United Airlines

United repeatedly told analysts it was restricting or reducing capacity, which it credited for higher revenues

United’s CEO said that macro trends were “biased towards reducing capacity over the next 6 to 18 months.” “J. SCOTT KIRBY, CEO & DIRECTOR, UNITED AIRLINES HOLDINGS, INC: So there are 2 macro demand trends, recession versus continuing COVID recovery working across purposes. And for now at least, the COVID recovery trend is at least canceling out and arguably exceeding the economic headwinds. So where does that leave us as we look to the future? Clearly, all 3 looming risks, industry infrastructure constraints, significantly higher fuel prices and an economic slowdown, biased toward reducing capacity over the next 6 to 18 months.” (Q2 2022 United Airlines Holdings Inc Earnings Call, 7/21/2022)

United’s EVP boasted “we successfully revenue managed our capacity” and “revenues for June of $4.6 billion were 12% or above our previous best month ever on 14% less capacity.“ “ANDREW P. NOCELLA, EXECUTIVE VP & CHIEF COMMERCIAL OFFICER, UNITED AIRLINES HOLDINGS, INC.: Thanks, Toby. I’m pleased to report revenues accelerated in the quarter versus Q1. TRASM finished 24% higher with capacity down 15% versus Q2 ’19. Top line revenues for June of $4.6 billion were 12% or above our previous best month ever on 14% less capacity. Q2 leisure demand was exceptionally strong, and we successfully revenue managed our capacity, largely compensating for higher fuel costs and inflationary pressures. Passenger yields were up 20%. Business demand continued to rebound into the quarter to 75% of 2Q ’19 volume levels and 80% of revenues. Business demand continues to grow but the rate of progress has slowed in the last few weeks from the growth we saw early in the quarter.” (Q2 2022 United Airlines Holdings Inc Earnings Call, 7/21/2022)

United’s EVP credited “capacity constraint” for record results, telling analysts that their 3rd quarter and 4th quarter capacity would be 11% lower than 2019. “ANDREW P. NOCELLA, EXECUTIVE VP & CHIEF COMMERCIAL OFFICER, UNITED AIRLINES HOLDINGS, INC.: The strength of the post-COVID recovery, combined with capacity constraints, are offset in any macroeconomic headwinds, enabling record TRASM results. Now turning to the third quarter. We’re focused on carefully managing our capacity, yield and operation with schedules we can reliably and profitably deliver. We expect third quarter capacity will be down approximately 11% versus third quarter of ’19. Q3 TRASM is expected to improve by 24% to 26% versus the same period in 2019. International TRASM is now spooling up further. We’re well into the Q3 booking curve and pleased with the revenue trends. We’re not counting on a material rebound in business bookings in the quarter to meet our TRASM guide. United’s capacity in the fourth quarter will also remain below our original targets at approximately down 11%.” (Q2 2022 United Airlines Holdings Inc Earnings Call, 7/21/2022)

United told analysts that the company’s capacity plans for 2023 would be up 8% and that “8% growth is significantly lower than our previous planned growth.” “ANDREW P. NOCELLA, EXECUTIVE VP & CHIEF COMMERCIAL OFFICER, UNITED AIRLINES HOLDINGS, INC.: We continue to assess capacity plans for 2023 and now expect United capacity will be up about 8%. To be transparent, our outlook for growth — 8% growth is significantly lower than our previous planned growth. We at United are going to be able to execute our plan and do it comfortably. We feel 8% growth is the right choice and achievable for United. At United taking care of our customers is our #1 focus, and we believe that moderating capacity growth will allow us to deliver service levels our customers expect. The entire industry faces at least 3 core challenges over the next 18 to 24 months. One, industry infrastructure shortfall; two, high fuel prices; and three, macroeconomic concerns.” (Q2 2022 United Airlines Holdings Inc Earnings Call, 7/21/2022)

United’s EVP: “We will have higher cost, higher fuel, lower capacity, but most importantly, higher revenues.” “ANDREW P. NOCELLA, EXECUTIVE VP & CHIEF COMMERCIAL OFFICER, UNITED AIRLINES HOLDINGS, INC.: We will have higher cost, higher fuel, lower capacity, but most importantly, higher revenues. Thanks to the entire United team. And with that, I will hand it over to Gerry to discuss our financial results.” (Q2 2022 United Airlines Holdings Inc Earnings Call, 7/21/2022)

United told analysts that their network would be “thinner” than in previous years, noting the company had removed many smaller communities from their network. “ANDREW P. NOCELLA: Leslie, from a network perspective, obviously, the schedules, I would use the word — the term thinner. They will be thinner in the fourth quarter and early next year as we have the capacity that we have available to fly reliably. So it will be a little bit different. We are appointed still a little bit more leisure focused than we were in 2019. We also think that’s appropriate until we see business return to 100%. And we also have the issues on regional jet flying from our express partners, as I said earlier, which are causing even thinner schedules in the smaller communities we serve. I don’t think we have any more communities that we’re going to have to see service to for the remainder of the year based on the current plan. Unfortunately, we’ve already had to remove many from our operation prior to today. So it is a bit different of a network, and it’s not our run rate network, and it won’t be our run rate network until next summer.” (Q2 2022 United Airlines Holdings Inc Earnings Call, 7/21/2022)

United said it planned to grow capacity for premium seats fasters than main cabin

United’s EVP said the airline planned to grow capacity for “premiums even faster than main cabin over the next few year.”  “ANDREW P. NOCELLA, EXECUTIVE VP & CHIEF COMMERCIAL OFFICER, UNITED AIRLINES HOLDINGS, INC.: This trend is really important as our United Next capacity plans grows premiums even faster than main cabin over the next few years. For Q2, Pacific PRASM increased 15%, albeit on a capacity down 67%. Atlantic PRASM was up 6%, even in the backdrop of a 9% capacity growth versus ’19, and Latin PRASM was up 14% in the quarter on 8% more capacity.” (Q2 2022 United Airlines Holdings Inc Earnings Call, 7/21/2022)

United’s CEO repeatedly blamed tight staffing for capacity constraints

United CEO blamed staffing and physical constraints for capacity problems, saying “we’d be profitable if we were flying more right now.” “J. SCOTT KIRBY: Jamie, I’d like to try on this. I just think that the training is more physical constraint. I mean Andrew sort of hinted at and said it in his capacity for us and everyone else in the industry is not so much about trying to maximize next quarter’s profitability or margin. It’s — we’d be profitable if we were flying more right now. It’s about physical constraints. The physical constraint on being able to fly are the current constraints. They happen to, at the moment, aligned with what everyone is worried about on fuel prices and the economy, but the physical constraints are the factor.” (Q2 2022 United Airlines Holdings Inc Earnings Call, 7/21/2022)

United’s CEO said tight staffing “is the reason that we’re pulling our capacity down and waiting to grow until the whole system catches up.” “J. SCOTT KIRBY: Well, look, I think the whole system is strained. I mean there’s tight staffing everywhere. I mean, that’s part of the — that is the reason that we’re pulling our capacity down and waiting to grow until the whole system catches up. It’s not unique to the FAA. I mean, it’s everything that touches — I mean, almost everything in the whole economy, certainly, a big chunk of these that touch aviation are tight. And while you’re theoretically scheduled, if it’s a good weather day, and nobody calls in sick, that everything can work. There is weather and people do call in sick. And sometimes, the Jet bridge breaks and the power goes out for 20 minutes and like stuff happens. And the system just doesn’t have any buffer to deal with that. And that’s — at its core, that’s why we pulled the schedule down to create more buffer, more resiliency for our customers.” (Q2 2022 United Airlines Holdings Inc Earnings Call, 7/21/2022)

A United executive crowed that they had replaced change fees with “ancillary fees” like luggage and seats

United’s EVP bragged that “Our ancillary and premium revenue streams are also doing great. Ancillary revenue per onboard passenger was up almost 30% versus ’19. Additionally, our steep product revenues per passenger were almost up 40%.” “ANDREW P. NOCELLA: Our ancillary and premium revenue streams are also doing great. Ancillary revenue per onboard passenger was up almost 30% versus ’19. Additionally, our steep product revenues per passenger were almost up 40%. As I’ve mentioned before, premium leisure continues to be a bright spot with the premium cabin domestic revenue growth, outpacing the economy cabin in the second quarter.” (Q2 2022 United Airlines Holdings Inc Earnings Call, 7/21/2022)

United’s EVP: “we’re offsetting all of the change fee loss, which is with all the ancillary fees we do, particularly luggage and seats. And seats have been obviously just a boom. And I give all the credit to our digital team and our app and how our marketing on those things, and we’re accelerating on that front. So we’re very excited about it. “ANDREW P. NOCELLA: I think the simple answer is we’re offsetting all of the change fee loss, which is with all the ancillary fees we do, particularly luggage and seats. And seats have been obviously just a boom. And I give all the credit to our digital team and our app and how our marketing on those things, and we’re accelerating on that front. So we’re very excited about it. But the answer is it’s 100%. And it’s not something that’s going to change in Q3. In Q3, in terms of some of the other revenues, cargo, in particular, I think we already talked about the yield issue there. But our ancillary revenues look incredibly strong.” (Q2 2022 United Airlines Holdings Inc Earnings Call, 7/21/2022)