United Airlines Holdings, Inc. (UAL) Earnings Call Transcript & Summary

Good morning, and welcome to United Airlines Holdings Earnings Conference Call for the Second Quarter 2026. My name is Regina, and I will be your conference facilitator today. [Operator Instructions] This call is being recorded, and is copyrighted. Please note that no portion of the call may be recorded, transcribed or rebroadcast without the company's permission. Your participation implies your consent to our recording of this call. If you do not agree with these terms, simply drop off the line. I will now turn the presentation over to your host for today's call, Kristina Edwards, Managing Director of Investor Relations. Please go ahead.

Thank you, Regina. Good morning, everyone, and welcome to United's second 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 and 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 exclude 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 and our 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. And now I'd like to turn the call over to Scott.

Thank you, Kristina, and good morning, everyone. I want to start by thanking the United team for staying focused on taking care of our customers and running a best-in-class airline and not letting the conflicts in Iran distract from the consistent execution we've become accustomed to. 2026 is once again demonstrating the durability and strength of the United business model. Our focus on building brand loyalty is evident in our strong top line performance with second quarter revenues up 16%, recovering about half the increase in fuel price for the period. The significant increase in fuel in just the past week is also proof that our strategy is resilient. At this time last week, I was planning to tell you that we had a good line of sight to growing earnings year-over-year based on what we expected our guidance to be at the time. But fuel has gone up a lot in the last week, and we've decided to once again be a leader by changing our guidance policy on fuel. We feel we owe it to investors to update our practice and provide guidance to reflect the most current fuel prices. The fuel price spike this month is equal to $1.12 of EPS, so if fuel goes back to where it was earlier this month, we expect to be above the high-end of the guidance range. While our multiples don't yet reflect it, we believe this industry has structurally changed, as demonstrated by the quickness of the fuel recovery for United but also at an industry level. Perhaps the most important structural change in the industry has been the significant inflation and harmonization in nonfuel costs like airport fees, labor and maintenance. Cost inflation is what is driving fares higher, though fares still remain 13% lower in real terms compared to pre-pandemic. In the quarters ahead, I expect yields to continue returning to reasonable pre-COVID levels that will ultimately allow the industry to earn its cost of capital. The impact of structural changes are just now beginning to be felt. Demand remains robust as we expect both 3Q and 4Q RASM to grow faster than 2Q's 12% and yields for fourth quarter are currently booked about 14 points higher for 4Q than at the same point in time for 3Q. Demand is strong and the overall cost pressure continue forcing fares higher. United has proven that our brand loyal strategy is working, and we're using today's environment to accelerate our investments in all aspects of the customer experience from nose to tail. My conviction in building a brand loyal airline is stronger than ever and I'm encouraged by the consistent share gains we've seen across the board and the corresponding financial results. The more brand loyalty we have, the stronger we expect our earnings will be during good times and more resilient our earnings will be during industry shocks events. And I can already see and hear from customers that getting Starlink on all our aircraft is going to be a step function increase and are attractive to those customers. And with that, I'll hand it over to Brett.

Thank you, Scott, and good morning, everyone. Second quarter is always an important moment for United as we accelerate into the busy summer travel season. And our employees once again rose to the occasion. Across the operation, our teams delivered a safe, reliable experience for our customers with the care, professionalism and commitment that show how good leads the way every day. In the quarter, United carried 10 of our highest passenger days in company history, with the highest being over 640,000 customers carried on June 18. We had top-tier on-time departures for the sixth consecutive quarter, ranking second amongst our largest U.S. competitors and representing our best on-time departure rate in the second quarter since the pandemic. We also had our lowest second quarter seat cancellation rate in company history. Notably, we saw meaningful improvements at our Newark hub, our busiest global gateway. For the month of June, Newark ranked #1 in on-time arrivals, delivered its best on-time departure rate ever and its lowest seat cancellation rate since 2018. These results reflect the continued strength of our operation and the work our team is doing across the network to solve problems in real time, adjust as conditions change and deliver a safe, reliable experience for our customers. And our customers noticed, we had our highest second quarter Net Promoter Score since the pandemic in the second quarter. Starlink is another example of how we are investing in a better customer experience and differentiating United. During the quarter, we accelerated the rollout of free Starlink WiFi and now expect to have close to 1,000 Starlink-equipped aircraft by the end of this year. Early customer feedback has been very strong, and WiFi satisfaction scores on Starlink equipment are more than double the scores of other WiFi operating aircraft. On labor, we are pleased that our flight attendants ratified a new agreement in May. This agreement is an important investment that is included in our outlook for the third quarter and full year 2026, and we remain committed to reaching much deserved agreements across all work groups. United Next continues to be the right plan for the company. We are building a united that is more reliable, more elevated, more global and more customer-focused, strengthening the experience we deliver today and positioning us well for the future. We believe that our ability to remain nimble and proactively respond to evolving industry headwinds, such as higher fuel maximizes our earnings potential improves, but we have structurally changed for the better. Thank you again to the entire United team for delivering for our customers and each other. With that, I'll turn it over to Andrew to discuss the revenue environment.

Thanks, Brett. Overall, revenue performance was exceptional in the quarter, and proved once again United's ability to quickly adjust to an ever-changing environment. I think our outlook for the rest of 2026 validates our commercial plans are working well. United's revenue accelerated across the board in Q2 with total operating revenue up 16% to $17.7 billion. TRASM was up 12.1% year-over-year with load factors up slightly, which indicates strong demand for United's products. We observed minimal to no negative impact on demand from higher price points, a trend we see continuing. Domestic passenger revenue was up 20.3% with PRASM up 12.2%. International PRASM was also up 12%. Pacific led the way with PRASM up 14%, Atlantic up 12.1% and Latin up 10.7%. Cargo revenues were also strong, up 22.6% and Loyalty revenue was up $11.3 million. MileagePlus program changes have been very effective in building momentum in new co-brand accounts, spend, engagement and membership as expected. New co-branded credit card accounts reached a record level for the second quarter, up 22% with Q2 card spend increasing 14%. MileagePlus enrollments were up 9%, outpacing capacity by 5 points. We saw the largest increase in membership in Chicago and in New York. Premium revenues were up 16.4% and Premium PRASM up 11.6% in the quarter. RASM specific to the Polaris and Premium Plus cabins was up even more at 13.6% in the quarter. Main Cabin RASMs were up 11.5% in the quarter, this is the second quarter in a row where we've seen Main Cabin RASM positive after years of below average performance at an industry level. While Main Cabin RASMs turned the corner in 2026, our Main Cabin fares remain far behind inflation driven by all costs not just fuel. We are now just seeing a necessary catch-up in pricing. In fact, to put these current fare levels in context, the average Main Cabin fare today is minimally up versus 2024, well short of inflation, which is up nearly 7%. Close-in business travel was exceptionally strong in Q2 with contracted business revenues flown up an impressive 27% year-over-year and bookings up 30%, led by technology, financial services and professional services. In Q2, United grew corporate share year-over-year in all of our hubs. These same positive business demand trends continued into early July, and we expect to continue for the remainder of the year. We have adjusted our revenue management posture to save more seats for Close-in business demand. The load factor contribution of business travel from all channels in the quarter was up about 0.5 point year-over-year. Our outlook for the remainder of 2026 assumes demand strength from Q2 is consistent in Q3 and in Q4. Looking ahead, the pricing environment remains strong across the entire network with selling yields up mid- to high teens year-over-year in recent weeks, setting up a strong double-digit increase in year-over-year RASM. Currently, we're booked about 58%, booked through Q3 and given current selling yields and strong demand we do expect year-over-year RASM in Q3 and Q4 to exceed Q2. Consolidated Q4 yield is currently tracking up a strong 19% year-over-year, while Q3 yield at the same point in the booking curve sat up only 5%. United continues to gain local share in each of our 7 hubs. Passenger share in our hubs has increased 7 points from 2019, by far the largest increase of any airline from their respective hubs. United's Q3 schedules are largely final. United's Q4 domestic schedules are not final and will be adjusted downward, when finalized. While we are not providing capacity guidance anymore, we will make a final determination on Q4 capacity as we get closer to the quarter where we can properly consider the latest fuel and demand trends. United's efforts to decommoditize our revenue streams and create consumer choice are accelerating as we head into 2027. New fleet and product initiatives position the business for RASM and margin gains in '27 and beyond, and we're particularly excited to get Relax Row and the CRJ-450 out for sale. We also have a very clear path to larger gauge in 2027 as well, which we expect will be accretive to results in a tailwind to CASM-ex. We have renewed optimism that we'll take delivery of our first MAX 10 in mid- to late 2027. The MAX 10 has more premium seats than the aircraft it replaces along with the best-in-class CASM. We've absorbed an increase in gauge from 104 to 126 seats since we announced United Next, but we're still about 10 seats from our goal of 136 seats and North America. We can also now see the horizon -- on the horizon, completion of key aircraft modification programs, including fast and free Starlink WiFi, seatback entertainment, larger overhead bins and our refreshed onboard branding. Our United Next plan will be largely done in 2027, but we have many new commercial and product initiatives coming. We will begin to rapidly spool up our flying on our new premium 321, the XLR and the Coastliner later this year and into 2027. We anticipate a fleet of 100 Premium-configured 321 by the end of the [ 2026 ]. At United, we're rewriting the definition of what a premium global airline looks like every day. By late 2027, we'll provide a consistent and elevated experience for all customers in all cabins unmatched by anyone. I wanted to say thanks to the entire United team for delivering these excellent results across the spectrum. And with that, I'll hand it over to Mike.

Thanks, Andrew. The second quarter provided yet another proof point of the strength and resilience of our business and our United Next strategic plan. We have decommoditized United Airlines by earning an ever-growing proportion of brand loyal customers, which in turn then allow us to generate durable financial results, especially during tough environments for the broader industry. Our strategy continues to deliver margins at the top end of the industry, a strengthening balance sheet and an overall financial position that allows us to focus on the long term. Our confidence in our ability to deliver double-digit pretax margins in 2027 and mid-teen pretax margins beyond that had never been higher. We delivered second quarter earnings per share of $1.99 at the high-end of our guidance range of $1 to $2, and pretax margin of 4.8% despite a $2.3 billion year-over-year headwind from fuel. Second quarter CASM-ex was up 6.1% year-over-year, which reflected pressure from labor deals and capacity reductions, all consistent with our expectations. We remain focused on driving greater efficiency without compromising the investments in our people, customers and products that underpin our growing brand loyal customer base. In the quarter, we were able to recapture 50% of the increase in fuel expense and accounting for the sharp rise in fuel recently, we expect to recover 80% to 90% in the third quarter and full recovery by the fourth quarter. At today's prices, fuel remains almost $6 billion higher for the year compared to our outlook at the start of the year. Our focus on efficiency has helped offset some of the fuel headwind but our ability to drive higher yields has been critical in helping cover the heightened cost of our operations. And as Andrew mentioned, United has not seen a measurable demand impact based on the higher fares. In fact, if you zoom-out to consider price inflation for travel over the last 10 and 20 years, airfare stands out as a tremendous value. Our customers increasingly desire a better travel experience, and we believe they will continue to pay reasonable prices for it. That's why we invest billions of dollars into our business. It's why our margins have been near the top of the industry, and that's why we expect to continue to deliver strong top line revenue growth and mid-teens margins in the years to come. Looking ahead, we expect third quarter earnings per share to be between $2.50 and $3.50, underpinned with an all-in fuel price of approximately $3.69 based on Tuesday's curve. Given the recent run-up in oil, we felt it prudent to adjust our outlook to reflect the current environment. For the full year, we are tightening our guidance range to the high-end of our previous guide and expect earnings per share between $9 and $11. Since early July, fuel prices have increased 15% to 20%, and our guidance reflects that pressure. However, if fuel prices return to prior levels, we expect to be above the high end of both ranges. Additionally, given oil volatility, we expect crack spreads to remain elevated for the remainder of the year. In a year where the industry is experiencing a multibillion-dollar shock from oil. This will be a fantastic outcome that demonstrates United's ability to absorb and manage through times of uncertainty and meaningful financial pressure. On cost specifically, our plan volume-adjusted has remained consistent with our expectations at the start of the year. The pressure on our unit costs in the first half of the year was solely driven by our close-in capacity adjustments, and will remain a headwind to unit costs for the remainder of the year. We've consistently demonstrated we will adjust capacity when necessary rather than operate flying that does not make economic sense. These actions reflect our focus on maximizing long-term profits and cash flow. With this in mind, in 2027, we plan to retire at least 80 aircraft as we continue to renew and up-gauge our fleet, a step-up from the last few years. Turning to the balance sheet. As the quarter began, the industry faced significant risk and uncertainty driven by the hostilities with Iran and the closure of the Strait of Hormuz. Given that heightened volatility, we proactively secured additional funding to build extra liquidity to manage through a scenario where oil remained higher for longer. We raised capital through a series of private bank transactions that raised $3.7 billion of new debt that is attractively priced at a fixed rate equivalent in the low 5% range, pricing well inside of our most expensive existing debt. Once oil prices stabilize, our intent is to use this newly raised debt to prepay more expensive debt and to purchase aircraft with cash. Our ability to raise this quantum of debt at these terms further demonstrates United's improved financial position and progress towards investment grade. Since the beginning of the second quarter, we have prepaid approximately $1 billion of higher cost legacy aircraft debt and PSP debt. We will continue to closely monitor the situation in the Middle East. But in interim, this cap will provide us plenty of flexibility. We ended the quarter with $19.6 billion of available liquidity. We remain focused on achieving investment-grade credit rating metrics and remain optimistic for our prospects later this year. To wrap up, demand for the United product is as strong as ever. Our customers continue to demonstrate a preference for the value our products provide. This supports our relative financial performance and reinforces our confidence in the durability of our strategy and our ability to deliver mid-teens margins in the future. I'll turn it to Kristina to kick off the Q&A.

Thanks, Mike. We will now take questions from the analyst community. [Operator Instructions]. Regina, please describe the procedure to ask a question.

[Operator Instructions] Our first question will come from the line of Catherine O'Brien with Goldman Sachs.

I know we're not going to get an actual RASM guide, but Andrew I just had a couple of questions all related on the fact that 3Q RASM should accelerate into 3Q versus 2Q. Can you just help us think what that looks like for each of your regions RASM, system RASM comp, that's fairly comparable to 2Q, but domestic has a tougher comp and then the 3 international regions have easier comps. And I guess just anything we should also be aware of on Other revenue or Cargo as we make our assumptions on RASM acceleration? Just trying to get a sense of the puts and takes.

Sure. When we look across the system, as I said in my script, we see strength just about everywhere. In Q2, I think we're particularly proud of our performance across the board but really in the Atlantic and Pacific. And if you look at those numbers year over two, even more proud, like we've got it really dialed in on those entities -- and we see continued strength in both of those entities in Q3. Internationally, Latin America year-over-year will be the standout in Q3, considering it definitely has an easy comp, but the number for Latin in Q3 for PRASM growth year-over-year will be off the charts. Cargo had a really strong quarter. Most of the gains in Cargo were yield-related, not volume related. And I expect that to continue into Q3 as well. So I think a really good outlook. The only place that combined that has lower yields than I would otherwise expect is Hawaii. But other than that, I think the system is firing on all cylinders. We've done a really good job our capacity planning group putting capacity where it needs to be. And I think that shows up in our yields in the outlook for Q3 and what we've told you about the outlook for Q4.

Our next question will come from the line of Andrew Didora with Bank of America.

First question, Mike, I see '26 CapEx came down a little bit. I know there are some delivery changes. I guess as we think about modeling your free cash flow the next few years, what year do you see as sort of peak CapEx? And when do you begin to see it bend down a bit more significantly?

Andrew, thanks very much for the question. We're focused free cash flow, uniquely focused on free cash flow. We've talked about a 50% conversion rate for the next few years, heading to 75% as we exit the decade. The CapEx is going to vary based on our results. We're determined to get to double-digit margins, as I said in my script, mid-teens margins longer term. As we get there faster, we may allow CapEx to be a little bit higher as we get there more slowly, we'll manage CapEx appropriately. But what we're committed to is those free cash conversion figures.

Okay. Understood. And then just as a quick follow-up here, investment grade, obviously, a big goal of yours this year. When you couple that with that path to double-digit margins, kind of the CapEx comments you just had. How do you think about target leverage and future capital return potential as that kind of CapEx maybe decelerates from the peak?

We've had significant consultations with the rating agencies. I expect and we plan for net debt to be below 2 turns. I think if you normalized our earnings this year, for fuel, we would already be there. As we look into 2027, we will absolutely trend below 2 turns. And in addition to the actual metrics, what we've proven through this fuel crisis is the resiliency of this business. And at least for the airlines that have a brand-loyal strategy, we've proven the resilience that would earn us a higher rating for the industry and the business itself. So put those meaningful factors together, and I think we're -- the market is already recognizing us with investment-grade type terms. And I think the rating is right on the precipice.

Our next question will come from the line of Sheila Kahyaoglu with Jefferies.

Maybe just to start it off, can you talk about Starlink? You've now installed it on 450 aircraft out of your 1000 aircraft fleet, and that's expected by year-end or nearly most of your fleet. How do you think about monetizing the addition of Starlink and the advantage versus your peers? And I guess, how do you think about new product introductions more broadly? You mentioned MAX 10 finally coming into the fleet at the end of 2027 and the XLRs.

Well, thanks, Sheila. We've been doing a lot in the past 5, 6 years to really invest in the customer experience and we look at the -- this aggregated data, market shared data, every single one of our hubs like just incredible growth from the local customers, and it's been the right strategy. And I think Starlink is probably going to be the biggest of everything that we've done. And like the feedback I get from customers is just unbelievable, good when they get on a flight. We're doing everything we possibly can including taking aircraft out of service as fast as Starlink can produce the antennas for us. We're going to get them on the airplane. And I think particularly for many of the Premium customers, but all customers, but for Premium customers that really want to be able to make sure they're connected with high speed, it is going to lead to big share gains for us. We're excited about it, proud of it. And it's just the next step forward for us at United. But we can already tell it's going to be big.

Great. And just on the new product introductions with the MAX 10 coming in, how do you think about that more broadly?

Well, we've been waiting a really long time for the MAX 10. And hopefully, that wait is coming to an end. We have our first implementation going down the line for, I think, a July delivery of next year. So we're anxious to see that. With the MAX 10, you'll see us stop taking delivery of MAX 9 shortly thereafter. The MAX 10 will be superior in every way, a little bit larger and far less cost on the incremental side. So the marginal CASM is very low, [indiscernible] the bigger aircraft. And that goes towards our CASM-ex goal. I think it's going to be a really great aircraft for making sure we have efficient growth into the future. Across the board, the products look great on these aircraft. However, the XLR and Coastliner, which is the 321 NEO platform, are arriving this year. They have a lot of premium seats on board those aircraft, and you'll see us deploy them rapidly as we go into 2027, which will increase our Premium seating faster than our Main Cabin seating for a bit. And we're really excited about that. These aircraft will have Starlink on board, they'll fly [ those ] premier routes within the United States and of course, to smaller definitions in Europe and Latin America. And I think we'll be a game changer. We have about 100 of these coming before the end of the decade, far more than any of our primary competitors. So we're really leaning into the premium narrow-body. We think it's going to be a structural advantage for United, and we're excited about that. And then last, the elevated 789. We have those flying, the Studio suite is performing unbelievably well, and we are excited to rapidly introduce the size of the elevated 789 fleet in 2027. We will have an infinite number of aircraft with that many premium seats. That's a really large complement onboard, but we'll have enough to fly key routes in Asia into London, Heathrow where that plane makes appropriate sense, and our customers and the NPS scores show that they really love the amenities onboard the aircraft. So that all adds up to a lot of different product features. There is more to come, and we will let you know what those are, at the appropriate point in time.

Our next question will come from the line of Conor Cunningham with Melius Research.

Mike, it seems like we're going to face peak cost pressures in 3Q this year. I know it's early and you're still investing heavily in the product and the customer experience. But it just seems like you have the biggest opportunity on cost come next year. So maybe you could just talk about the puts and takes there? And just why shouldn't we already be penciling in United leading on costs in 2027?

Thanks, Conor. And to answer the question simply, I think you should. As we roll into 2027, we remain committed and expect the CASM-ex in the 2% to 3% range, core CASM-ex. That includes some investment -- continued investment in the consumer. I also think you are thinking about the pacing of CASM-ex in 2026 correctly. I expect Q3 will be peak, and everything is working to plan. We're doing a great job of managing core CASM-ex. We're investing in the customer. And the gauge growth that reaccelerates in '27 is going to get us right back on that 2% to 3% core CASM-ex path.

Okay. Great. And then you guys have obviously done a very good job of managing the business this year and your conviction level around double-digit pretax margins next year only seems to get a bit stronger. But like if I still think about the opportunity set in front of you, you have Starlink unlocking, NPS scores, Ad businesses and so on, Gauge, Premium, Merchandising. It just -- you have a ton of stuff. And a lot of that ramps actually past '27. So if you could just talk a little bit about how you view the long-term margin profile of the business. And it just seems like we are at a much different place than we've been ever before.

Well, thanks, Connor. I'm afraid to answer that because you said it all so well. I don't want to screw it up. But -- so -- but here is what I think the margin path is for United. And it's just consistent with what I said in the past. I think we're on a trajectory to get to low double-digit margins with no structural changes in the industry. Just everything that you just talked about, the path that we're on, gets us to low double-digit margins. And by the way, somebody may ask it later, but we're going to exit 2026 at a revenue run rate here in the second half that would just -- on its own imply double-digit margins for next year, which I also expect. But we'll get to low double-digit margins with no other kind of structural changes in the industry. I do, however, think that -- and I think getting to mid-double -- mid-teens margins requires or is likely to require some more intellectual changes in the industry. And I do think that's going to happen. I mean it doesn't happen immediately. It takes time, but economic gravity always wins. And the reality is this year, 4 of the 8 publicly traded commercial airlines are probably going to lose money. They have an awful lot of flying that loses money on an individual route basis. And one way or another, that gets resolved over time. I'm not going to try to predict when. I'm not going to predict exactly when it happens. But I think that probably drives us into the mid-teens margin range. So on our own, even if none of that happens, we're in a pretty straightforward path, I think, to low double-digit margins. And you get to add several points on to that, structural changes happening in the industry.

Our next question will come from the line of Jamie Baker with JPMorgan.

Scott, on fuel, one concern we all hear quite often, particularly by the elevated fourth quarter schedules is that when fuel prices ultimately received capacity will come back on and hurt RASM. You may recall that back in 2015 and 2016, I actually criticized you -- well, I mean, not you personally, but we -- I know you can take it. We felt that American under your leadership did just that. Huge fuel cost savings at that time as a way to sort of hammer some of your competitors, particularly [indiscernible]. So that's the basis of my question. Do you think the industry has evolved to the point that this is less of a risk? Or is this something that analysts and investors should still fret about?

Well, let me start with why [indiscernible] prices have gone up. It's not fuel price. Fuel prices accelerated a little. It's not fuel price and it's not capacity. It is what I said in my script, probably the biggest structural change that's happened in the industry coming out of COVID is cost inflation and cost harmonization. And the harmonization is really important. And what has happened is airport fees have gone up something like 60% since COVID, labor costs have estimated dramatically, maintenance is off the charts in terms of escalation. And those are all costs that every single airline pays the same. And that has driven -- that is why 4 of 8 airlines are going to lose money this year. It's why 1 airline went out of business this year. That is the underlying driver of price increases. And even with fares up this year, as I said earlier this morning, earlier in my script, airfares are down still 13% in real terms, compared to where they were in 2019. And that's just basic economics, and any industry has to pass along the price increases. So I look at kind of where prices are right now. I would say 10% of the price increase -- 10% of price here in the second quarter was less capacity growth in the second and third quarter. 90% of it is the structural change that happened with cost increases. There was another fare increase this week as fuel started to go back up. And there were no fare decreases when fuel went down. And so if you're an investor, what's different this time than 2016 is the cost harmonization across the industry. It's a dramatic structural difference. And so I think it's fair to be arguing about what the capacity is going to be. By the way, I think capacity for the fourth quarter is likely to come down. That's what happens every quarter, likely to come down. But if it doesn't, you're really talking about 10% of the fare increase that's sort of at risk. And the 90% is probably not done yet because all those costs haven't yet been recovered. This is about a structural change in the cost side of the business, which is forcing a structural change in the pricing and revenue side of the business.

Excellent. And then for Mike, on this capital raise in the quarter, how does this play into management's overall conservative? Is that conservatism -- excuse me, in the remarks in my view that you didn't need to be this proactive. You have [indiscernible] secured access. You've got access to [indiscernible]. I guess I was kind of wondering why you prefund all this CapEx when other options seem to exist?

Jamie, thanks for the question. And look, we just -- we have a track record, and we're going to maintain that of being proactive. We are right on the precipice of investment grade that's going to unlock a lot of options for us. And this is a very cost effective. And the net cost, as we invest the proceeds in money markets is very low. And so this was a very cost-effective way of adding some extra insurance in a way that will bring down our overall cost of carry as we prepay the more expensive debt. So it was truly a no regrets move, and I'm really proud of the treasury team for the execution.

Our next question will come from the line of Tom Fitzgerald with TD Cowen.

Two for me on loyalty. Just one, would you just update us on your latest thinking about the timeline on that contract renegotiation? I know that's one of the longer-term upside drivers for you guys? And then just my follow-up is I know you redid the credit card program in -- back in March just to further incentivize and align with the credit card holders. I'm wondering how -- what the early learnings from that's been? If that's having an intended result?

Sure. In terms of duration, I'll say, I think it's out there on the Internet. We're in the sunset phase of the current contract and -- but we have not started to reengage, with our bank partner Chase at this point. But soon, we'll do so. But I think we're -- I can describe it as a sunset phase. In terms of the program changes, look, I gave a bunch of stats on my opening remarks, and we're really happy with the changes we did. Some of them were new and unique for the industry. But I think it's had the desired effect. I think the credit card space is most interesting and complicated and also full of a lot of upside for United Airlines as we grow and take advantage of these opportunities as our business -- core of our business, it allows us to grow the credit card business even more. So we're super excited about it. I think the numbers are all moving in the right direction. Just to point out, we did have a out-of-period onetime adjustment in loyalty of the revenue in the quarter. That made our number look a little bit lower than it otherwise would be. It showed just under 8% when -- without that onetime adjustment would have been over 13%. So if you're looking at those numbers and thinking that the revenue slowed a bit in the quarter, they did not, we expect strong numbers in Q3 as well. So I think we're really set up well. I couldn't be prouder of the changes. That was 1.5 years of research and investigation and technology changes but they're all implemented. They were implemented flawlessly and are doing really well. I'll also point out, we implemented a lot of changes on united.com and how we sell tickets, how we sell [ nested ] fares. All those changes are really critical to our evolving and more complex product mix. They were also implemented flawlessly. The technology worked perfectly, and I'm really proud of the team for delivering all that. And I think the nested selling is also delivering exactly what I wanted to deliver in the very early stages here.

Our next question will come from the line of Ravi Shanker with Morgan Stanley.

Scott, it's interesting that you tied the industry-wide fare increases to overall cost inflation rather than fuel. And you said there was another round of increase this month, despite fuel not hitting a new high watermark, I think that's a demonstration of that. So as investors or analysts, what do we think is the new benchmark for when United could raise pricing going forward in the coming years? Is there a certain number of points of CASM inflation? Is it specific cost catalysts like a new labor contract? Or I'm just trying to get a sense of how many kind of -- what is the opportunity for pricing ex-fuel benchmark for the industry going forward?

Well, I'm not going to answer a forward-looking question on pricing. But I think the way to think about pricing, what's happened this year is sort of cleaning up the core basic pricing environment. That's the 90% that I talked about relative to capacity. There are no more $9 fares from Houston to Central America or $4 tickets from Los Angeles to Cabo with some of the crazy stuff -- that just doesn't exist anymore. I don't think it's ever going to exist again. And so the core fare structure is in a much more reasonable place today and it continues to go up as it has this week. The capacity side of the equation is really yield management. How often you sell the lowest fare versus higher fares in the market. And that's sort of the 90:10 ratio that I think exists. But I think really the way for investors to think about this, is to think about that 90:10 ratio. And the cost structure inflation and the harmonization meaning everyone's costs have gone up on those things that are outside of our control, it's 90% of the driver.

Our next question will come from the line of Scott Group with Wolfe Research.

Just two quick things. The comment booked yield 14% higher for Q4, like any way to help us think like what that actually means for our model? Like is the implication RASM accelerates further Q3 to Q4. I just don't know like how to actually -- what to do with that comment? And then, Mike, you said retiring 80 aircraft next year. How much capacity is that? Any like preliminary directional thoughts about capacity growth next year?

Well, I'll start. Look, we kind of -- we don't give RASM guidance, but I did give a lot of hints and that Q3 and Q4 would be above Q2. So we obviously think we're in a really good year-over-year RASM set up for the remainder of the year. In terms of that particular comment, I think it's a reflection that the incredibly low fares, as Scott pointed out, from L.A. to Cabo of $4 or $14. I think $14 is the accurate number -- are no longer out there. So leisure yields far out in the booking curve are actually seeing the highest year-over-year change because of their incredibly low base and they're reset during this current situation. So that's why that number seems so high. So I think we've given you the appropriate revenue guidance I think it's a really good revenue outlook, and I'll leave it at that and hand it over to Mike for the second half.