United Airlines Holdings, Inc.

Good morning and welcome to United Airlines Holdings earnings conference call for the third quarter 2022. My name is Candice and I will be your conference facilitator today. Following the initial remarks from management, we will open the lines for questions. At that time, you may press pound two on your telephone keypad to enter the queue. 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, Candace. Good morning, everyone, and welcome to United's third quarter 2022 earnings 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 in Outlook are Chief Executive Officer Scott Kirby, President Brett Hart, Executive Vice President and Chief Commercial Officer Andrew Nassel, and Executive Vice President and Chief Financial Officer Jerry Letterman. 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, and good morning. It's great having everyone on the call today. I want to start by congratulating and thanking everyone at United for your hard work, dedication, and perseverance throughout the last two and a half years. Our people stayed focused on our unique long-term strategies. and we're now beginning to see the strong and differentiated results. Our operation is firing on all cylinders. In fact, based on most metrics, it's running better than ever. That isn't just better for customers. It also reduces costs and leads to strong financial performance that creates the foundation for United Next, really positions United to be the world's best airline. We recognize that the near-term geopolitical and macroeconomic risks and overall pessimism facing the global economy, including airlines, are unusually high right now. However, there are three industry tailwinds prevailing the COVID recovery for aviation and United that are currently overcoming those macro headwinds and we believe will continue to do so in 2023 in increasing order of importance. First, aviation uniquely is still in the COVID recovery phase. To take one example, Japan just opened last week. And regardless of whether you think demand for business travel will ultimately return to 100% or something less, it almost certainly is going higher from here. Second, there's been a permanent structural change in leisure demand because of the flexibility that hybrid work allows. With hybrid work, every weekend can be a holiday weekend. That's why September, a normally off-peak month, was the third strongest month in our history. People want to travel and have experiences, and hybrid work environments untether them from the office and give them the newfound flexibility to travel far more often than before. I'll bet many of you listening today have taken an extra trip or two this year because you can work remotely for a couple of those days. This is not pent-up demand. It's the new normal. And third, the strong demand environment is happening against a supply backdrop that currently has the industry 10% to 15% smaller relative GDP than it was in 2019. And the multiple constraints, pilot shortages, aircraft delivery shortages from both Boeing and Airbus, air traffic control saturation, and airport infrastructure constraints around the world are all real, and they are constraints that will take years to fully resolve. These three trends are why all airline revenues keep surprising to the upside, but they're also real and durable, which is why we're so optimistic about 2023 and the longer term, despite the economic challenges. And for what it's worth, you don't need to believe all three of those trends for estimates to go up. Probably any one of them will do though I happen to be confident that all three are already happening and are sustainable. And in that strong industry environment, United is uniquely positioned to benefit for the long term. United really did chart a different path through the pandemic than any other airline. Differentiated fleet and growth decisions, increased exposure to growing international markets, real technology changes to change the customer experience and run the airline more efficiently. Long-term investments in the infrastructure needed for growth, such as Newark Gates, are building 14 additional simulator bays during the pandemic, founding our own pilot training academy, and a cultural transformation to be fast, creative, innovative, and customer-focused. It is just one quarter, and we know we have a lot to prove, but our third-quarter margin results and fourth-quarter guidance with operating margins above 2019 are early indicators of both the absolute and relative potential of the new United Airlines I am very proud of the United team for executing incredibly well, and I'm confident that we're well positioned for success next year and the years to come after that. With that, I'll hand it over to Brett. Thanks, Scott. I also want to start by recognizing the entire United family for their hard work in the quarter. Our team never fails to pull together, and we couldn't be more proud. During the quarter, our operational performance set records. Our on-time arrival and missed connection rates were the best for a third quarter in company history when excluding the low flying quarters during the pandemic. We saved over 1,500 daily connections on average with our Connection Saver tool. This means over 137,000 additional customers got to their destinations on time. Connection Saver is a unique innovation and customer benefit for United. In addition, our team did a fantastic job helping our customers and their bags get to their destination as seamlessly as possible. In fact, our mishandled bag ratio in September was better than 2019 levels. Our daily controllable cancels, which are driven by maintenance or crew challenges, dropped over 95% in September versus what they were in January. With a reduction in these cancels alone, we were able to add 1% This provides a better experience for our customers, but also leads to much more cost-efficient flying. We look forward to continuing these trends into the final part of the year. Putting that all together, and despite all the challenges around the industry, this was the best third quarter operationally for a full schedule in United's post-merger history. Huge kudos to the team. One of the most significant changes for United operationally and for cost has been the return of the Pratt & Whitney Boeing 777s. As their grounding, we've had to make suboptimal operational and schedule adjustments that have led to a more complex operation. And the work required to return these aircraft to service created a heavy burden on our tech ops organization. For the first time this, for the first part of this year, we had over 500 of our technicians dedicated to this fleet in Victorville, California. with over 175,000 hours of work spent to get these aircraft back into service. This drove inefficiencies in our technician staffing with negative cost and operational impacts. The great news is that this work is behind us, and these technicians have returned to their bases, which has led to the improvement in our performance metrics. With these aircraft fully back in service, our fleet can be more efficiently positioned for both our operation and our customers. I'd like to thank the entire TechOps organization for their significant effort in returning these aircraft to service. We're proud that a career at United remains in high demand. This year, we're on track to hire 7,000 airport personnel, 4,000 flight attendants, 2,300 pilots, and 2,000 technicians. Momentum is high. For example, Ultimately, we expect to welcome 15,000 new team members this year and another 15,000 next year to support our United Mexico plan. And with that, I'll hand it off to Andrew to talk about the revenue environment in more detail. Thanks, Brett.