This presentation is actually being webcast, so we need to be as on time as we possibly can be. Anyway, I'm Helane Becker, TD Cowen Senior Analyst covering airlines, and I'm joined this morning by Gerry Laderman, Chief Financial Officer of United Airlines. Gerry is joined by Kristina Munoz, who is Director of Investor Relations at United. Is Caitlin here? Oh, there you are. Mm-hmm. I didn't see you sneak over there. Caitlin Kennedy, who is also in investor relations. Thanks very much for being here. You guys did an 8-K this morning. We did. Maybe my first question was, did you want to update guidance before we get into the Q&A? Nothing more than what we've said in the 8-K, where we. You know, as everybody knows, fuel. Fuel. -jumped up a bit right after everybody's earnings call. So I don't think we were alone in updating fuel for the third quarter to reflect the fact that- No, that's right. ... that fuel's gone up 20-ish%. So our new range, as we put in the 8-K, was we moved from a midpoint of $2.65 to a midpoint of $3, a $2.95-$3.05 range. Everything else for the third quarter, capacity, revenue, CASM, we just reiterated what we had said in the original guidance. Right. I saw that. I saw the only thing that changed was, Fuel ... was fuel. Yes. That was it. So let's talk about the outlook for the business. There was some severe weather on the West Coast last month. And you guys have— And I actually have two unrelated questions, which is, like, typical of me, if you know me from the conference calls. So the first question is, can you talk about how those might have impacted, those cancellations related to the weather, might have impacted, operations? And I don't know if you want to put Hawaii in there, and, because you have a pretty big operation from Denver, from- Mm-hmm ... from Newark, from Chicago. You fly to San Francisco, quite a lot of mainland to Hawaii. So don't know if you want to talk about that at all. So I think, Helane, the real story for this summer was the heat- Okay ... and what that heat did to the weather in the system, particularly on the East Coast. You know, one chain of thunderstorms after another, after another, after another, really going into July. And you know, as you know, when you have disruptions like that, it impacts the reliability of the operation. And so we and others, but we were hit with more than the usual number of cancellations. And you know, there's nothing better for CASM, in my mind, than having a reliable operation. So when you're having cancellations and whatnot, that does impact... In my world, it impacts CASM. But you know, we still have reiterated our guidance for the quarter. And it's fair to say that August, we saw much better weather. In fact, August for us operationally was probably the best August since the merger. Oh, that's good. So, so we did see some of that. So yes, it was the weather in July that really took a toll on everybody. Okay. So, so the other place where you were really ahead of the curve was in Europe, right? You added a lot of capacity. Well, you were ahead of the curve all through the pandemic. Mm-hmm. I was about to say. Yeah, right. We were unique. You were very unique. We did not retire our wide-body fleet- That's right ... in anticipation of a rebound, and we saw that rebound. Right. And then you added some really interesting destinations. Mm. I would have appreciated if you could have kept Tenerife in until maybe January, but somehow it's gone, so. You need to tell more of your friends to- To, to- to fly to Tenerife ... to fly there with me. Yes. Yeah, it becomes a double connect, actually, and like a 24-hour—like, you leave on the 25th- Mm ... and get there on the 27th, which is not a lot of fun. But anyway, that's not my question. My question is, you added a lot of capacity into Europe and into leisure destinations, which is unique among airlines. But now I see next summer, a lot of other airlines are copying you, so again, ahead of the curve. Are you guys concerned that maybe there's gonna be overcapacity in, in that market? And, and I noticed, by the way, you're sort of softening that with Asia, and you're growing Asia for next summer, too. Yeah, so we did it in steps. We added capacity where it was appropriate to add capacity. Okay. As you know, the rebound in Asia has been slower than the rebound- Mm-hmm ... trans-Atlantic. It's a combination of a number of factors. Working with our alliance partners, it was right-sizing capacity into their hubs. It was working with new partners, both on both sides of, in both oceans. Our alliance with Virgin Australia got off to a great start- Okay ... and our new alliance with Emirates as well, gave us new- Yes, you are adding more cities. That's right, new opportunities. And so we supplement that with secondary markets, some of them, the issues you've pointed out, where we have felt there have been really good opportunities. And given the location of our international hubs- Mm-hmm ... New York, Washington, West Coast, San Francisco, we are much better positioned than many of our peers to- Oh, good point. ... take advantage of those opportunities. Yeah, it's, it's kind of interesting. I always tell these, like, stories on myself about places where I've been wrong. But in December of 2019, 2019, I wrote a report about how airlines were overflying their partner hubs, and that maybe the alliances going forward would be less important than they'd been in the past. Because you guys were going, like, United was, was a prime example, going instead of connecting in Frankfurt, going direct to places like Sicily and Naples and places other, you know- Mm-hmm ... people wanted to go to. And, and then, of course, the pandemic hit, and alliances are more important now. Right. Right? Yes. It's like, whatever, Mm-hmm. It is what it is. I do the best I can. So I wanted to ask you about the recent purchase of 200 acres in Denver. There's some speculation that the board is thinking of moving the corporate headquarters there and leaving Chicago. Is that? Is there any truth to that? There are no imminent plans for that. We have a long-term lease at the Willis Tower, our headquarters. We've been there for decades in Chicago. You know, it's fair to say Denver is like Houston. If you went down to Houston, we have lots of facilities in Houston. Yes. Our in-flight training center is there. We have all sorts of operations there. Denver is the same way. Okay. Keep in mind that in Denver is our flight training center. Right. I think it's the largest in the world now. I've seen that, yeah. But that space, which is- I've seen that space. ... right by the old Stapleton Airport- Yeah ... we've outgrown it. Okay. And so one of the first things we'll do with that new space we have is we have now a location to be able to expand the flight training center. And then over the years, we'll find other opportunities. Okay. This is a little off-topic, but can you say when the pilot vote will be done? Yeah, that's, that's not for me to talk about. Oh, okay. Now, I just, I haven't seen the date, and most of the- Yeah ... other airlines, like, give a date for when the- There is, but- It's not from the airlines, it's from the union. Yes. Yeah. Yeah. Okay. We let them talk about the process. Okay. So coming out of the pandemic, what do you think the biggest surprises are that you've seen? You know, I think for me, the biggest surprise over the last year and a half, and not just in the airline business, but business generally, the difficulty in kind of restoring everything back to where it was pre-pandemic. I think the entire world underestimated, you know, issues like the labor shortages- Mm-hmm ... the supply chain issues. I don't think we did a wonderful job as an entire world really managing that. And so, you know, we've seen it in the airline business, both with hiring, it's in some locations been more difficult than we would have expected. And then obviously, supply chain from, you know, the aircraft manufacturers down to, you know, the catering and what we would have available to put on our airplanes. You know, everywhere we looked, there were, you know, unexpected delays in the supply chain process. Interesting. I find it frustrating, too, but for other reasons. Everything has gotten more expensive. Mm-hmm. I think that's the other thing, right? The catering, food has gotten more- Some people say airplane tickets have gotten more expensive also. Well, on a relative basis- Yes ... I don't think so, right? Well, so, you know, we're margin focused, and so as our costs have gone up, you know, we've been able to generate that incremental revenue- Revenue ... to offset that. So it's more about margin than it is about absolute cost or absolute revenue. You know, as you think. You and I have done this for a really long time, although I prefer not to think about it really long, just a while. How do you, how do you think about... Like, I feel like I've seen this movie before, right? It's, it's, costs are up, infrastructure issues, capacity can't grow necessarily because of all sorts of issues over which you have no control. And one of the things you guys are doing is replacing smaller aircraft with larger aircraft. Mm-hmm. So more seats per departure, maybe fewer departures a day. Newark as a hub is constrained, and yet I think that, I don't know, what's the local versus connect traffic there? It must be, must be reversed from what you would think, right? Like, maybe 50/50. It's obviously the strongest local market- Right, that you would- ... in the country. Yeah. Yeah. Yeah, I would think that's true. Yeah. So I worry- Yeah ... that this can't end well for the airlines. I can't speak about how it will end for other airlines. I can speak to how- Yeah, how does it look for you? ... we would expect it to end. Oh, by the way, we have been in this business a long time, haven't we? Yeah. In fact, I thought you were going to introduce me as the soon to be former CFO of United Airlines. Well, that's for you to talk about. We can talk about that later. We can come back. But anyway, let's start with United Next. So United Next really was putting back in place the plan we had pre-COVID, where we had recognized if you go back to the merger through the last decade, we kind of went in the wrong direction. We shrank when everybody else grew. Oh, yeah. We did not take advantage of the natural opportunities we had in, you know, the best hubs in the country, as far as we're concerned, and recognized that we needed to rightsize, particularly the domestic hubs. And COVID hit, so we had to take a little bit of a pause, but then United Next was really bringing that back. And so the order that we made, which initially, largely... Well, it's a combination I would describe as growth and replacement. Because keep in mind, while the mainline has been growing-... the regional fleet's been shrinking. Been shrinking, yeah. So there's been some of that replacement as we've truly upgauged from regionals to mainline and stopped flying regionals where we never should have been flying the regional aircraft to begin with, as perhaps you witnessed out of Newark back in the day. And so that, that's a unique opportunity for us. It's a unique opportunity to rightsize our hubs, to add connectivity, to grow relatively inexpensively. I mean, the cheapest way to grow is gauge. Mm-hmm. We were behind everybody, and so we have that unique United opportunity to grow with gauge domestically. You're right about Newark. Newark is, you know, kind of at capacity, so the growth in Newark is also about gauge and making sure, in addition to the local market, to bring in the customers who then want to use Newark to connect transatlantic. Yeah. I mean, the service is great. Mm-hmm ... as long as the airport can handle it, and unfortunately, the airport can't always handle it, and it's not through any fault of your own. Yeah. It's just at capacity. But just generally, we've been as focused on the infrastructure on the ground as we have- Okay ... on, you know, having the right aircraft and having enough aircraft. So a lot of time, and ultimately some money, is going to be spent throughout the system, making sure that we can handle the traffic, the customers that we expect in our hubs as we implement the plan. Okay. Another place where you guys are leading edge is in sustainability and your United Ventures. So, how do you think about that? You know, the investment you're pulling in from other airlines to kind of grow SAF and some of the other things that you guys are doing, how do you see that playing out over the next, I don't know, 10 or 20 years? Especially because the decisions you're making now on aircraft, it's not like these aircraft are going away in 2040 or 2045. You and I probably are not going to be doing these jobs anymore. Well, I can confirm not. You're definitely not. Although we were watching CNBC, and they talked about Charlie Munger, who works with Warren Buffett, and, and one of the announcers said: "You're still doing this at 99?" And my husband looked at me and said: "Oh, that'll be you." And I thought, I thought that was really, really not true. Right. I was like, 'cause I probably won't be here at 99, but that's another story. Um- But anyway, so how are you thinking about, you know, just that, that? What, working at 99? -getting there? No, no. No, No, working, SAF and all that future. Um- You know, future of SAF and so on. You know, we and others have a commitment, you know, zero carbon. Right. The only way the industry is going to get there is really through the research necessary to come up with cost-effective ways to produce sustainable aviation fuel. What Ventures and the fund is all about is having the money to invest in those new ideas. Okay. You know, by you know, setting up the fund and attracting money from some of our partners and some others, you know, it builds on itself, that as more and more companies sort of see this, that there are opportunities, more and more money will be attracted. That's what it's gonna take. Okay ... to solve the problem. Okay. So we're not, you know, necessarily gonna succeed with every investment. That's, that's not necessarily the point. The point is to find the one or two or three ideas that really will work. Okay. You and I have talked about owning versus leasing aircraft in the past. Mm. United, you have a big CapEx plan at United- Mm ... over the next few years that you're leaving as one of your legacies. And a few years ago, pre-pandemic, we were in Dublin, and you gave one of the best answers I'd ever heard somebody give in terms of explaining why you own versus lease and I don't know if you remember this, but you talked well about why you make those choices. Because you're gonna own the aircraft- Mm-hmm ... for X number of years or whatever. So maybe you could just talk about how you're thinking about that in line with the big CapEx plan and how you're thinking about or, or what you're thinking about financing that. Yeah. For us, leasing is just another form of financing. And so when we look at lease versus buy, leasing versus raising EETC debt or other types of debt, we look at it over the full life of the aircraft. We're not that interested in taking on aircraft for 10 or 12 years. You know, these are all core aircraft to the fleet. Right. And so 20-30 years would be more of what we would think about. Once you look at it that way, it's rare for traditional operating leases to make sense. Okay. We do have some transactions that maybe get counted as leases for accounting reasons, but embedded in those, structures are effectively purchase options that we would expect to exercise. So we view those as just another form of, of debt financing. But it really amounts to, Once you, once you want to keep that aircraft for a long period of time, tough to make leasing work. On the other hand, we have recently done some leases to supplement our order book. So whereas the manufacturers are sold out for a number of years, leasing companies have aircraft available closer in. Okay. So, you know, it's not a meaningful number of aircraft, but, you know, it helps supplement near term some opportunities to bring in some aircraft. Okay. So this is, this is the second to last question, or maybe there's a few more. What didn't I ask you that I should have, before I ask you some other things? How I'm gonna spend my retirement? I was gonna ask you that. That, that was going to be my last question, actually. But, you are retiring next year. I'm really saddened about that, because truth be told, we both know you're younger than I am. And here I am, still working, and loving it. But, what are you gonna miss most about United? I mean, other than missing, like, me- Well, you- ... and my peer group. I mean, without question. Goes without saying. Yes. What will you miss most? I'll still see you, so I'll still be involved with ISTAT, for example, so... Okay. I'll still see you then. I'll still see you then. I'll be around. I do plan on being in Dublin in January. Me too. But, what will I miss most? Two things. I will miss really seeing United Next come to full fruition. You know, we're sort of, you know, only part of the way through the process, so... But I would be happy to sit on the sidelines and watch, Scott, Andrew, and the rest of the team, succeed. So what's left, I'll miss my friends. You know, the great thing about United, and really going back to Continental, I've always enjoyed working with the people that I've worked with, and so not having that day-to-day interaction will be what I will miss most. Okay. I think the airline industry has some amazing people, and I think the analyst community, too. Oh, yeah. I can see where you would definitely miss us. Yes, and no one ever leaves. They don't. No. They really don't. Yeah, I always tell that to, you know, like, analysts starting out, that you're either gonna love it or you're not. I don't know how you felt when you started covering airlines. When I joined Continental in 1988, I had said, "2 years and then I'll be done." 'Cause I was a lawyer in New York at the time. Right ... moved to Houston, and 2 years became 35 years. Yeah. That's not an unusual story. No, when I became an airline analyst, it was sort of the same. I was assigned out of business school, thought I was smart, wasn't. I was assigned to the trucking and rail analyst, and after six months, he said, "We really need an airline analyst, so here's what we're gonna do." And he introduced me... I don't know if you remember Mike Armellino? Mm-mm. So he was the number one-rated analyst at Goldman Sachs, and that was his mentor. So he introduced me to his mentor, who then took me around to all the airlines. He probably cut five years off my career in terms of development. He told me what I had to do, what was important, and, yeah. So to your point, people like that- Mm-hmm ... who helped move you forward, and here we are. I admit to four decades. That's all, all I admit to. But, you know, you mention a good point, 'cause the one job that I have left is to make sure that all of my institutional knowledge is passed down to my successor, so that my successor can really hit the ground running. Well, that's what I was gonna... That was gonna be actually my last question: What's the best piece of advice that you will give, him or her? But what's your biggest- what do you think your biggest career accomplishment is? 'Cause I feel like- As opposed to survive, something other than survival, right? No, but like, I feel like I have two kids and three stepkids that I helped raise, and I feel like they're my biggest accomplishment. Mm. Right? Because knock on wood, every one of them is gainfully employed today. Mm-hmm. They all seem to be happy and well-adjusted right now. I can't speak for what will happen, but I feel like if I didn't get that right, nothing else I did in life mattered. Mm-hmm. Now I have one grandson that's mine, and six that I borrow from my husband, 'cause it's our second marriage. Mm. But, I adore every one of those seven kids, and I just think that's the best thing I've ever done, no matter what I accomplish in my career. And I just kind of wonder, like, career-wise... I know you have Ezra, and- Yes ... and he's, he's your grandson. He's, what, two now? No, he's 15, 16 months. 16 months. Yes. Okay, so. He's probably listening right now. So what is your biggest, like, career accomplishment? So given that I think at least one of my kids is listening, I can't say anything different than what you said. The most important thing was having a reasonably successful career, but still being able to have, maintain a relationship with all my kids- Yeah ... which, hopefully is true to this day. The family is growing, and this is really one of the primary reasons why it's time to retire. Ezra's going to have a little girl cousin next month. Oh, nice. Um- Congratulations. Thanks. That's wonderful. And then Ezra's gonna have a little brother in February. Oh, my God! So- That's amazing. So- The family is truly growing. Oh, yes. By next summer, when we're all together in Vermont, we will have three young ones running around, so. Oh, that's so nice. Oh, yeah. Yeah. Yeah. That's funny, because we're going to Antarctica this in February. Mm-hmm. The whole reason we're doing it in February of 2024 is because I can guarantee that not one of our kids is having a baby in February. Can't guarantee the rest of the year, but they would all be crushed if somehow we missed it, even though- Yeah This will be 8, 9, and 10. Yeah, I leave those negotiations up to my wife. She and the kids work on all that. That's great. Okay. But wait, wait. About what- No, go ahead. Um. Career? No, what will I tell- What will you tell your successor? Uh, the- What advice? The value of partnerships. Not just the internal partnerships, which is sort of table stakes, you know, with all the other division heads, but the partnerships with the OEMs. The partnership with Boeing, which I've had for 30 of my 35 years, has been critical to our success, in many ways. And in a partnership, you know, it's a two-way street. You know, Boeing obviously has helped us a lot, but we've also been known to help Boeing as well, and, it's paid off, huge dividends. Same thing with, you know, the banks and pretty much anybody. The value of partnerships, and building those partnerships, and that's all about trust. You know, you can't walk in and expect, you know, the other party you're dealing with trust you on day one, but you can quickly kind of build that trust. But I think that's a critical component to succeeding in the job. Are they near finding somebody? Um- I feel like you're really hard to replace. So I don't, I don't know how that's gonna work out, Gerry. As you know, everybody's replaceable. I like to think not. I mean, you're. I feel I'm gonna miss you terribly because I feel like you've done so much for United, Continental before that, but really so much for United in the last decade. We're in a good spot, though. Yeah, definitely. Yeah. Okay. Anything else you wanted to say? Anything else you wanna talk about? Like, I don't know, what's changed the most in the industry? I feel like not a lot, but maybe you have a different perspective. Well, what hasn't changed is that this industry still gets hit with exogenous shocks more than some industries. Mm. That hasn't changed. True. What has changed, though, is that we as an industry are so much better at managing through those crises than we ever were before. And having, as you know, lived through crisis after crisis after crisis, I can speak from experience that you know, the worst crisis we had was obviously COVID, and while there was one or two nights in April of 2020 where maybe I lost a little bit of sleep over, you know, whether or not the industry was, you know, going to get out of it, that didn't last. And the fact that the industry is thriving once again is testament to how much the industry has changed. Yeah. Interesting. Well, it has, and, I think, people like to travel. People like to go places. I think it gives you hope. Oh, yeah. Well, that was our thesis. Like planning a trip. Yeah, remember what happened? We were, you know, we were way more pessimistic than everybody in the world about how bad it was going to be- Right ... but way more optimistic at how quickly it was gonna rebound, and we were right. You were right. Yeah. Yes, that's really nice. Well, Gerry, this is, sadly, our last one of these. Yes. Although, as we both mentioned, I'll see you in ISTAT or in Dublin, maybe. Mm-hmm. I mean, if you're having- I'll be there. Okay, so I'll see you there, and I'll see you at ISTAT events. Yes. Although not next month. I'm going to the Sustainability Summit in Madrid. Oh, so you won't be- I won't be in London. ... at ISTAT. In London. Yeah. Too bad. No, too bad for me. Yeah. But anyway, anyway, thank you very much. Thank you for being here, and have a wonderful and happy and successful retirement. Thanks. Helane, thank you, not just for the support you've given me, but the support you've given both Continental in the old days- Yeah, of course. ... and United these days. Well, my airline of choice. I just wish you had not busted me down to 1K from Global Services- Fly more. But it's okay. I've been trying really hard. Okay, everybody, thank you very much for being here. Thank you.