United Airlines Holdings, Inc. (UAL) Q1 2026 Earnings Call Transcript

Good morning, and welcome to United Airlines Holdings Earnings Conference Call for the First Quarter 2026. My name is Regina, and I will be your conference facilitator today. Operator instructions were provided. 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, Kristina Munoz, Managing Director of Investor Relations. Please go ahead.

Thanks, Regina. Good morning, everyone, and welcome to United's First Quarter 2026 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 and 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, and historical operational metrics will exclude pandemic years. Please refer to the related definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures at the end of our earnings release. Joining us today to discuss our results and outlook are Chief Executive Officer, Scott Kirby; President, Brett Hart; Executive Vice President and Chief Commercial Officer, Andrew Nocella; and Executive Vice President and Chief Financial Officer, Mike Leskinen. We also have other members of the executive team on the line available for Q&A. And now I'd like to flip the call over to Scott.

Thanks, Kristina, and good morning, everyone. I'd like to congratulate the United team on a strong first quarter. We're building the number one brand-loyal airline in the world, and our financial results are indicative of the structural, permanent and irreversible changes that have happened at United and across the industry. Our first quarter results are just the latest proof point in our strategy to build a decommoditized, brand-loyal airline that's setting a new standard for what is possible for customers in air travel. We've proven that the winning strategy is to make travel easier and better for all customers, and while all of us at United are deservedly proud of the brand we've built, we aspire to go farther, and we want to set a new higher standard by revolutionizing air travel for our customers. More immediately, of course, we're managing through the impact of jet fuel prices that have doubled. Industry stress events seem to happen every five to six years. While we didn't know exactly what or when it would be, we knew something would happen. The best thing we could do was to prepare United in advance. To that end, we have, one, tripled our cash balance; two, moved to the top of the industry on profit margins; and three, strengthened our balance sheet. In fact, we ended 2025 with our highest credit rating in almost three decades. Advanced preparation allows us to stay focused on the long term while making near-term tactical adjustments to account for elevated fuel prices. At the moment, our goal is to do whatever it takes to recover 100% of the increase in jet fuel prices as quickly as possible and to achieve double-digit pretax margins next year. Oil is incredibly volatile right now, but because we think we're moving towards 100% pass-through, it allows us to have confidence in both our near- and medium-term earnings trajectory enough so that we can still provide guidance. For United, here's how we're thinking about our goals to get to 100% pass-through and achieve double-digit margins in 2027. One, to recover 100% of fuel costs, yields need to increase by about 15% to 20%, and we are assuming that fuel may remain higher for longer. Two, as yields increase, there will be an elasticity effect on demand that we're estimating will lead to less overall demand. While we haven't actually seen that decline yet, Economics 101 makes us believe it's coming. Three, less demand means that we should be supplying fewer seats to the market. For United, that means we're targeting capacity to be flat to up 2% for the third and fourth quarters on a year-over-year basis. It simply doesn't make sense to fly marginal flights that will lose cash in a higher fuel price environment. Mike will provide more details behind our 2026 outlook, but our view for 2027 is that we're targeting a pretax margin of at least 10%. We obviously have some time to see what happens, but if jet fuel remains elevated compared to our pre-war levels as we think it might, we'd once again expect to require less capacity growth in 2027 than we were planning just two months ago. Realistically, there probably isn't enough time to make up 100% of the fuel price increase this year. But I feel very good about 100% recovery and getting to double-digit margins in 2027. And because we've positioned United for success, we can make tactical adjustments to manage what we need to in the short term while also staying focused on our long-term plan. I'm also more convinced than ever that our decade-long strategy to build a great brand-loyal airline that is obsessively focused on making travel easier and better for all customers is the winning strategy. Finally, there's been a lot of press coverage regarding consolidation rumors. We've not commented specifically on those reports and aren't going to start today. So you can ask me about it if you'd like, but you won't be getting anything new from me on it today. And with that, I'll hand it over to Brett.

Thank you, Scott, and good morning. During the first quarter of 2026, United carried a record number of passengers while also navigating a challenging operating environment. The quarter experienced elevated weather events and geopolitical disruptions, but our teams remain laser-focused on recovering from these events swiftly and delivering top-tier reliability for our customers. In the first quarter, we continued our streak of ranking first in on-time departures among the eight largest U.S. carriers. During the quarter, United's per-seat cancellation rate averaged 44% lower than the next two largest U.S. carriers. Solid operational performance is the backbone of the airline and helped drive our highest first quarter on-time Net Promoter Score since the pandemic. During the quarter, customers increasingly engaged with our self-service tools, allowing us to drive more personalization throughout their journey. Day-of-app usage reached a record 86%, supported by continued mobile enhancements such as improved bag tracking and live TSA wait times. Additionally, I would also like to take a moment to thank the TSA employees, who showed up to keep us safe during the government shutdown. We have also improved our disruption communications by embedding live maps directly within customer messages. These tools and redesign help us recover faster and make it easier for customers to navigate disruptions. Another reason United remains differentiated and why we continue to build brand loyalty. Late last week, the FAA issued an order regarding the summer 2026 schedule at Chicago O'Hare. We are currently reviewing the FAA order and we'll share additional information, including any next steps as soon as our review is complete. We are pleased to reach a tentative agreement during the quarter with our flight attendants represented by the Association of Flight Attendants. This agreement includes well-deserved industry-leading wages and other meaningful improvements for our flight attendants who play an essential role in caring for our customers and representing United every day. Voting concludes on May 12. On April 6, United celebrated its 100th birthday, a meaningful milestone for our airline, the generations of employees who have built it and our loyal customers who continue to choose to fly the friendly skies on United. I want to thank all of our employees for the care and commitment they bring each day to our customers and to one another. As we recognize this milestone, we remain firmly focused on the future and on building an even better airline through continued investment in our product, our people, our network and our operation. With that, I will hand it over to Andrew to discuss the revenue environment and our other industry-leading commercial initiatives.

Thanks, Brett. Consolidated total operating revenue in Q1 increased 10.6% year-over-year to a record first quarter of $14.6 billion. TRASM increased by 6.9% year-over-year. All regions had positive PRASM in the quarter. I'd describe the start of the year as strong for all customer types and all regions. For January and February, prior to any impact from the war, we saw ticketing for business revenues up approximately 12%, while leisure was up a healthy 6%. Looking back at Q4, business ticketed revenues were up 6% and leisure was up only 2% year-over-year, creating a nice sequential increase in the first two-thirds of the quarter. Premium demand remains strong with Q1 premium revenues up 13.6% on a 4.4% increase in capacity. Premium RASM was up 8.9% year-over-year, leading main cabin by four points. It is clear that consumers continue to seek elevated experiences. Business demand was strong in Q1 with revenues up 14% year-over-year and strength across all verticals. Headlines about TSA wait times did suppress demand between March 23 and April 1, but they have fully recovered since. Our loyalty business continued to outperform and total loyalty revenue was up 13% in the quarter. Acquisitions and spend were both very healthy and supported by updates we made to the MileagePlus program. Late in the first quarter, we implemented five broadly successful price increases, along with an increase in baggage fees that began to offset the increase in the price of jet fuel. Price increases in response to the increase in jet fuel have been significant and across the board. However, global long-haul increases have been a bit stronger than domestic. In January and February, United's selling ticket yields were up 4% year-over-year. In the first half of March, that increased to 12% and further increased to 18% for the second half of March. So far in April, this trend has continued; in the last week, sell-in yields for all future travel are now up 20% year-over-year. As you would expect, we sold 23% of our Q2 and 8% of our Q3 capacity at lower price points prior to the rise in jet fuel costs. We remain confident in our ability to fully recapture the fuel cost increases over time. And in Q2, we expect to recover between 40% and 50% of the current increase. In response to the higher fuel cost environment, we've begun to adjust capacity downward by approximately five points throughout the rest of the year. We now expect Q3 and Q4 capacity to be flat to up approximately 2%. Our adjustments removed marginal capacity on off-peak days and flight times such as red-eyes, which we believe will fuel our recovery of fuel price increases in the second half of 2026. Our current sell-in schedule is up just over 4% in the summer, but those capacity adjustments will be loaded in the next week or so to get the capacity out there selling appropriately. On our January call, I hinted about new commercial initiatives that we believe will drive brand loyalty, choice and increase revenue for United over the medium and long term. We have now formally announced these initiatives, and I will summarize them today for you. To be clear, these changes have been in the works for years and they were made across all aircraft, all cabins and in many different areas of the commercial business. First and maybe of greatest importance, we've made the largest change in a decade to how we display and sell products on united.com and in our app. Internally, we described this change as nested selling. Nested selling took years to research, program and test and is now active in our digital channels. We can now properly merchandise our grown product lineup. We have already seen large increases in upselling because of these website changes. We simply were unable to show all of the products we had for sale easily on the old website display. Second, as part of the website evolution, we've introduced base fares in our premium cabins. Base fares come with less checked luggage, no early seat assignments and different club access features. To be clear, everyone on a base fare will be able to secure a seat assignment at any point via an ancillary purchase or for free during the check-in window. These base fares allow consumers more control over their experience by choosing what services they want to include on their journey and were a tremendous success in the economy cabin with basic economy. Third, we announced that 50 A321 Coastliners are planned to join our fleet. With the Coastliner, we can extend our award-winning Polaris brand for the first time on all United flights from New York to Los Angeles and San Francisco. Fourth, we unveiled United's new Airbus A321 XLR onboard products. These products on each XLR are consistent with the Coastliner. However, we've modified certain aspects of each XLR for the unique needs of an eight-hour Atlantic crossing versus a transcontinental flight, including the larger snack bar, more lavatories, more galley space and less main cabin seating density. Combined between the Coastliner and the XLR, we expect to have a fleet of 100 A321s equipped with 20 lie-flat beds and 12 Premium Plus seats, a commitment to this unique narrow-body platform unmatched by others. Premium Plus seats will for the first time be deployed on domestic routes at scale. Fifth, to be a premium brand, we needed to have a consistent product no matter what plane you fly on or where you're going. United redefined service to smaller communities a few years back with the CRJ550, and we've now extended that idea into what we're calling the CRJ450. Sixth, we announced Relax Row, our latest product innovation for young families on global routes. Relax Row is a main cabin product that transforms three seats into a flat surface and includes bedding and pillows. And seventh, we said we would change MileagePlus to accelerate United's earn-in, and we have. Members will now be awarded more miles when they fly if they hold our co-branded credit card versus members who do not hold the card. We also announced discounts for redemption only available to credit card holders. All these actions will increase the value of being a MileagePlus member and holding our credit card. While we continue to work under a long-term co-brand contract with our partners at Chase, we're making changes to what we can control today. In due course, we expect to have a new contract optimized for all stakeholders to the current market dynamics. Turning to our fleet, we have taken delivery of four high-premium Boeing 787-9s with up to 16 more expected to be added in 2026 and a total of 33 planned over the next two years. The interior of our new 787-9 has something for everyone, and we believe further strengthens our premium brand. All of our commercial initiatives announced over the last few weeks have been years in the making, tested with countless customers and employee focus groups and are ready for prime time. Our launch plan is bold, quick and designed to increase customer choice, revenues and brand-loyal customers. These new initiatives plus previous initiatives like Signature Interiors and Starlink are additions expected to be largely rolled out in two years. The future is now. United is now on final approach towards our product and premium vision that completely transformed United versus pre-pandemic for all customers. I could not be more proud of the United team that has spent countless years and hours planning these product changes. These are the type of changes and product improvements across all cabins and for all customers that we believe genuinely differentiate United. We will continue to watch the demand and pricing environment very carefully in the coming weeks and quarter to refine as necessary our approach to this rapidly changing environment. With that, I'll hand it over to Mike to discuss our results and our outlook. Mike?

Thanks, Andrew. The first quarter has been a reminder that successfully managing the airline for the long term requires being prepared for short-term shocks. We've accomplished that at United by earning brand-loyal customers. That strategy has led to margins at the top end of our industry and the best balance sheet we've had in almost 30 years. The financial strength that's created reinforces our ability to make the right long-term decisions. The latest challenge in our industry is the massive run-up in fuel prices created by the conflict in Iran. Fuel prices remain volatile, and we're monitoring the situation closely. We delivered resilient results with first quarter earnings per share of $1.19 within our initial guidance range of $1 to $1.50 and up 31% year-over-year, even with a $340 million higher fuel bill in the quarter. Our pretax margin was 3.4%, a 40 basis point expansion versus the first quarter of last year. Demand for the United product was already robust going into this heightened fuel environment. We believe we have the ability to pass on the increase in fuel due in large part to our brand-loyal customers, continued demand strength and preference to fly United even at higher fares. In this elevated fuel environment, we began to swiftly adjust capacity in addition to pulling our Tel Aviv and Dubai flights, which together were 1.5 points of our capacity. These close-in cancellations from low-CASM markets, along with significant storm-related capacity reductions throughout the quarter, pressured our unit costs. As a result, our CASM-ex for the first quarter was up 5.9% year-over-year. As discussed, we are also proactively removing about five points of capacity for the rest of the year that we don't believe can cover the elevated cost of fuel. We expect capacity in the back half of the year to be flat to up 2%, several points lower than our original plan. That will continue to pressure our CASM-ex, but we expect it will improve profitability and cash flow for the remainder of the year. This is precisely why we don't manage to CASM-ex but to long-term profits and cash flow. Looking ahead, we expect second quarter EPS to be between $1 and $2, anchored by an all-in fuel average price of approximately $4.30 per gallon. For the full year, we are providing an updated and widened guidance range to encompass multiple scenarios. As we've experienced over the last two months, the world can change quickly, but in both higher and lower fuel price scenarios, we expect to recapture 40% to 50% of the increased fuel cost in the second quarter, 70% to 80% in the third quarter and 85% to 100% by the fourth quarter. We expect to deliver full-year 2026 EPS in the $7 to $11 range. The demand environment to date remains strong, and we expect it will support a double-digit increase in RASM in the second quarter and for the full year. If fuel prices remain on a downward trend, we expect to be in the upper half of the guidance ranges. And if fuel reescalates, we would expect to be in the lower half of the guidance ranges. With that said, United remains in a strong financial position. Our resilience in a high fuel price environment as well as our relative position in the industry provides further confidence in our long-term target of achieving double-digit pretax margins as soon as next year. Our proactive approach to managing the network in this environment is helping us achieve this outcome. Turning to the balance sheet, we continue to march towards our goal of being investment grade. In the quarter, we took actions to make further progress towards this goal and paid down more than $3.1 billion in debt, unencumbering more assets by accelerating our repayment of $2 billion of our notes that were secured by our slots, gates and routes while also prepaying $400 million of near-term maturity or higher-cost aircraft debt. Additionally, the first quarter marked United's return to the unsecured market as we raised $2 billion across two unsecured bonds, our first unsecured issuance since 2019. The five-year bonds priced at competitive market levels, while the three-year bonds came in under 5% at around 4.8%. We successfully reset the credit curve for United, compressing the gap in our credit spreads with investment-grade peers to historically low levels. This was the first high-yield bond issued with a coupon below 5% since Ford did it four years ago. Our execution exceeded our initial expectations as the market responded with incredible demand. This is the strongest evidence yet that the buy side appreciates that we're knocking on the door of investment grade. In the first quarter, we generated $2.9 billion in free cash flow. And while our free cash conversion in the near term will be pressured as fuel prices remain elevated, we remain committed to generating durable and growing free cash flow. To wrap up, our first quarter performance remained resilient. We are managing the business with the expectation that jet fuel remains elevated in the medium term. We're nimbly adjusting the network and cutting capacity that doesn't cover fuel costs, all while continuing to invest in our people and our hard product. As we look to the future, United is positioned to deliver stable double-digit pretax margins, strong free cash conversion and strong EPS growth on the other side of it. I'll now turn it to Kristina to kick off the Q&A.

Thanks, Mike. We will now take questions from the analyst community. Operator, please describe the procedure to ask a question.

Analysts, please follow the provided instructions to queue for questions. Our first question will come from the line of Jamie Baker with JPMorgan.

So Scott, the CNBC interview where you articulated the idea of a larger brand that would capture passenger flows that are currently flying foreign competitors — it sounds like this is an idea that's still under development at United. But I'm curious, could you envision a world where United might operate its own hub in Europe the way that Pan Am once did? And second, do your existing partnerships with Star Alliance members factor in at all to your thinking in this regard? I mean, I think the idea of capturing foreign flows is fascinating. I'm just trying to think through how you might get there and maybe consolidation is the only way.

Well, thanks, Jamie. I thought you were going to get through that without saying the consolidation word. You almost did. First, I think it's extremely unlikely that we'll open a foreign hub anywhere. Our Star Alliance partnerships are great. They enable global reach and breadth. They enable us to give our customers the ability to fly to lots of cities around the globe that are never going to be big enough for United on our own and use frequent flyer miles to go to those kinds of places. So those are all great. Everything that I've said today—and that I said on CNBC and Bloomberg this morning—are all things that I have said in the past. People are viewing it in a different light because of the rumors that came out last week. But everything I said comes from our vision to build a great brand-loyal airline, and it just worked incredibly well. You look at our first quarter results: with this kind of increase in fuel prices to deliver those kinds of results—to be able to look through to the full year with fuel prices doubling and still have reasonable confidence in $7 to $11 of earnings and stay focused on the long term—it's dramatically different here at United than it was in the past. In the past, this would have meant furloughing and deferring aircraft orders and cost-cutting exercises. It's dramatically different now. We've won by winning customers in all classes of service. We invest nose to tail. Most of our investments apply to all customers: Starlink, seatback entertainment and Wi-Fi in every seat, the best app in the industry. These investments apply to every single customer on the airplane. Because that strategy has worked—actually even better than I thought—we can raise the bar on ourselves and aspire to something bigger. There is a big global trade deficit in the U.S. We compete with some really good airlines in the Middle East and Asia, and they have some advantages that we don't. I haven't said exactly what it takes to do it, and I don't even know the answer. Anything that might be an answer comes with complications and no certainty it will get there on its own. But it's an aspiration we have at United. I've talked about it and hinted at it in the past. It is an aspiration that I think United uniquely is in a position to take a run at. Dream big. That's the way you accomplish big things.

Okay. And for my quasi-related follow-up, it's on the tape that the administration is readying a $500 million rescue package for Spirit. I've been with you for the last couple of years in terms of permanent and irreversible structural change. But how does the industry continue to evolve if the government chooses to prop up failing businesses whose failures have nothing to do with fuel?

Yes. Well, first, I don't know what's going to happen there. We're proving right now that well-run airlines like United can be profitable and certainly don't need bailouts in a time like this. Spirit's business model was fundamentally flawed and the airline was not going to be able to make it or ever cover its cash operating costs. I hope that a bailout doesn't happen. But if it does, we're going to keep focused on winning brand-loyal customers. For us, this is brand-loyal customers; I don't think it has much effect on United one way or another.

Our next question will come from the line of Conor Cunningham with Melius Research.

I'm pretty happy that I don't need to ask the Spirit question. In a world where fuel remains elevated for a long period of time, just curious on how that changes your management style of a hub or your general view on profitability to the overall system. I assume you're refreshing that analysis for yourself all the time. Are you doing that for your competitors as well as you look for opportunities more broadly?

Yes. The answer is affirmative on all the above. We look at this daily, weekly, quarterly—however often is needed. As fuel prices go higher, the question is how will demand react. At this point, we can tell you that the price increases are going well and demand is hanging in there really strong. What we've done is proactively canceled flights, particularly on off-peak days and off-peak times, expecting that there could be some demand weakness in those channels. We'll see. We think we're ahead of the curve here, and we'll continue to watch it and monitor it. So far, so good, and demand is holding.

Perfect. And maybe just on the demand-destruction commentary a little bit. I'm trying to unpack it because in the past, you've talked about demand being somewhat inelastic to price. I realize you're not seeing it fall off now, but there's a lot of speculation that may happen. So as you run your scenarios, can you talk a little bit about how you expect premium, maybe the business traveler, to change? Or I assume that the demand destruction really comes from the leisure side. How do the scenarios play out within your 2026 guidance?

I think we're a bit in uncharted territory. I can tell you right now that all types of customers remain particularly strong. In the last week or so, our yields are up 20% year-over-year. More importantly, the business part of our business—business traffic—over the last two weeks is up 25%, and business revenue is up 25%. That's accelerated from up 16% in Q1 and 9% late last year. These price points are being absorbed and passed through, and volumes are increasing. For United, you'll recall we had the unique headwind last year related to Newark, which we're going to lap in about 10 days. That will create easier comps for United and maybe harder comps for others. The numbers look really strong over the last few weeks. We'll have to keep watching it, particularly as summer ends. To maintain these yields at United, we felt we needed less capacity on Tuesdays, Wednesdays and Saturdays and off-peak times, and we've done that. Business traffic is strong. Leisure traffic is bouncing in the mid-single digits right now, which we're happy with. We've had five broadly successful price increases. Right now, we are passing on yields that are up 20% year-over-year.

Conor, this is Mike. I just want to add on guidance policy. We've long had a guidance policy of building an act of God into the guidance. So what you're hearing from Andrew and Scott—there's nothing in our bookings that suggests demand destruction. But I believe it's prudent to be prepared for that. We are not seeing it now and we're hopeful we won't see it. The economy seems robust. The stock market indicates the economy is robust. It may be an act of God we did not need to be prepared for. But that is our policy, and we need to be prepared for lots of scenarios.

Our next question will come from the line of Ravi Shanker with Morgan Stanley.

Just on fuel, the debate appears to be moving from fuel inflation to fuel availability. What's your visibility, especially out in Asia or Europe, regarding potential fuel shortages and what the plan B might be in that case?

Ravi, great question. We've got really good visibility for four to five weeks. You are right to say this issue is centered on Europe and Asia; it's much less of an issue in the U.S. We don't see a lack of availability being an issue at all in the U.S.—it's a price issue. Even in Europe and Asia, as we sit here today, we think it is a price issue, not an availability issue. As prices rise, you're seeing the price of jet fuel rise much more than the price of Brent as crack spreads widen. We think price will be a rationing function, meaning there will not be spot outages, but we're watching it closely. The longer the strait remains closed, the more that is a risk. The risk is in Asia and Europe, not so much the U.S.

Great. And maybe as a quick follow-up, Scott, you said you compete with some good airlines in the Middle East. They're having some issues now. Do you see any structural share gain opportunities in transatlantic or longer haul from those challenges? Or vice versa, do you expect them to be aggressive when the situation settles down?

I think it's temporary. What Dubai and some of the Middle Eastern carriers have accomplished is remarkable and impressive. If I had to bet, I'd bet on Dubai. I think it will come back fully, but it won't come back immediately. It's temporary; we'll come back fully.

Our next question comes from the line of Scott Group with Wolfe Research.

So Scott, maybe this is a naive question, but why does the industry need a crisis to start pushing through such higher yields? Why can't we do it more sustainably? And when you take your 10% pretax margin target for next year, that roughly gets to $18 of earnings. I know you don't want to get into specifics, but at a high level, as fuel hopefully normalizes lower, do you assume you hold on to this higher yield? Or do we have to give some of that back?

I'll try to answer both. Over 25 years watching the industry, I've concluded that every airline CEO should spend time at a senior position in revenue management; it's core and most haven't. Revenue management teams know travel demand is relatively inelastic and there's room to price more appropriately to return the cost of capital. But marketing and other functions are often better communicators to the CEO and push back against fare increases. Marketing teams sometimes run fare sales weekly, undoing revenue management's work. Organizational dynamics make it hard to raise fares sustainably except in a crisis. Another reliable time to raise fares is late October or November when budgets are finalized and teams are asked to improve results. Now, regarding whether these price increases will hold next year: a situation like this has the potential to be different. Airfares in real terms were down significantly versus pre-pandemic, which pressured many airlines. I think it's more likely than not that pricing holds more this time, and the longer the elevated fuel environment persists, the higher the probability that pricing holds. If things went back to mid-February normal, my guess is we keep some portion of the price increase next year; as this goes on longer, a larger share will stick. We won't give specific guidance for next year here, but I do think we'll achieve double-digit margins next year.

Our next question will come from the line of Brandon Oglenski with Barclays.

Scott, I'm wondering if you could elaborate on winning brand-loyal share and specifically as it relates to your Chicago O'Hare hub, especially now that there's a proposed FAA summer cap on operations there. A, how are you faring versus your competitor? And B, how do you anticipate complying with that?

In Chicago, we're still reviewing the FAA order, but it appears we won't be able to grow as much as we and our customers would like. The important point is we've won brand-loyal share in Chicago; it's not about number of flights or gates, which are outputs of the brand. We have the best technology, service, reliability and product. Customers have overwhelmingly voted—this isn't unique to Chicago; it's happened in all our hubs. In our three big hubs where we had big competitors, we've won about 20 points of market share in each; in Chicago we've won 38 points of market share with business travelers. Quality matters and we've delivered it. The FAA order may limit how much we grow this summer, but it doesn't change the decade we've spent winning brand-loyal customers here.

Our next question will come from the line of Andrew Didora with Bank of America.

Maybe changing gears a little bit, a question for Mike on maintenance costs. How do you think maintenance trends as you cut five points of capacity throughout the rest of the year? I would think you get some leverage on the maintenance side. Or am I not thinking about that the right way? And from a long-term maintenance cost perspective, should we think about maintenance growing a couple points more than capacity growth?

Thanks, Andrew. A few points: broadly, expect CASM-ex to move inversely with the amount of capacity we take out—that's what happened in Q1 and what you should expect for the remainder of the year. The sooner you take out flights, the further out they are, the more you can variabilize cost. At United, we're investing to win brand-loyal customers, and nothing about this crisis is long-term, so expect us to continue investing. On maintenance, we have unique opportunities to fight the trend of maintenance cost expanding as a percentage of costs. Part of that is gauge, but part is our work in global procurement and with our tech ops team. I'm optimistic we will not face the same negative trend that much of the industry faces.

Got it. And on buybacks, you stepped it up this time last year amid market volatility, but Q1 this year was similar to recent quarters with muted buybacks. How did you think about buybacks this quarter?

Great question. We have two objectives with buybacks and capital management. One, we're absolutely committed to getting to investment grade. We need to balance buying shares opportunistically with that commitment. What you saw in Q1 is how we're balancing. I'm proud of the two unsecured offerings we completed. We will get to investment grade in all scenarios.

Our next question will come from the line of Sheila Kahyaoglu with Jefferies.

Question for revenue management: You're removing five points of planned capacity through the end of the year. What range would fuel need to settle in for United to return to mid-single-digit capacity growth in the second half? And how do you think about irrational capacity coming back online? How do you manage costs while continuing to invest?

That's a lot of questions, but the core is demand. We've cut off-peak capacity to sustain the yield increases we see right now. We'll continue to watch demand and manage the business to hit our financial targets and margins. If we can meet those targets with more capacity, we'll bring it back. Economics would suggest some level of demand reduction related to a 20% fare increase. We haven't seen it yet; if we don't, that's a great outcome, but we're planning for it.

Our next question will come from the line of Tom Fitzgerald with TD Cowen.

Multipart question for Andrew about commercial initiatives: If we bucket them into merchandising, fleet and MileagePlus, can you walk through the margin uplift you contemplate over the longer term from these initiatives? For instance, putting some Airbus aircraft on routes—how do they compare to the aircraft they're replacing?

I'll keep it high level. The initiatives we've worked on for years are meaningful. Properly merchandising products and being able to sell them—things we couldn't sell previously—are valued in the hundreds of millions per year. The new aircraft optimally configured for premium demand is also a significant number. I'm avoiding assigning values to each change individually here; maybe we'll do an Investor Day later to dive deeper. But the seven initiatives are all significant and set the foundation to reach not only double-digit margins but ultimately mid-teens margins. We're well on our way. We've dialed in segmentation and willingness-to-pay and are giving customers more choices across cabins. We have more ideas and plan to discuss them at a future event.

Our next question will come from the line of Michael Linenberg with Deutsche Bank.

Just on revenue recapture: Thanks for outlining the progression for the year. What gives you confidence you'll get to 100%? Do you need other carriers cutting capacity? And how quickly did you recover after the Russia/Ukraine disruption in 2022 when we had the last major fuel spike?

I'm not going to count on other airlines. From our perspective, the fact we've already gotten to a 20% yield increase is strong evidence. We've cut capacity appropriately to sustain higher yields. I feel confident we're passing through fuel increases. Demand is holding. We're well on our way with 40% to 50% recovered in Q2 and more to come.

The underlying point is that for a growing portion of our customer base, this is a decommoditized business. Brand loyalty at United—better experience, better value—produces results you can see in our performance.

Our next question will come from the line of John Godyn with Citigroup.

Following up on fuel pass-through: Could you give geographic color on how pass-throughs are evolving internationally versus domestic? Capacity trends differ, surcharge activity differs, competitors hedge differently. Some color would be helpful.

I thought domestic would be quicker to move than international, and I was wrong. Both are strong, but the international environment is actually better than domestic; price increases have been more substantial and are covering more of the fuel burden than domestically. There have been changes in overseas pricing behavior that have surprised me given industry dynamics. I'm really pleased with that. Depending on how long things last, the longer it continues, the more likely pricing will stick.

John, on hedging: if other carriers hedge Brent, that doesn't hedge jet fuel. A big portion of the jet move has been crack spreads. This experience has proven that hedging Brent is a poor policy for jet fuel exposure.

That's great color. For the pass-through to the end of the year, are you assuming status quo and not counting on other carriers to slash capacity to help your pass-through? Or are there industry dynamics you're looking for to drive 100% pass-through by year-end?

I can't speak for other airlines. We've engaged in self-help and know what it takes to pass on these price increases by managing what we fly. We're focused on hitting our financial targets and margins independent of what the industry does.

Our next question will come from the line of Chris Wetherbee with Wells Fargo.

On fuel pass-through and retention rates: You talked about holding on to 20% of increases and maybe that going to 80% over time. What's the mechanism behind that? Is it just duration? Competitive capacity actions? Ancillary pricing that sticks even when fuel comes down? How can you hold on longer?

The longer the price of fuel remains in this range and the longer consumers pay these prices and airlines become accustomed to the revenue stream, the more likely it is to stick. International is running well above domestic on price increases now. Most U.S. airlines haven't been returning their cost of capital, which is unsustainable long-term, so something had to change. It's unfortunate it took an oil shock, but here we are.

Our next question will come from the line of Duane Pfennigwerth with Evercore ISI.

On MileagePlus changes motivated to get more people to sign up: Can you speak to changes you're seeing in card uptake since you've made those changes? And what's the current thinking about the timeline for a new comprehensive co-brand agreement?

We've been working on the MileagePlus changes for well over a year and engaged in activities we can control outside a new contract. The uplift in spend has been incredible and we are really happy. It's still new, but early indicators are very positive; penetration of cardholders who are Premier members is at a record rate. The details of the deal with Chase are largely confidential; the contract expiration is not tomorrow but not that far off. We're working with Chase and view them as a great partner running a sophisticated program required by United's co-brand scale.

Our next question will come from the line of Michael Goldie with BMO Capital Markets.

By the end of the year, your aircraft count will be up around 8%. How do you think about operating leverage of these assets in a recovery versus the decremental drag if flight activity remains constrained? And related, how are you thinking about managing labor requirements as you take on this new equipment while managing capacity?

In an elevated fuel environment, it exacerbates the advantage of new, fuel-efficient equipment versus older equipment. You can see in our fleet plan we expect to continue taking delivery. It's financially advantageous to take the new aircraft from a margin and return-on-invested-capital standpoint. For older aircraft, there's an opportunity to fly them in a capital-efficient way by managing maintenance at the end of life to maximize value. You can bring utilization down, have extra spares and add flexibility to cover peaks. We are in an enviable position from a fleet standpoint and won't change our plan. On labor, we have a sophisticated team to manage hiring across workgroups at the appropriate level to ensure we invest in the customer, the hard product and our people while managing workforce efficiency.

We will now switch to the media portion of the call. Our first question will come from the line of Leslie Josephs with CNBC.

Just on the possible Spirit bailout—if the administration moves toward that, what's your comment? And does that change any of your assumptions for capacity? Do you think there will be more capacity out in the market just because there was a liquidation risk earlier this year? Also, any geography where you're seeing a pullback? I think you mentioned international was a bit stronger than domestic.

Leslie, briefly on Spirit: Well-run airlines are still solidly profitable even in this environment. United doesn't need a bailout. My record goes back years saying Spirit's business model is fundamentally flawed and likely to fail; I feel bad for the people, but I don't think a bailout is necessary. I also don't think it is terribly relevant to a brand-loyal airline like United in practical terms. On demand, putting the Middle East aside, we're seeing strength everywhere. We're seeing strength in premium cabins going into Q2, particularly across the Pacific and Atlantic. United went into the summer with a conservative global long-haul capacity number, and we look set to produce very good numbers with strong business demand into Polaris cabins.

To add: we're seeing strength everywhere except for the temporary disruption in the Middle East. Premium demand is very healthy and we're positioned well with our products going into the summer.

Thanks, Regina. As always, we don't control the environment, but we do control how we perform in it. I appreciate your interest today, and we will see you next quarter.

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