United Airlines Holdings, Inc.

Good morning and welcome to the United Airlines Holdings earnings conference call for the third quarter 2023. My name is Silas and I will be your conference facilitator today. Following the initial remarks from management, we will open the line for questions. At that time, please press pound two on your telephone keypad to enter the question 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 Edwards, Director of Investor Relations. Please go ahead.

Thank you, Silas. Good morning, everyone, and welcome to United's third quarter 2023 earnings conference call. Yesterday, we issued our earnings release, which is available on our website at ir.united.com. Information in yesterday's release and the remarks made during this conference call may contain forward-looking statements. which represent the company's current expectations or beliefs concerning future events and financial performance. All forward-looking statements are based upon information currently available to the company. A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release, Form 10-K and 10-Q, and other reports filed with the SEC by United Airlines Holdings and United Airlines for a more thorough description of these factors. Unless otherwise noted, we will be discussing our financial metrics on a non-GAAP basis on this call. Please refer to the related definitions and reconciliations in our press release. For 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 our Chief Executive Officer, Scott Kirby, President Brett Hart, Executive Vice President and Chief Commercial Officer, Andrew Nacella, and our new Executive Vice President and Chief Financial Officer, Michael Okenen. 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.

Thank you, Christina. I want to start today by saying how heartbroken we are by the horrific attacks on Israel and the escalating conflict in the region that has millions of innocent people in harm's way. Here at United, when tragedy strikes anywhere around the world, we focus first on safety and second on how we can use our unique capabilities to help. While we suspended our service to Tel Aviv, we were the first U.S. carrier to add extra flights to Athens where customers connect from airlines operating between Tel Aviv and Athens. We also outgaged some regularly scheduled flights to Athens, added a dedicated Tel Aviv support desk, and continued flying to Oman and Dubai to maximize flexibility for our customers with tickets to Tel Aviv. We're closely monitoring the situation on the ground and staying in close touch with State Department officials so that we can resume service as soon as possible. We look forward to a succession cessation of violence in the region, and as we've done in the past crises around the globe, we expect United to continue to play a meaningful role in the humanitarian response. Turning back to the business, I want to start by welcoming Mike to the leadership team. You all know him well, but I'm excited to have him as a partner who agrees with my no excuses approach and is 100% committed to making United work for our employees, customers, and shareholders. I also want to congratulate Christina for her recent announcement from Crain's here in Chicago as one of the top 40 under 40. The third quarter was another solid milestone to demonstrate that United Next is working as we expected and the growth we are adding is profitable. Though fuel spiked this quarter, we're very encouraged about our results. It's clear to see why from the numbers. Our top line revenue grew 12.5% to $14.5 billion, making it the highest third quarter in our history. Our costs were also on track with our plan as we delivered strong operations in both August and September. United's diverse revenue streams have also allowed us to handle variations in demand and produce solid, absolute, and even better relative results. It's evident in the numbers. United and one other airline expected to count for 98 percent of the total industry revenue growth this quarter and over 90 percent of the industry's total pre-tax profitability. Even in a tough industry environment, United's diverse model is building strong, absolute, and even more impressive relative margins. So what is it about revenue diversity that makes us different? First, because of our size and industry-leading global network, our loyalty program is the most attractive program in the world for customers, and it therefore generates significantly directly earned significant loyalty, but also significant opportunity to do even more with it in the future. Expect to hear a lot more details from us on this front starting at an investor day in early 2024. Second, we have unmatched geographic diversity with a large domestic network complemented by the largest long-haul international network, and both are solidly profitable. While this is a great attribute, it does create some short-term risk and volatility, as we're seeing right now, with a transitory hit to margins this quarter as a result of the tragedy of misery. Third, we appeal to both business travelers, and it's been nice to see recent momentum in that segment, but also increasingly to leisure customers as well. We've gotten a lot more agile at pivoting capacity in the leisure markets and not surprisingly have found that our core customers can now fly us in both business and leisure markets as we add seats to leisure destinations. Our ability to move domestic capacity in the leisure markets when they're strong is a consequential driver of our strong relative revenue performance. And four, we continue to advance and improve our segmentation efforts. This is a project almost a decade in the making, but all the way from basic economy, which just allows us to compete profitably on price on the low end, and all the way up to Polaris on long-haul international, United is able to give our customers the real choice they want. So what does that mean going forward? In short, it's a confirmation that United Next is working as we expected. We thought the industry operating environment would be difficult. We thought that medium-term capacity aspirations would be higher than demand growth. We thought that domestic would be a lot tougher than international in the short to medium term. But we also thought United would win share, grow our gauge, and grow our connectivity, and that would allow United specifically to improve our results. By the way, we also expected, and now believe will happen even faster, that the domestic market is going to see a shakeout that leads to an improvement in margins over the medium to long term. It's impossible to call the timing exactly, but I guess that we see meaningful industry changes by 2H24. And for what it's worth, that's what has happened every single time we've been through one of these cycles in my career. And as that is happening, I'll continue closely tracking the airline industry revenue to GDP relationship. I've talked about this in the past, but that ratio declined by approximately 35 percent the past few decades. I don't think we'll make all that up, but almost everything we do make up goes straight to the bottom line. So, in conclusion, I'm proud of the team at United. We're creating something special here. Even in a tough industry environment, we're producing strong, absolute results while producing the best relative results in our history. We believe we have a lot of runway ahead of us with United Next in our diverse revenue streams, along with our ability to catch up, engage, and connectivity position United well. We expect that the current stress in some segments of the industry is also going to lead to structural changes that lay the foundation for an even better future for United, our employees, our customers, and our shareholders. With that, I'll turn it over to Brett. Thank you, Scott, and thank you to each member of the United team. conflict in Israel. At United, our top priority is the safety of our crews and customers. We're closely monitoring the situation. Following our coordination with the State Department, we have suspended flights to Tel Aviv until the end of October, and we're offering waivers to impacted customers. We will continue to monitor the situation and adjust as needed. Mike will provide more detail on the impact of these capacity adjustments shortly. Last quarter, we announced changes to our operation at disruptions, including taking advantage of FAA-granted waivers to reduce our flight schedule, allowing for necessary airspace relief in the highly congested region. While July was a difficult weather month, the Newark waivers and other proactive measures to improve reliability helped avoid pre-pandemic levels of ATC-related delays. In the third quarter, delayed arrivals were down 16 points versus the third quarter of 2019. Additionally, In August, we had the fewest cancels of any August in history, while operating the third largest quarter wide-body schedule ever. In September, the FAA granted extensions to the New York airspace waivers, allowing the ability to maintain a reduced flight schedule at Newark that will help minimize air traffic delays through the rest of the year. The flexibility enabled by waivers are proving to be successful in ensuring operational reliability and resiliency at our largest international hub and have meaningfully improved the travel experience for our customers traveling in and out of Newark and throughout our network. Looking to our system operations, during the quarter, we carried over 482,000 revenue passengers daily, the most in any quarter in United's history and September. We're grateful to the FAA for allowing us to make necessary adjustments in Newark and thank our employees who worked hard to get our customers to their destinations safely and on time. While most of our network has recovered to 2019 capacity levels or beyond, our China network has been last to recover. At the start of the quarter, we were operating four flights a week from San Francisco to Shanghai, and this month we increased that to a daily flight. Next month, we will be the first US airline to return to Beijing with a daily flight from San Francisco. We believe this measured approach to bringing China capacity back online is appropriate as demand slowly recovers. These increased flights are a significant step forward in rebuilding our Asia-Pacific network. Late last month, our pilots ratified their industry-leading agreement. This contract enables us to continue And I'm excited for the future as we continue to execute our UnitedX plan. At this point, we have ratified agreements for four out of our five major work groups. The flight attendants, represented by AFA, are in active negotiations, and we look forward to sharing an update when we have one. As a reminder, we began accruing for pilot pay rate increases in the first quarter of this year. Our outlook has and continues to represent our expectation for this agreement. it over to Andrew to discuss the revenue environment. Thanks, Brett.