Summary of United Airlines FY Conference Call - September 11, 2025 Company Overview - **Company**: United Airlines (NasdaqGS: UAL) - **Event**: FY Conference Call Key Industry Insights - **Transformation in the Airline Industry**: The airline industry is undergoing a significant transformation driven by customer preferences rather than just price and schedule considerations. Customers are increasingly choosing airlines based on product quality, loyalty programs, and overall experience [6][8][10]. - **Customer-Centric Business Model**: Airlines that focus on customer experience and product differentiation are expected to outperform those that primarily compete on cost. This shift is fundamental to achieving double-digit margins and maintaining an investment-grade credit rating [13][21]. Financial Performance and Projections - **Current Margins and Resilience**: United Airlines is currently operating at a 12% margin, which is expected to remain resilient even in the event of an economic downturn. The company aims to avoid diluting shareholder value by issuing equity during crises [15][17]. - **Investment in Customer Experience**: The company has invested significantly in enhancing customer experience, including a $100 million investment in food quality and improvements in club facilities [20][21]. - **Future Margin Expansion**: The path to double-digit margins is seen as achievable through a combination of customer-led demand, disciplined cost management, and operational efficiencies [34][38]. Competitive Landscape - **Differentiation Among Airlines**: There is limited space for differentiated, brand-loyal airlines at the top of the industry. While cost-focused airlines will continue to serve smaller markets, the overall preference is shifting towards airlines that offer superior products and services [24][25]. - **Impact of Competitors**: Other airlines are attempting to pivot towards a more customer-centric model, but they are perceived to be lagging behind United Airlines in this transformation [20][22]. Operational Updates - **Newark Airport Operations**: The resolution of operational issues at Newark Airport is expected to improve reliability and profitability. The airport's capacity has been capped to enhance operational efficiency [51][54]. - **Corporate Travel Recovery**: Corporate travel is showing signs of recovery, with expectations for continued growth as businesses catch up on travel that was postponed during the pandemic [45][49]. Future Outlook - **Near-Term Trends**: Strong booking trends are anticipated for the fourth quarter, particularly in corporate travel. The company is optimistic about matching supply with demand in the upcoming quarters [39][44]. - **Technological Investments**: United Airlines is exploring AI tools to enhance customer service and operational efficiency, particularly in managing irregular operations [95][104]. Strategic Partnerships - **JetBlue Partnership**: The partnership with JetBlue is expected to enhance customer choice and improve ancillary revenue opportunities, benefiting both airlines' customers and shareholders [76][78]. Financial Discipline and Shareholder Value - **Focus on Return on Invested Capital**: The company emphasizes the importance of financial discipline and return on invested capital, with shareholders increasingly holding management accountable for financial performance [29][30]. - **Balance Sheet Strength**: United Airlines has a strong balance sheet, with plans to optimize borrowing costs and maintain flexibility for future growth [120][121]. Conclusion - **Positive Outlook**: The overall sentiment from the conference call indicates a strong belief in the company's strategic direction, operational improvements, and the potential for significant shareholder value creation as the airline industry continues to evolve [124][123].

Financial Data and Key Metrics Changes - United Airlines reported a top line revenue increase of 1.7% to a record $15.2 billion in Q2 2025 [25] - Earnings per share (EPS) was $3.87, within guidance and ahead of Wall Street expectations of $3.81 [38] - The company generated over $1.1 billion in free cash flow and ended the quarter with $18.6 billion in liquidity [41][42] Business Line Data and Key Metrics Changes - International flying outperformed domestic, with a decrease in RASM of 1% for international compared to a 7% decrease for domestic [27] - Premium cabin revenues increased by 5.6% year over year, while economy cabin revenues were negative [28] - Cargo performance was strong, with revenue up 4% year over year on record volumes [28] Market Data and Key Metrics Changes - The demand environment showed a six-point positive swing in sales in July compared to Q2, with a double-digit increase in business revenues [31] - Newark's share of New York City sales has largely recovered in July, which is critical for revenue performance [29] - The overall demand environment has improved due to reduced macroeconomic uncertainty, leading to positive year-over-year yields for domestic ticket sales for the first time since February [31][96] Company Strategy and Development Direction - The company continues to focus on revenue diversity, including both basic economy and premium offerings, as a formula for industry-leading margins [12] - United Airlines plans to introduce the Polaris Studio Suite later this year to enhance premium capacity and revenue diversity [36] - The company is optimistic about future growth, particularly with the expected reduction in low-margin airline capacity [30][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of demand and the operational improvements at Newark Airport, which is now performing better than ever [19][20] - The company anticipates continued stabilization in the geopolitical environment, which is expected to drive stronger bookings [40] - Management believes that the industry is transforming into a healthier state, with brand loyalty becoming increasingly important [39] Other Important Information - The company has reduced gross debt by almost $11 billion since the peak level during COVID [42] - United Airlines repurchased $235 million worth of shares during the quarter, leaving $829 million in authorization [43] - The company is targeting net leverage below two times and continues to work towards achieving investment grade [42] Q&A Session Summary Question: On cost performance and distribution expenses - Management highlighted strong cost performance with a 2.2% CASM ex growth in Q2 and noted a long-term trend of decreasing distribution expenses due to more customers choosing direct channels [48][50] Question: On demand recovery and current levels - Management confirmed a six-point inflection in demand compared to Q2, particularly strong for business traffic, and expressed optimism about the recovery trajectory [51][52] Question: On guidance and demand acceleration - Management explained that guidance is conservative, accounting for potential uncertainties, but recent strong bookings suggest that the guidance may prove conservative [60] Question: On competitive positioning against Delta - Management emphasized a focus on returning to solid double-digit margins and highlighted the structural advantages of United's hubs and brand loyalty [71][72] Question: On the Connected Media initiative - Management indicated that they are working on building the technology stack and client roster for Connected Media, aiming to double revenues in 2025 compared to 2024 [114] Question: On fleet deliveries and supply chain - Management reported that Boeing is performing well with narrow-body deliveries, while wide-body deliveries are still uncertain due to engine constraints [118]

Financial Data and Key Metrics Changes - United Airlines reported a top line revenue increase of 1.7% to a record $15.2 billion in Q2 2025 [24] - Earnings per share (EPS) was $3.87, exceeding Wall Street expectations of $3.81, and if excluding the impact of Newark disruptions, EPS would have been at the high end of guidance [36][37] - The company ended Q2 with $18.6 billion in liquidity and generated over $1.1 billion in free cash flow [40] Business Line Data and Key Metrics Changes - Consolidated TRASM decreased by 4% on a 5.9% increase in capacity, with adjusted TRASM expected to be down 2% to 3% without Newark's impact [24] - Premium cabin revenues increased by 5.6% year over year, while economy cabin revenues were negative [26] - Cargo performance was strong, with revenue up 4% year over year on record volumes [26] Market Data and Key Metrics Changes - International flying outperformed domestic, with a RASM decrease of 1% for international compared to a 7% decrease for domestic [25] - The Atlantic market experienced a 23% RASM growth since the pandemic but had negative RASM year over year in Q2 [25] - The company noted a significant recovery in Newark, with bookings largely recovered and operational performance improved [17][18] Company Strategy and Development Direction - The company emphasized revenue diversity as a key strategy, including both basic economy and premium offerings [11] - United Airlines plans to further lean into premium products and capacity in the coming years [26] - The company is focused on building domestic connectivity at its hubs and plans to introduce the Polaris Studio Suite to enhance premium capacity [34] Management's Comments on Operating Environment and Future Outlook - Management noted a positive inflection in demand due to reduced macroeconomic uncertainty, with a six-point positive swing in sales in July compared to Q2 [30] - The company expects continued stabilization in the geopolitical environment, which is driving stronger bookings [39] - Management expressed confidence in achieving double-digit margins in the long term, driven by brand loyalty and diversified revenue streams [38] Other Important Information - The company repurchased $235 million worth of shares during the quarter, leaving $829 million in authorization [42] - United Airlines paid down the remaining $1.5 billion balance of its MileagePlus bonds two years early, unencumbering a significant asset [40][41] Q&A Session Summary Question: Cost performance outlook - Management expressed pride in the cost performance, expecting similar results in Q3 and Q4, with distribution expenses decreasing as more customers choose direct channels [45][48] Question: Demand recovery status - Management indicated a six-point inflection in demand, particularly strong for business traffic, and noted that bookings have improved significantly [49][50] Question: Guidance adjustments - Management explained the conservative guidance approach, emphasizing the importance of delivering on commitments while acknowledging strong recent bookings [56][58] Question: Industry capacity dynamics - Management discussed the distinct demand situations among carriers and the natural tendency to push aircraft harder during peak periods, leading to capacity adjustments [96][98] Question: Newark's impact on performance - Management confirmed that the six-point improvement in performance is broad-based, with Newark showing significant recovery [102] Question: JetBlue partnership significance - Management highlighted the importance of the JetBlue partnership for expanding market presence and enhancing customer loyalty [104][106] Question: Connected Media update - Management reported progress in building technology and client roster for Connected Media, aiming to double revenues in 2025 [111] Question: Fleet and supply chain updates - Management noted that Boeing is performing well with narrow-body deliveries, while wide-body deliveries face some constraints [115][116]