United Airlines Holdings, Inc. ($UAL)

And everyone for joining us for the conference today. Scott Kirby, CEO, Christina us for IR. Like Baskin is also with us today, dropping everything off the stage. We are going to do a fireside chat format today. If you have questions, you want to put them in through the pigeon hole. I have that device up here and I can try to work those into the conversation. Before we begin, Kristi is going to give us a few required disclaimers and then I'll hand the mic over to Scott. First of all, thank you guys for joining us. And I'll hand the mic over to Scott to talk a little bit about the state of the state, and then we'll dig into the Q&A.

Awesome. Thanks, Dave. The remarks made during this fireside chat may contain forward-looking statements, which represent the company's current expectations concerning future events and financial performance. All forward-looking statements are based upon information currently available to the company. A number of factors could cause actual results to differ from our current expectations. Please refer to our most recent filings for further information. Additionally, today's remarks may include non-GAAP financial measures. Please refer to our most recent earnings release for those non-GAAP and GAAP measures. .

All right. Now that you've been properly disclaimed. .

That was the highlight of the day .

I'm not sure if you want to actually say anything given the sale.

Well, thanks, everyone, for joining us and everyone listening online. I'll be brief. I'm sure we'll talk in Q&A about the more near-term near term that was developing much like we thought. Oil prices have been high. As everyone knows, demand has remained strong as is well publicized. So we feel pretty good about moving it as oil prices come down, moving to 100% revenue -- 100% recovery, probably even sooner than we otherwise would have as oil prices start to come down. . So we feel good about the near term. More importantly, we feel great about the strategy and the execution that we have had at United. We've been on a long-term journey to build a brand loyal airline that was durable that had resilience in the revenue, the diversity in the revenue -- multiple revenue streams, not just concentrated in 1 area, and we thought that, that would lead to higher margins in good times and provide a lot more resilience when times were more difficult. And I think both last year and this year, a lot of curve balls thrown last year and then oil prices this year, pretty remarkable compared to the history that I've been in the airline industry to see how resilient our results have been even in that environment. It really is because we've won brand loyal customers. I mean you get the customers wanting to go with you. It leads to much better financial results. Financially, as we look forward, we're -- this year is oil prices aside, we remain solidly on pace to have 50% conversion -- free cash flow conversion moving towards 75% as we start to taper off the number of aircraft deliveries that we'll take toward the end of the decade. -- we'll be moving from 50% to 75%. So we feel good about that. We think that there's an awful lot of upside for us, not uniquely, but us the biggest upside in the loyalty program. We've got a great partnership with Chase, but it's a decade old. And the other deals have been modernized. And we're just in the opening innings, it's starting to modernize our deal. You can see it through the disclosed financials, that there's opportunity for us there compared to some of our peers. And we look forward to that. We do expect to double the EBITDA in that particular business EBITDA and that particular business provides further upside. So we kind of look forward. We had a really good strategy. The team has done a great job executing whether it was the commercial initiatives, the operation, financials. We've done a great job of executing even though we've been growing a lot, generating significant free cash flow and expect those numbers to go up more as we aren't acquiring -- aren't spending as much on CapEx in the years to come, committed to getting to investment grade, and I hope to do that soon. And those are the things that we are focused on at United. So -- we feel good.

All right. So you've described United. It's a decommoditized brand loyal airline. Call changes at United and in the industry structural permanent irreversible, which if you don't -- if you need a second career after this one, the marketing and the tagline here is great. But for investors in generalist, who maybe heard that pitch before this industry in particular. What do you think is fundamentally different about the market and about United today that would make somebody who's not as familiar with the story that you'd want to kind of emphasize to.

A reporter they didn't publish it, but a reporter at an interview recently, like what's the biggest change in the last 10 or 15 years in the aviation industry. And I said it is the emergence for the first time of true brand loyal Airlines and there's 2 of us. And most of -- for most of history, brand loyal met your schedule. That's the commodity part of the business. If you live in Dallas, you're probably an American Airlines frequent flyer. If you live in Houston, you're probably a United frequent flyer. If you live in Atlanta, you're probably adult up regal flyer. If you live in Nashville, you're probably a Southwest frequent flyer because of the schedule. And so there are a lot of customers who -- the schedule drives it. But most people in the country live in markets where there's multiple airlines that have similar schedule utility you live in smaller cities, you Chicago live in New York, liven Los Angeles. -- multiple airlines have scheduled utility is equal. So that commodity part of the business is a toss-up. So it's the first time that airlines have differentiated themselves on everything else that matters to customers. And these 4 things in that bucket, technology, product, reliability and service. And if you look at it like technology at United is we're a clear leader in look across the board and around the globe. There's -- you could see it in the app, but the app is the tip of the iceberg for everything else that comes underneath it. We can just do things. We are doing things now that no other airlines that we're working on that know the airline is even thinking about yet. So we're way ahead on technology and reliability. I think we -- in about November of last year, moved into the point where we're the best operator certainly in the country, I don't track or airline around the globe. But New York, those of you here in New York, New York is now the most reliable of 3 New York airports, a remarkable change. Thank you to the FAA for helping us get there. On product, we're doing more to invest nose to tail in the cabins than anyone, and you could feel it and see it when you get on airplanes, whether it's seatback entertainment, we're going to have Starlink on our whole fleet. By next year, we're already close to 500 aircraft -- with -- starting today, just across the board on a product. And when you do all that, your people feel great. They're proud of the airline, and they deliver great customer service. And because of that, we just won overwhelming market share. You look at competitive market tick -- pick it on any 1 airline. But Three big hubs where we had a big or have a big competitor in all 3 of those hubs in the last 5 or 6 years, we've won about 20 points of local market share. Normally, 1 to 2 points is a big move in airlines. And when I say it's structural, permanent reversible, what I mean is those customers have switched to United in all of those markets, not just in -- in all of those markets. And for someone to switch back because the scheduled utilities, let's call it equal, Irish actually is better than all of them, but let's just call it approximately equal. To switch back, those other airlines have to be better than us. If you're going to scale at 1 to 100 and we're 100 and they're a 50, they getting to 75, they don't get 50% of the benefit. They get 0 because they still like aren't as good. They got to kind of get to 110 before they could switch. And that's like a decade-long process. It assumes we sit still. It's tens of billions of dollars of investment. That's why I say it's structural, permanent and irreversible because you get -- in a business like this, you get a big enough lead. The others can't catch up. They just can't. And in those competitive markets, they're forced to be what we call spill carrier. When we sell out of seats, they sell take it, but we're not slowing out, they don't all take it. And so I do believe it is structural. It is permanent. It is irreversible. You can see it in the financial results. And I realize other airlines might disagree with it, but it is structural permanent reversal.

All right. Thank you for that. So you have talked about this path to double-digit pretax margin in 2017 and getting free cash flow going from 50% to 75%. Doubling the contribution to the loyalty program gets a long way there. But as you think about the rest of the levers that you have to play with premium mix, change the network, efficiencies, investments in technology. What are the other sort of 2 or 3 things that really move the that investors should be .

It's going to maybe a boring answer. It's continuing to now what we're doing. If you'd have asked me to make a bet on February '26, where we'd be at double-digit pretax margins in or not. I would have an awful lot of money that we would now 2 days later, the Hernan started, and that up into the fuel prices. But we were almost certainly going to be double-digit margins this year. And -- and so a lot of it is just letting that play out. I think you just look at where we are right now, like nothing special needs to happen. I'm increasingly it's early to give 2027 guidance and stuff can change. But I am increasingly confident that 2027 will be double-digit pretax margins. All that has to happen is the current environment plays out. You don't need anything special for us to be at double-digit margins. So I think we're going to move -- I think by -- I think we'll be moving into double-digit margins next year. And then I think the path, I think that's sort of call that -- getting to 12% with no other sort of structural changes in the industry and other structural changes, I think, is what kind of get us to mid-double-digit margins. One of those has already happened, obviously, with 1 airline. There's still an awful lot of airlines that are breakeven or worse. If you're breakeven or worse as an airline, that means you got a bunch of flying that loses money. It's simple math. It is what's happening. And look, I don't know when that's going to get fixed, but that's upside for us. But I think we're current steady-state pace, we're at double-digit margins. The current performance of the business is double-digit margins. And just do core things that we're doing, drive more next year. I really don't even include the upside from the loyalty program explicitly in that. I think that's the core airline. I think the doubling the EBITDA and the loyalty program probably comes on top of that.

Okay. So if you think about that projection into 2027? I'm assuming you're seeing some normalization of the crisis in the Middle East. It feels to me like when I look at consensus and this is my read, investors have kind of taken the targets we had for '26 and just push them into '27. Is that the right way to think about it? Well, topically .

But certainly, if oil prices are normalized for 2027, our goal internally will be to make up for 2025 and 2026. And so I would want us to have margins and our goal has been a point a year. I would want us to have margins that are 3 points higher than 2024. So if I looked out today, we had a forecast that was less than 3 points of margin growth compared to 2025 between '24, sorry. Because a lot happened in 2025, what's happened this year. I'd be pushing hard to figure out how we -- so that's about 11%. .

Okay. So upside to that it's not just going to be a push from '26 to '27. It's going to be something .

And just I watch the dynamics in the market of what's happening. It feels -- I feel more confident. It can't be 100%, but I feel more confident about that path than I would have even a few months ago. .

And I'm assuming some of that confidence comes from kind of what you're seeing in terms of the consumer and the demand environment in relation to the fair increases that the industry has put .

Yes, I have expected more of an elasticity effect. I said there still will be, like, I mean you can't -- we all took economics, you can't expect to not change, but the demand environment is pretty strong. But sort of a lot of pricing cleanup, I guess, has happened. We're starting from a structurally better or tactically better base as oil prices start to come down.

And have you seen anywhere in the portfolio, leisure, regional domestic, international main cabin, whatever, however you want to slice it, where you've seen some demand response in response to higher fuel .

Not really. You always have some markets that are stronger and some that are weaker, but nothing that I think is structurally it's just normal noise.

Okay. And I think earlier this year, you started out kind of saying you'd be at 100% were captured by that pace that you laid out pre the start of the year is it kind of like the similar you feeling a little bit more optimistic last to .

Well, I'm telling -- I think the demand and the revenue environment has been spot on with what we were thinking. But oil prices have come down. And so the fuel price. So the hurdle to get to 100% is lower. So I think the 100% ought to be moving closer moving forward, just because oil prices have come down. Nothing about the demand environment is very much like we thought it would be.

Right. So 1 of the $65,000 question that I continue to get asked is fares are going up unit revenue is fantastic right now, but at some point, it all comes down, fares will then come down with it. How much of this can you keep -- as much as possible, well. .

Look, we are going to recover less than we're going to be a little below 50% in this quarter. So we haven't recovered 100% yet. So I look forward to getting to 100%. And as I said earlier, I'm feeling really good about double-digit margins. Next year, I'm not going talk about specific up pricing, but I'm feeling really good about double-digit margins next year. You can interpret that as you will.

But as you think about that the market normalizing for fuel, like what are the things that have changed in the business that should allow you to kind of keep some of that as price .

Well, like I said earlier, I think we're going to be a double-digit margin this year. So it's not a lot -- has had -- not a lot of sad change. Tactically, at United, we've pulled some capacity. There's no point in flying flights that are going to burn cash just because fuel prices have come up. But -- we really haven't changed much of anything. We've always had confidence -- the strategy has been working. Everything we see the strategy is working. So we've really, we've stuck to the strategy I think we would have been double digits this year. So it's pretty easy to think you're going to get that plus a little bit next year. You just got to keep executing.

All right. And on that topic of the strategy and product innovation, you guys have done a lot of product announcements in the last sort of 12 months, the coast liners, the XLRs, LiftPolaris, Par Studio. -- of everything in the pipeline, what are the 2 or 3 things that you're kind of most excited about bringing to customers and think have the most potential to move the earnings needle?

Well, Starlink on 100% of the fleet is going to be the biggest. That is going to be a differentiator versus every other airline. We're going to be the first to get there. We're going to be I saw less going to get there to Alaska is going to get there, but everyone else is going to be miles wind. And that by far is going to be the biggest. And then all the other stuff are just it's the hundreds of little things that we're doing to invest for the customer that make a difference. It's not 1 or 2 things. It's a culture of investing for the customer and the hundreds of other things. I was going to say a second one. It's 1 we already have, but we've got some cool stuff coming, and we've got some really cool ideas. It's the technology that customers experience using our app. I mean anybody that's 1 another. Like it's the most universal comment I get from people that have flown United and on other airlines is how much better the app is than anything that they've ever seeing anywhere else. It's not just the app that really is the tip of the iceberg. It's all the other things that go under the app to make it in. And we built a data -- we built data like we spent the last -- we started 10 years ago getting off of mainframes, spending money to get a modern technology, not just in the cloud, beginning on modern technology platforms, organizing our data in ways that you could use it. And those are the kind of projects that are hard for airlines to do because there's no immediate ROI. You spent -- we spent close to $1 billion. Just taking our existing systems, putting in a modern systems that did exactly the same thing as they did before. But once you get it in there, it just opens up all kinds of possibilities. I really think we're the only ones that have done that. And so we have some really cool stuff that we're ...

All right. And then I guess as you think about the -- that level of investment going into support premium, I'd be curious to hear how you think about measuring that pace of investment? Because it sounds like, hey, this is stuff we haven't done. And there's -- if we do it, we can get customers to pay us more. Like how do you think about prioritizing .

It is you're getting this from a guy who is likes math. It is good at math and understands math. But this is an art -- this part is an art, not a science because this is a challenge where everyone has building a brand loyal airline. Every single individual decision you say, if I make the decision to spend more on meals, spend more on wine, whatever, hundreds of decisions like that. Every single 1 of those, if you look at it and say, well, really like we spend an extra $5 million on wine and you think we're going to get enough people switching airlines because of the wine. And the answer is no. It's always no. And it's correct that the answer is no. And so any 1 decision saying, no, 1 of the finance department say, no, sorry, Mike, let in the finance department, say, no, what they always want to do is the right short-term tactical answer. But you string several hundred of those decisions together and all of a sudden, the brand is different. This is about building a brand. And so I don't have a perfect formula for it. I think of this as we have this vision of a brand airline. It's a mountain off in the distance, and we're driving towards it. And as long as our results, absolute and relative results are -- they're mile markers along the way to that mountain. And as long as they're good feel like we're on the right path. And if they start to get bad in 1 way or another -- financials, of course, which is happening with a different class of traffic. And we use all that data to try to do a little more art than science, what it means. But then we also have all kinds of great anecdotal data that supports Starlink is a 90-plus NPS for in-flight service. And the rest of our WiFi sure you is 90-plus NPS. Somebody told me earlier today that just in the past week as load factors are the past weekend for Memorial Day as load factors picked up, somebody just went rantanalysis because it's heavy load factors that flights with seat-back entertainment had a 15-point higher NPS than not. And normally, it's 5 or 6 points, but it's 15 points when it fights are full because that amps up the stress. And just like all those little -- so we do a lot of time going through data like that. So lots of anecdotal data that informs the judgment of how much is the right amount.

And how does this affect the cost profile of the business, right? Obviously, running an airline in inflation are.

We spend more. We've been on a path really for at least 7 or 8 years to add about -- we've about a point of CASM ex to our expense base for investing in the customer. And that's in the CASM ex. We're trying to be -- we've done a pretty good job on cost compared to everyone else. That's core efficiency. I much rather drive real core efficiency in the business and not cut the customer expense. I mean, the challenge in an airline is it's a lot like the U.S. government budget and entitlements -- like 90% of our expenses are fixed base. 80% of our expenses are fixed -- fuel labor contracts, airport landing fees, all those kinds of things are largely fixed. And so if you've got 20% of your budget to play with and you want to cut CASM x by 10%, you got to take 10% out of the customer. And you do that 10 years in a row and wholly color way behind. That's what's happened to some airlines, like they've been great at CASMex and terrible at earnings profile because customers care about that stuff. And we've been investing about a point of CASM ex don't do it all at once. We do kind of a point every year embedded within the CASMex that we've got to come .

And I know the answer to this, but I'm going to ask it anyway because I get asked it by investors in a time like this, when your budget hasn't blown by factor out of your control with oil, is there any temptation from the Department of -- no to pull back on some of those investments are you just going full bore. .

No. And we prepared for times like this. We prepared by having the best balance sheet we've had over 30 years. We repaired by being the top of the industry and profit margins. We are confident that this 1 way or another will be temporal that either oil prices will come back down and/or capacity will come out of the industry. So we have not pulled that at all.

And as you think about then the outlook for the next level of efficiency coming out of the network, where does it come from? You've gauged up quite a bit. I mean I think you're getting a little bit more to do in the Mid-Con .

Gauge because Boeing and Airbus have both been behind in aircraft deliveries, gauge hasn't happened yet. Gauge is yet to come. So gauge is coming. And we continue to use technology to just get more and more efficient with whether it's utilizing crews, running the operation better, just across the board, how we schedule and manage maintenance like as good as the app is that you people that customers can see or investors could go see our underlying technology for however, on the airline, like we should do a tour someday let people come out and see what the technology, our maintenance technicians work with. And you could do it toward another line with their mentions technicians work with, like technology is embedded so deeply and United. That's -- I think that's an unheralded unappreciated advantage that we have. I listed it first in those things about Brown Loyal was technology, those 4 items, it's probably an underappreciated advantage that we have at United.

And do you think there's still quite a bit of runway for United?

I absolutely do. And like I think a bunch of AI I am now a believer -- a bunch of the stuff that people do with AI, I think, is ridiculous, like summarize your e-mail, like great I want to read my e-mail. But it the ability to code and take your own data and just go experiment like the revenue management guys like there's things that I wanted to do for 20 years, but like to experiment with it like would have taken your each 1 of those experiments, I like 10 experiments. Each 1 of them would have taken a year of programming before you can even try and run it and then it might not work like an analyst can do it in a week now. I can write those literally, a good analyst can do it in a week and just run experiments and see which works. It's got some really good potential.

And how are you adopting that and rolling it out in the organization? Are you changing -- are you just training the existing people changing the way your program I was starting to do another company I cover, and they've kind of gone away from this old idea of having like a team of developers to come in and think about the job and just moving -- not doing much more .

It started with me. I hired AI tutor for programming. And I would tell you, like it turned me around a play with a few hours of lessons like amazing what you can do totally on your own. And so we're going into the business units and recruiting our own training programs to make people go be coders and experiment and try in a bunch of parts of the company.

That's exciting. All right. So -- let's see here. Obviously, you guys have been doing great in on-time departures, Cancel rate is very, very low. Operational discipline is a part of that, but also, obviously, some of the changes in Newark has changed in Chicago. Like how much of the differential step-up in performance is just because you're swimming in a less crowded stream versus you guys are really getting better and doing it the...

Chicago never went up, so that's not. New York is a big deal that the FAA finally after 10 years of me being in or 9 years be banging my head gains that will is managing the airport to equal the capacity. And it's just crazy that we schedule more flights than the airport handle. This is like when the people World Cup comes here, I don't know how many seats of that stadium at 80,000 -- let's say, 80,000 . If it's to 80,000, would you sell 100,000 tickets to the game? Like it's just dumb. But that's what we used to do with scheduling at Newark. And so that's been a big -- really big deal for Newark. But I also think -- I mean, part of the -- we're a technology focused airline. I mean I have -- partly, I have it in my blood. But the technology that we have to run our airline we watch what happens with our competitors when their storms come through and like, good grief, like the next day, sometimes 2 days later, like what the hell is going on there. . And I mean, we know, but we're just -- and we used to have that like we had Hellweg 3 years ago at Newark that was really, really bad. And we thought we had pretty good systems and technology, but that was a pivotal wake-up moment for us. We can now crews where this happens at airlines like anytime airlines are canceling after the weather has gone through. It's crew issues that are -- there's been some other airlines have had it recently, but crew issues that can linger in some places for days. We can now -- same person can process over 10x as much crew cancellation issues when there's events, so that we can just add to it. So we're literally 10x what we could do. And we thought we were the best before we're 10x what we could do 3 years ago. And that means we use -- have automated weather comes through like kind of push the button, let the system run. I mean it's harder than that. But we're pretty much always the next day up and running, and we cancel last during the day of the event because we have so much confidence about like next day, we don't have to cancel as much. And so we really like -- everywhere we fly, we're -- any time there's a new regular operation, we come to with the best of every airline in our cities.

So I think when we had this conversation in the last couple of years, we've -- at some point in the conversation I always talked about constraints that's pilot constraints or aerospace constraints, control or constraints. That's a little bit moved out of focus given the conflict in the Gulf. I'm assuming they've not moved out of focus for you. Like what are you worried about in terms of your ability to kind of meet your financial objectives for the airline from an input on .

I'm not the worrying type but

What are you monitoring?

The constraint that is real, and it's not something to worry about, especially if you're an investor that is real, is engines and components of it forging and casting engines like I'm sorry, like there's just not enough still 800 or 900 aircraft around the globe that are grounded for engines, and they're not -- that is not getting fixed this decade. . And as rates go up at Boeing and Airbus, like they're producing gliders and they're both fighting with the engine manufacturers. There's just not enough engines like supply is going to be constrained around the globe because there are not enough engines. -- not about how many Boeing can produce. It's not about how many Airbus can produce. It is about the engines, and there are not enough engines and they're not going to be for many, many years.

And what about sort of air traffic and controllers in that kind of issue?

Yes. I think that under this administration in Secretary Duffy and administrator Bedford, they're going to work to improve -- I think we're going to get more capacity into the system. And so it can -- but most of that will just be to run better. So that will be much better if we do that, block times will come down. There's a bunch of routes that you can go look at that took longer -- takes longer today than did 50 years ago to fly them out even though the planes fly a lot faster. It's all because of the air traffic control. So I think we'll be able to save time. So we'll burn less gas. We'll use the aircraft more efficiently, employs more efficiently, customers will be better. It's less a constraint mostly on growth. It's going to be more about using the aircraft. It's going to be more about efficiency across burn less fuel, leave less employee time, less customer time sitting on airplanes. And I think that we're on a good trajectory to finally make that happen.

I mean I've been doing more research on the FAA component of the aerospace management part of it. It seems like there would be some opportunity to optimize the allocation of space, which would then allow you to run faster. Is that a ...

They're working on it, but it's an easy problem to describe. In the real world, solving it is not as easy as because the world doesn't work as clean as it was deterministic, it'd be an easy problem for math minds to solve, but the world is stochastic. And so you can plan great for exactly where every airplane is going to be 6 hours from now. but to within 100 feet, but the chance is that they're all going to be within 100 feet of where you thought they were 6 hours earlier is pretty small. But do you think the complications -- tons of there's tons of opportunity. But we've got to probably experiment with it, take it a step at a time over the horizon still. It depends on where you think the horizon is. It's close enough to the horizon that we're working on it, working about with the FA, they're actively working on it.

So let's talk a little bit about structure and sort of the structural change in the industry. Obviously, we've gone through the bankruptcy of Spirit, which is something that you would have seen in the cards going and commented as much. And Southwest changing its business model, right? Obviously, there's a bit a pretty significant change in the discount space, how is that affecting your business? How is that changing your opportunity set? How is that changing? How you're thinking about?

The discount set, particularly the ULCCs, truths is no longer that dramatic. One of the is that happened on the ULCCs is the big airports price them out of the market. Like when the New York Airport are charged at $52 per employment spirit in frontiers average fares $58, like I'd be a rocket scientist to know that fine of the New York area airport doesn't work like you're spending $52 before you've paid for your gas or your employees or your airplanes or anything else like it just doesn't work. . And so I think that, that portion of the market is 1 way or another going to retreat to the niche that works. The nice that works is big -- is leisure markets that don't have competition from big airlines. The Allegiant model works and the other markets to Orlando and sort of Orlando, Vegas, maybe a few other beaches. But trying to fly in Atlanta is not going to work for any ULCC.

What about Chicago Vegas? Does that work at some now?

It's too expensive. Yes. It's too expensive for them to fly. And we are now -- we can be -- we are price competitive because we've upgauged and we've got basic economy like it doesn't work. I mean, I look at the P&L of every year on bet that I know the P&Ls of my competitors better than most of their CEOs know the route by route P&Ls, those routes don't work. I know they love them. Look, there's a golden rule for airlines, like every airline in the world could earn its cost of capital if they would just follow the golden rule. Don't fly places that lose money, have the discipline to stop flying places that lose money. And I, by the way, have closed 3 hubs in my career as much as I like to be aggressive. I have closed 3 hubs in my career. Delta, by the way, closed 3 hubs. You cannot be successful if you're dragging around an anchor and you cannot be successful if you're not willing to pull the losses on place lose money. Most airlines aren't -- it's hard on your ego for some people at least. It's hard on the ego. Most airlines aren't. But that's the golden rule of investing. And Spirit didn't learn in time. And I don't know if untiring either.

So what do you think happens prospectively then?

I think they're going to be materially smaller. I don't know if like they go bankrupt and drink or they just shrink or somebody goes away or they're going to be materially smaller because they got to shrink down to the niche that works. Eventually, they're going to be in a niche that works, that's solidly profitable for them. There's a good profitable model there. It used to be solidly profitable. When they started to grow outside of their niche, you get out of your niche, you're in trouble and they got out of their niche. In Chicago, Vegas is out of their niche. .

So is this more organic consolidation? Or do you think there's going to be opportunities large scale consolidation? .

Are you asking me about consolidation. I've been waiting for you to get there. Well, look, here's -- I'll just speak for United instead of others. I thought there was -- for many years, have thought there was that only the kind of big transaction that we tried was the only 1 that made economic sense. -- and none of the other deals made sense. And also know though that the big transaction required a willing partner, which we clearly don't have. So I don't think that United at least is going to participate in any consolidation for any time I can see in the foreseeable future. .

So the thesis out there that was swing big for American and then maybe it's easier to do a smaller deal. .

Idiotic. Sorry. Had it like, I don't understand that at all. .

You're not going to find me. .

I got to understand that at all, but that was definitely not the plan. .

Okay. I mean do you think though that there would have been room to get that deal done?

It's not about room to get the deal done, like, look, I have a mic respect for Joanna and her team and what they're trying to do. And I wish them look, and by the way, we're going to try to help them be successful. But I already talked about discipline. Like I've been disciplined enough to close 3 hubs. The last thing I'm going to do is buy a route network that loses money. . And I think for us, like I look at that, you can do the math, too, like we got to somehow think we can improve JetBlue's margin by 25 points to make it work? Like that seems mathematically close to impossible to me. Like I never understood why everyone thought we were going to do it. I never said it never hinted at it. I never understood why everyone thought we were going to do it. It just seems mathematically not doable like I'm pretty good in math. So I never understood it.

All right. So you guys have obviously also made a lot of progress on the balance sheet, kind of improving the quality of the -- getting closer to, I guess, to investment-grade rating. When you get there, what changes? Anything besides cost of debt? Or is there going to be a more formal change in capital return priorities .

I'm sure there will be. We're going to get there first, and then we'll have a good robust confidence in -- it's a robust discussion with our Board, who will appropriately want to be involved in that. But let's get there first. And look, 50% free cash flow now and then moving to 75%. By the time we're moving towards the end of the decade, we're going to have a lot of free cash flow, I think we'll be solidly investment grade. And a huge a big chunk of that will be some form of capital return to shareholders assuming we progress the way we think. .

Conversation with the Board at a later date. Yes. Okay. So CapEx, less than $8 billion to $26 billion. It's kind of inside of your multiyear band that you have laid out around $7 billion to $9 billion. the capital hierarchy for within that $8 billion, right? Obviously, you've got some aircraft delivery. Beyond the aircraft delivery, where are you spending the reinvestment? What technology technology. Okay. customer-facing, internally facing?

Both .

Like the app, the connected media .

I mean, it's sort of all of the above. We're spending on the app. We're spending -- we're going to be spending more on -- we are spending more on AI now. running experiments. We're spending money and revenue management. We're spending money in the operation sort of across the board. We -- I already said like we spent close to now about 8 years getting our platforms modernized, largely modernized and getting them in data lakes where we have easy access to the data. They're not in some of the old systems that are a lot of places. We also, by the way, we're sort of in this unique -- we used to be an advantage like we got lucky on this one. We're the only airline, I think, in the world that owns our own reservation system. We run on shares. We don't have to go through Sabre. We don't go to Apollo, like they're so difficult to deal with for others. I've talked to other airline CEOs to try to do stuff like your data is all there, like you're kind of stuck. So we're just in a better place because we did that. Now it's doing things to use all that data. But we're really -- we're kind of growing across the board. Our goal is within a year to be also to be twice as 100% increase in productivity for our DT team as measured by -- it's hard to measure it for sure. But you could measure by lines. I don't know if you measure by lines of code it's the right metric, but to double the amount that they do.

Now as you think about maybe if we drill into the revenue management system component of that, right, there's been some talk about whether it's AI within the revenue management process or supporting the revenue management process. Your experience with coding and getting the data -- getting large series of progressions done sort of very quickly and being able to kind of do that stuff. As you roll that into the system, should we be expecting that to show up in a better unit revenue outcome, lower cost? Like how .

That's a better unit revenue outcome. .

Okay. And then what about the extra time that the analysts would have spent a year building a model that can get it done in a week then? .

Well, they didn't spend the year before. Like to me, the promise of AI is much less what everyone else is talking about, about doing things that people already do faster efficiency. The promise of AI. And by the way, I don't think you justify the trillions of investment, if all you're going to do is like read your e-mail a little bit faster and do that kind of stuff. I think you can justify the trillions of dollars investment if you're going to do things that nobody thought were possible before and do new things. I'll give you 1 good example. Every flight's story. At United for customers. The goal is to get to a point where any time there's a flight delay, we tell customers in clear plain English that we send them text messages, we're going to start to send videos like maintenance videos and cool stuff about exactly what's going on with their airplane and why and try to give them really good information. Because generally, if I mean, most people in here fly if you know what's going uncertainty, that's a killer. You walk up to a gate and it says your flights on time and you're supposed to be boarding and there's no airplane at the gate. We don't -- that I don't think that happens to the United. But that does happen. It's some airlines like it buries you. And so giving people good information. The goal I've set for the team is pretend to I'm on the flight, and I've asked what's going on with my flight. What would you tell me, I want to tell all of our customers that. And we've been doing that, Mike, we call it every flex story and some of the results. I got some phenomenal statistics when we do it and do it well. But it's really hard to do for 6,000 flights a day, especially when there's weather and it's uncertain thunderstorms, maybe they're going to -- maybe the airport's closing, maybe it's not, you don't know. And so it's really hard to do. And I think we're probably 2 to 3x better than any other airline in the world just because we're the only 1 that's really worked on it and tried to do it. We've decided that the current path that we're on is never going to get to the nirvana that we want. And we're starting brand -- we started a brand-new work path that's built kind of native AI, building the right data so that it doesn't require any human intervention that the AI will be able to tell you about every flight and what's going on with every flight with no human intervention, just from all the other data that we have and everything else that you can see about the system. By the way, I think that will be great for customers, won't only help with customers that will cause more brand loyal customers to fly United. It will be unique. They'll feel different than any other airline in the world than when we're able to do that. But I'm convinced we're going to find all kinds of ways to run our operation more efficiently when we've built that. And that, to me, is what AI can do. When we're building that, we're going to be able to run the airline better, a lot better than we could before because we built that infrastructure for every flight story. So that's 1 of my favorite examples of what we're trying to do.

Thank you for sharing that. Question from the audience. If you sort of disaggregate the customer views into areas where you are performing and areas where you can still improve, what are the things you're doing to improve those areas where you need to get better from a customer experience and .

We're trying to improve across the board, like the nearest-term thing that we can do applies to every customer, which is WiFi. Like I told you, 90-plus NPS when we have Starlink on the airplane. I actually like announce the most common complaint -- I'm counting like my FIA delayed for whatever reason. But the most common structural complaint that I now get is about WiFi. And partly, it's because we've raised the bar on WiFi by getting Starlink on and the legacy providers that we have. Just it's dramatically different. And so getting that done as fast as possible is probably #1 on my list for customers.

Anywhere else that you are looking at .

We're doing it across the board. It's not like there's some 1 magic bullet. This is about running the airline, running the airline well, doing all the hundreds of things well. We have a great team that's doing it like there's not some magic bullet. It's about executing and executing on everything. .

Okay. And the part of that execution, obviously, is cultural transformation. We talked about this, I think, the last time you were with us. You've gotten the attendant agreement done. How is the level of satisfaction buy in -- how are you thinking about the team .

Our people are great. They're doing a great job. Our flight tents, by the way, did a great job as we were going through negotiations. A lot of times, you've heard airlines if people have followed along. -- bleed through and lead to bad customer service that did not happen at United, our flight tennis were awesome. They're the best in the world. I'm glad they got the industry-leading contract that they deserve. But you guys go fly and you decide, but I think the culture at United is great. Our people are proud. I tell our team that I have the easiest job of anyone at United because I really only have 1 responsibility create an airline that they're proud of because if they're proud, they're going to take care of everything else. And they're importantly, they're going to want you, the customers to feel the same way. And I hear that from all the time. I had someone stop me walking through the hotel here today, just in the civilian clothes, and he's all excited. He's a United pilot. I want to stop and take a picture and just excited. And just -- I hear it from all the time. I was at my daughter's wedding this weekend, which is pretty cool. But there was a Yes, thank you. I had to get that in somewhere. It's cost betting market. No I'm not, it's kidding. But there was a retired United pilot that retired 2 years ago, he was there. like he was just bragging everyone like, "Oh, United is the greatest. And like it is the best like I hate that I had to retire and he's married to a captain for another airline. And she was Well, I don't know who it was, if I tell you everything. But anyway, she was wishing -- it was like that at our airline. But it's just great. I hear it from all the time. I see it in the customer satisfaction score. I see in our NPS scores like Crossword they're doing a great job. And momentum is great, like you get momentum. That's another reason, by the way to make the kind of product investments, like I really look at the product investments through the lens of how our employees are going to feel about this. And like I don't want our employees in a position where they have to apologize if they're having to apologize for something, they're behind the 8 ball. And like WiFi was the last structural thing that people had to apologize for. And going fast enough certainly 100% fast to

It sounds like the employee buying is there. The product innovation is rolling. You got a group of generalist investors and obviously, investors on the webcast listening today, what's the bull case why is United the right place to put an incremental dollar of capital to work? And what's the 1 thing you think the market doesn't understand about the story? .

First, I think we had a great strategy, and we've executed really well, and we're going to continue. We have a no excuses mantra at United. Like we've got all kinds of stuff happen. They come make excuses, but our Chief Operating Officer, I use no excuses because I went to the Air Force Academy, our Chief Operating Officer, Toby Invest, sayespecially talking about the weather. . It may not be our fault, but it is our responsibility. And that matters to how you pave on everything, but it also matters how you take care of customers. And winning brand loyal customers really, we've proven in the last 2 years, like this is close to a recessionary environment for many airlines. And you can look across the result that we have resilience. And when times are good, we do even better. we outperform in times are good even more, and we retain more of the revenue when times are bad. And we've been investing a lot, growing and buying aircraft. But as we've said all along, that starts to taper towards the end of the decade. So if you care about free cash flow, which we do, that number is starting to go up and you're getting it at just a remarkable multiple. I do not think that airlines like United or Delta by the way, are going to trade at 8, 9 multiples. Once we've proven durability, sustainability of earnings, high free cash flow conversion, in the years to come. And so I think you're getting a pretty screaming bargain. I don't know what's going to happen with stock tomorrow. I don't know what's going happen straight to or moves tomorrow. There's a lot of volatility. I wish it was less volatility. But if you're a long-term investor, it's hard to come up with much better to me.

With that, I think we're going to close it down. Thank you, Scott. Thank you for the United team for coming out and joining us. .

Thanks, everybody. .

And thank you all for supporting the STC. Enjoy the rest of the conference. .