United Airlines Holdings, Inc. (UAL) 2024 Citi’s Global Industrial Tech & Mobility Conference (Transcript)

United Airlines Holdings, Inc. (NASDAQ:UAL) 2024 Citi’s Global Industrial Tech & Mobility Conference Call February 20, 2024 11:20 AM ET

Company Participants

Mike Leskinen – Executive Vice President & Chief Financial Officer

Conference Call Participants

Stephen Trent – Citi

Stephen Trent

Good morning, everybody and thank you very much for attending Citi’s Industrials Conference. I’m Steve Trent, the Americas Airlines and Latin Transport Analyst. And we are absolutely delighted to have United Airlines with us this morning, CFO, Mike Leskinen. Really great to have you. And before we start just kind of 2 minor housekeeping things, if anyone does need my legal disclosures, they are available upon request, I can e-mail them off to you. And we would encourage our audience participation. So you folks have questions, you are more important than me, please — please ask away.

But in the meantime, Mike, thanks so much for coming and really great to have you here. If I could kick off your position in the new CFO seat, What’s your number one priority when you think about your new role and maybe what things have surprised you about being in the seat.

Mike Leskinen

Well, Steve, thank you very much for being here. And I’m so excited to be in this new seat. United Airlines, depending on how you measure it, already the largest airline in the world, we are in the very early innings of a transformation of this industry that is going to create structurally higher, more — less cyclical earnings. And I think we’ll ultimately lead to strong free cash flow profile for United and some of the major carriers. And what’s special to be CFO at that time is right now, none of you believe that with my stock trade at 4x. So I only have upside.

What has been a surprise for me in the CFO seat? Look, I made the transition to corporate America 6 years ago and I’ve had 6 years to learn a lot about United before taking the seat. I think that it is fair to say that this is an industry that folks joined because aircraft are sexy, people like buying airplanes. And I like buying airplanes, too. But we need to balance the airplanes we build — we purchase with the returns that we generate as we share with other stakeholders like creditors and shareholders. And so as I think about — what I intend to influenced early is balance, the balance between FX and other uses of cash we generate.

Stephen Trent

Great. Super — do you think very much, Mike. And when we think about costs, just to kind of build on that idea a little bit, across the industry, there has been pressure on the labor cost, maintenance cost, how are you seeing this in 2024? And is it conceivable that 2025, we could see a clean year from the cost perspective.

Mike Leskinen

The costs have been surprising for the whole industry. When we launched United Next, we were in a world that was less inflationary. I think inflation has surprised the entire economy. That’s why the Fed has had to do what it has had to do. But in the airline industry, in particular, as we’ve emerged from the pandemic, there’s been a scarcity of inputs, whether that be labor or maintenance or aircraft, et cetera, air traffic controllers. And that has created a tightness of those inputs that hasn’t even elevated inflation.

And so without a doubt, if you look at our ’23 results, as you look at our ’24 results, we are seeing higher costs than we expected but we’re seeing revenue that’s even higher than that. And the reason for that is that the scarcity of inputs has caused a cost convergence that has really accelerated the structural improvement in this industry.

And why do I say that? The low-cost carriers are formerly low-cost carriers. They had big labor cost advantage. And that really was the biggest advantage. The labor cost — structural labor cost but then also they had a juniority of workforce because they’re growing so fast. Well, the juniority workforce is going away as our growth rate converges with their growth rate.

So no advantage there. And because of the scarcity of labor, wages have gone up for everybody but they’ve gone up for the low-cost carriers more. That doesn’t unwind. There’s no natural way for that to unwind. And so at the same time that have generated premium revenue by giving customers choice in the cabin and customers increasingly are choosing premium experience.

So at the same time, we break out with the revenue advantage through decommoditizing our product that long-term structural advantage formerly structural advantage around cost has gone away. And so what you’ve seen is a complete inversion in the margin structure of the industry where previously the low-cost carriers had margins that were 2x the legacy carriers. That has flipped. In fact, it’s more than flipped right now because most of them are actually losing money right now. And so they face some very tough choices.

But I went off on a rabbit hole. I mean, the core question was costs are higher. I think some of that is permanent. I think that the slope increase in cost is going to level off and start to come back down and we’re already starting to see that with the purchasing power of United Airlines and — some of the things that we can do to use our position. I think we’ve got more opportunity than most just to sweat some of our expenses. And I’m excited about that in the seat of CFO to make some improvements in the procurement department, in particular but also tech ops. I think we’ve got some opportunity to do better things there, with a part or working with additional [indiscernible] and so I’m excited about that.

The biggest cost opportunity at United Airlines remains and it will be spit out over the remaining part of this decade when we were trying to bring it in and that is driving additional gauge. We have a network from big cities to big cities that works really well with Gauge and we intend to continue to do that. Most of our competitors have already exercised that lever and their gauge is where maybe it is optimal. We at United have a unique opportunity to drive additional gauge.

Stephen Trent

Fantastic. Thank you. Thank you very much for that, Mike. And thinking about guidance, you guys have pivoted to offering less guidance and sort of just love your high-level view on what drove that change.

Mike Leskinen

This was an active debate. It’s one I remember sitting in the audience thinking about what the best guidance policy is for companies. And so I think foundationally, a guidance policy is only as good as your ability to hit it. If we give a bunch of guidance, you don’t believe it, it’s actually worse than not having guidance. And so what I’ve seen the airline industry do — airline after airline is set numbers only to miss them; it’s almost like a bad joke. And so what I’ve seen being inside of United is that, we have more ability than we’re giving credit for to deliver on EPS.

And we’ve got actually a pretty good track record since we’ve been giving EPS guidance of hitting it. But what happens some quarters, almost every quarter, fuel zigs and we get more revenue but fuel price goes outside of the range or more recently, we see more inflation — inflationary pressures on other inputs but we drive more revenue. And the reverse can be true as well, where we end up missing on a TRASM but fuel fell through the bottom and so all sequel that put a little pressure on TRASM.

And so we get to the quarter and we have EPS that’s like pretty solid, we should be pretty proud of. And everybody is like you suck because you need — TRASM, you suck because you need [indiscernible]. And that’s going to happen. And we need to have the ability to maneuver in a way that you all are focused on EPS and to be clear, over time, over multiple years, driving free cash. And so I want to refocus the Street on that.

I want to earn a reputation for setting guidance in a way that we deliver on it, almost all of the time with no excuses philosophy. There will be scenarios where there’s a 2 standard deviation event or as I like to say, like 2x of God in the quarter versus — we’ll prepare the guidance for like 1 active god that negatively impacts us but not two. So it will be times when we miss it. But more often than not, we’re going to hit. And as we build that reputation, I think that the Street will put more — will give us more credit for that guidance and we can start to expand our multiple.

And we thought about when should we change the guidance policy. We had really active debates internally about when we should change it. And I was like, well, wait maybe we should like improve the balance sheet a little bit more. Maybe we should have another couple of years of relative margins that are higher than the industry or maybe when we hit this milestone. But the individual metrics that we were guiding to, really, it’s like a drug. And no matter what point you’re going to come off that drug, it hurts, you can go through a hangover. And so we — where we came down as there was no better time than to take ourselves off of that drug of the granular guidance than when we’re trading at 4x earnings because there’s not a lot of downside to that. And so we’re going cold turkey. We’re coming off the individual metrics.

We’re going to talk in a fulsome way. I hope that you all in sessions like this and in one on ones you feel that you come away that we are very transparent as a management team. We’re going to tell you what we think about the future. We’re going to tell you what we’re driving to. We’re going to work hard to do it. We’re going to be open about our views of industry and competitors but setting granular guidance is not helping us achieve the valuations that we think we deserve. And so we’re done.

Stephen Trent

Great color. And if I may kind of follow up on that, I’m kind of intrigued on this focus you mentioned on free cash flow. And that’s something as well with — from my perspective, the share is being unreasonably low from a PE valuation perspective. We just love to dig in, in terms of your view on that free cash flow focus.

Mike Leskinen

Well, Steve, it’s balanced, it’s balanced. And I don’t want anyone in the audience to kind of over-rotate. I think you generate operating cash as a company and some of that goes to maintain the business. Some of that goes to grow the business in the form of CapEx, both of those. Some of that goes into our creditors to delever the business. And some of that, in the fullness of time, should go back to shareholders in the form of share repurchases and dividends. And I’d say my unique view on this that I’m bringing into the C-suite at United is that over time, we need to have more balance. And so I think while we’re deeply disappointed in Boeing, for the delays around our aircraft deliveries.

That growth plan United Next is working. It’s tremendous what is done to create this inversion in margins where ours are now very strong relative to the low-cost carriers. And so we’re not coming off of that. But we have this opportunity because of those delays in the supply chain to moderate the rate at which we grow to spread it out over the remaining part of this decade to, therefore, bring down CapEx and therefore, to have, I think, some really value-enhancing opportunities for the use of that cash that before was earmarked for CapEx.

Stephen Trent

Super. And just getting in a little bit to some of the operating side of the fence. You guys had very good premium cabin growth in the latest quarter. But basic economy also did very well. So when you think about the trajectory of those 2 products, what’s the high level view with respect to where we could see greater growth and maybe if you’re seeing any incursions from the discount carriers trying to peel away some of that main cabin.

Mike Leskinen

I won’t go into prognosticating on the specific near-term leisure business, not going to go. What I will say is that at United and our major competitor in Atlanta, we’re taking a very differentiated approach in decommoditizing this business and giving customers choice. If they want to be in a first-class cabin, they want to be in a premium economy cabin, if they want to have a window seat, we’re going to give a broad menu of options so that customers can choose — different customers can choose different levels of service.

And that is very different. It doesn’t sound different like for most normal industries but it’s very different for this airline industry that historically, because of the low-cost nature, because of the dual wage rates that had existed until post pandemic. It was price and schedule, price and schedule, pricing and schedule and that’s where the airline — the highest margins operated. I think this is new.

And so — and this isn’t before we talked about this at United Next, we talked about this being kind of like a [indiscernible]. This is our vision. But now we have proof points of quarter after quarter after quarter where despite our elevated growth, we’ve driven TRASM in excess of the industry. And so this is no longer — this is no longer a show-me story. You don’t know where the story ends. You don’t know if we’re in the sat inning or the fifth in of the story but none of you should have any doubt.

Just look at the data that it is working and customers increasingly millennial thing, maybe something going on in the broader economy. But our customers care about the service level. They care about the food. They care about the WiFi. They care about the recoverability during irregular operations. And the legacy carriers can uniquely provide that experience and people are paying for it.

Stephen Trent

Super. No, definitely appreciate it. I actually have had a couple of investors ask about capital allocation. Agreeing with the view that the PE right now looks absurdly low. And from a medium- to long-term perspective, maybe if you have any high-level thoughts with respect to share repurchases or [indiscernible] is down the line? Just love to hear your views on that.

Mike Leskinen

I bet you would. Let me talk about the multiple a little bit. We live in an industry that historically has not returned its cost of capital to shareholders. And we live in an industry where you’ve seen boom to bus cycles. So the neighborhood is not like the nicest neighborhood. In addition to that, there are several carriers that are on the ropes. And those are our neighbors. And so you look it, as the capital markets, you look at the valuation of those companies and say, maybe there’s mean reversion, maybe United is over earning. No matter what, the neighborhood is messy, it’s unpredictable. If you’re a generalist, many of you are experts on airline in the room and so you’re like, “Oh, wow,” this is a special opportunity for United.

But if you’re a journalist and you’re like, “Hey, I’ve never invested in the airline sector. This is the time. It’s not — it’s a scary prospect. Now I think if they dug in and did the work and I think as we prove it, more people will do that. And you’ve got this uplift at the whole industry level as the neighborhood gentrifies. But right now, with the negative margins at some of these low-cost carriers, I think some call them LMAs now; the neighborhood doesn’t look very pretty and so that’s holding us down. I can’t do anything about that individually as United but we can make sure that we earn margins consistently. So that would be point number one.

Point number two, United specific. Our margins on a relative basis have expanded dramatically and the margins of some of our competitors have contracted significantly. And I think there are those out there that say, there should be some mean reversion. And so we’re over-earning and some are under-earning. Southwest trading at 18x and us trading at 4. All I have to do and there’s only one thing I can do. It’s not like all I have to do. It’s one thing — all I can do is continue to deliver margins that are at the top of the industry. And that spread should narrow naturally through execution. And that’s what we’re committing to do. And that ties in with our change to guidance policy.

The third thing I think we need to do and I hear it from investors over and over and over again is we need to balance how we allocate our operating cash flow. And so you’ve all heard that from me today. I talked about it in the fourth quarter conference call. I’m committed to doing that. It’s not just me. These are board level decisions. But there’s a recognition that spending more than operating cash flow year after year after year is depressing our multiple. And so we’re going to work to fix that. Now it’s a moderation. I don’t want people to over-rotate on it. It’s a moderation but it is a recognition that over time, OCF is going to get distributed into more than just CapEx. Okay.

And then the fourth one is really just a special one and I just mentioned it because it’s near and dear to my heart. It was a twinkle in my eye when I was covering the industry. We have an incredible high-margin, asset-light growth business within United Airlines. And 2 of our competitors have similar businesses. And right now, those businesses are deeply, deeply undervalued. And if I cannot through disclosure help the capital markets recognize the value of Mileage Plus, we have other levers we can press to create shareholder value. But it is a compelling business and it is — and you’re going to have to stay tuned for our May 1 Investor Day. But there is — there are even some more growth opportunities to this business that are unappreciated.

So we’re going to try to educate the Street on those opportunities. We’re going to show you results. We’re going to segment out over time. So you can see the high-margin nature of the business and the growth trajectory of that business. And I think that will accrue to shareholders. If it doesn’t, we’ll do something more aggressive.

Stephen Trent

Terrific. And I think the MileagePlus view is intriguing. The co-branded card revenue that you guys bring in. In terms of the verticals you have and the opportunities you see in the various revenue lines, are you thinking as well in other terms, how cargo long term is doing, maybe MRO at some point, becomes something that you guys do with third parties. I just love your view in terms of where you really see the strong long-term ROI.

Mike Leskinen

I love that question because it’s an easy one for me to answer very directly. We have a core business of running an airline and we have a relationship with our customers that allows us to have a loyalty program that is self-reinforcing. Distractions around — you didn’t say refineries but I’m going to use that example. We’re going to do what is our core competency. We’re going to run an airline. And we have to do a certain amount of our own maintenance for sure to run this airline optimally. And there are daily maintenance events that we need to be able to operate ourselves.

But outside of that, dancing outside of that, I’ve got so much value to create in the core business that don’t expect us to do anything far afield from running a great passenger airline, cargo because of the ability to have a lot of cargo in the bellies of our aircraft, we will run but it’s — we’re not going to have stand-alone cargo, stand-alone freighters. I’m not going to buy refinery. We’re going to create a lot of value running an airline.

Stephen Trent

Super, really appreciate that. Well, this is a slightly shy crowd than I thought but I’ve got plenty more left here. Could you tell us a little bit about the Transpacific in terms of what you’re seeing there growth opportunity wise and maybe any views you have on where we could see the U.S.-China corridor maybe longer term vis-à-vis how it was pre-pandemic.

Mike Leskinen

Well, United has long had the strongest franchise in the Transpacific. And so as we emerge from COVID. It’s been the slowest region to emerge from the COVID pandemic. But we’re starting to see that come back on without a doubt, the margins in the Pacific are strong right now and we’re going to continue to layer in growth. You asked about China specifically. We have an issue with Russian overflight right now. And so the Chinese carriers right now can fly to the U.S. over Russia which is a much less circuitous route and land in the U.S.

We can’t — that makes flying from the East Coast and even from Chicago to China very difficult, if not impossible. And so I think we need to see some resolution to that. An American citizen flying on Chinese metal over Russian airspace. It seems a little bit frustrating that, that’s okay but it is not okay for us to do the same. And then by the way, I’m not encouraging that we change that but I think that the rules — it should be a level playing field, it’s not a level playing field right now.

Stephen Trent

It looks like we have a question in the back, please.

Unidentified Analyst

Yes. You’ve mentioned PMA parts earlier as an opportunity. What’s your current penetration of PMA parts and where do you see the biggest opportunities?

Mike Leskinen

I love these conferences for when we talk about how to make money in our supplier stocks and not airline stocks but no, it’s a fair question. Our penetration, we have opportunity there. And maybe we’ll talk about it more in an upcoming Investor Day but it’s an area where we have the opportunity to expand and I’m not going to give any specifics today.

Unidentified Analyst

There seems to be a fear that Atlantic is over earning last summer this year, too much capacity from non-U.S. carriers. Could you talk about what’s within your control, how you’re thinking about how this year, next year set up on the Atlantic?

Mike Leskinen

Yes. I think that you’re going to see ebb and flow region by region in this business forever. It’s the question of the amplitude of those cycles. And so we were unique during the pandemic in that we did not retire wide-body aircraft. In fact, we ordered wide-body aircraft. And we are unique in the way we kept our pilots ready to fly those routes as soon as demand returned. And so we were — in fact, we did this in every market around the world as it opened, United was spring loaded, ready to go after that. And Atlantic is a really great case study in that. And so we were ready to serve our customers in demand in a way that was pretty special. And we benefited from that financially. As we look into the future, I think that there are — I think that the aspirations for capacity adds are not going to be fully met and we expect Atlantic margins to remain quite strong.

Do they come off of a cyclical high, some but then that will be offset by higher margins elsewhere in our network.

Unidentified Analyst

Mike, just a plug, don’t stop flying wide-bodies between San Francisco and New York, please. And then maybe just talk a little bit and I think you’ve answered.

Mike Leskinen

It’s a special product that high-density aircraft coast to coast.

Unidentified Analyst

Yes, keep it going. I don’t want to go back on a 757 [ph] between is going to New York, if I can avoid it.

Mike Leskinen

Do you care about the wide-body or do you care about the lie-flat seat.

Unidentified Analyst

The lie-flat seat.

Mike Leskinen

We will keep lie-flat seats in the coast markets.

Unidentified Analyst

Perfect. And then — the — I think you talked a little bit about this on your call but just can you remind the people here in the room, maybe provide some updated thoughts on just how you’re going to manage capacity here over the next 12 to 24 months in light of what’s going on with Boeing and their inability to ramp production and what we’re seeing with the health of the A320 fleet.

Mike Leskinen

I would say, Steve asked about surprises in this new role. The most pleasant upside, I thought Gerry had done all the fleet planning and then it would be 3 or 4 years or longer before I got to play a role in fleet planning. And here I am 4 months in and we’ve got lots of opportunity to talk to Airbus and Boeing about fleet. Look, United Next is working in a tremendous way. You’ve seen that. I’ve talked about it now 3 times the inversion in margins between us and the low-cost carriers. And so we are going to continue to grow at a rate materially above GDP as far as I can see. Now the mixture of that growth had been reliant on MAX 10s. And what you’re going to see now is much more MAX 9 and 321 aircraft. The mix of which I don’t know yet. It depends on the prices.

Stephen Trent

Did I miss anybody? No. Okay. If I could ask, Mike, about some of the ventures in which you guys have invested — you’ve had the supersonic jets, that you — on what you place an order. You’ve done some EV toll investment. You have the venture sustainable flight fund. What’s your high-level view on how you want to manage that vehicle with you at the CFO helm?

Mike Leskinen

So we’ve got a great team running United Ventures. It’s led by Andrew Chang now, was a former Lazard investment banker, brilliant, brilliant guy. Ventures is about 2 main strategic goals. Number one, to drive innovation into this sector to make sure that United is at the cutting edge, whether that’s bringing back supersonic aircraft or eVTOL, to bring our customers from City Center into our airports or something like clear technologies to expedite your path through TSA but we want to make sure that United is always on that cutting edge and driving innovation into an industry that historically hasn’t innovated very much.

It’s about this differentiation, decommoditization of the product that allows us to charge a different price because customers choose it. So key, key part of ventures, number one. Number two, airline industry is probably the hardest industry to decarbonize that exists. And so there’s been different approaches to what is the airlines’ responsibility for the environment and how do we decarbonize. And so there have been different approaches.

The first approach which has been, I think, totally debunked and is fake is carbon offsets. Claiming the carbon removal credits of trees around country clubs that weren’t going to be cut down and saying that you’ve done your part. There are — you can’t — there’s not enough arable land on the planet to plant enough trees to offset the carbon footprint of a 777, right? It just doesn’t work, right? And so I think, finally, society has come around to the point that, that doesn’t work.

The second approach which is — has much more merit is the purchase of sustainable aviation fuel. Sustainable aviation fuel the vast majority today of sustainable aviation fuel is produced from collecting fats oils and greases from restaurants and from meat rendering plants and turning that into fuel and it’s expensive to do that. It probably costs $4 to $5 in variable cost to produce sustainable aviation fuel in that way when Jet is trading at half of that or less.

But even more critically, there’s only so much feedstock of fats oils and greases to produce SAF in that way. And so while it truly is having an impact on the molecules of carbon in the atmosphere, what airlines were starting to do is just to bid up the price of that scarce resource so that they claim the credit. And so in aggregate, as an industry, we weren’t changing the amount of SAF being used. We were just jocking for position to get more of it.

Ventures is about expanding the supply of sustainable aviation fuel and developing technologies, seeding start-ups that are developing technologies to decrease the variable cost of producing it from other feedstocks, whether they be algae, whether they be carbon capture to utilization through carbon monoxide, adding it to hydrogen to produce additional SAF, whether it’s a company out of Texas, we have called SimVeda factory that is developing microbes that were originally the precursor genetics were microbes that would have been found in deep sea events and around Geysers and Yellowstone, genetically engineering those microbes to munch on carbon dioxide and start to produce precursors to sustainable aviation fuel.

That already can be done very economically by the way for plastic production. So it’s — you know you can do it with microbes. But it’s all about changing that the supply, so that the entire airline industry can decarbonize in a way by producing more and more SAF. And so those are the 2 strategic objectives: innovation and decarbonization. And I think that we’ve done a lot as United Ventures and pursuing both of those.

The third that kind of overlies all of it is like I like to make money for my shareholders. And so you better count on, this is not a loss leader. We’re going to produce profits we already have. We’re going to harvest those profits over time and you’re going to see additional cash coming into United’s balance sheet because of our activities in ventures. It’s not a one-way street.

Unidentified Analyst

So Delta has shown that a major legacy with normalized CapEx is about $5 billion for an airline its size today. With your stock at 4x earnings, how do you think about the incremental return you need on CapEx — growth CapEx above that $5 billion as we go forward. So how do you think about returns on that growth CapEx?

Mike Leskinen

So we’re having some live discussions about this now as you might expect. So let me just give you a couple of perspectives that I have and where we said, oh, I don’t know, yes. But at 4x earnings, the inverse of that is what I call an earnings yield and I think many of you think about that would suggest that our cost of capital was something — cost of equity capital is something like 25%, even if you don’t think our earnings are growing and I happen to think our earnings are growing. So our cost of equity capital right now, I’m going to prove all of you wrong and you’re going to learn to love our stock and my cost of equity capital is going to come down. But right now, it’s 25%.

And then my cost of debt, I can borrow very, very efficiently in the EETC market at investment-grade rates. But I do have a little bit of higher coupon debt that is rapidly becoming prepayable in the form of SGR facility and some mileage plus debt. And that debt is in the 8% to 9% ZIP code. And so that’s my cost of debt. So you can do some math and think about what my cost of capital is. I need investments that nicely exceed that cost of capital by margin to justify incremental growth. So I gave you some. It wasn’t a non-answer. I gave you a little bit.

Unidentified Analyst

Do you think the market is being myopic about the CapEx potential because the gauge domestically could have led to much, much higher earnings which may have covered that CapEx and then some.

Mike Leskinen

I think that this is an industry that has historically overinvested until they drive margins down and it’s on us to prove that this growth is going to drive higher margins and we have. And make no mistake, if the MAX 10 were available today, we would still have our foot firmly on the gas. But a combination of 9s and 321s, I’m not going to grow as fast. And so we have this convergence of opportunity to reallocate some of that capital but this is in no way shape or form backing away from our in-state goal of what our connectivity, what the number of flights, what the bank structure is in our hubs where we have a true and permanent competitive advantage.

It will take a few more years to get there but we are not backing away from that. And so that CapEx is coming. It’s just going to be spread out over more years.

Unidentified Analyst

Is there anything you can do in the short term with the existing fleet to achieve some of that gauge without the 10s [ph], a configuration standpoint or route standpoint?

Mike Leskinen

That would be putting us back on this commodity pathway. So no, we’re going to — we’re not going to grow through densification. We’re going to grow through great product with premium options for our customers. We have some options on the margin to extend the life of some aircraft. It’s not my favorite option because some of the aircraft are ready to retire but you have some option to do that. And then we have some option to mix some additional Airbus product into what is a Boeing heavy fleet.

Stephen Trent

Super. It looks like we’re almost out of time. Maybe if anybody has a burning question. Seems like the answer is no, just one last real quick one from me, Mike. Pilot supply. I know this has been an issue in recent years. And how are you guys seeing that now?

Mike Leskinen

Well, pilot supply has never been an issue for United because this has always been the number one place pilots want to have a career. And justifiably, it’s the highest NPV career you can have as a pilot is to come fly at United, where you can — you are top of scale at the beginning when you’re flying narrowbodies but you can move up to widebodies and have quite an amazing career. Some of our regional partners have had some pilot issues for sure. And while it has moderated, there still is a scarcity of pilots. Wages have come up enough that it’s not a scarcity of aspiring pilots.

It’s a scarcity of trained pilots and there’s only so many simulators. So it’s a training scarcity. And so for United, not an issue and what it has done, though, in addition to the regional carriers having a little bit of scarcity is the 2-tiered wage structure has permanently flattened.

If you want to pilot, there’s a wage rate with a relatively narrow band and that’s what you have to pay to recruit the best and brightest pilots out there. And so at United, we did do something really special in the pandemic, anticipating this as we formed the Aviate Academy. And I’m really proud of what Aviate Academy is doing because in addition to helping secure the best and brightest pilots, we’ve added quite a bit of diversity into that recruitment path which I think is a unique United attributes.

Stephen Trent

Well, that was super. And really appreciate the time and your insights. It was super helpful. And I would like to thank you for coming to present with us today and thank you again.

Mike Leskinen

Thanks, Steve. It’s a hardship to come to Miami in the middle of February.

Question-and-Answer Session

End of Q&A