UAL
Earnings call · Sep 2025 (Q3 FY25)

United Airlines Holdings Q3 FY25 earnings call UAL

Oct 16, 2025 Source

Executive summary

United Airlines Holdings, Inc. Q3 FY25 — Strong Earnings Growth and Brand Loyalty

United Airlines demonstrated resilience in Q3 FY25, exceeding earnings expectations and achieving strong operational performance despite macro volatility and industry-wide supply/demand imbalances. The company's strategy of investing in customer experience and fostering brand loyalty is driving earnings growth and positioning it for long-term double-digit margins. Management is focused on optimizing capacity and leveraging technology for cost efficiencies, while also planning for significant loyalty program expansion.

Highlights

5

  • Delivered Q3 EPS of $2.78, above guidance range of $2.25-$2.75 and street expectations of $2.68.

  • Achieved industry-leading CASM-ex performance, down 0.9% in Q3.

  • Loyalty revenues up over 9% YoY, with Amex remuneration up 15% YoY.

  • Achieved the lowest rate of cancellations for any Q3 in company history.

  • S&P upgraded credit rating to BB+ from BB, the highest in over 2 decades.

Concerns

4

  • Consolidated TRASM was down 4.3% in Q3, with domestic down 3.3% and international down 7.1%.

  • Supply/demand imbalance impacted Q3 profits, particularly in domestic flying.

  • Latin America results were disappointing, with RASM performance not warranting capacity growth.

  • Q3 RASM trailed Q2 and Q4 in 2024 and is expected to widen in 2025, indicating an industry-wide issue.

Guidance & targets

CategoryTargetConfidence
Full Year 2025 Earnings Growth
Grow earnings
high materiality
High
Annual Margin Expansion
at least 1 point or more of margin each year
high materiality
High
Long-term Pretax Margins
mid-teens margins
high materiality
High
2026 Pilot Hiring
over 2,000 pilots
medium materiality
High
2026 Flight Attendant Hiring
over 3,200 new flight attendants
medium materiality
High
Newark Operations Cap
capped through October 2026 at 72 operations per hour
medium materiality
High
Starlink Fleet-wide Rollout
expand across the remainder of our fleet by 2027
high materiality
High
Q4 Consolidated RASM
meaningfully improve in Q4 year-over-year
high materiality
High
Q4 International RASM vs Domestic
International RASMs in Q4 will outperform domestic
medium materiality
High
Q4 Revenue and Absolute RASM
Q4 will have United's best revenue quarter ever, but also have the highest absolute RASM of any quarter of 2025
high materiality
High
Q3 2026 Atlantic Capacity
flat to negative in Q3 2026
medium materiality
High
2026 Customer Product Investments
another $1 billion
medium materiality
High
2026 Management Headcount Reduction
shrink another 4%
medium materiality
High
Annual CASM-ex Run Rate
run up around 2% to 3% annually
high materiality
High
Q4 FY25 EPS
$3 to $3.50
high materiality
High
Full Year 2025 EPS
towards the better half of full year 2025 guidance range of $9 to $11
high materiality
High
Long-term Pretax Margins
double-digit pretax margins
high materiality
High
Full Year 2025 Free Cash Flow
over $3 billion
high materiality
High
FCF Conversion Rate (mid-term)
remain in the 50% range
medium materiality
High
FCF Conversion Rate (long-term)
accelerate closer to around 75%
high materiality
High
Net Leverage Target
below 2x
high materiality
High
Flight Attendant Contract Ratification
ratified deal
high materiality
High
Multi-year CASM-ex Growth
2% to 3%
high materiality
High

Operational metrics

Total revenues
$15.2 billion up 2.6%
Q3

On a 7.2% increase in capacity.

Capacity (ASMs)
7.2% increase
Q3

System capacity growth YoY.

Consolidated TRASM
down 4.3% YoY
Q3

Total Revenue per Available Seat Mile.

Domestic TRASM
down 3.3% YoY
Q3

On 6.6% more capacity.

International TRASM
down 7.1% YoY
Q3

Global long-haul demand spreading earlier and later in the year.

Premium revenues
6% year-over-year
Q3

Premium cabins outperformed main cabin.

Premium cabin TRASM vs Main cabin TRASM
5 points outperformed
Q3

Premium cabins outperformed the main cabin.

MileagePlus loyalty revenues
over 9% up
Q3

Another strong quarter for MileagePlus.

Amex remuneration
15% year-over-year
Q3

Expected to end the year up over 12%.

Amex remuneration
over 12% up
FY25

Expected for the full year.

Customer NPS score
nearly 7% up versus summer 2024
summer

Reflects dedication of United team and improved customer experience.

CASM-ex
negative 0.9%
Q3

Expected to be industry-leading, benefiting from maintenance and labor contract timing.

CASM-ex benefit from maintenance shift
approximately 1 point
Q3

Expense moving to the fourth quarter.

CASM-ex benefit from labor contract timing
approximately 1 point
Q3

From the timing of certain labor contracts.

Earnings per share
$2.78 above guidance range of $2.25-$2.75
Q3

Above top end of guidance range and Wall Street expectations of $2.68.

Pretax margin
8%
Q3

Would have been 1 point higher absent disruptions earlier this year at Newark.

Management headcount
4% lower than last year
current

Efficiency work continues.

Aircraft buyback
377 aircraft
Q3 and early Oct

Bought back off expensive COVID air leases, accelerating deleveraging.

Average cost of debt
less than 5%
current

After eliminating all expensive financing.

Fixed coupons
no fixed coupons over 6%
current

All expensive financing eliminated from the balance sheet.

Average floating margin
1.9%
current

Current average floating margin.

Signature interior conversion
64%
current

Investment of over $1.6 billion.

Jets with seatback screens
765 jets with more than 146,000 seatback screens
current

Part of signature interior conversion.

Domestic gauge increase
almost 20%
since 2019

Proven formula for margin growth.

Food spend increase
25%
this year

Part of customer product investments.

Club investments
doubled
2025

Expected to more than double in 2026 as demand grows.

Industry KPIs

MetricValueDetails
Casm exnegative 0.9% %
Capacity7.2% %
Fleet mro64% %
Unit revenuedown 4.3% %
Loyalty co brandover 9% %
Demand indicatorsnearly 7% %
Premium diverse revenue mix6% %

Product announcements

ProductTypeDetails
Starlink Wi-Fi on Boeing 737-800launch
Starlink Wi-Fi Fleet-wide Rolloutroadmap

Capital programs

Customer product enhancements underway over $1 billion
Period spend: another $1 billion
Start: Last few years

Benefit:Improved aircraft, clubs, food, Wi-Fi, enhanced customer experience

Annual investment to win brand loyal customers and differentiate United Airlines. Expected to spend another $1 billion next year.

Signature interior conversion underway over $1.6 billion

Benefit:765 jets with more than 146,000 seatback screens, premium airline definition

Conversion is now at 64% completion, defining a premium airline in the U.S.

Starlink Wi-Fi rollout underway $1 billion

Benefit:Best-in-class connectivity for customers, game-changing in-flight experience

Investment to provide fastest, most reliable Wi-Fi across the fleet by 2027.

Risks & headwinds

Macro volatility First 9 months of FY25

Economic downturn for airlines in the first 9 months of the year

Mitigation:United's brand loyal strategy proved resilient, growing earnings despite issues.

Newark disruptions Q3 FY25

1 point impact on pretax margin

Mitigation:FAA cap on flights through October 2026 at 72 operations per hour; investments in technology and ATC staffing.

Supply/demand imbalance Q3 FY25

Impacted United's profits

Mitigation:Industry flying expected to be scaled back; United making refinements to network and commercial strategies for Q3 2026.

Latin America overcapacity Approximately another 2 quarters

Elevated year-over-year capacity in the region

Mitigation:Removing non-core, non-Houston flying that underperformed; maintaining core Houston-Latin America capacity.

Government shutdown Ongoing

Risk to the U.S. economy grows

Mitigation:Q4 EPS guidance calibrated with shutdown in mind; hope for political resolution.

What to watch in Q4 FY25

Q4 FY25 EPS

Q4 FY25
Current Q3 EPS $2.78
Target $3.00-$3.50

Why it matters

Verifies short-term earnings momentum and resilience against macro headwinds.

Looking to the fourth quarter. The momentum in the revenue environment, Andrew described continues, and we expect fourth quarter EPS to be $3 to $3.50

Q&A highlights

What is the view on main cabin margins if there's a step function change in main cabin supply? Will it narrow the gap with premium cabin margins, or will a gap always exist?

Scott Kirby explained that the industry is transforming from a commodity to a brand-loyal model. Brand-loyal customers (the majority) prioritize schedule, then product/tech/service. Commodity flying (e.g., ULCCs) currently loses money but will become profitable (low margin) as supply adjusts. United's revenue from brand-loyal customers is resilient and higher margin, while commodity seats will remain lower margin.

“I think that portion of the business currently loses money for everyone. For the ultra-low-cost carriers, they're 100% commoditized, and you can see how much it loses, but it really loses money across the board.”

asked by Catherine O'Brien · answered by Scott Kirby

2 min read 6 chapters

Detailed narrative

Brand Loyal Strategy and Decommoditization

Scott Kirby emphasized that air travel is not a commodity, highlighting United's strategy of winning brand-loyal customers through over $1 billion in annual customer product enhancements. This investment spans all cabins, offering superior value through features like the best app, on-time performance, seatback screens, and a rewarding loyalty program. This approach is seen as a structural, permanent, and irreversible change, giving United a generational lead.

Operational Resilience and Customer Experience

Despite record volumes (over 1 billion ASMs, 48 million customers) and significant weather/ATC disruptions in Q3, United achieved its lowest Q3 cancellation rate ever. Investments in technology like ConnectionSaver preserved travel plans for over 290,000 customers, contributing to a nearly 7% increase in customer NPS score year-over-year. The Starlink Wi-Fi rollout, with the first 737-800 certified, is expected to be a "game-changer" for in-flight connectivity by 2027.

Cost Management and Efficiency

United is focusing on driving real cost efficiencies through technology, such as modernizing maintenance with iPads and using the ORCA tool for IROPs recovery, which helps offset higher costs from customer investments. Management headcount is 4% lower than last year and is planned to shrink another 4% in 2026, reflecting a new culture of efficiency. The company expects its core CASM-ex to grow 1-2% annually, with an additional 1% pressure from customer investments, leading to an overall 2-3% annual CASM-ex run rate.

Loyalty Program and Premiumization

The MileagePlus program had a strong quarter with loyalty revenues up over 9% and Amex remuneration up 15% YoY. Management believes there is potential to double the loyalty program's EBITDA by the end of the decade. United's premium cabins continue to outperform the main cabin, with premium revenues up 6% YoY. The company is actively adjusting its network and commercial strategies, including for Q3 2026, to optimize margins by reducing peaked summer capacity and redeye flights.

Fleet Modernization and Gauge Growth

United's signature interior conversion is now at 64%, representing an investment of over $1.6 billion, with 765 jets equipped with more than 146,000 seatback screens. The company has increased domestic gauge by almost 20% since 2019 and expects further acceleration in 2027 with the A321 fleet, which will drive cost convergence and margin growth as smaller, lower-margin aircraft are retired by 2030.

Balance Sheet and Capital Allocation

United is progressing towards an investment-grade balance sheet, having bought back 377 aircraft off expensive COVID air leases and eliminated all fixed coupons over 6%. S&P upgraded its rating to BB+ from BB. The company expects to generate over $3 billion in free cash flow this year, with conversion rates trending well above 50% and accelerating to around 75% by the end of the decade. Net leverage target is below 2x.

AI-generated summary of the company's earnings call. Not investment advice.