United Airlines Holdings, Inc. Common Stock 2026 Q3 Earnings Call

Please go ahead. Thank you, Regina.

Good morning, everyone, and welcome to United's third 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, 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, and historical operational metrics will include pandemic years of 2020 to 2022.

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 here in Houston 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. I would like to put the call over to Scott.

Thanks, Kristina, and thank you all for joining us on the call today. It has been an eventful year, but it is once again given us the opportunity to demonstrate how de-commoditizing and becoming a true brand loyal airline was a structural change for United that gives us resilience in volatile times, and I expect it will lead to strong results in a normalized environment. We have built an airline that our employees are proud of, and they are delivering and have made United the leading airline around the globe. Before I start, I want to congratulate Boeing on the certification of the MAX 10. It is a fantastic aircraft, and we look forward to taking our first delivery next year.

On this call, we will talk a lot about 2026 and the current environment, but I want to take a couple of minutes to focus on 2027 and specifically answer the question: What will it take for us to reach our goal of double-digit pre-tax margins next year? We live and breathe no excuses, and the one thing you will never hear us say or use as a planning excuse is, "If it were not for fuel." Instead, we are planning for and actually expect fuel to remain elevated for all of 2027. It also appears that industry capacity will accelerate. Obviously, either of those things could change and get us to double-digit pre-tax margins, but we are not counting on it. So what would it take to get there in a higher fuel and capacity environment? To be blunt, even though we are outperforming, the traditional way of looking at it would be hard.

Though in fairness, I have been pleasantly surprised at the industry's ability this year to raise yields and pass through much of the increase in fuel prices. So it is possible that airlines will continue to focus on yields at the expense of load factor, and that alone could get us to double-digit margins next year. But we are not going to assume that will happen. You have heard me say in the past that hope is not a strategy. Instead, we are focused on things we can control, and those are the big investments we have made over the past several years in products, service, and technology. And one of those things is Starlink, a new and truly differentiating RASM tailwind in 2027. Today, about half of United departures are on Starlink-equipped aircraft, but we offer more Starlink flights than the entire U.S. airline industry combined.

We currently expect to reach 61% of departures by the end of 2026, 87% by June 1st, and available fleet-wide by the end of 2027. Importantly, we are also seeing evidence that Starlink is a motivating factor for customers to choose which airline they fly. That is why we launched a new tracker so people can check if their flight has it and can follow along as we outfit our fleet. It is hard to get brand loyal customers to switch airlines, and while it is mostly anecdotal, we are seeing two important things happen. One, customers who are brand loyal to other airlines and have flown them for years switch to a United flight solely because of Starlink.

Once they try us, they stick with us because they also experience great service and all the nose-to-tail things we've invested in for years, like new aircraft, larger seat back screens in every class of service, oversized bins, technology like ConnectionSaver, and a mobile app that's dramatically better than anything they've experienced before. We know that eventually high-speed, low-Earth orbit Wi-Fi will be industry standard for everyone. But for 2027, and really 2028, we are well on our way to being the only global U.S. airline with Starlink at scale. A lot of new customers are going to try us. It's a huge head start, and we're going to press our advantage wherever we can.

While others are just ramping up on their LEO Wi-Fi installations, we'll be onto our next wave of product and technology to sustain our lead and further deepen the competitive moats around our business. Our mission will be to show new customers the very best of United and then earn their long-term loyalty by demonstrating that we're the number one airline in everything else as well. With both fuel and industry capacity expected to be elevated next year, will that share shift happen fast enough to get us to double-digit pre-tax margins? While I do expect a meaningful RASM tailwind from Starlink in 2027, to be honest, it probably isn't enough on its own.

To get there in 2027, we probably also need at least one of the three following things to happen: lower fuel, lower industry capacity, or a continued willingness for the industry to trade load factor for yield. Regardless of what happens on how big the RASM benefits are in 2027, however, our series of big customer investments, including Starlink and some big new ideas we haven't even announced yet that are coming in the not-too-distant future, have emerged as a new tailwind to a plan that was already working at United. We expect to exit 2027 with more brand loyal customers than we otherwise would have had, and expect that to lead to higher RASM in 2027 and beyond. With that, I'll pass it over to Brett.

Thank you, Scott, and good morning. First, I want to thank all of our United employees for their tremendous work throughout the quarter. Our team demonstrated exceptional resilience and adaptability, working together to restore our operation and get our customers to their destinations. United ranked second in on-time departures for the third quarter, with United being first among the top seven U.S. carriers in July. We also delivered our second-best third-quarter post-pandemic seat cancellation rate in United history, ranking first amongst the three largest U.S. carriers for the quarter. Ultimately, the strength of our operation is reflected in our customer satisfaction results. In the third quarter, we saw our highest quarterly NPS score since 2022 amidst record passenger growth.

Our people remain at the center of everything we do. In August, we completed the first phase of our expanded pilot training center in Denver, increasing our capacity to train up to 860 pilots per day with 86 flight simulation training devices, 52 of which are full-motion simulators. This investment supports both our existing workforce and our ability to develop the talent needed for United's future. Transportation Secretary Duffy and FAA Administrator Bedford announced that they are seeking an additional $30 billion in improvements for our nation's air traffic control system. A safer and more resilient ATC system will benefit United's customers and operations, and we are actively engaged with the administration and both sides of the aisle in Congress to advocate for this much-needed funding.