent. But you should assume that most of the capex reduction this year simply got moved into the first half of next year. You know, longer-term, you know, we are laser focused on reducing that debt balance and be leveraging. You know, we could have done some more if we had more prepayable debt. We simply don't. So we are going to, over the next few years, focus on reducing that debt as we have the opportunity to, you know, economically prepay that debt. That's a critical component of our United Next Plan.

I guess if I can follow up on that, Jerry, if you get upside to earnings, you can get margins faster, you know, based on getting a yield premium and leveraging the international network. Is that how you plan to manage the balance sheet and potentially get leverage down faster?

So we, yes, the answer is yes. As we implement the plan and we see the returns, that profitability is going to go directly into paying down the debt. And keep in mind, we also have the flexibility if, you know, recovery takes a little bit longer. Over the next few years, we have the flexibility to manage aircraft deliveries and retirements to adjust to whatever the environment is.

From Bank of America, we have Andrew D'Otora. Please go ahead.

Hi, good morning, everyone. So Scott or maybe Andrew, you know, I think the consensus out there to this point is that, you know, the international recovery is expected to take a bit longer than the domestic recovery. So just curious if you'd maybe elaborate on your plans to grow, to get international capacity back above pre-pandemic levels before domestic. And then also just curious on how you think about your Pacific growth as it relates to that 10% international growth next year.

Sure, I'll take that. Definitely the growth rate and the recovery will be different by the different regions of the world. And the Pacific is going to be the slowest and we've said that a number of times. However, when you go through all of our data, what I would tell you is that we really need to start to break down our entities and do a little bit more detail, particularly going across the Atlantic. You know, we expect, and again, I said already today, that our bookings across the Atlantic are now approaching in past 2019 levels. We expect a very strong bounce back next year, in particular starting in the spring and summer. And then the second point I'll point out is that a lot of our Atlantic capacity is not going to the traditional core European markets. We've gone aggressively into the Middle East and Africa as well. And for example, we have a new flight to Oman. We're flying to Cape Town and Johannesburg, Lagos, and Ghana. So our numbers, while up here and elevated across the Atlantic, are going into new revenue pools that we feel very good about. We feel very good about the pricing in those revenue pools. And we feel really good about the bounce back in those revenue pools. And we're seeing that data already today. So we're accounting for a slow, positive recovery. We're accounting for a strong Atlantic, but that strong Atlantic really is across multiple different entities within the Atlantic today, which allows that kind of bounce back that we're anticipating. And again, the numbers over the last few weeks have just been, or really in the last week, have been incredible going across the Atlantic. So we remain really bullish. We think we have the right plan and we think we've pointed the aircraft to where we can make the most money next year.

Got it. Understood. And then just my second question. Obviously, operational challenges have been increasing at a lot of your competitors, yet you haven't seen the same type of disruptions. One, what do you think that is? And then I guess more importantly, what do you see as the biggest operational risks as you begin to ramp capacity back up to those 2019 levels? Thanks.

Well, thanks for noticing that. And you're right, it has been uniquely different at United than many other airlines, including all of our large competitors who at different times have had operational challenges in the past year. And really, the reason starts, I think, going back to the realistic assessment that we had all the way in February, last week in February of last year, because we thought this pandemic was gonna last all the way through the end of 2021. It caused a different planning mentality and it caused a different management process, a very collaborative management process. It drives the easy and crazy, I suspect, but we do three times a week now, three hours, so nine hours a week where we are all together, either in person or on a team's meeting. Every single one of us knows what is happening at every single other department, and in many cases, we just step into each other's jobs if we have to. But that collaborative process in a really complex environment, because this environment is really complicated. When you brought the airline down 90% and then try to bring it back up, that's really difficult to do. None of us in aviation have experience to do it. That process and that realistic assessment set us up. Well, it led us to make different decisions. We're the only airline out there that went and negotiated to deal with pilots, for example. And then because of that, we could pull the airline down, keep everyone in their seats, keep everyone in their positions, and bring the airline back up without having the kind of crew shortages or coup constraints that have affected other airlines. We've worked with our flight attendants on processes onboard the aircrafts to avoid escalations and avoid some of the conflict that has happened on other airlines around masks. We had over a 50% reduction in mask issues this year, and our flight attendants have just done an amazing job, an amazing professional to tone the environment. It's not that we have zero issues, but the tone the environment has been on United is certainly different than what I read about in the press on other airlines. And we also metered in the growth. We didn't try to get out over our skis and say demand is starting to come back and grow at a rate that we wouldn't be able to support. We viewed that as risky to our customers, and we've really changed the customer experience during this, and we weren't going to lose it by trying to fly a few more flights. And so we just managed it completely different than has happened at other airlines. And you're talking about the risk going forward. I think looking forward, by far the biggest incremental risk in aviation in the United States are vaccine mandates. And United, we did our vaccine mandate, and obviously we did it before it was a mandate. We were done with it before government requirements came in, so we did it purely for safety reasons. But listening to other airlines that are now backing off those vaccine requirements and are going to encouraging employees to just all apply for an exemption, and they're likely to have tens of thousands of employees that need to be tested every week. This is a rearview mirror for United. This is not going to be an issue, but can you imagine tens of thousands of employees, people forget to get their test, people do the test wrong, people don't get it done, people test positive. And if you think weather in one state can lead to a meltdown, imagine if you have thousands of employees on one day calling in and saying, oh, for some reason my test didn't pass. I mean, it is going to be a huge challenge for airlines that are not implementing vaccine requirements. Customers can book with confidence on United. We're done with it. You can book with confidence on United. But if you're booking on an airline that doesn't have a vaccine requirement, they've got government rules they have to follow and caveat and tour.

I'm Jamie Morgan. We have Jamie Baker. Please go ahead.

Hey, good morning, everybody. Scott, I like the four big picture trends that you discussed in your opening remarks. Question on the expectation for the Atlantic and the Pacific to outperform the domestic over the next several years. Is that really a comment on how strong the Atlantic and Pacific might be? Or is it shorthand for we expect the domestic to structurally suffer going forward? Why shouldn't I look at it with that sort of -edged-edged view?

Well, Jamie, I'll let Andrew. It would be better to answer it than me, but mostly it's supply-demand. The supply-demand balance is just significantly different in the long-haul international widebody market. Hundreds of airplanes around the globe have been retired, and those take a really long time to change. And the supply-demand balance is more balanced, and it's as simple as that. Okay.

Jamie,

the only thing I can add is that we just have this structural advantage when it comes to global long-haul, given where our gateways are. And this is the time for us to move forward and deploy our capacity in a way that makes sense and is profitable in those regions of the world. And in some respects, I think we're uniquely able to do it as a US flag carrier, and we're going to take advantage of it.

Understood. And a follow-up on that, Andrew, while I got you, I just wanted to make sure I hadn't missed any changes in the last year or so as it relates to fuel surcharges. So we do not have a fuel surcharge mechanism domestically, but how broadly do they exist right now in your international market? How should we think about that?

Jamie, I don't want to get into a lot of details. There are certain countries around the world that do have fuel surcharges. Their government is mandated. In fact, they go up and down with the price of oil, and it's kind of set by that country. So those exist, and then in other countries, we take care of it ourselves. I think we have this under control, but the price of fuel, I think you're going to, is high. By the way, we view that price of fuel being high as a sign that business demand is recovering as people get to work in factories around the world or making things. So that is a good thing, not just completely a bad thing. And that being said, when can we price through this higher price of fuel? It's going to take some time. The supply, demand, and balance was broken temporarily. We're getting it, I think the industry is, well, I think United is moving in the right direction. I think the numbers look a lot better as you get into next year, particularly as you get to the President's Day and Spring Break holidays. So I'm optimistic about yield quality out then. And like I said earlier, our yields for these upcoming holidays and early next year are positive, which is great to see.

That's great. Thank you, Andrew. Thank you, Scott. Take care.

From the city, we have Stephen Trent. Please go ahead.

Good morning, everybody, and thanks for taking my question. Kind of a follow-up to Jamie's question, actually. Over the past few months, you guys had mentioned doing some domestic -to-point flying. How should we think about where you are now and the, let's say, gradual process of maybe phasing that out as some of your international spools up and you move more towards domestic capillarity out of your hubs?

Sure, Andrew. We did, during the middle of the pandemic, opportunistically look at some -to-point flying, and we had that out there. As we return to normal, which we are doing rapidly now, we are almost 100% focused on our seven hubs for all kinds of reasons. We think our best opportunities there and, in particular, our best opportunity for higher margins are there, and that's where we're pointing the metals. So that's what you'll see. We do have a little bit of -to-point flying in our system. It's proved what's left. It proved very successful, so we'll continue to do that. That is not our strategic focus. Our focus is on our seven hubs.

Okay, very helpful. I will let someone else ask a question. Thank you.

From Raymond James. We have a question. Please go ahead.

Hey, good morning, everyone. Just on the capacity, I was wondering if you could help me understand just next year how that progresses from down 23% currently in the fourth quarter. I'm guessing a lot of it comes over the summer, but I was wondering if you could help bridge that, kind of getting from down 23% to up five next year.

Sure, Sabi. We've timed the capacity to measure or match where we think demand is going to be. So in the early part of the year, it is continuing to be a pretty low number, and the latter part of the year, it is a higher number. We haven't finalized our budget for next year, so we don't have the exact numbers, and our overall number is an approximate number at this point, as you can tell. The other thing to note is our deliveries for next year are heavily geared toward the latter part of next year. That's when, in many respects, we really get started with United Next States and changes in the game page equation going forward. So we'll have more information on how the staff could be metered in later this year, early next year when we finalize our budget.

That's helpful. Thank you. And then, if I might, I know we've not talked a lot about cash flow, given that we have strong liquidity and the earnings are turning around here, but I'm just kind of curious if you could provide some color on just the cash flow components over the next 12 to 18 months, especially how you're kind of thinking about ATL here.

Hi, it's Jerry. So we'll provide some more color in January. I would say on ATL, as the war returns to normal, ATL will begin to return to normal as well. You'll see the normal peaks and valleys that are driven by seasonality. On sort of other matters, the biggest other thing for us to look at is, as I said earlier, debt repayment. And when we start seeing those debt maturities kick in and repayment opportunities kick in, next year, relatively modest year on debt repayment, about 3 billion of scheduled debt payments. But we're going to focus on other opportunities to use that cash to manage the balance sheet, starting as early as next year.

Appreciate it. Thank you.

From Evercore ISI, we have Dwayne Finnegworth. Please go ahead.

Hey, thank you. Andrew, in your extensive list, you talked about domestic business demand rebounding to 19 levels. I'll admit I missed the context on that. Was that a premium comment? And kind of where are we on corporate now relative to kind of the exit rate last quarter?

Yeah, what I said was, over the last week, we've seen our total bookings for domestic and for the Atlantic exceeding the same period in 2019, which is great to see. We have not recovered fully on business traffic and have a long way to go. The Atlantic comment was the recovery on Atlantic business traffic is now similar to, or in fact slightly ahead of the recovery for domestic business traffic, which we obviously feel really good about to see that number and see how quickly the Atlantic business traffic is recovering over the last few weeks in particular. But the numbers are heading towards down 50%, but they're not there just yet. But just looking at the trends of only the last two days, I would tell you our level of being bullish about this has increased a lot. The numbers for the Delta variant caused things to go down quickly, and now that we're past Delta variant, it appears that they're going to go up, hopefully, just as quickly. So it is a bit more volatile than you think we'd otherwise like to see, but we definitely like the upward volatility that we're seeing right now.

That's helpful. And then just for my follow-up on non-fuel cost, can you speak to the cadence? And I guess the dependency here is when you expect longer stage flying to be more fully restored at these fuel prices, it seems like March is maybe our best shot at the earliest, but is the cost story more of a second half at this point? Appreciate your thoughts there.

Yeah, sure. So the cost will track the capacity. So what you'll see and what we'll talk about in January is the first half of the year versus second half of the year, and you'll see as the 777s come back, as the other aircraft come in, as we hit the full run rate on the $2.2 billion initiatives next summer, you'll see the second half of the year being significantly different from the first half of the year. But you could essentially track the capacity to the cabin.

Thank you. From Goldman's Next we have Kat -O'Brien. Please go ahead.

Hi, good morning, everyone. Maybe a bit of a different take on Jamie's question earlier, but has the current demand backdrop or the competitive capacity backdrop in the US changed your plans on domestic expansion at all since you introduced United Next back in June? Was it your view back then that 2020 domestic capacity would be flat or is it just with some of these international border reopenings has the opportunities that changed? Thanks.

The latter. The international border opening and the recovery that we're seeing over the last few weeks just leads us to think that the profit maximizing opportunity is to deploy those flights overseas and that's what we've done.

Okay, got it. And then maybe just not sure you can share this yet, but could you give us any high level color on what entities are going to drive the 10% international growth and maybe are you able to frame the hack some of these new long-range routes you mentioned they're having on that 10% growth? Thanks so much for the time.

Sure, our current expectations will be more across the Atlantic than the Pacific obviously given what I said earlier. And so we are growing in core Europe and we've been in a bunch of new markets that are brand new to the United Airlines, in fact, nor the US carrier fly. So we're really excited about those. But we've also announced more service to the Middle East with Amman, Jordan. We've announced a lot of service to Africa which has gone really well so far so you should expect more of that. So there's a lot going on there and as well as South America which we think is on a path to recovery, particularly Brazil in recent days given the change there has looked really good. Across the Pacific, again, much slower. We do expect across the South Pacific faster than the North Pacific, but we're going to be really agile across the Pacific and we're going to be able to cancel down or grow depending on the demand we see. We have the best specific network of any US carrier and we expect we'll bounce back first and we'll bounce back stronger. But that being said, we're going to be really careful when we choose to load that extra capacity.

Thanks.

From Wolf Research, we have Hunter Kaye. Please go ahead.

Hey, good morning. So it seems like after Labor Day a lot of folks went back to the office and they're excited to be there and now it kind of feels like people are working from home a little bit more again because they realize that commuting is really not fun. I'm kind of wondering if you're expecting that with business travel next year, Scott. Like are you expecting this big pop in pent up business travel demand that everyone's all excited to get back on the road and you're 100% recovered and then maybe slowly it sort of bleeds back to like a lower watermark as the year progresses and sort of the euphoria wears off?

Hunter, I would say what I would say is that the Delta variant clearly delays some offices return. United today is here in the Willis Tower. So we're all back in our office and when we talk to our corporate clients, we definitely see a hot spot. Some are in and some are not. But people are generally more and more returning to their offices and what we've been told, although look it changes depending on the week, is that we should expect really an acceleration of business traffic next year with a lot of pent up demand. We have a lot of clients that need to get back on the road and they're anxious to do so and when they do so they're glad they have done it. And I know I'm excited to get back on the road and have been traveling a lot more in the last few weeks. So a lot, you know, it's a TVD. I can't exactly answer that question other than the feedback we get. It's going to be very strong. We also expect consumer demand next year after being not able to travel as they would like for almost two years. We think it's going to be really strong including here domestically by the way. We believe our profit maximizing opportunities are across the Atlantic right now and to India and Africa and the Middle East. But we also think there's going to be a domestic recovery that's really significant and strong and in fact hopefully by February, March, April it's going to overcome this much higher price of fuel. And that's the directory on. We feel good about it and that's our plan.

And then how do you expect Andrew corporates to book travel in 2023? I know that there's a lot of direct bookings right now and 22 is probably going to be weird too but is 2023 going to look like 2019? Are you going to have the same mix of GDS channel and TMC is just as relevant? How do you expect that to shake out long term?

You know long term I don't know. Technology is changing rapidly but what I would say is we have really great TMC partners and they greatly help us reach our SME market and we use the GDS just to provide all that content and we do so successfully and in agreement with our major GDS contractors up until this point. I don't expect any radical changes. Clearly there are those in the distribution network that would like to do things slightly different and we'll let those companies and those agencies tell us what they would like and we'll do our best obviously with all of our clients and all of our customers to give them the best customer service we possibly can but I do believe the TMC and GDS model are really strong and help deliver high quality revenue to United Airlines.

Thank you. I'm Colin. We have Helen Becker. Please go ahead.

Thanks very much operator. Hi everybody and thank you so much for the time. Just a couple of questions. One is on the triple sevens that are coming back. Jerry what's the cost going to be to bring those back and is that included in your CAPEX forecast for 2022 or will it be in your CAPEX forecast for fourth quarter and for 2022?

The triple sevens are aircraft that are already in the fleet. There's not a CAPEX component to bringing them back. There is an op-ed component of getting them ready and so that's included in our forecast. What's not included in any forecast is whether there's any contribution to that from other parties. We're assuming in our forecast that we are incurring that cost.

Okay that's very helpful. And then the other question I have is with regard to all these new markets. Little letter A is are you concerned that your alliance partners will be put off by the fact that you're over flying their hubs to do this on your own? And little letter B can I give you a list of cities I'd like to go to that are on my bucket list?

I would have thought with the cities you just added we got to your bucket list. Let me know. We work with our great alliance partners. We really do have the best alliance partners in the globe. What I would tell you is about how we came to the conclusion about what city fairs to add for the summer. Many city fairs United and our star alliance partners have very low share sense. So traffic between the United States and those markets are carried by other alliances, not ours. And that's why these markets are great. And the other thing I'll tell you is sometimes you have to make the market and there's a lot of service to a lot of different places around the world. But for example the Azores is a great opportunity for you personally and all your colleagues to head on a great vacation that was very, very difficult to reach in previous years. That will be a lot easier to reach on United Airlines nonstop at a newer, extravagant summer.

That's great. Very helpful. Thanks everybody. Have a nice day.

From the bank we have Mike Lindenburg. Please go ahead.

Yeah. Hey, good morning everyone. Hey Scott, back to your point about the vaccine mandates being the biggest risk. Where are you maybe in conversations with the government and as it pertains to the TSA, which I think, you know, latest data is that I think they're only at like 60, 65 percent vaccinated. Are you making any sort of contingency plans or, you know, as we approach the holidays are we going to have to have additional United people to help staff and kind of get people through the airports? Just where things stand on that. Thanks.

Well, I have a lot of confidence that TSA will get there. They've been working hard. I think they've been doing a great job during the pandemic in really tough times. They also, you know, the same department was instrumental in bringing the tens of thousands of refugees back from Afghanistan. So I think we all should give kudos and credit to the Department of Homeland Security, Secretary Mayorkas and the TSA for everything they're doing. I'm pretty confident that we'll get there. I mean, I think they're implementing vaccine requirements correctly. I mean, at United, we have proven that if you just do it, if you put the requirement out there and you're not compromising, you're not wishy washy, you don't waffle, you don't backtrack, you get to over 99 percent. And I think they'll do the same thing and we'll get there.

Okay, very good. And then just a quick follow up. Scott, you talked about hitting your targets with, I think, you know, only 85 to 90 percent of corporate coming back. And, you know, there's a lot of talk about premium leisure travel. And I'm just curious, is there is there something secular going on with that passenger segment or is this just United catching up to the rest of the industry and just having premium seats that are on par with everybody else? Thoughts there? Thanks.

Hey, Mike. It's Andrew. I would tell you it's probably a little of both, although we have really not started to materially change the aircraft mix from when we announced United Nexus a few months ago. So we, you know, a lot of that benefits are going to come in 2023 and beyond. But there has been an amazing amount of premium leisure business, our being able to sell premium seats in the first class cabin and even in the main cabin with much higher load factors than we've done in the past. We're anxious to prove out that this is a permanent change. But part of it's clearly that there is more inventory available closer in for these seats because corporate travel hasn't rebounded completely. So corporate travel is 100 percent. And we'll have to see where the premium leisure yields are. I think we have a little bit of balance both and come out with a better outcome given this change, if any of it proves permanent, which again, where Bullitt said it will be is exciting to see. It is pretty material in such a short period of time. So we'll have to wait and see for sure because we need to balance that with the corporate demand when it comes back. But all that being said, in the unlikely event corporate demand is not 100 percent, we do have other levers to push. And this one has become increasingly obvious over the last three months as an opportunity to do something a little bit different and get some more revenue on board the aircraft.

Great. Thanks.

From MKM Partners, we have Connor Cunningham. Please go ahead.

Hi, everyone. Thanks for the time. I think you hinted at it in the prepared remarks. But when you think about potential swing capacity in 2022, is it fair to assume that the swing capacity in the domestic market could move lower rather than you making an adjustment on the international side just given the competitive landscape? I get that demand dictates all that. But just curious on your thoughts on the high level.

I was just going to add we have a lot of flexibility to move aircraft around. Our aircraft are our factories and they clearly can be moved around wherever we need them to go, whether it be domestically or overseas. So we're agile. I think we've proved that continuously throughout the entire pandemic. And we look like we're getting back on track and getting back to our normal scheduled deployment, which again is why I said there'll be less point to point flying in the future. But we'll be flexible to do what we need to do both domestically and internationally, including ground widebody jets if they're not needed later this year. But we'll wait and see.

Okay. And then just a follow up to what Hunter was talking about on the business side. So I'm just curious on what sectors you're seeing the most pinned up demand for business travel or maybe like which sectors you're actually most bullish on longer term that you think you can gain share or however you're thinking about it. I'm not sure I'm aware of that in the current context. Thank you.

Well, with everything we've done at United, we've been the game chair everywhere to make that really clear to you and all of our competitors. That being said, you know, what we're seeing right now is consultants obviously very strong as they get back on the road and start helping businesses all around the globe. But we're also seeing rebounds across the board. But things are moving in the right direction.

Thank you. And we will now take questions from the media. As a reminder, if you have a question, please star 1 on your phone. And once again, please stand by. And from Wall Street Journal, we have Allison Snyder. Please go ahead.

Hey, thanks so much. Yeah, I guess one of the big complaints we've heard from customers throughout the industry over the course of the last several months is just sort of about the instability of schedules, you know, late close in changes and everything kind of being up in the air. And I'm just curious when you think we might see that level out, just see some more stability and get back to kind of normal or if this is part of the new normal going forward.

Hi, Allison. It's Andrew. What I would tell you is that we needed to be really flexible as we went into this crisis. We took the airline down to basically 10 percent within a matter of a few weeks. And we learned a bunch of things about how flexible we can be in our process. That being said, to run an airline of this size, we need process, we need consistency, and we need to load our schedules early for the convenience of our customers so they can book with certainty. And we have more left as of this week or next, return to a normal schedule load process where we load our schedules 90 days in advance and their final, as close to 90 days as possible. During the pandemic, that number was dramatically lower and that caused a level of disruption that was unfortunate but necessary. And we did talk to our customers about it and we did react to it at res and we reacted to it in every way possible to make it as simple and easy to change the reservation. However, that problem should be, you know, in the past very, very soon, if not already.

Thanks. From CNBC, we have Leslie Joseph. Please go ahead.

Hi. Good morning, everyone. My question is about regional airlines. Do you know if the carriers that fly for you under your name are going to be subject to the same federal mandate or if not, if it's under the OSHA rules, do you have any operational concerns about getting them into compliance in the next few weeks? And then also if you have any information about how you're approaching cargo, just given all the supply chain issues going forward, especially before the holidays. Thanks.

Hi. This is Brett Hart. What we will say is that our regional carriers, we know that they're evaluating the applicability of the executive order on their business. And we're in discussions with them. I think it's pretty clear where we stand with respect to the importance of vaccinations. But they're in the process of working through that now. And we'll certainly be in the process of helping them in that process to the extent that we can. Andrew, do you want to

talk to cargo?

Yeah.

In terms of cargo, we've obviously had a record quarter, a record year. We expect that to continue well into the fourth quarter and actually beyond, you know, given where the country stands in terms of the backup that supports, but also in terms of consumer demand. We're transporting things by airplane today that we traditionally have not. And in talking to the entire cargo team, we expect that to continue well into next year, if not all of next year, based on where demand is for these products and again where the ports are and the services that we provide, which are just, I think, second to none on the cargo front. And Leslie, if you look at our numbers, you can see there are numbers every quarter.

Okay, thanks. Did you ask the regional airlines to adhere to the same vaccine mandate that you have? And did they say no? Just for uniformity, names on the plane.

No, at present we haven't asked or required our regional carriers to adopt our same policy. And you understand from a legal perspective. We know I have the right to require them to do it. But this is a process that they will work through in the same way that we did. And we know that they're very focused on it and we're confident that at the end of the day they'll get to a good place on it. But we have and are strongly encouraging them and pushing them to do it. We think it's the right thing for them to do as well. We just aren't in control.

Once again, if you do have a question, please dial star 1 on your phone. And from Bloomberg News, we have Justin Bachman. Please go ahead.

Hi. Thanks for taking my question. I wanted to go back to the earlier comment about United Being the U.S. flag carrier and that sort of structural change that you see on the international widebody front and how that makes long haul more profitable. I wanted to get your thoughts on the thesis though because it seems to rest on the idea that other carriers can't or won't add widebody capacity if they can get some decent yields on that. And I just wanted to get your thoughts on that because some of these airlines you've accused in the past of being government subsidized and it seems that they could add capacity if they chose to. Thank you.

Hey, Justin. It's Andrew. Well, there's really two components. One is the fleet and how long it takes to get widebody aircraft and configure them and put them in the air. And that is having done it here at United, it takes a couple years. So when you choose to retire aircraft, it's very difficult to reverse that decision, get trained up and acquire new aircraft to replace them. So it just cannot happen immediately. But secondly and more importantly is the fact that we're flying from what are seven mazen hubs here in the United States that just represent the bulk of international travel to and from the country. Not only leisure business but business, regular corporate business. And so we just have a structural advantage on this front. We're already the largest international carrier by far. We're able to successfully fly not only to our partner hubs but to spokes all over the world. And you saw that with our recent announcement, including a new place like Amman, Jordan. And so we're simply taking advantage of the structural advantage we have as United that we just haven't been able to in the past properly do. But now we can and we're doing so in an era of I think tailwinds based on the fact that demand is bouncing back rapidly. And our competitors across the board have retired many, many large aircraft, many of them with large business class cabins. Thank you.

From CNN, we have Chris in the door. Please go ahead. Getting

back to the cargo and supply chain issues, are you still flying any all cargo flights? And are you considering any purchases of freighter air, you know, traditional freighter aircraft either used or new as you're seeing more cargo demand?

I'll take that. We stopped, we had stopped or planned to stop all cargo flights, to be more correct, as we were going through the summer because of the rebound in traffic and the lack of our Pratt & Whitney 777s to fly. As we went through the Delta variant phase and demand fell, we did allocate a small number of wide bodies to our cargo team and they've taken them and they are flying as all cargo through the end of this year and that is doing extremely well. We will likely bring that to an end again sometime late this year, early next year. All that depends on the return to service of our Pratt & Whitney 777s. So we do see a lot of demand on the cargo front. The team is doing a great job and we're going to have a record year.

And for your aircraft, is that something that you're weighing and considering or is that just not something that you see being a mix long term? Sure.

You know, we have a fleet of about 220 or so wide body jets at United Airlines. They all have large bellies with room for a lot of cargo. We just haven't seen the need to supplement those aircraft with any all freighter versions of those aircraft at this point in time. Just from a business model perspective, we can obviously pick months or years where that makes sense or a few individual routes. But the fact that we operate, I think, the second largest wide body fleet in the world, we have a ton of belly capacity that more than meets our needs.

From the Associated Press, we have David Koenig. Please go ahead.

Hey, thanks very much, Scott. Following up on your caveat and tour comment earlier, I wondered if you have any evidence that people are looking too united because of your mandate? And I guess, you know, are you counting on some of your rivals struggling to have enough staff over the holidays?

Well, I think it would be hard to sort that out even if it was happening. But I would also say I don't want that to happen. I mean, I don't because I want everyone to get vaccinated. That's the right answer for safety. That's the right answer for the country. I hope that every airline will stop backtracking and will, in fact, get everyone vaccinated like United Airlines has done. And so that it will not be a competitive advantage for us because it is without question the right thing to do.

Is it a competitive disadvantage if they seem to settle for less and have some sort of testing alternative to vaccination?

Well, again, I hope that they will again backtrack and get all their employees vaccinated because it is the right thing to do. But it is, I think, unquestionably going to be operationally really, really difficult to get tens of thousands of employees tested every week.

Okay.

Thanks. From Reuters, we have Rajat

Singh.

Please go ahead.

Good morning, everyone. I have two questions. First, I want to clarify your comments on 777s. You said that you expect them to return to service in the first half of next year. Is that your assumption or has FAA cleared the ground fleet to return to service in the first half of 2022?

Hi, this is Greg. We haven't heard that from the FAA, but we have been working tirelessly with Boeing, Pratt & Whitney, and the FAA over the past six months. And we do expect the aircraft to return to service in the first quarter of next year safely.

My second question is about supply chain bottlenecks. You alluded to the supply chain pressures in your comments on NPLIS magic pressure. Can you share some color and details on these bottlenecks and how are you navigating from them?

Hey, it's Jerry. So I'll say, you know, we're not seeing anything different from what others are seeing. And, you know, where we are seeing shortages or potential shortages, you know, we're just trying to stay ahead of it. So it's not at all impacting the operation or the product, but it does have some impact just on cost. It's just more expensive, as the whole world is seeing, sometimes to get the supplies that you need.

And from Washington Post, we have Hannah Stamson. Please go ahead.

Hey, good morning. On the question of premium, increased demand for, maybe your customers for premium products, how are you seeing that play out? Are they just kind of booking those upfront, using miles for upgrades or getting free upgrades? I guess I'm curious, have leisure travelers been like dying to book these seats all along and just didn't have the chance or do they have more cash to work with now? What do you see playing out there?

Well, we'll let, this is Andrew speaking, we'll let this play out over time. What we've seen over the last few months in particular is more of a willingness to spend a few extra dollars to upgrade to a premium seat in the main cabin or to fly in the first class cabin. Across the Atlantic, we've seen, you know, a better rebound in our business class cabin to our leisure oriented routes, such as Athens or Italy this summer than we did in the main cabin. And I think people, you know, a lot of consumers have saved up some money during the pandemic and maybe are spurting a little bit. But it's also, these are great upgrades to the product. You know, a big thing here at United is to make sure that we have a product for all of our customers from the top of the scale in terms of Polaris down to a basic economy customer. We can provide products across that range and that's exactly what we're doing. We expect to do more of that over time, by the way. And we actually know that there are certain customers that want that elevated experience while there are others that don't. And we will offer a range of product types that allow us to do that.

Okay, thanks. And then if I could slip another one in real quick, how are you feeling prepared for the holidays staffing-wise, not just pilots and flight attendants, but across the board, gate agents, people to answer the phones if people have questions or problems? How prepared are you feeling for that?

We're in good shape and customers can book with confidence at United Airlines.

Thank you. We will now turn it back to Christina Munoz for a closing remark.

Thanks everyone for joining the call today. Please contact Investor Media Relations if you have any further questions. And we look forward to talking to you next year. Thanks everyone.

Thank you, ladies and gentlemen. This concludes the presentation conference. Thank you for joining. You may now disconnect.