United Airlines Holdings, Inc. Q1 FY2025 earnings call

• Scott Kirby emphasized United's strong performance in a softer macroeconomic environment, noting they've won brand loyal customers, achieving the highest first quarter pretax margins since COVID began and expecting to be one of only two profitable airlines in Q1. He discussed investments like new clubs, Starlink Wi-Fi, and travel app enhancements. • Brett Hart highlighted operational excellence, mentioning United served more customers in Q1, was number one in on-time departures among US large peers, achieved high NPS scores, and made progress on Starlink technology rollout. • Andrew Nocella talked about revenue trends, noting demand turned down in January, domestic main cabin RASMs were down, but premium performance offset some of this. He discussed market share gains in key hubs like Chicago, Denver, and Bay Area, and adjusted revenue management strategies. • Mike Leskinen discussed financial results, stating EPS was $0.91, ahead of expectations, CASM X was up 0.3% year-over-year, and provided guidance for Q2 and full-year, also discussing balance sheet strength, free cash flow generation, and share repurchases.

United Airlines Holdings' first quarter 2025 saw top line revenue increase 5.4% to a company record $13.2 billion. TRASM for the quarter was up 0.5%. Domestic main cabin RASMs were down 5% year-over-year, but overall premium cabin unit revenues were up mid-single digits. International Polaris RASMs were up 8% and international premium plus RASMs were up over 5%. Loyalty revenue grew 9% to $1.5 billion in the quarter. Co-brand spend was also strong, up 9%.

• Q2 earnings per share expected to be between $3.25 and $4.25. • Full-year 2025 guidance remains $11.50 to $13.50. • In a recessionary scenario, expects full-year earnings per share to be between $7 and $9. • Q2 booked premium PRASMs for international flights remained solidly positive, and domestic capacity adjustments made to lower utilization.

• Macro-economic uncertainty and softer travel demand. • Potential impact of tariffs on aircraft purchases, though currently no meaningful direct impact anticipated. • Risk of US economy entering recession, which could lead to further revenue declines and require additional capacity adjustments.

Q: Presumably, this past January, you had an internal forecast for 2026 earnings. If we embrace something closer to the recessionary scenario that you just laid out, would your 2026 forecast be higher, lower, or the same today?

A: Scott Kirby responded that margins would be higher in a normalized back to growth economy, believing United's margins would be solidly double-digit in the long run.

Q: Why have you been active in share repurchases despite goals to de-risk the balance sheet and achieve IG ratings?

A: Mike Leskinen said they are optimizing their overall cost of capital, and as the share price declines and the gap between market price and intrinsic value widens, it becomes more opportunistic to buy back shares.

Q: Can you speak to how you can continue to move down the path of eliminating spill traffic in general?

A: Scott Kirby stated they are focused on creating the best airline for United customers, and their plan hasn't changed, with tactical adjustments made to pull out utilization points as needed.

Q: How do you think about maintaining that brand loyalty leadership over a multiyear period if other airlines invest in similar capabilities?

A: Andrew Nocella said United has an enviable position with their plan working, they have a strong foundation, and there are many planned announcements to continue innovating and staying ahead.

Q: Can you give high-level thoughts on how much lower nonfuel cost and lower fuel each helped offset revenue lower by five points than your January expectations in the base case?

A: Mike Leskinen said fuel has been the biggest tailwind, followed by cost management, and then the decision around capacity made early enough to save maintenance expense.

Q: How do we think about your operating margins and free cash flow in the seven to nine dollar scenario in a recession?

A: Mike Leskinen said operating margin is a matter of math, and free cash flow would be near breakeven but still positive.

Q: My question is gonna be a little bit more low brow. Just touch basic economy here. I think last quarter, you gave us a number. Maybe it was about fifteen percent of volume. When we look at, you know, the year-over-year increase in basic economy revenue relative to your total revenue, it's almost outpacing a two to one. Where is that percentage today? And is that just largely a function of the up gauging in next, or are you starting to see, you know, maybe more intense competitive, you know, competing at the lower part of the fair structure that's driving a higher volume?

A: Andrew Nocella said he expects in Q2 to see more competitiveness at the lower end of the fare structure creating higher volume, with the decline in demand happening quickly in mid-February and March not allowing quick reaction in Q1, but expecting expansion in Q2 based on market conditions.

Q: You guys dig into how you're defining brand loyal customers? Because I think this is a pretty important concept. And, Scott, I think in your prepared remarks, or maybe it was Andrew, you talked about, like, share of local customers. Is that a way we could start to measure it from the outside looking in?

A: Andrew Nocella said there are multiple ways to measure it, including origin market share, share among big global travel agencies, and it shows up in regular revenue premium to the industry and market share.

Q: Great. Thanks. Good morning, guys. So just to follow-up on the multiple scenarios here, but from a loyalty and co-brand standpoint, how do you think that evolves if we do get, you know, probably the first broad-based consumer recession we've had since 2008? Obviously, the whole industry and loyalty and corporate have changed a lot since. It stays as resilient as it was during the pandemic, or do you think it has greater risk?

A: Mike Leskinen said the loyalty business was resilient through the COVID pandemic and expects secular growth to continue through an economic weak spot. Andrew Nocella added that the brand loyal customers make the difference, with the flywheel effect continuing to strengthen the business.

Q: With China saying that they're going to halt Boeing deliveries, and we've got an aircraft engine and parts supplier that says they'll be scrapping shipments that are subject to tariffs. Building that on top of the current supply chain issues, is there kind of a crisis developing in the overall aerospace industry? And if so, what are your main concerns there?

A: Scott Kirby said it's too early to panic, aerospace is a successful high-tech manufacturer export powerhouse, and they view it as an opportunity to strengthen partnerships, with United having less exposure to tariffs making it easier to work through issues.

Q: You guys mentioned in the press release this morning about adding additional gates at O'Hare. Can you talk a little bit about how that fits into both the overall strategy for United as well as what it means for the expansion underway at O'Hare?

A: Andrew Nocella said they're gaining six gates later this year, which will allow them to continue executing on the United Next growth plan, with the hub economics looking good and excited about the future in Chicago.