What is the peak CapEx year, and when will it significantly decline? How does this relate to free cash flow and future capital return potential?

Mike Leskinen stated a focus on free cash flow, targeting a 50% conversion rate for the next few years, rising to 75% by the end of the decade. CapEx will vary based on results, but the commitment is to free cash conversion. Scott Kirby added that net debt is expected to be below 2 turns in 2027, supporting investment grade and future capital returns. “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.”

How will Starlink be monetized, what is its competitive advantage, and what are the broader implications of new aircraft like MAX 10 and XLR?

Scott Kirby emphasized Starlink's role in driving significant share gains, especially for premium customers, calling it the biggest customer experience improvement. Andrew Nocella detailed the MAX 10's superior economics (larger, lower marginal CASM) and the premium-configured XLR/Coastliner A321s, which will increase premium seating faster than main cabin, providing a structural advantage. “I think Starlink is probably going to be the biggest of everything that we've done... it is going to lead to big share gains for us.”

Will United lead on costs in 2027, and what is the long-term margin outlook given numerous initiatives?

Mike Leskinen confirmed expectations for 2%-3% core CASM-ex in 2027, driven by gauge growth. Scott Kirby outlined a path to low double-digit margins based on current initiatives, with potential for mid-teens margins if structural industry changes (like irrational capacity removal) occur, emphasizing the company's unique position. “I think we're on a trajectory to get to low double-digit margins with no structural changes in the industry.”

UAL

United Airlines (UAL) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Jul 16, 2026

Source: earnings call transcript

Executive summary

United Airlines Q2 FY26 — Strong Revenue Growth Despite Fuel Headwinds

United Airlines demonstrated strong financial performance in Q2 FY26, with robust revenue growth driven by brand loyalty and effective commercial strategies, despite significant fuel price increases. The company is accelerating investments in customer experience, including Starlink WiFi, and remains confident in its long-term margin targets, aiming for double-digit pretax margins in 2027. Management emphasized structural changes in the industry, particularly cost harmonization, as a primary driver of higher fares.

Highlights

Q2 total operating revenues increased 16% year-over-year to $17.7 billion.
TRASM was up 12.1% year-over-year, with minimal to no negative impact on demand from higher prices.
New co-branded credit card accounts reached a record level, up 22% year-over-year.
Contracted business revenues flown were up an impressive 27% year-over-year, with bookings up 30%.
Q2 Adjusted EPS of $1.99 was at the high-end of the guidance range of $1 to $2.

Concerns

A fuel price spike in July was equal to a $1.12 impact on EPS.
Fuel remains almost $6 billion higher for the full year compared to the outlook at the start of the year.
Q2 CASM-ex was up 6.1% year-over-year, reflecting pressure from labor deals and capacity reductions.
Pressure on unit costs in the first half of the year, driven by close-in capacity adjustments, will remain a headwind for the remainder of the year.

Guidance & targets

Category	Target	Timeline	Confidence
Q3 Adjusted EPS	$2.50 - $3.50 high materiality	Q3 · FY26	High
Full-year Adjusted EPS	$9 - $11 high materiality	FY26	High
Q3 Fuel Recapture Rate	80% - 90% medium materiality	Q3 · FY26	High
Q4 Fuel Recapture Rate	Full recovery medium materiality	Q4 · FY26	High
Core CASM-ex	2% - 3% medium materiality	FY27	High
Pretax Margins	Double-digit high materiality	FY27	High
Pretax Margins	Mid-teen high materiality	Beyond FY27	High
Net Debt	Below 2 turns medium materiality	FY27	High
MAX 10 First Delivery	Mid- to late 2027 medium materiality	2027 · FY27	Medium
Starlink-equipped Aircraft	Close to 1,000 aircraft medium materiality	End of 2026 · FY26	High
Aircraft Retirements	At least 80 aircraft medium materiality	FY27	High
Premium-configured A321 Fleet	100 aircraft medium materiality	End of 2026 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Total Operating Revenue Overall revenue performance was exceptional, demonstrating United's ability to quickly adjust to changing environments.	$17.7B	16%	—	—
Domestic Passenger Revenue Strong performance in the domestic market. PRASM: 12.2% YoY	—	20.3%	—	—
International PRASM International markets showed strong growth.	—	12%	—	—
Pacific PRASM Pacific led the international regions in PRASM growth.	—	14%	—	—
Atlantic PRASM Strong PRASM growth in the Atlantic region.	—	12.1%	—	—
Latin PRASM Solid PRASM growth in Latin America.	—	10.7%	—	—
Cargo Revenues Strong cargo performance, primarily yield-related.	—	22.6%	—	—
Loyalty Revenue Reported increase, but with an out-of-period one-time adjustment that made the reported growth look lower than it would have been (over 13% without adjustment).	$11.3M	—	—	—
Premium Revenues Strong growth in premium offerings. Premium PRASM: 11.6% YoY	—	16.4%	—	—
Polaris and Premium Plus RASM Even stronger RASM growth in the highest premium cabins.	—	13.6%	—	—
Main Cabin RASM Second consecutive quarter of positive Main Cabin RASM after years of below-average performance.	—	11.5%	—	—

Product announcements

Product	Type	Timeline
Relax Row	launch	—
CRJ-450	launch	—
Premium 321 (XLR and Coastliner)	launch	H2 2026 - 2027
Elevated 789 Studio Suite	expansion	2027

Risks & headwinds

Fuel price volatility Q2 FY26 and full-year FY26

$1.12 EPS impact from recent spike; $6 billion higher for FY26 compared to initial outlook.

Mitigation:Adjusted guidance policy to reflect current fuel prices; expected 80-90% recapture in Q3 and full recovery by Q4; proactive debt raise for liquidity.

Unit cost pressure Remainder of FY26

CASM-ex up 6.1% YoY in Q2.

Mitigation:Focus on driving greater efficiency; gauge growth reaccelerating in 2027 to drive CASM-ex tailwind; capacity adjustments when necessary.

Airport capacity constraints Indefinite for Chicago/Newark; 2-3 weeks for SFO improvement; until October for SFO runway construction.

Extended caps in Chicago and Newark; new FAA approach lowering rates in San Francisco.

Mitigation:Up-gauging aircraft; striving to gain market share through creative measures; long-term focus on gauge growth in fleet plan.

Q&A highlights

How will the expected Q3 RASM acceleration break down by region, and what are the contributions from Cargo and Other revenue?

Andrew Nocella highlighted strength across the system, with Latin America expected to be a standout for PRASM growth in Q3 due to easier comps. Cargo revenues were strong due to yield, a trend expected to continue into Q3. Hawaii was noted as the only area with lower-than-expected yields.

“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.”

asked by Catherine O'Brien · answered by Andrew Nocella

2 min read 6 chapters

Detailed narrative

Fuel Price Volatility & Strategy

United Airlines faced a significant fuel price spike in July, which management estimated impacted Q2 EPS by $1.12. In response, the company adjusted its guidance policy to reflect current fuel prices, expecting to recover 80-90% of the increase in Q3 and achieve full recovery by Q4.

This proactive approach, coupled with strong revenue management, demonstrates the airline's resilience and adaptability to industry shocks, reinforcing the belief that the industry has structurally changed.

Operational Excellence & Customer Satisfaction

The airline achieved top-tier operational performance in Q2 FY26, recording its best on-time departure rate since the pandemic and its lowest Q2 seat cancellation rate in company history. Notably, the Newark hub showed significant improvements, ranking #1 in on-time arrivals for June. These operational successes contributed to the highest second-quarter Net Promoter Score since the pandemic, indicating enhanced customer satisfaction.

Customer Experience & Loyalty Investments

United is accelerating investments in customer experience, including the rollout of free Starlink WiFi, with close to 1,000 aircraft expected to be equipped by the end of 2026. Early customer feedback on Starlink is very positive, with WiFi satisfaction scores more than double those of other systems.

These initiatives are central to building brand loyalty, which management believes will lead to stronger earnings during favorable periods and greater resilience during industry downturns.

Robust Demand & Revenue Management

Demand remains robust across the network, with minimal negative impact from higher price points. Contracted business revenues flown were up 27% year-over-year in Q2, and corporate bookings increased 30%, led by technology and financial services. United has adjusted its revenue management posture to save more seats for close-in business demand, contributing to an expected acceleration in year-over-year RASM for Q3 and Q4, surpassing Q2 performance.

Fleet Modernization & Premiumization Strategy

United plans to retire at least 80 older, less fuel-efficient aircraft in 2027, replacing them with newer, larger-gauge models. This includes the anticipated delivery of the first MAX 10 in mid-to-late 2027 and the rapid integration of premium-configured A321s (XLR and Coastliner) starting later this year and into 2027.

This fleet strategy aims to enhance the premium product offering, increase premium seating faster than main cabin, and drive CASM-ex tailwinds.

Capital Structure & Investment Grade Pursuit

Amidst heightened market volatility, United proactively secured $3.7 billion in new debt at attractive fixed rates to bolster liquidity. The company has also prepaid approximately $1 billion of higher-cost legacy aircraft and PSP debt since the beginning of Q2. Management remains focused on achieving investment-grade credit rating metrics, with a target of reducing net debt to below 2 turns in 2027, demonstrating an improved financial position and disciplined capital management.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.