United Airlines Holdings, Inc. Q2 FY2025 earnings call

Newark Situation - Newark faced challenges in Q2 with cancellations and delays due to FAA technology outages, runway construction, and staffing shortage, but has rebounded with bookings recovering, runway construction completed early, FAA infrastructure upgrades, and hourly flight caps implemented. ### Supply and Demand - Supply is adjusting like last year, demand has inflected upward due to reduced macroeconomic uncertainty. ### United's Strategy - Focus on revenue diversity, brand loyalty, cost convergence at high-cost airports, and focusing on comparative advantages. ### Operational Highlights - Strong on-time performance, with United ranking #2 in on-time departure among top 8 U.S. carriers, and Newark operation having fewest cancellations and most on-time flights in June.

United's top line revenue increased to $15.2 billion in the quarter. International flying outperformed domestic, with international RASM decreasing 1% compared to domestic's 7% decrease. Premium cabin revenues grew 5.6% year-over-year, while economy cabin was negative. Cargo revenue was up 4% year-over-year on record volumes and loyalty revenues were up 9%.

Q3 EPS - Expected to be between $2.25 and $2.75. ### Full Year EPS - Expected to be between $9 and $11. ### Cost Performance - Expect continued strong cost performance similar to Q2 in Q3 and Q4. ### Industry Impact - Anticipate industry capacity cuts benefiting United, with less overall industry capacity setting up an improved revenue backdrop.

Geopolitical/Macroeconomic - Uncertainties in tax, geopolitics, and tariffs. ### FAA Infrastructure - Issues with ATC infrastructure impacting operations. ### Competition - From low-margin airlines without strong brand loyalty and diversified revenue streams.

Q: Tom Wadewitz from UBS asked about cost performance and demand reset.

A: Michael Leskinen said cost performance similar to Q2 is expected in Q3 and Q4, and distribution expense is headed lower long-term; Andrew Nocella talked about a 6-point inflection in demand versus Q2 with stronger business traffic inflection.

Q: David Vernon from Bernstein asked about guidance and RASM step-up.

A: Michael Leskinen said they guide conservatively and bookings inflection makes the 9% - 11% full year EPS range achievable; Andrew Nocella mentioned the setup for Q4 with demand environment, published industry capacity, and business traffic rebound.

Q: Jamie Baker from JPMorgan asked about overtaking Delta margins.

A: Scott Kirby said United's focus is on returning to solid double-digit margins and creating a great airline for brand loyal customers, with United being one of the two brand loyal revenue diverse airlines.

Q: Conor Cunningham from Melius Research asked about industry thesis and basic economy.

A: Scott Kirby said the industry thesis is intact with supply adjusting and demand inflecting upward, and Andrew Nocella said expect a higher percentage of basic economy passengers in the next 90 days.

Q: Andrew Didora from Bank of America asked about corporate demand and basic economy.

A: Andrew Nocella said the demand environment has inflected positively and there are more open RM systems leading to higher basic economy penetration.

Q: Scott Group from Wolfe Research asked about Newark and JetBlue.

A: Andrew Nocella said 6-point improvement is broad-based with domestic improvement, and Scott Kirby said the partnership with JetBlue is important for being in JFK and having a built-in frequent flyer base.

Q: Tom Fitzgerald from TD Cowen asked about Connected Media and fleet.

A: Andrew Nocella said Connected Media is moving along with technology stack building and client roster expansion, and Michael Leskinen said Boeing is doing well on narrow-bodies with MAX deliveries ahead of schedule.

Q: Catherine O'Brien from Goldman Sachs asked about costs and flight attendant contract.

A: Michael Leskinen said running a strong operation and supply chain savings contributed to Q2 cost performance, and CASM in Q3 and Q4 is inclusive of the AFA deal.

Q: Duane Pfennigwerth from Evercore ISI asked about margin contributors and pilot hiring.

A: Andrew Nocella said international margins are strong and pilot staffing is balanced, and Torbjorn Enqvist said they've been balanced with pilots.

Q: Michael Linenberg from Deutsche Bank asked about Newark caps and 321 XLR.

A: Scott Kirby said Newark has capacity control and Michael Leskinen said no 321 XLRs this year with summer 2026 for international service.

Q: Stephen Trent from Citi asked about Europe tourism and flow.

A: Andrew Nocella said United has a strong summer to Europe, especially Southern Europe.

Q: Brandon Oglenski from Barclays asked about free cash flow and CapEx.

A: Michael Leskinen said free cash flow is expected to expand with operating cash flow outpacing CapEx.

Q: Mary Schlangenstein from Bloomberg asked about Starlink issues.

A: Torbjorn Enqvist said Starlink issues on E175 were resolved with 60 airplanes flying around.

Q: Leslie Josephs from CNBC asked about MAX 10 and Delta routes.

A: Michael Leskinen said hopeful for MAX 10 deliveries in 2027 and Scott Kirby said Delta's new routes aren't a big issue for United.

Q: Dawn Gilbertson from The Wall Street Journal asked about Polaris and barebones business class.

A: Andrew Nocella said United focuses on revenue segmentation to provide more choices for customers.