United Airlines Holdings, Inc.

My name is Regina, and I will be your conference facilitator today. Following the initial remarks from management, we will open the lines for questions. To ask a question during that time, simply press star followed by the number one on your telephone keypad. To withdraw your question, press star one a second time. 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, Managing Director of Investor Relations. Please go ahead.

Thank you, Regina. Good morning, and welcome to United's fourth quarter and full year 2024 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, which 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 today on the call to discuss our results in Outlook are Chief Executive Officer Scott Kerbede, President Brett Hart, Executive Vice President and Chief Commercial Officer Andrew Stella, and Executive Vice President and Chief Financial Officer Mike Luskinen. In addition, we have other members of the executive team on the line available for Q&A. And now I'd like to turn the call over to Scott.

Thanks, Christina, and thanks to everyone for joining us today. I want to begin by saying that our thoughts are with those affected by the wildfires in the Los Angeles area. We've been in close touch with our employees and communities in the area to offer them support. We'll continue to monitor the situation to see if there are more ways that we can help. Turning to earnings, 2024 was another solid proof point on our way to double-digit margins. By the fall of 2020, several months after COVID struck, we at United had a clear vision of how our airline and the industry were going to evolve. And 2024 seems to have been the year that we gained broad recognition from others that the vision is playing out as we expected. Our outlook has always been based on a realistic view of how the economics of the industry were going to change and how those changes had the potential to drive structural, permanent, and irreversible changes in the entire industry. Our 2024 plan developed from that vision, and our results were the culmination of years of thoughtful planning, bold action, and strategic investment. I'd like to thank our employees for these stellar results, and I'm proud to say that we'll be paying out $713 million in profit sharing this year. In 2024, United continued to make progress with our United Next plan and once again delivered earnings within our original range. Our investments over the last several years have further differentiated United from the rest of the industry and led to strong customer preference for the United brand. But the bigger point here is that the changes that have led to this moment are structural and durable. Cost convergence, which we first talked publicly about on this call in Houston two years ago, combined with effective revenue diversity at United for the first time ever, and industry-leading product and service causing customers to choose United are just irreversible structural changes that have created a competitive moat for United. Answering an analyst question two quarters ago, I talked about how this feels very much like 2012 to 2014. But today, I'll add that there are two additional tailwinds this time around. The international environment, which Andrew will discuss in more detail, is going to be far stronger for longer because of the structural supply constraints that are going to last at least for the rest of this decade. Wide-body supply, both airframes and engines, is even more challenged than narrowbodies. And second, domestically, the seeds of the 2012 to 2014 era's demise were being sown at the time with 15% to 20% growth from the ULCC. It's very hard to see that happening again. Importantly, all of this means that the industry is evolving into an equilibrium where each airline, driven by economic necessity, will be primarily focused on flying where they have a competitive advantage. Different airlines have different competitive strengths and weaknesses in the post-COVID era. Cost convergence has been the most impactful at the big, high-cost airports in the country. The cost per passenger in the three New York City airports is $48, compared to the average ULCC fare of $67 in those three airports. When an airline is spending 72% of their fare on airport costs, it's hard for me to imagine that they could ever be profitable in those airports. At the same time, LCCs do have an advantage and will always be able to be more profitable than United in point-to-point, low-cost airports. It really is a transformed industry, and United, more than anyone, is leading the way. We have seven great hubs. We got well ahead of the curve in investing for the future, and we're focusing all of our efforts and growth in our hubs where we have the competitive advantage. The combined virtues of our size and our innovative culture make us a competitive chagrin. We know who we are. We know our strengths. We also know our weaknesses, and we're going to focus on our strengths and nothing else. But we won't rest on our laurels, and we'll never be complacent or satisfied with our results. We'll continue to be an airline where good leads the way by focusing on ways to be an even better airline for our customers. Starlink is one of the most obvious high-profile investments for customers, but it's really just the visible tip of the iceberg. Our digital team is expanding our best-in-the-world technology by making further improvements to make the airline even more transparent and easy to do business with. And our ops team is focused on changing the unchangeable and trying to solve problems that no other airline in the world has ever even tried to fix. and we'll continue to invest in a brand that inspires pride in employees and customers alike. This year, we expect to grow our EPS by approximately 18% at the midpoint, and we'll deliver strong free cash flow while continuing to invest in the future. That includes signing industry-leading contracts with our United team, which is made up of the best aviation professionals in the world. We are the best airline in the history of aviation, and we're going to continue to raise that bar. That's been and will continue to be increasingly good for our employees, customers, and our shareholders. And with that, I'll turn it over to Brett.

Thank you Scott and good morning. 2024 was an exceptional year for United. The investments we've made to improve our operational reliability and resilience have driven top tier results. We served a record nearly 174 million customers last year and finished the year first in on time departures at all seven of our hubs. We had the busiest December in our history, flying on average 511,000 people a day. And when so many of our customers were counting on us to get them home safely for the holidays, we closed out the month of December ranked number one in on-time departures. I want to thank the incredible professionals at United who worked through the holidays and through tough weather to deliver for our customers. Thanks to enhanced processes for recovering crews during irregular operation events, we achieved an 82% reduction in crew-related cancellations compared to two prior years. Additionally, we continued refining our aircraft turn process, focusing on key components such as aircraft cleaner time and boarding efficiency, driving improved turnaround speed and overall operational performance. In 2024, we had the company's best post-pandemic turn execution, reducing cancellations and improving efficiency, both meaningfully cut costs and results in a much better experience for our customers. Despite that progress, staffing at the FAA remains a challenge for the airline industry, and most importantly, the traveling public. In 2024, even on clear blue sky days, 66% of United's delays were driven by ATC challenges in technology and staffing. We remain engaged with leaders in Washington, and in both parties to get the FAA the resources they need, and we'll look for opportunities to work with the new Congress and new administration to achieve that goal. Over the last several years, our culture of innovation has fueled countless advancements in technology that empower our employees and improve customers' experiences. In just the last several months, our team has developed new capabilities for our award-winning app. like integrating Apple AirTag data to help us reunite customers with their bags and allowing customers to select seat preferences so they can get moved to the seat they prefer automatically as soon as it becomes available. Translating our entire app into Spanish drove usage even higher, and now nearly 90% of customers engage with our digital channels on the day they travel. In 2024, These and other app enhancements enabled half of our customers who experienced a cancellation to utilize a self-service or automated method to get back on their way, a 28% increase year over year. Our industry-leading app has led to happier customers who have more control over their travels and employees who have more time to help customers who most need it. At United, We're proud of this culture of innovation because it's central to our effort to differentiate our good leads away brand and give our customers even more reasons to choose United. With that, I'll hand it over to Andrew to review our strong revenue performance in 2024 and discuss our expectations for revenue environment in 2025.

Thanks, Brett. The fourth quarter revenue environment materially improved as the capacity backdrop for the industry became more constructive. United's Q4 TRASM increased 1.6% year-over-year on a 6.2% increase in capacity. The Sunday after Thanksgiving was our best revenue day in history, shattering the former record by 25%. United's domestic capacity increased 7.8% in Q4, with RASM down 1.9%. We project domestic RASM will turn solidly positive in Q1. The domestic pricing environment is improving as underperforming airlines remove unprofitable capacity at an increasing rate and business traffic growth accelerates. Industry fare sales are less prevalent with lower discount rates as airlines are prioritizing profitability. All United's hubs were profitable in Q4 and for the last 12 months with only a seven-point pre-tax margin difference between the best and the worst performing hub, the narrowest spread we've recorded in a quarter since 2016. Our network health is very strong, with room for margin expansion as we continue our United Next plan. After years of waiting, we're also finally starting to gain a critical mass of larger narrowbody aircraft, which allows us to execute on our plans to increase gauge. United's international capacity was clearly the star of the quarter in terms of RASM growth relative to Q3. As a result, international margins continue to outpace domestic margins in 2024. United's plan during the pandemic was to double down on international flying, and it's proven to be the right move. Q4 Pacific capacity moderated, and China headwinds slowed versus Q3, resulting in prasm flipping from down 15.7% to up 4.1%. Pacific prasm was up high single digits for the last two-thirds of the quarter versus last year. United has profitably digested a 31% increase in Pacific capacity in 2024, and we've now fully reinstated our pre-pandemic capacity levels across the region with margins that are now above system averages. In the past, the Pacific margins routinely lagged. We plan to moderate our Pacific growth as we head into the first half of 2025, letting capacity added in 2024 mature. During 2025, we are excited to launch a new initiative to operate 737s on a small number of Narita feed flights to destinations in Asia that do not support nonstop service to the U.S. We anticipate this unique initiative, made possible by our Guam base, will extend our lead as the largest Transpac carrier, build an unmatchable network scope. We're going to redeploy underperforming assets and efficiently grow load factors from Japan to the U.S. where local origin demand still is not fully recovered from the pandemic. 2024 was also a great year for the United Atlantic Network, and Q4 was no exception, with PRASM up 7.1% on flat capacity. We entered 2024 positive capacity growth for the year in the Atlantic after rapid growth in the region post-pandemic. Our plan for 2024 worked extremely well. All months in Q4 were PRASM positive year over year, with December RASM up double digits. United is the largest U.S. carrier flying over the Atlantic by SMs, And in 2025, we plan to have low to minimal capacity growth in Q1 to support continued PRASM strength. From what we see today, we expect the first quarter to be our best Atlantic financial result in the company's first quarter histories. Latin America trailed the other regions throughout 2024. However, it's important to note that United continued to operate profitably in the region despite these challenges. PRASM was up slightly in Q4, and the outlook for early 2025 is positive. Overall, the momentum for international flying in the fourth quarter was exceptionally strong. We believe the pandemic pandemic era global long haul reset, along with a sluggish delivery rate of new wide body jets, sets up the industry really well for years to come. International flying. Cargo also had a very strong showing in 2024. Cargo revenues for the year were up nearly 17% and up almost 30% in Q4 versus last year. It was a very good quarter and year for cargo. The business traffic recovery was a nice tailwind in Q4. Results in Q4 and our outlook for Q1 clearly showed this trend in higher yield corporate traffic volumes. Flown business revenue grew 16% in Q4 year-over-year. We expect that trend to continue in Q1, which is a tailwind for our business-focused network. Contracted business sales in the quarter for all future travel were up 14% year-over-year. Premium passenger revenues increased 10% year-over-year, and premium cabin unit revenues were positive, both trends that persisted throughout the year. We see no change in consumer behavior seeking out increased premium experiences, but we also remain committed to our most basic products. In Q4, basic economy passengers increased 21% year-over-year and now represent 15% of domestic passengers, up two points versus 2023. Loyalty revenues grew at a healthy pace at 12% in 2024. Co-brand spend was up 9% with 1 million new card acquisitions. Turning to the product, we reached a milestone of deployment of our signature interior with nearly 50% of the fleet work complete as of year-end 2024. With installation work moving quickly now, we expect to be at 70% by the end of 2025. Across the entire United network, we expect to have 150,000 seat back chains full of rich content available to all of our passengers with a better ability to personalize everyone's experience by the end of 2025. As you can see from our first quarter outlook, we continue to make progress on improving the financial performance of that quarter. Changes to our capacity deployment across hubs, days of week, and time of day have been very effective. Return to more corporate traffic and the desirability of Southern European vacation in the winter is also a tailwind. As we announced a few weeks ago, we're tracking ahead of our schedule on Starlink installation, which we think will be a material advantage versus slower for-pay Wi-Fi services offered by other U.S. carriers. United's Starlink plan is yet one more action to elevate our product, creating a brand customers choose more and more often. We will share more on product innovation, merchandising, and capacity optimization in the coming year further in our lead. We will also talk about how we believe Starlink will unlock a host of new digital benefits for our customers and shareholders. We believe that creating more choice, more segmentation, and enhancing our products is the winning formula. Merchandising, selling, and managing the complexity of these multiple experiences is our proven expertise. With that, I want to say thanks to the entire United team for an amazing 2024, and I'll hand it off to Mike to talk about our financial results. Mike?

Thanks, Andrew. We delivered record fourth quarter earnings with earnings per share of $3.26, ahead of expectations and a fourth quarter pre-tax margin of 9.7%, up 3.5 points year over year. These strong fourth quarter results brought our full year earnings per share to $10.61, above the midpoint of our initial guidance range of $9 to $11. Much of this success is due to the strong revenue performance that Andrew just discussed. But the foundation of our success is a strong operation, and I'm incredibly grateful for the tremendous efforts of our operations team this quarter. Our hubs are in some of the most congested airspace in the world, and still we delivered industry-leading operational performance during the quarter. Importantly, an operation that runs on time and with few cancellations is also a more cost-efficient operation. Finally, I'd like to celebrate our stock performance over the last 12 months. In 2024, we were the fourth best performing stock in the S&P 500. I've long believed in the potential for a stock to re-rate given the structural improvements in our business. It's nice that the market is beginning to recognize the shareholder value we've delivered. For the first quarter of 2025, we expect earnings per share of $0.75 to $1.25, an approximately $400 million improvement from the first quarter of last year at the midpoint, implying an approximately 3.5 point improvement in pre-tax margins the commercial team has done a great job of continuing to shape the network to match demand in what has historically been our seasonally weakest quarter further billing off first quarter momentum we expect full year 2025 earnings per share to be between eleven dollars and fifty cents and thirteen dollars and fifty cents at the midpoint this represents eighteen percent growth in earnings per share versus twenty twenty four we expect a similar pace of earnings growth is sustainable as we march toward low double-digit pre-tax margins. We have decommoditized air travel. Our operation is strong, and the United Next plan continues to deliver both higher and more sustainable profits. Airlines with less competitive offerings are cutting money-losing routes and frequencies. The industry setup has never been better, and we believe United is uniquely positioned to succeed. On costs. CASMX was up 5% on 6.2% capacity growth versus the fourth quarter of last year. As we look ahead to 2025, we are focused on driving efficiency improvements throughout the business while also improving the experience for our customers and enabling our employees to be more effective at their jobs. For the year, we continue to expect two to three points of CASMX pressure from our labor agreements not yet signed. Shifting gears to the fleet. In the fourth quarter, we took delivery of five Boeing MAX aircraft, 14 Airbus A321neo aircraft, and three Boeing 787s. In 2025, we are planning to take delivery of 71 narrowbody aircraft and 10 widebody aircraft. Recall, we had been planning for approximately 100 narrowbody aircraft deliveries in 2025, but due to the OEM production delays, we are planning for less, which leads to our expected full-year capex spend to be below $7 billion. That's below the low end of our $79 billion multi-year guidance. Turning to the balance sheet, we ended the year with $17.4 billion in liquidity, including our undrawn revolver. We generated $3.4 billion of free cash flow. In 2024, we paid down $7.4 billion of debt, $3.6 billion of which we voluntarily prepaid. We've now prepaid or refinanced our remaining high-cost COVID error debt, bringing our total cost of debt down to 4.6%. Our net leverage was 2.4 times at year end, an improvement as we make progress to our long-term net leverage target of less than two times. On the buyback, in the quarter, we've repurchased $81 million worth of shares, leaving over $1.4 billion left in the authorization. We remain firm believers that United stock is undervalued as we continue to grow earnings and margins year after year with further room for multiple expansion. Finally, I want to reiterate the consistent and growing free cash flow generation remains a top priority. And in 2025, we are targeting free cash flow around the 3.4 billion we delivered in 2024. The future at United Airlines has never looked brighter, and I'm excited as we continue to build upon our competitive advantages in 2025 and beyond. Now back to Christina to start the Q&A.

Thank you, Mike. We will now take questions from the analyst community. Please limit yourself to one question and, if needed, one follow-up question. Regina, please describe the procedure to ask a question.

Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, please press star followed by the number 1 on your telephone keypad. Please hold for a moment while we assemble our queue. Our first question comes from the line of David Vernon with Bernstein. Please go ahead.

Hey, good morning, guys, and thanks for taking the question. So, Mike, maybe could you talk a little bit about how much of the trend improvement you're seeing in 1Q and how that extends kind of into the full year guide? I'm trying to get a sense for whether the range that you're putting out there for us for the year contemplates things continuing to get better from where we are today or kind of just a reflection of where we are today.

Hey, thanks, David. I love the question. We've had a longstanding policy of setting guidance with a no excuses philosophy, and that has served us well. We delivered over three points of margin expansion in Q4, and I expect to deliver three to four points of margin expansion again in Q1. We'll continue to build a single act of God into our longer term guidance so that we deliver even in imperfect conditions. That's kind of a hallmark of our guidance strategy. It's pretty easy, however, for us to sit here and think there's opportunity in the back half of the year, and then we could do even better than our full year guide.

All right. Thanks for that. And then just to be clear about the guidance range as well, that includes the incorporation of some potential flight intended deal in the course of the year, correct?

Yes, it does, and it always does.

All right. Thanks very much for the time, guys.

Our next question comes from the line of Sheila Kayalu with Jefferies. Please go ahead.

Good morning. Congrats team on great results. So Mike, maybe this one's for you since you entered your script with the stock is undervalued but bought back only $81 million in Q4. So great free cash flow in 2024, $3.4 billion. The guide is for 20% earnings growth and CapEx is up less than expected. So it would suggest free cash flow north of $2.5 to $3 billion in 2025. How are you thinking about Your deployment priorities toward your leverage targets with the voluntary prepayments as well versus share repurchases.

Thanks, Sheila. And let me remind everyone that over the last four years, we've also invested $32 billion in our business and our people, which has been central to our success. The strong performance in our valuation, it was a steep increase just as soon as we announced the share buyback authorization late last year. And so this first quarter out of the gate regarding the buyback, we started conservatively. It seemed like a reasonable approach. Right now we have to balance our improvement in our balance sheet and repurchasing shares. And so I think that was the right approach. We're really pleased to see the stock moving so strongly. We were number four out of the S&P 500 last year. I mentioned that in my script. And you'll continue to see an opportunistic repurchase of shares as we move forward through 2025. I'll remind you that we've got a billion foreign authorization. Expect continued multiple expansion. We're going to be really, really deliberate about that. I'll also add that the deleveraging that we, this journey that we're on, we expect to reach below two times net leverage during this calendar year.

Great. Thank you. Our next question comes from the line of Connor Cunningham with Milius Research. Please go ahead.

Hi, everyone. Thank you. On basic economy, can you talk a little bit about, I mean, in the script, you talked about how the industry is discounting a lot less, and there's obviously a big move in premium from the low-cost guys. Can you just talk about how you're going to deploy basic economy? Is there an evolution in how that changes? It just seems like You know, there's going to be the barbell approach that you had this last couple of years before the industry really structurally changes. Maybe that involves on how you deploy the basic economy side of the equation overall. Thank you.

Thanks, Connor. Andrew, you know, I would say as we look out into the next 12 months, we don't intend to change that, that we're incredibly happy with the effectiveness of basic economy, particularly as we grow our gauge as a competitive tool. It's done exactly what we wanted it to do. And it does seem to me the more of it we do, actually, the better off we are. Obviously, there are points. We are clearly balancing multiple product types in our quiver here, and many of it premium, but also basic. And we truly believe that a broad spectrum of choice for consumers and being able to offer the lowest possible fare to fly in United where you get a signature interior, seat back entertainment, free Wi-Fi is the winning recipe. And we're not going to change that recipe as we go through 2025. Okay.

And then maybe big picture, your relative margin performance obviously speaks to your willingness to adapt to the environment overall. But, you know, the United Next Day, we talked a ton about up gauging. And Obviously there's been a lot of delivery delays and so on. So I'm just trying to understand on your conviction level around the up gauging strategy. Do you have a lot of that baked into 2025? It just seems like there's still multiple margin points that you have from these uniquely United opportunities that you have going forward. Just any thoughts there. Thank you.

Yeah. Look, I think gauges, it's not a secret weapon, but gauges I think really important to us. For 2025, gauge is not moving a lot. You know, the delivery delays have been extensive, and our ability to put RJs back to full utilization proved to be the right decision for 2025. What I can say is as we look out through the end of the decade, I believe we have the highest gauge possibilities, which is going to be great for the business, great for our unit costs, and great for our customers because these new aircraft have incredibly high NPS scores as we bring them online. So we think there's an incredible amount of runway related to gauge. We obviously operate in hubs that are gigantic from local population base, but they're also now gigantic from a connectivity base, allowing us to use these larger gauge aircraft. We're behind on this. I think this summer we had 12 A321s that seat 200 people. Next summer we have, I think, in the mid 40s. And that's probably still, you know, 150 aircraft behind our nearest competitor. And as we said over and over again, The large-gauge narrowbody aircraft are the highest margin aircraft flying in the country, and that is going to be a meaningful tailwind to United's margin acceleration as we head into 2026 and 2027. So 2025 is a bit of a pause year, but we look forward to getting back on the gauge bandwagon in 2026 and beyond.

Hey, Brandon. This is Mike. I just want to add a an extra point there. As we look into 26 and 27, as Andrew said, the gauge really starts to accelerate, and so it becomes an idiosyncratic CASMAX benefit for United in 26, and it really starts to kick in in 27. So you're not seeing the benefit of that in any of our guidance for this calendar year, but you will see it in coming years.

Great. Thank you.

Our next question comes from the line of Brandon Oglenski with Barclays. Please go ahead.

Hey, congratulations team on what was a great year and obviously a good outlook here. And Mike, maybe just following up on that, I presume with that comment about Gage looking out years ahead, that's including some expectation that MAX-10 is in the mix?

We are becoming more hopeful that the MAX-10 will be an important Gage for United. We like the MAX-9. The MAX-9 is a great aircraft, but We are, with Boeing starting to make some real progress in improving their business, we're becoming more bullish on the MAX 10. That's correct.

I'll just add, whether it's the MAX 9 or 10, our gauge is going to increase a lot. So the 10 would be great, but I'm counting on the 9 and the A321 to do what I described a few minutes ago. If we have the 10 available to us, that only helps it even further.

Well, and Andrew, maybe for my follow-up, on those lines, your domestic capacity growth is a little bit elevated here. What are the priorities in the network as you look in 2025 domestically, especially with those constraints on gauge? And it looks like the solidly positive PRASM comment on domestic is pretty bullish for 1Q. So can you elaborate on those?

Sure. We've been working really hard, particularly for off-peak months and quarters like Q1 to readjust how we deploy our capacity, whether it be by day, week or hub. And I think it's been incredibly effective and you see that in the guidance along with the fact that business traffic is coming back. So we're pretty optimistic that this is moving in the right direction and we can really close margin gaps by making the off-peak periods better. As we think about 2025, And I've said this in the past, and I'll say it again, we're really focused on building connectivity in our bank structures, particularly in Chicago, Houston, and Denver, where our hubs are fantastic, but they lack the same level of connectivity that we see at some of our larger OA competitor hubs. And so we're going to be able to close that gap materially in 2025, which I think is going to be really good for our relative RASM results as we go forward. So that'll be are focused in 2025 at this point. Thank you.

Your next question comes from the line of Ravi Shankar with Morgan Stanley. Please go ahead.

Great. Thanks. Morning, everyone. Just a question on Starlink. Obviously, you guys mentioned that a couple of times in your prepared remarks. Any thoughts on kind of ruling that out? How much of a differentiator do you think that will be, what the initial performance has been like, and maybe how we can monetize that?

Sure. It's an excellent question, and I have to say this is one of the things we are absolutely most excited about at United. We did a ton of research on this product and all the alternative products and feel 100% convinced that this is going to be a game changer. Fast and free Wi-Fi available to our customers, including the ability to have games on your personal device is going to be amazing. But look, you know, I think the big question here is with Connective and our ability to grow MileagePlus, and you're going to see us, I think, unleash a lot of really unique things on this front. And in particular, you know, I think we see an opportunity maybe where others don't. And I think that comes from a number of factors that are probably unique to United. One is we have advanced screens on the vast majority of our fleet. We need advanced screens to be able to personalize service and deliver content in the way that we're going to be doing in the future, which we can obviously make service for our customers better, travel with less friction, but also monetize some media sales. Second, with Starlink connectivity, you know, which we'll have, which I don't think any of our major competitors will have, it allows us to do that in a way that really older Wi-Fi services could not do. And then you combine that with the size of Mileage Plus, the legacy program size, And I think our innovative spirit here at United, it is a very good recipe. You know, I think, you know, we need to prove out this as we go forward. But we're very excited to do this. We're very excited that it's United being unique on this front. And we hope to show you in the coming quarters and years what can be made possible with these investments.

That's really helpful. Thank you. Maybe for a follow-up, obviously, lots of momentum in the story. Stock's doing great. You know, everything's going to set up really well. Can it possibly be greater? You guys hinted last year at potential creative options with the loyalty program. Obviously, it's been a long time since you gave us United Next, and a lot has changed with the world since. Any thoughts on hosting that investor day potentially at some point this year? How do you think about giving us updates on some of those big picture items?

Hey, Ravi, thanks for the question. And we still continue to see tremendous value in the loyalty program, but we're going to start to disclose data on that when it makes sense for the business. We're still discussing the timing of an investor day. However, we've been really effective getting our message to all of you during these earnings calls and investor conferences. Unlike other airlines, our investor calls are much closer to many investor days. We give you long-term guidance. We're giving you a lot more free cash flow commentary as well. We manage earnings calls like we manage our business with a focus on the long term. And today's call is a good example of that. So stay tuned. Investor Day is an important tool, but no update on precise timing today.

Our next question comes from the line of Jamie Baker with JP Morgan. Please go ahead.

Okay, good morning, everybody. So, Andrew, you know, in the past, I think it was last summer, you talked about that life cycle for discount airlines. Obviously, since that time, we've seen a bankruptcy, domestic capacity has tightened, you know, we're seeing discounters experiment with new LOPAs. Do your original comments still stand, or has there been enough evolution in that particular, you know, business model that You know, maybe the outlook from United's perspective is a little bit brighter than what you articulated last year. Any thoughts on that?

Well, look, I think it's largely still fans. You know, I think as Scott said earlier, we each have our expertise is what we're great at and what we're less great at maybe. At United, we think we're great at a lot of things, but there's a few things we don't do and we don't intend to do. But we manage the complexity of many product types from basic to premium and I think do very well in the premium space. And it's because of generations of investment that came before me and the management team here in the room today. And you just can't snap your fingers and make those generational investments overnight. So I'm a bit surprised by the amount of change. But the effectiveness of that change remains to be seen. The effectiveness of what we've been putting in place for years now has been proven. We're going to do more of it in 2025. So I think that life cycle I went through still holds. And I don't expect that we're going to see airlines compete at the level of, you know, United in terms of this broad range of products and experiences anytime soon.

Thank you for that. And then quickly, for Scott, it was several years ago, I think it was at a conference that I asked you, if you could clear up one analyst or investor misperception, what would it be? And I don't remember your exact words. But you know, basically, you said that, you know, you'd confront the idea that all capacity is created equal and all capacity is equally bad. You and Mike spend a lot of time in front of clients. I know I have my opinions on this, but where do you think you are in terms of addressing that capacity topic? And would your answer be the same if I had simply asked the question a second time? Thanks.

Well, I don't know if the answer would have been the same, but it's a good answer regardless. And I think I would attend that as, All capacity is definitely not created equal. And, you know, if you look, even if you look, if you look at total industry capacity in the fourth quarter or in the first quarter, you'd probably reach a different conclusion than if you disaggregated by, you know, who is doing the growing. The difference is then airline like United, Delta is the same. You know, we tend to, you know, add service, add route frequency because that's good for customers. We don't chase load factor. You know, we've been running lower load factors. You know, we maintain pricing integrity. And because we don't chase load factor and are willing to run lower loads, if that's appropriate, you know, it just has a much less negative impact on industry RASM than growth from some carriers who manage only load factor. And so I think not all growth is anywhere close to created equal. and you are seeing that in the results today. The results in the fourth quarter and the first quarter proved that that thesis was correct. I also think that it's going to continue for years to come. It could be a longer discussion, but it's going to continue for years to come.

All right. Good stuff. Thanks, Scott. Appreciate it.

Our next question comes from the line of Andrew DeDora with Bank of America. Please go ahead.

Hi, good morning, everyone. Maybe coming back to loyalty a little bit. Scott, Andrew, with revenues up kind of double digits in 4Q, and you continue to invest a few billion dollars each year into your product, whether that be Starlink, Connective, Lounges, et cetera, that's more than most airlines spend in total per year. So maybe can you help frame the growth opportunity over the next few years as these investments come online and maybe speak to how you think these This changes the value proposition for a traveler and drives them into the loyalty program over time. Any thoughts there would be appreciated. Thanks.

Look, I talked about it a few minutes ago, but the whole Mileage Plus Connective Foundation is incredibly strong, and I couldn't be more bullish on the opportunity. It does require some investment and some technology, and we're well on our way. But look, we did, I think, 12% growth last year in loyalty revenue. And that was pretty amazing. I think hopefully we'll show that we lead the industry with that number. And our goal for this year is more than that in percentage terms. And so we believe this is an accelerating momentum at this point. We need to prove it as we head into 2025 and beyond. But connected media in particular, like our media sales, We intend to double them next year and double them again the following year. And so it's a lot of opportunity. It's a lot of work. We have a brand new team on board to help us execute on that. And as we do all that and personalize the service more and more, I just think we make MileagePlus even that much more attractive to our customer base. We have a flywheel effect with more credit cards that are issued. I think we did about a million last year. We'll do more this year. So it's just going exceedingly well, and I think there's a lot more to come. And we look forward to, at the appropriate time, disclosing more and more. But look, it's an interesting story. I gave you many of the unique things that I think are in our quiver related to this, and we intend to fully exploit that to the best of our ability while delivering, I think, a more personalized experience for our customers which we think will reduce friction and air travel a lot, particularly when you're onboard the aircraft. So there's a lot more to say on how we're going to use these screens and how we're going to deliver great service to our customers, and we're going to do that in the due course.

Great. Thank you.

I'm going to pile on that real quickly. Just the quality of the earnings from MileagePlus, not only are they growing rapidly, but the stability of those earnings at high margin levels high margin business. As we grow that business, I do think it's important that you all think about that differentiated stability, and it's something we're going to work hard to highlight in our disclosures as time goes on. Thanks for the question.

Our next question comes from the line of Dwayne Finningworth with Evercore ISI. Please go ahead.

Hey, thanks. Just on seasonality of margins, Maybe you can remind us about some of the network changes you've made over the years. Historically, we didn't really think of the first quarter as a breakout quarter for relative margins for United. So what changes have you made? Is it geography? Is it how you're flying? What's changed versus maybe pre-COVID?

Well, look, I would say it's a lot of things. And definitely how we fly is pretty meaningful to that. But look, first of all, I think you have a brand that is rising across the board as we invest in multiple products and multiple experiences, and we're just an airline people are choosing more and more often. So, like, that's just foundational. And, you know, I think we're really proud of that. Now, in the nuts and bolts, yes, the schedule has changed a lot. We're very, very careful in particular how we work with utilization. You know, just adding flights for the sake of ASMs We proved that last year in first quarter was not a great idea from the industry perspective, and we didn't do it, and we're not doing it this year. In fact, our utilization rate for this year is actually probably lower than last year at the current rate. So we're being very careful on how we deploy capacity, and I think we're the best in the business at it. But that goes not only within the quarter, but it's by day, week, it's by hub, and it's by aircraft type, and all those changes, including more sunshine capacity, I think have been really important. And then the last thing, Q1 was always a strength point for corporate traffic that didn't exist during the pandemic or right after the pandemic. And what we see today is corporate traffic coming back very strongly in Q1, which I think will be uniquely beneficial to the business-centric airlines, which obviously United is one of them. So that's really important. And then the last thing that I think is maybe underappreciated is the fact that Europe is becoming more of a year-round destination. And so Europe always did not so great, is a polite way to say it, particularly from January 15th through mid-March. And now we're seeing a totally different result where people are willing to go on a Southern European vacation. And so that's just great. And that really helps de-seasonalize Europe at the same time that our connectivity with our Lufthansa hubs builds back to normal. At the same time, the business traffic builds back to London Heathrow. And you put all those factors together, a lot of them created by United through schedule changes, some of them created by industry dynamics, and we're de-seasonalizing Q1 and making it look a lot better. That was our goal a number of years ago, and we're really proud to say we've come a long way. We have a long way to go still, but we've come a long way.

That's really helpful, Andrew. Thank you. And then just on the path to double-digit margins, which implies a bit of improvement relative to pre-COVID, you touched on in your prepared remarks, is this really about structurally higher margins in international and maybe holding serve on domestic, or do you see it more balanced? And again, not necessarily a 2025 answer, but over the next few years. Thanks for taking the questions.

Well, as I said in my opening, international margins are higher, but we think they have room to expand, particularly by making the off-peak periods better. So we'll remain excited about that, but there is an opportunity on international. There's also a bigger opportunity on domestic as our mid-continent hubs in particular reach that critical mass of connectivity and gauge that we're seeking internationally. We're still a bit off from where we want to be on Gage. As we said, this year is a bit of a Gage pause year. But starting in 2026 and beyond, we're going to really focus on Gage, which is incredibly efficient. It's going to unlock the connectivity in our hubs even further. And so I'm actually more optimistic that margin growth in the domestic system, given all the structural changes we're putting in place and what's happening around us by our competitors, Uh, has an incredible amount of upside and we can start to close the gap with international. But I have to say international strength is just unbelievably strong right now. And I, well, we'll close the gap. I don't think we'll close some of the gap. I don't think we'll close all of the gap. From the way I look at it at this point, so international is going to continue to lead the way. I think for the coming years, and as we said at the beginning. There's just a significant supply constraint when it comes to wide-body aircraft and wide-body engines that we think confidently last through the end of the decade at this point.

Thank you.

Our next question comes from the line of Scott Group with Wolf Research. Please go ahead.

Hey, thanks. Good morning. Scott, in one of the earlier questions, you said that you think the current industry backdrop has years to go. I guess, what gives you the confidence in the duration part of this story? I guess, what's the risk in your mind that as domestic pricing turns positive and others start maybe making a little bit more money that they start chasing it and adding capacity again?

Well, the short answer is just math. And this has been driven by economic realities. I said in my prepared remarks, I gave some stats on the expense of flying at big airports in New York. That doesn't mean things won't get a little more positive and people will try to put more capacity back one or two quarters, but I just don't see how it's possible to be a low-cost carrier and fly profitably to the New York airports or Chicago or Los Angeles or San Francisco. The business model just doesn't work because the governments in those entities have priced low-cost carriers out of the market. And it's just math. Like every airline that has low margins, don't look like Delta and United, has unprofitable capacity. And the only way to solve that is to not fly it. That doesn't mean they'll do it overnight. There will be some ups and downs along the way. There'll be ego involved in that. But ultimately, it is math, and it is going to come out because it cannot be profitable.

Okay. And then maybe just, Mike, a numbers question. 1Q clearly has RASM outperforming CASM. Does the guidance contemplate that you have a positive spread all year, or is there something unique about the 1Q strength? And I know you talked about two to three points from labor. Anything else on the cost side you want to add some color on? Thank you.

Thanks, Scott. Let me try to be clear about it. For the full year, we expect RASM to exceed CASM. We expect continued margin expansion. I expect continued margin expansion into 26 as well. Regarding costs, I think about costs in three buckets. I think about industry-wide inflationary pressures, whether that be labor, whether that be airport costs, whether that be food costs, fuel costs. Those costs are going to be passed through to the consumer, 100%. It's frustrating that those inflationary costs have been persistent. We need to make sure that we do at least as well as the industry regarding that number one bucket of costs, but those costs should not interfere with our long-term profitability. The second bucket, I'll break into two categories, an A and a B. And that is, what can we do as an airline to drive efficiency into the operation? Gage at United is the largest measure of efficiency. That'll really kick in, as I said earlier, in 26 and 27. But we're doing lots more with our app. We've got the best digital technology team in the business. to drive efficiency. We're doing a great job with tech ops and the operation driving efficiency, and we feel we'll do better than average in that category. There is a 2B, though, and that is driving efficiency by flying more in red-eye situations, flying more during the off-peak. And some of our competitors are doing that. We feel that that is, and I think our results prove, that flying in that way to drive utilization, it does drive down chasm, but it does not maximize profits. So you will not see United Airlines driving efficiency in that way. And then the third bucket is one that United's been on a mission for several years, and that is investing in the product and service to differentiate, to decommoditize the business. And it is clearer than it has ever been. that that decommoditization of the product is driving higher margins and I think more stability to this business. So you'll see continued investment by United that will drive chasm, but we think it will also expand margins. Thank you, guys.

Our next question comes from the line of Tom Fitzgerald with TD Cowen. Please go ahead.

Thanks so much for the time and congrats on the great results. There was a line in the press release that caught my eye on utilizing GenAI to expedite customer search. And I'm wondering if you could update us on other areas you're already deploying GenAI in the business or thinking about it and how you're thinking about the impact, whether on the revenue side or in the operations.

You know, we do have the leading digital team in the business. You can see it in the app. You can see it in all kinds of places. And we have been, I think, done a yeoman's effort, but really using GenAI in all kinds of ways that maybe not be as sexy as some of the big high-profile announces, but a whole lot more impactful for the airline and the operation. You talked about some of them. One of the things that I'm most proud of is how much better we are than any airline in history has ever been at communicating with customers when there are delays, as Joyce was explaining it, in terms that they understand, and we're getting better and better. I think we're the first inning of that. We're the only ones on the field. No one else is even trying to do it, but Gen AI has been an important unlock in that. All kinds of other, you know, to me, one of the interesting applications, you know, we have these old labor contracts that, you know, go back decades, and they've got all these provisions that have built up over decades, and You know, we have people that have 25, 30 years of experience trying to interpret what the labor contracts mean when a pilot or a flight attendant or someone calls in with some unusual situation, and some of the provisions are hard to know and always hard to figure out. Literally, a team of people that try to interpret and get those right, and they didn't always know. Amazingly, Jen and I can read the contract and give you a really good answer of what the output is. That's just a small example, but, you know, really what that means to me is our team, it's It's down in the entire organization. This isn't like some one cool sexy project that we talk about on an earnings call or some other forum, but really throughout the organization, embedded in the organization, is part of what's driving us to be, without question, the leading technology innovator of any airline around the world.

Thanks so much. That's really helpful color. And then just as a follow up, Andrew, you talked about adding sunshine capacity, being part of the success and improving one queue. And I'm just curious how you're thinking about Florida and the broader domestic network. And, you know, if there's if opportunities present themselves to maybe get larger in that region, whether it's a focus city or possibly a new hub, just love to hear your thoughts there. Thanks again for the time.

We That's a good question. We have seven great hubs. And for all my years here, we've been focused on making those hubs as great as they can be. And I don't think we're anywhere close to that. And you can look at our relative market shares in our hubs relative to other hub competitors around the country, and you can see our shares are still low. And I think as our brand rises, people want to fly us more and our gauges can increase. we continue to be very focused on our hubs. That's not to say that it will always be that way, but for now and for the foreseeable future, our opportunities in our hubs, there's a lot of growth, and that's how we're going to grow earnings and grow our margins, as Mike talked about earlier. But we will continue, you know, to build on what is a very successful Florida franchise. You know, I think it's done incredibly well, and we're tilting a higher percent of our capacity into it, but at least in the short term, there's no plans for a hub in the southeast of Florida.

Our next question will come from the line of Catherine O'Brien with Goldman Sachs. Please go ahead.

Good morning, everyone. Thanks for the time. Mike, one for you. You know, while respecting you don't give a chasm guide, you've already given us your high-level thoughts on the different buckets of costs we should be thinking about over the next couple years. Just was hoping to get some more color on the puts and takes for 25. You know, if you don't have a ratified flight attendant contract, for instance, how does that impact the timing of that two to three points of labor headwind you've spoken to? And anything else potentially lumpy we should be aware of quarter to quarter?

Hi, Katie. Thanks for the question. And let me try to expand around the edges. Talked about two to three points of labor headwind that we expect in 2025. That anticipates a labor deal with the flight attendants, the timing of which we aren't going to discuss today, but it expects that if that timing were to push to the right, there would be less of a headwind. If it pushes to the left, pushes earlier, then we'd have a little bit more of a headwind. I would say we have half a point to a point of pressure from investments that are driving even more revenue into the business. And so I feel really good about that as well. It does seem like the inflationary pressures overall at the industry level have peaked and have started to abate. But as we sit here, I think that they persist longer than we might have thought six or 12 months ago. So hopefully that helps.

Yes, it does. Thanks. And Andrew, maybe one for you as well. You know, you talk about managing the complexity of more products and more choices being an area of expertise for the team. Can you help us think through where the opportunities are to lean into this more going forward? You know, is this adding more cabins? Is this adding more varied soft products to your existing cabin? Something else that, you know, we haven't even maybe thought of yet? Anything there would be super helpful. Thanks.

Well, that's a really good question, and I'm not going to answer it today because I'm going to save it. Other than to say, as I said in my opening script, you know, I think product choice has won the day. And it's kind of ironic because if you go back a few years ago, there were people saying the opposite, which I never, ever understood. But product choice has won the day. We think we have some innovative ideas to expand on all that, including the merchandising of product choice. Um, as we go forward and, uh, when I convinced Mike to do an investor day, uh, hopefully we'll talk about that more. That was a joke, obviously. Uh, but the, the point of all that is, is not, we're not gonna give it away today, but we, we are working on a bunch of innovative things, um, that I think are gonna be very exciting for customers. Uh, so there's a lot more to come. There's a, a lot more investment occurring. Um, you know, we wish we could announce it today and bring it to the marketplace even sooner. Uh, but these things, uh, take time and, you know, I said earlier, I think United has a multi-generational lead, and we've been working over the last few years to make sure that lead expands and accelerates as we head into the latter part of this decade. So there's quite a bit more to announce, but just not today.

Great. So I look forward to it. Thanks for the time.

We will now switch to the media portion of the call. To ask a question, press star followed by the number one on your telephone keypad. Please hold for a moment while we assemble our queue. Our first question will come from the line of Mary Schengelstein with Bloomberg News. Please go ahead.

Hi, thanks. Good morning. The Trump administration has ordered the DOT and the FAA to rescind their DEI policies and review the job performance of individuals in critical safety positions. I'm wondering if you are concerned that that may cause some churn of employees and increase the problems that already exist with ATC and the staffing issues. And then secondly, I wanted to ask if United is considering rescinding its own DEI policies.

So I'll answer for United and let the DOT answer for themselves. Although we're, I feel good about the DOT and the administration and the impact that they will have on the air traffic controls. There's a ton of upside there. But at United, we have always have today and will continue to hire based on merit. But We're in the fortunate position that we're a very high-quality employer, and we make efforts to cast a wide net for people coming into United. In fact, last year, we had over 600,000 applications for fewer than 10,000 positions. And because of that, we can be incredibly selective about who we pick. And while we do hire on merit, we can hire the absolute best of the best and have a naturally diverse workforce. So at United, we can do both. And the proof is in the results. We are performing better coming out of the COVID for the last few years than any other airline in the world. And our workforce having a diverse but also very best people is a huge part of the reason why we are the best airline in the world.

And why do you say that there's a ton of upside with the new administration, FAA and DOT?

Well, last year, even on clear blue sky days, 68% of our delays were because of air traffic control restrictions on the airspace. That impacted millions of customers, and it is just basic blocking and tackling. When I talk to the president, he knows a lot about airplanes. He knows a lot about the airspace. He is focused, even at his level, on fixing it. Incoming Secretary Duffy, I spoke to this weekend, also focused on fixing it. and I think that they will do the basic blocking and tackling, get the FAA the right resources, the right technology to run effectively. And there is, like, everything else combined is not as big for airline customers as running the FAA effectively and efficiently. That is bigger than everything else combined, and I think we're going to be off to the races on that.

Our next question will come from the line of Rajesh Singh with Reuters. Please go ahead.

Hi. Thanks for taking my question. I have a two-part question. Scott, some people are calling it the new golden age of U.S. airlines because of the capacity discipline as well as improved pricing. Do you subscribe to this view? And second, do you see any risk for the industry due to the increased macro uncertainty not just from the demand perspective because of high inflation and interest rates, but also from supply perspective because of trade and tariffs? Thank you.

So I think this is the golden age for airline customers, particularly at an airline like United. The amount that we've invested in the product and the service, the loyalty programs, The amount of customers who are brand loyal to United today, I think, is bigger than it's ever been in history. The wide array of products from premium all the way down to basic economy. And so I think it's the golden age of customers. And because customers like that and because customers choose United Airlines, it makes it really good for United Airlines as well. That is a symbiotic relationship. On the question about supply chain, we're early into the Trump administration, so we'll see what happens with tariffs and such. But just like my comments about what's going to happen at the FAA, I have a lot of confidence in this administration that they're focused on doing things that unlock American innovation and entrepreneurialism and that remove regulatory burdens and expand the economy. And so I think My base case is that the net of that is going to be a strong, robust economy and strong, robust demand for United Airlines.

And I will now turn the call back over to Christina Edwards for closing remarks.

Thanks 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 quarter. Stay warm.

Thank you, ladies and gentlemen. This concludes today's conference, and you may now disconnect.