United Airlines Holdings (UAL) Q1 FY26 earnings call: guidance and Q&A

Could United operate its own hub in Europe, and how do Star Alliance partnerships factor into capturing foreign passenger flows, especially given consolidation rumors?

Scott Kirby stated it's extremely unlikely United would open a foreign hub, emphasizing the value of Star Alliance partnerships for global reach. He reiterated that his comments on global trade deficits and aspirations for United to capture more international traffic are long-held views, not new responses to recent consolidation rumors, and reflect the success of United's brand-loyal strategy.

“I think it's extremely unlikely that we'll open a foreign anywhere in that form. Our Star Alliance partnerships are great. They enable global reach and breadth.”

asked by Jamie Baker · answered by Scott Kirby

How does sustained elevated fuel change management's view on profitability and system-wide opportunities, especially regarding demand elasticity given past statements?

Andrew Nocella confirmed that management constantly analyzes the situation. While demand remains strong and price increases are successful, United proactively cut off-peak capacity in anticipation of potential demand weakness. Mike Leskinen added that the guidance incorporates an 'active God' approach, preparing for demand destruction even though current bookings don't show it, as the economy appears robust.

“What we've done is proactively canceled flights, particularly on off-peak days and off-peak times, expecting that there could be some demand weakness in those channels, we'll see.”

asked by Conor Cunningham · answered by Andrew Nocella

What is United's visibility on potential fuel shortages, especially in Europe or Asia, and are there structural share gain opportunities from Middle East airline issues?

Michael Leskinen stated good visibility for 4-5 weeks, noting that in Europe and Asia, it's currently a price issue, not an availability issue, with price acting as a rationing function. Scott Kirby believes any issues with Middle Eastern airlines are temporary and expects them to recover fully, so he doesn't foresee structural share gains for United.

“even in Europe and Asia, as we sit here today, we think it is a price issue, not an availability issue.”

asked by Ravi Shanker · answered by Michael Leskinen

Why does the industry need a crisis to push higher yields, and will the current higher yields be sustainable if fuel prices normalize, potentially leading to $18 EPS next year?

Scott Kirby attributed the industry's reluctance to raise fares to internal pressures from marketing/government affairs over revenue management. He believes this time could be different for pricing to hold, especially if the crisis lasts longer, as airfares in real terms are down 27% versus pre-pandemic. He guessed United could retain 20% of the price increase if fuel normalizes, potentially moving to 80%, and confirmed the analyst's $18 EPS analysis for next year is not unreasonable.

“I think we get -- keep 20% of the price increase next year. And I think that's going to move towards 80%.”

asked by Scott Group · answered by Scott Kirby

How is United faring at its Chicago O'Hare hub against competitors, and how will it comply with the proposed FAA summer cap on operations there?

Scott Kirby stated United has won significant brand-loyal share in Chicago, gaining 38 points with business travelers, due to superior technology, service, and product. He acknowledged the FAA cap means United won't grow as much as desired but emphasized that the underlying strength in Chicago remains, and the company can pursue growth in other markets.

“Here in Chicago, we've actually won 38 points of market share with business travelers. So customers care about quality. Quality really matters.”

asked by Brandon Oglenski · answered by Scott Kirby

How will maintenance costs trend with capacity cuts, and what is the long-term outlook for maintenance? Also, what are the thoughts on the buyback given its consistency in Q1?

Michael Leskinen explained that CASM ex trends inversely with capacity cuts, but United will continue investing in the business. He expressed optimism about fighting the industry trend of rising maintenance costs through gauge management and global procurement. Regarding buybacks, he stated United balances opportunistic share repurchases with its commitment to achieving investment grade, which was prioritized in Q1 through debt paydown and unsecured bond issuance.

“we are committed -- absolutely committed to getting to investment grade. And so we need to balance our buyback and our opportunism around buying shares when they're below intrinsic value with our commitment to get investment grade.”

asked by Andrew Didora · answered by Michael Leskinen

What fuel price range would allow United to return to mid-single-digit capacity growth, and how does the company manage costs while investing in an environment of potential irrational capacity?

Andrew Nocella stated United will carefully watch demand and manage capacity to hit financial targets and double-digit margins. He noted that if demand remains strong despite price increases, the company will adjust its plans. He emphasized that United will manage its capacity to achieve its goals independently of what other airlines do, focusing on self-help.

“we're going to manage the business to hit the financial targets and margins that we have out there. And so if if we can do that with more capacity, we'll gladly bring it back online.”

asked by Sheila Kahyaoglu · answered by Andrew Nocella

Can you provide geographic color on how fuel pass-throughs are evolving internationally versus domestically, considering different capacity trends and hedging activities?

Andrew Nocella noted that international pricing has been stronger and more substantial than domestic, covering more of the fuel burden, which surprised him. He believes this indicates changes in overseas pricing behavior. Michael Leskinen added that foreign carriers hedging Brent are not hedging crack spreads, which have been the biggest driver of jet fuel price increases, suggesting hedging is a poor policy.

“the international environment is actually better than domestic, that the price increases have been more substantial and are covering more of the fuel burden than they are domestically.”

asked by John Godyn · answered by Andrew Nocella