Participants

Kristina Edwards; Managing Director - Investor Relations; United Airlines Holdings Inc

J. Scott Kirby; Chief Executive Officer, Director; United Airlines Holdings Inc

Brett Hart; President; United Airlines Holdings Inc

Andrew Nocella; Executive Vice President and Chief Commercial Officer; United Airlines Holdings Inc

Michael Leskinen; Chief Financial Officer, Executive Vice President; United Airlines Holdings Inc

Jamie Baker; Analyst; JPMorgan Securities LLC

Andrew Didora; Analyst; BofA Securities, Inc.

Connor Cunningham; Analyst; Melius Research LLC

Dave Vernon; Analyst; Bernstein Institutional Services LLC

Catherine O'Brien; Analyst; Goldman Sachs & Co. LLC

Tom Fitzgerald; Analyst; TD Securities (USA) LLC

Sheila Kahyaoglu; Analyst; Jefferies LLC

Tom Wadewitz; Analyst; UBS Securities LLC

Duane Pfennigwerth; Analyst; Evercore Group LLC

Mike Linenberg; Analyst; Deutsche Bank Securities, Inc.

Brandon Oglenski; Analyst; Barclays Capital, Inc.

Ravi Shanker; Analyst; Morgan Stanley & Co. LLC

Mary Schlangenstein; Media; Bloomberg News

John Pletz; Media; Crain's Chicago Business

Presentation

Operator

Good morning and welcome to United Airlines Holdings' earnings conference call for the first quarter of 2025. My name is Sarah, and I will be your conference facilitator today. (Operator Instructions) This call is being recorded and is copyrighted. Please note that no portion of the call may be recorded, transcribed, or rebroadcast without the company's permission. Your participation implies your consent to our recording of this call. If you do not agree with these terms, simply drop off the line.
I will now turn the presentation over to your host for today's call, Kristina Edwards, Managing Director of Investor Relations. Please go ahead.

Kristina Edwards

Thank you, Sarah. Good morning, everyone, and welcome to United's first-quarter 2025 earnings conference call. Yesterday, we issued our earnings release, which is available on our website at ir.united.com. Information in yesterday's release and the remarks made during this conference call may contain forward-looking statements, which represent the company's current expectations, which are based upon information currently available to the company.
A number of factors could cause actual results to differ materially from our current expectations. Please refer to our earnings release, Form 10-K and 10-Q, and other reports filed with the SEC by United Airlines Holdings and United Airlines for a more thorough description of these factors. Unless otherwise noted, we will be discussing our financial metrics on a non-GAAP basis on this call. Please refer to the related definitions and reconciliations in our press release. For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to the tables at the end of our earnings release.
Joining us on the call today to discuss our results and outlook are our Chief Executive Officer, Scott Kirby; President, Brett Hart; Executive Vice President and Chief Commercial Officer, Andrew Nocella; and Executive Vice President and Chief Financial Officer, Mike Leskinen. In addition, we have other members of the executive team on the line available for the Q&A.
And now, I'd like to turn the call over to Scott.

J. Scott Kirby

Thanks, Kristina. And good morning, everyone. The first quarter of 2025 was sure eventful. It's clear the softer macroeconomic environment is driving both volatility in the market and softer demand for travel. But for United specifically, two big-picture themes have been confirmed. First, United's performance is strong, even in this weak environment, because we've won the battle for brand-loyal customers. And second, because we've won those brand-loyal customers, our earnings and financial metrics are demonstrating resilience that United's never had before.
The strains on the macroeconomy have impacted demand. But even in that strained environment, United just had the highest first-quarter pre-tax margin since COVID began, and we expect to be one of only two airlines that are profitable in the first quarter. And our resilience is further demonstrated by the fact that if the environment remains relatively weaker but stable, we can stay within our full-year guidance range.
However, we read the same headlines as you, and so we think that there's a reasonable chance that bookings could weaken from here. But even if we're in that recessionary environment, we still expect to earn $7 to $9 per share for the full year of 2025. When I say that there's been a structural, permanent, and irreversible change, what I mean is that United has won brand-loyal customers, and they are sticky, life-long customers.
We are now the brand-loyal leader by a wide margin in six of our seven hubs and tied with one other airline in Los Angeles. In most spokes around the country, we're the leader or one of the leaders with brand-loyal customers. Andrew will share some facts on customers that live in the Bay Area, Denver, and Chicago in his remarks. But it is those gains that are allowing us to be resilient even in this weaker economic environment.
To be clear, even though those customers are sticky and we believe those market share gains are permanent, we're capitalizing on our momentum and doing more to attract even more brand-loyal customers. We're building huge new clubs in Houston and San Francisco and about to open an additional new club in Denver. We're installing the fastest Wi-Fi in the world on our planes with Starlink, and they'll start flying next month.
We're adding new features to the most powerful travel app in the world every couple of weeks. And our operation is reliable and resilient as ever. This weakening environment doesn't have us reconsidering these investments. In fact, we're leaning into them because they're at the center of our biggest competitive advantage, winning brand-loyal customers. And a huge thank you to our employees for their incredible service that makes this one possible.
Periods of economic softening are part of the business cycle. So the question for United is what should we do now that we see economic softness? Tactically, we're being very diligent about expenses and removing capacity, particularly off-peak utilization flying. And Andrew and Mike will talk about those in a few minutes. And strategically, our priority is pretty simple, and it hasn't changed: win the brand-loyal customers, because that gives us the best margins in good times, and that lead can grow even larger during lean times.
The reason is that for any given customer living in any given city, if you're not the brand-loyal airline, you're the spill airline. The only way a spill airline gets passengers is through lower prices. When times are good, that strategy can work okay. But when times get tougher, the brand-loyal airline like United has more seats to sell, which we do sell at lower prices. But that disproportionately impacts all the spill carriers that we compete with.
Some of the recent guidance updates from other airlines are a stark reminder of this point. For some historical perspective, Southwest historically was the airline with the highest percentage of brand-loyal customers. For most of its history, Southwest was focused on smaller, secondary cities where they had by far the best schedule for customers. They also had a huge customer advantage as the only airline that didn't have change fees or back fees. That meant that a high percentage of their customers were brand loyal to Southwest.
At its core, that's why Southwest historically was the highest-margin airline in good times and why they always outperform by an even wider margin when times got tough. But as they've moved into big high-cost hubs of other airlines, both of those advantages are gone. And now United and one other airline are the brand-loyal customer leaders. It's always dangerous to say that it's different this time. And in fact, we're saying exactly the opposite. It's going to be exactly the same this time.
History is just repeating. The only thing that changed is that United is now one of the two brands that are leading brand-loyal airlines. So to conclude, United Next is the right strategy. It's been well executed by our people and it's producing strong, resilient results in good times and even more impressively in tough times. United has never been in a stronger competitive position. Customers are benefiting, our employees are benefiting, and our shareholders will also benefit in the value that's being created.
Brett, over to you.

Brett Hart

Thank you, Scott, and good morning. Despite a challenging macro environment, 2025 is off to a solid start. We operate in a dynamic and evolving landscape. Global trade policies, including tariffs, are shaping that landscape, and as Scott mentioned, broader economic uncertainties remain top of mind. We are closely monitoring the potential impact on the prices we would pay for aircraft.
As a reminder, Boeing accounts for the majority of our future total order book, and most of our Airbus 321neos are produced in Alabama. As such, we don't currently anticipate a meaningful direct impact from tariffs relating to aircraft purchases. Turning to our performance this quarter, we are seeing the results of our continued investments in operational excellence, and we are delivering an exceptional customer experience. These achievements are a testament to the commitment and excellence of our employees. None of it would be possible without you. Thank you.
In Q1, not only did we serve more customers than ever in a first quarter for United, but we also finished number one in on-time departures among our US large peers when including customers who were helped with ConnectionSaver. We achieved our highest NPS scores and our best on-time arrival score since the pandemic, as well as the second lowest first quarter seat cancellation rate in company history.
We accomplished all of this with safety at the forefront. United is committed to getting every customer to their destination safely and on time. We continue to invest in enhanced pilot training and safety technology, making it easier for our employees to report safety concerns. Our United team is engaged across the industry and with government to ensure the safety of our aviation system.
In the first quarter, we reached two major milestones on the accelerated rollout of Starlink technology across our fleet, completing our first Starlink installation on a United Express aircraft and securing FAA certification to begin operations on the Embraer 175 fleet. We're on track for our first Starlink-enabled regional flight later this spring, with our entire two-cabin regional fleet expected to be retrofitted by year end.
We continue to expect the first mainline aircraft with Starlink to take flight before the end of 2025. We believe Starlink will revolutionize the in-flight experience for our customers, and United is leading the way for the future of Wi-Fi for the airline industry.
With that, I will hand it over to Andrew to discuss the revenue environment.

Andrew Nocella

Thanks, Brett. United's top-line Q1 revenue increased 5.4% to a company record $13.2 billion. TRASM for the quarter was up 0.5%. We've been hard at work adjusting how we fly in the historically weaker United Q1 period, and our efforts paid off with a material year-over-year improvement in our margins. Demand trends did turn down as we exited January, resulting in lower revenue production than we had originally forecasted for Q1. Domestic main cabin RASMs were down 5% year over year and represent the bulk of the gap between our Q1 revenue expectations and actual results.
As we would expect in times of economic weakness, we saw the weakness magnified on off-peak flights. For example, the revenue gap on domestic flights departing prior to 7:00 AM or after 8:00 PM outside of the golden hours is usually 30% lower. But in Q1, that gap expanded to 40% lower. That's why we are cancelling more off-peak fly-in and lower utilization going forward.
Weakness in the main cabin was somewhat offset by premium performance. Overall premium cabin unit revenues were up mid-single digits in P1. International Polaris RASMs were up 8% and International Premium Plus RASMs were up over 5%. Domestic Premium Seat RASMs were flat. Our long-term strategies to build premium capacity and customer choice were very helpful given the main cabin demand trends in Q1.
Business traffic trends we saw late in Q4 and early 2025 moderated later in the quarter. Flown business revenue grew 7% in Q1 year over year versus 15% in Q4. Contracted business sales for all future travel are currently up low single digits year over year, which is moderated from the up double digits at the start of the year. Loyalty revenue remained strong and grew 9% to $1.5 billion in the quarter. Co-brand spending was also strong, up 9%. Co-brand spending growth in early April remained consistent with March performance.
Q2 customer demand is not what we were planning just a few months ago, but we continue to expect our top-line revenue growth for Q2 to be positive. We have adjusted RM strategies going forward to accommodate more lower yield in passengers, a necessary reaction to the current environment. The effect of these RM changes is that we will spill less traffic to our competitors, but we will run with lower yields.
Since making this RM change about six weeks ago, bookings have stabilized, and we are currently booked ahead of last year at this same point in time by 1 point. We at United have a high number of brand-loyal customers, and our focus on our seven hubs puts us in a position where we are not a spill carrier. We determine how much traffic we spill to other carriers based on the amount of capacity we offer and the yield we're willing to accept.
To give you a few examples, in Chicago during Q4 2024, we expanded our passenger share lead of local origin traffic to 22 points ahead of our next largest competitor. In 2019, that lead was only six points, and in 2015, we actually had a negative GAAP. From Denver, we've increased our GAAP ahead of our largest competitor in that market to 10 points for Denver-based passengers. United also gained 2.1 points in market share in late 2024 in the Bay Area. United will operate our narrowbody aircraft with 2% less utilization in the coming quarters, effectively lowering our domestic capacity by 2 points.
In the last few weeks, we have reduced domestic capacity for the summer in our sell-in schedule by three points, with 1 more point to be removed shortly. Among our primary competitors, we operate the highest percentage of our domestic departures in the golden hours between 7:00 AM and 8:00 PM. We usually have the lowest overall aircraft utilization. And lower utilization is usually considered a negative in our industry, but for United, it has been one key to our relative success.
Fourth quarter domestic schedules are still being developed, and we will look to see if more significant changes are needed. The international environment is also strong for United, and we believe it looks good for Q2 as of now. The makeup of our international traffic skews heavily towards US point-of-origin business. While most of our international travel demand is US-based, we are seeing modest declines in non-US-origin passenger volumes.
For the second quarter, international passengers originated in Europe are currently booked 6% lower than last year. Canadian origin passenger volumes are slightly worse, down 9% year-over-year. For United, US origin demand has more than compensated for these reductions. As we think about the impact that potential recessions could have on business traffic, it is important to note that relative to pre-pandemic, our revenue makeup is less reliant on this revenue source.
Business revenue now makes up 8 points less of our passenger revenue and contributes 4.4 points less to our load factor. So far, we've seen no deterioration in high-end consumers' willingness to purchase a premium experience. We attribute this to the fact that the economic uncertainty has a larger impact on more budget-minded discretionary travelers than those seeking a premium experience.
Q2 booked premium TRASMs to date have remained solidly positive for international flights and flattish for domestic flights. United has a consistent strategy for the last nine years to win brand-loyal customers, and that has been happening. This is important for investors who want confidence that United's margined outperformance really can be structural, permanent, and irreversible.
With that, I want to say thanks to the entire United team, and I'll hand it off to Mike to talk about our financial results.

Michael Leskinen

Thanks, Andrew. For the first quarter, we delivered earnings per share of $0.91, ahead of expectations and within our guidance. Our pre-tax margin was 3%, up 3.6 points year over year, and the strongest first quarter we've had in the last five years. We expect these results to lead the industry and further demonstrate the success of our United Next plan.
As Andrew just described, at the start of February, we saw a steep drop in US government and government-adjacent travel. We guide, however, with a no-excuses philosophy. So seeing the pressure on revenue, we doubled down on managing costs to ensure we would deliver within the first-quarter EPS guidance range. Those efforts, along with favorable timing of a few maintenance events, led to a first quarter CASM-ex result of up only 0.3% year over year. These actions combined with lower fuel costs enable us to deliver on our guidance. I'm proud of the team for their hard work in making sure we delivered on our first-quarter financial commitments.
Looking to the second quarter, we expect earnings per share to be between $3.25 and $4.25. We are acutely focused on booking trends and the potential impact of tariffs, and we are closely monitoring the situation. And it is a risk. But to date, our bookings have stabilized. Looking out to the third quarter and beyond, we've already taken action to pull down our less profitable flying, including red-eye flying, capacity and US government traffic heavy routes, and trans-border flying, aided by accelerating the retirement of 21 aircraft.
We were the first airline to recognize slowing demand from US government spending and to take appropriate action. We expect our domestic capacity to come down 4 points from our original plan starting in the third quarter. There's a tremendous amount of uncertainty in the economy right now, and we've already seen a reduction in demand and correspondingly in revenue.
But we've seen stability at that lower demand level in the last six weeks. And the silver lining is we also expect a significant reduction in our fuel costs. If demand remains stable for the balance of the year, that combination of revenue decline and fuel cost reduction, along with the fact that we built a significant contingency into our initial guide, leaves me cautiously optimistic that we can still deliver full-year earnings per share within our guidance range of $11.50 to $13.50.
While we've seen stability in demand for the past six weeks, we also recognize that there's a real risk of the US economy going into a recession. If we enter a recession, we are modeling an additional 5-point reduction in total revenue for the remainder of the year, on average per quarter. In that scenario, we would make an additional downward adjustment to capacity, and we have not assumed any further relief in fuel price, even though that might happen.
Even in that world, we expect our full-year earnings per share to be between $7 and $9. While that is not what our expectations were at the start of the year, that scenario would be the first time United would have remained solidly profitable through a recession. We believe it would justify significant multiple expansion as we will have proven our financial resiliency, our greatly improved competitive position, and the durability of a de-commoditized business powered by brand-loyal customers.
Turning to the balance sheet, we ended the first quarter with $18.3 billion in liquidity, including our undrawn revolver. We generated over $2 billion of free cash flow and paid down $1 billion of debt. In fact, over the last 12 months, we've generated over $5 billion in free cash flow, representing approximately 130% of our net income. At our current equity valuation, that represents an over 20% free cash flow yield.
Our net leverage was reduced to 2.0 times from 2.2 times at the end of 2024, marking continued progress as we work towards our long-term net leverage target of less than 2 times. Recognizing our progress, Fitch upgraded United to BB with a positive outlook, with a change to a positive outlook from Moody's as well.
On the buyback, as of April 10, we've repurchased approximately 5.6 million shares in 2025 at an average price of $80. History has taught us that even industry leaders are prone to steep market overcorrections in times like this, and we've built our buyback strategy around being opportunistic. We believe this is precisely the right time to repurchase our shares at our current depressed valuation, with approximately $1 billion left in authorization.
Regardless of the economic path ahead, we expect our financial results to be resilient. We believe that the long-term earnings power of our company hasn't changed. And frankly, it's possible that some of the weaker airlines may be forced to curtail money-losing capacity sooner than they otherwise might have. Therefore, our view of the intrinsic value of our shares also hasn't changed.
In fact, as I mentioned earlier, we believe our multiples should expand as we prove that our business is stronger and more resilient even in a time of economic stress. For as long as our share price remains depressed, we plan to continue to utilize a meaningful portion of pre-cash flow to repurchase shares at what we believe are discounted prices.
As I've mentioned the last several quarters, free cash flow generation remains a top priority. While demand has softened, we continue to expect to generate full-year free cash flow approaching $3 billion in a base case and positive free cash flow even in a downside recession scenario. To close, United's competitive position in the industry is only strengthening. We're focused on leaning into our network strengths, continuing to win brand-loyal customers, and delivering on our financial commitments.
Now back to Kristina to start the Q&A.

Kristina Edwards

Thank you, Mike. We will not take questions from the analyst community. Please limit yourself to one question, and if needed, one follow-up question. Sarah, please describe the procedure to ask a question.

Question and Answer Session

Operator

(Operator Instructions) Jamie Baker, JP Morgan.

Jamie Baker

Hey, good morning, everybody. So first one, probably for Scott or Mike. Presumably this past January, you had an internal forecast for 2026 earnings. If we embrace something closer to the recessionary scenario that you just laid out, would your internal 2026 forecast be higher, lower, or the same today?

J. Scott Kirby

Hey, Jamie. Thanks for that question. I think it's insightful and maybe the most important question we talk about today.

Jamie Baker

Thank you. We can end the call after my question.

J. Scott Kirby

There you go. We're doing it. I'm going to slightly modify your timing from 2026 to say the 12 months once we're shorted to a normalized back-to-growth economy. I happen to think that will be for 2026, but it sort of depends on the macro environment. But in the 12 months where we're back to a normal macro economy, the short answer is yes, our margins would be higher.
But I would go back to what we've been telling you really for the last five years. And it started with, one, we were going to decommoditize and build United into a brand-loyal airline. That's been a part of the United Next strategy. It's been a part of the entire strategy coming out of COVID. Second was cost convergence was going to be a fundamental structural change for the industry. Third is revenue diversity.
We see that. We talked about international today. We haven't talked about loyalty yet, but loyalty is strong across the board. That's been another structural change. Part of this too is also part of the revenue diversity has been solving -- finally solving the puzzle on the price-sensitive travel. And we have done that with basic economy and gauge.
And so all the things that we've talked about for the last five years led to us on the last call talking about comparative advantage and saying that we thought the world was going to -- the airline world was going to evolve to a place where airlines flew primarily in places where they had competitive advantages, and the kind of capacity wars that have happened in the past would become a thing of the past because all of the trends we talked about just had separated the gap between the brand-loyal airlines and everyone else.
And so what this stressful environment is going to do is it is going to accelerate what was going to happen anyway of airlines focusing in markets where they have comparative advantage. And that means that looking forward, there's going to be less unprofitable flying in the industry, which means less total flying than was going to happen, and that is just going to happen sooner.
That means that I am confident that United Airlines is going to have higher margins than we would have had this taken longer to occur. And in fact, I will go one step further and say that when we get to the 12 months sort of post this economic period, not only are we going to have higher margins, I believe they will be solidly double-digit margins.

Jamie Baker

Okay, thank you for that. And then Mike, I know you touched on this in your prepared remarks, but your premium high-margin competitor refuses to buy that stock until they meet their leverage targets. You were obviously pretty active last quarter or through April 10. I'd love to believe it's because you like our [down 30-on-30 analysis].
But in all seriousness, our question on this topic is why? Is it simply a function of cash lying around, burning a hole in your pocket, given the delivery delays? I guess what Mark Streeter and I are trying to reconcile is your own goal to de-risk the balance sheet and achieve IG ratings against some pretty material repurchases through April 10. Any additional color?

Michael Leskinen

Thanks, Jamie. I love the question. Look, when we think about buyback versus deleveraging, we are trying to optimize our overall cost of capital. And therefore, as our stock price declines and the gap between our market price and our view of intrinsic value of the shares, as that widens, it is more opportunistic to buy back shares. And so that's what you have seen. You've seen an acceleration of buyback as the share price was lower.
Now we are very, very disciplined around making sure we have guardrails around that. And we need to continue to deleverage. I'm very prominent about talking about getting our leverage -- our net leverage below 2 times. It's very important to us to continue to march towards investment grade. It is very important to us that the buyback is funded by free cash flow and that we do not drift into a debt-funded buyback. With all of those constraints, we feel confident about the future and excited about, frankly, an opportunity to purchase shares at these low prices.

Jamie Baker

Scott and Mike, thank you very much. Appreciate it.

Operator

Andrew Didora, Bank of America.

Andrew Didora

Hi, good morning, everyone. Mike, you mentioned the cost performance in your prepared remarks, really impressive here in 1Q. I would imagine it's hard to do much better than that going forward. Is that the right way to think about it? And can you maybe speak to additional cost levers you have if the revenue environment starts to move towards your recession scenario?

Michael Leskinen

Thanks, Andrew, for the question. We're very proud of our cost performance in the first quarter. But before I talk about the first quarter, let me talk about our focus on building a cost-efficient culture here at United. We are being intentional about spending in areas that improve the customer experience, but we also know that there are a lot of areas to be more efficient as an airline.
These opportunities are wide ranging, including, for example, improving our procurement organization and taking advantage of technology and data. And we've always said that running a reliable operation is the best path to a low-cost operation. Most importantly, running a reliable operation is the best way we can win brand-loyal customers. So we feel great about it.
I do think we've had some costs that we don't think -- we've had some maintenance costs that drifted from 1Q into 2Q. And so I'd expect 1Q CASM-ex to be the best performance of the year. But as we sit here, I expect meaningfully better CASM-ex for the full year than I would have thought just in January. We're going to continue to work hard to find more areas for efficiency, but we made a lot of progress in the first quarter.

Andrew Didora

Got it. Understood. And then just my second question, just wanted to get your thoughts on the 4 -- on the 5 points of lower revenue production in a recessionary scenario. I guess, why is that the right number to anchor to, and I guess what's embedded from an industry perspective to get to the $7 to $9 in EPS? Thank you.

Michael Leskinen

It's a great question, and maybe Andrew will want to jump on at the end. But from a high level, what you've seen from what we expected in January to what we expect in the base case now, you've seen an about five-point reduction in revenue from what we thought just a few months ago. and then the recession scenario would be an additional five-point reduction starting whenever we enter into that recession, so sometime in the third quarter most likely. So if you add those together, which would be the appropriate way to think about it, it would be a 10-point reduction from the run rate we would have expected. Now how long we persist at that low level, you're going to have to make your own assumptions around. and listen, we don't have a crystal ball on how deep a recession might be, but that's our expectation of what a normal recession might look like. We've given you the tools if you want to create a different scenario than that, but that would be our expectation of a downside case and we wanted to be transparent with you all around the assumptions.

Andrew Didora

Great. Thank you very much.

Michael Leskinen

Hey, I want to clarify that the 10-point reduction, it kicks in in April for our recession scenario.

Operator

Connor Cunningham, Melius Research.

Connor Cunningham

Hi, everyone. Thank you. Appreciate the details on the spill traffic comment. I wanted to kind of start there. I just would have, this just seems like a time in which you would look to stamp out all the spill traffic carriers from your hub markets in general. So I just thought that that was the whole entire point of kind of basic economy in general. So can you just talk about how you continue to move down the path of eliminating spill traffic in general? Thank you.

J. Scott Kirby

So we're just trying to build a great airline for United Airlines customers. That's all we're doing. Truthfully, our plan hasn't changed in five years. We make tactical adjustments like we did this time to pull out utilization flying. Everyone else does what they do. I think it puts immense pressure on them. When United gets great, that the contrast between United Airlines and everyone else gets wider and more evident. But it's not us consciously trying to stamp out or do anything like that. We're trying to create the best airline in history for United Airlines customers. and that creates a big gap to everyone else. And it's up to them to do something else. And if they don't, well, we'll see. But we're just trying to do a great thing for United Airlines customers.

Connor Cunningham

Okay. That's helpful. And you're probably not going to like this question, but I've been getting it kind of on repeat. If you just look at the first half implied performance on EPS and then you look at what you're baking in on the second half to get to the $1150 range, it basically implies that you're going to be doing better on a year-over-year perspective versus 2024. So I'm just trying to understand what's driving that improvement if we're bouncing along the bottom in the current recession, not recession, the current environment in general. So just what additional levers do you have that you feel more comfortable now? Maybe it's premium, maybe it's loyalty. It might get you to sound better on costs. Just any thoughts there in general would be helpful. Thank you.

Michael Leskinen

Yes, look, the first point I'd make is that the full-year guidance in the 1150 to 1350 scenario counts on current booking trends holding steady. It accounts for the fact that we've burned up all the contingency that we put into that full-year guide. It assumes we have continued excellent cost management, but we don't uncover anything new. And it assumes that second half fuel is about 20 cents lower than first half fuel. and then finally it accounts for some profit-maximizing capacity cuts. And so that's how we're thinking about getting to the full-year guide of 1150 to 1350. And then we've been very clear about the downside case as well. I think that answers your question. If it doesn't, maybe clarify and I'll keep going.

Connor Cunningham

No, you're good. I appreciate it. Thank you.

J. Scott Kirby

And by the way, that was a totally fair question. We've asked ourselves that question.

Connor Cunningham

Well, Jamie asked all the good ones.

J. Scott Kirby

Yes, but the point is, I mean, I think the bigger point is we typically build a lot of contingency into guides and our 1150 to 1350 doesn't really have contingency left. Our quarterly guide still does. And I'll just make a bigger point on this, which is a cultural point. We expected more questions about doing two guys. No one's ever done that. We haven't really gotten them, but I told our whole team and I'll tell our investors as well. Part of that is also when you run the company with a no excuses philosophy, which is what we have, we are going to do everything possible no matter what happens to get to our numbers. And it is true that the environment has gotten a lot harder. and achieving our full year. If we didn't think we had a real shot at getting it, we wouldn't say it. But we do have a real shot. Bookings need to stabilize. We've got to work hard. We've got to do everything right to get there now. But we still have a real shot. And the most sure way to lose is throw in the towel. And at United Airlines, no matter what the economic environment is, we are going to bust our asses to get there. and we will not miss it because we didn't try. And that's the culture and that's the philosophy and our results, no matter what, are going to be better because we managed that way than if we didn't.

Michael Leskinen

Yes, I want to emphasize one point Scott made, make sure it's clear to everyone. The full year guide no longer has a contingency in it. We burned that. But the second quarter guide with a dollar range, we normally have a 50 cent range. We do have contingency in that figure. And so, look, as we move towards the end of the second quarter, if we're coming in towards the high end of that, I feel better about the 1150 to 1350. And if we're coming near the low end of that range, I feel like we're marching towards a recession scenario.

Connor Cunningham

Appreciate it. Thank you.

Operator

Dave Vernon, Bernstein.

Dave Vernon

Hey, good morning and thanks for taking the question. So Scott this is a relatively unique sort of time for the industry in that you and your other sort of brand loyal airline are working with a pretty significant margin advantage relative to some of the lower cost and spill airlines that are out there. How do you think about balancing the use of that margin advantage? Are you thinking about using that margin to take share right now, or are you thinking about trying to protect that margin? When you're trying to build a better United Airlines, how do you think about that tension between having an opportunity to maybe take even more share in a market like Denver versus trying to maintain the margin?

J. Scott Kirby

I don't think there is a tension. And in fact, I'll go back to one point, which I tried to make at the beginning, but the brand loyal airline has always won. The brand-loyal airline in the United States has always had the top margins, and the brand-loyal airline has always outperformed in recession. All this changes who the brand-loyal airlines are. And it really is back to like our plan hasn't changed really in any material way at all over the last five years. We have higher confidence in it. We thought we would win brand-loyal share. We thought we would start to outperform the rest of the industry. We thought that whenever the inevitable business cycle turned, we would outperform during that cycle, and all that's happening, so we feel good about that. But we're not doing anything specific. You know, we've had a number of markets, people ask questions about specific markets, Andrew can tell you, where we've had competitors do big changes up, some big changes down, some big changes up, and frankly, our capacity and our plans haven't changed at all in those places. We're in the enviable position of We can just play the United game because we've got the brand-loyal customers. We can just keep playing, running our plays and it works. We don't really need to, I mean, I still pay attention. I still read everyone's scripts and pay attention to what they're doing, but we don't really need to focus on what they're doing or respond to it because it doesn't have that much impact on us. We've created the leading airline for brand-loyal customers and that was the winning strategy and we've executed it and now we're just finishing the game.

Dave Vernon

and I guess as you think about that building the brand-loyal customer, obviously segmenting the cabin, adding in things like faster speed Wi-Fi, adding in clubs, it does seem like the industry as a whole is moving in that direction. How do you think about maintaining that brand loyalty leadership over a multi-year period if we're seeing some of the other airlines also investing in some of the same capabilities just come down to execution or Is there something further in the outlook that you're looking at in terms of trying to maintain that leadership position with brand-loyal customers?

Andrew Nocella

I'll try to take that. Look, I think we are charged with continuously trying to climb higher, to innovate more, and to go faster. That's definitely the culture that we have at United. And quite frankly, there's a lot of things in the hopper that we haven't announced that are yet to come. But we are, again, in this enviable position where the United Next plan is working. Our capacities come online at a much better rate than anybody else's. And that's a really strong foundation that allows us to continue to invest in the customer. And you're going to see more and more of that over the next 18 months. We have a bunch of announcements that are planned. And that's going to allow us to continue the segmentation, revenue choice, customer choice path. The only other thing I'll add is the Investments we've made, we've made over a really long period of time. Like, it takes years to build these clubs. It takes years to refit the aircraft with the appropriate LOPAs to invest in the Wi-Fi technology. And while it's, I guess, a bit flattering that others are trying to copy us, they are generations behind, in my opinion, and will never catch us. And we will continue to run as fast or faster to ensure that doesn't happen.

Dave Vernon

All right, thanks again for the time, guys.

Operator

Catherine O'Brien, Goldman Sachs.

Catherine O'Brien

Hey, good morning, everyone. Thanks so much for the time. So you've already given us a lot of detail on your full-year guide, but maybe just one more on the different levers, if you'll allow it. You know, I thought it was really helpful to frame the revenue downside in the base case versus the recessionary case. But can you give us any high-level thoughts on how much the single act of God buffer, lower non-fuel costs, and lower fuel each helped offset revenue lower by five points in your January expectations, the base case, such that you're able to keep that original EPS range?

Michael Leskinen

I'll give you directional feedback on that, Katie. Fuel has been the biggest tailwind, as you would expect. It's a big reason why I think fuel hedging doesn't make sense in this industry. as revenue declines, almost always fuel does as well. So that was the largest. The second largest impact was the work we've done on cost management. So that was a big driver. We've got plans, multi-year plans to hit some of these cost targets, but we definitely pulled some of that forward. Related to those cost savings, the decision to early retire 21 aircraft that naturally allows us to bring down maintenance expense. And so that would be the third bucket is the decision around capacity made early enough allows us to also save maintenance expense. So I put it in that range or that ordering, fuel and then cost management and then the capacity decision.

Catherine O'Brien

Really helpful. Thanks, Mike. Maybe one for Andrew, a little bit of a shorter-term question. Can you speak to how you see each entity performing in the second quarter? Should we expect RASM deceleration across each geography, or are there some of the international markets holding it better? Any color would be helpful. Thanks.

Andrew Nocella

Sure, Katie. I think we had a really very good, strong Q1 for international, and I think we'll have the same in Q2, but the year-over-year RASM won't be the same. But at this point, I do expect international RASMs to be positive across every single international entity, by the way, with the Pacific probably being the strongest Atlantic and Latin trail in that. So clearly, the bulk of the issue we're seeing today is demand for domestic flights, particularly in the main cabin. And that's where the challenge will be in Q2 as it was in Q1. And it's going to be clearly a negative RASM environment for domestic and Q2, based on everything we see right now.

Catherine O'Brien

Thanks a lot for the time.

Operator

Tom Fitzgerald, TD Cowen.

Tom Fitzgerald

Hi. Thanks for the time and congrats on the results. I'd love to just hear your perspective. higher level and longer term on the broader international market, given your flag carrier and your franchise and some of the growth you have with your freedom flying out of Hong Kong. Just given that it just seems like there's a heightened risk of more geopolitical tensions. I'd love to hear how you're thinking about that.

Andrew Nocella

Sure. I think international, for as long as I've been at United, has been the stronger entity. And we've worked really hard. and continue to work hard to make sure that domestic catches up. But international continues to accelerate. And the more we do, the better it all gets. Like, there's this S-curve type effect. And the world is getting smaller. Things that we did not think were possible five years ago are possible today. And I think the same will be true in five years as you look at that. And so, we are continuing to look at a broad range of opportunities outside of the United States. more lucrative environment as we go through this cycle. Clearly, there'll be ups and downs just like there are in any marketplace and things will move around and we'll move our aircraft appropriately. But we remain really bullish on the international environment. The results in Q1 were, I think, outstanding. Our margins across every single entity were up mid to high single digits in Q1. Really great performance. You know, we'll see where that lands in Q2, but Q2, the international outperform again. It has for years. We believe it will going forward. We have an order book to support that growth, and we'll continue to watch it. That being said, we also have a lot of older 767s and 777s that we can potentially retire if things do change. But at this point, we're leaning into it because it is working.

J. Scott Kirby

And I'll add structurally, the further you look out on the timeline, I think there are two structural supply constraints that are going to cause the international to outperform more and more over time. Number one is aircraft. All the aircraft that got retired in COVID combined with the supply chain challenges, not just at the manufacturers, but much deeper in the supply chain, whether it's engines or BFE or kind of across the board, there are going to be big supply chain challenges for wide-body internationals I think for the rest of my career. And then secondly is airport constraints. Like I can't tell you how hard it was for us to get slots in Manila, to fly to Manila. And international markets are far more constrained from a capacity perspective at the airports. And so if I had to make a bet, like I'm not, I'd actually make the bet the short term too, just because I see the data. But if I had to make a bet on a year from now, I'd have less confidence. But if I had to make a bet 5, 10, longer term, then I'd put all my chips on international because the supply constraints are real and are significant.

Tom Fitzgerald

That's really helpful. Thanks so much. And then just as a follow-up, Think about the rollout for Starlink on the mainline fleet, what the cadence like that could look like, and then how you're contemplating potential share gains as that product comes out in the market. I think that seems like a really positive idiosyncratic lever that you guys have next year. Thanks again for the time.

Andrew Nocella

Yes, we are very excited about Starlink and what it enables for our customers, what it enables for Connective and MileagePlus as well. We shouldn't forget that because these things are all kind of linked together. You know, we've made a lot of different investments, whether it be Starlink, food, seeds, you name it, and all those things together are kind of leading us to where we are today on the brand loyalty side, and I think it's been incredibly effective, and so we're super proud of that investment, and I think there's more to come on that front.

Operator

Sheila Kahyaoglu, Jefferies.

Sheila Kahyaoglu

Good morning guys and a great quarter just relative to the environment. So maybe I could ask about international. It's clearly strong, but I think in the prepared remarks there were comments around international non-US origin volumes down, Europe down six, Canada down nine, offset by the increase in US-originated international traffic. So maybe if you could talk about that dynamic and is there a share gain opportunity as you expand internationally and convert customers in those markets. And on the Pacific strength, if you could touch upon different markets there.

Andrew Nocella

Sure. Well, we wanted to give that data because I think, as most people know, there was some erroneous data about trans-border traffic and some outrageous number, which was completely false, that was put out there. So we wanted to put out the numbers that, yes, we are seeing a modest decline in foreign-origin business, but our US origin point of sale is, I think, a little over 80% to begin with. and so the 20% is seeing a modest decline and we're able to easily refill those seats with US origin point demand. So as a result of all that, our international looks fine. In terms of overseas, specifically the Pacific, that entity is kind of leading the way, clearly did in Q1. Across the board, we see strength just about everywhere in the Pacific, but Japan is really phenomenally strong right now. for us and our partner ANA. So I think that is noteworthy. The South Pacific is having a very good year. And really, across the board, the Pacific looks really good. The Atlantic, I think, also looks really good. Germany had a very good quarter in Q1. We'll see where that is in Q2. And Southern Europe is just increasingly a desirable vacation spot for US consumers and, in fact, for US consumers to go in off-peak periods. So overall, look I think the international environment would be even stronger if we hadn't had that deterioration in the origin business from overseas or the US consumer was even stronger in a stronger economic outlook. But the international entity looks, I think, really good, is a strong source of profits for United, and we're very bullish about the short-term and long-term outlook.

Sheila Kahyaoglu

And maybe one for Mike. On the $7 to $9 scenario in a recession, how do we think about your operating margins and free cash flow in that scenario?

Michael Leskinen

At $7 to $9, I mean, the operating margin is just some math. We can help you with that offline. Sure. Around free cash, that ends up being, we would expect that to be near break-even, but still positive free cash in the $7 to $9 range. We would have some There's some movement in CapEx, but probably not this calendar year.

Sheila Kahyaoglu

Okay. Thank you.

Operator

Tom Wadewitz, UBS.

Tom Wadewitz

Yes. Good morning. Thanks for the chance to ask a question here. I wanted to ask you a little bit about some of the cost assumptions and maybe how the pace of union agreements tends to work. during an economic downturn. I'm thinking of the flight attendants in particular, but do you think progress tends to be slower if you're in a recession or things are a lot weaker? Or do you kind of think the same assumptions in terms of your cost profile on timing of when you might get a union agreement?

J. Scott Kirby

Our people are doing a great job. You can see it in our resilient results. When I say we want brand-loyal customers, we talk about the hard product. The biggest thing we do is how our people care and take care of customers. There's nothing as powerful as walking onto an airplane. There's two flight attendants in the galley who are smiling, who are happy, who are positive, who you can tell are happy and positive. There's nothing as impactful as a captain coming out of the cockpit and talking to the customers and standing there. and they're doing a great job and we're winning even in a recession. So they're going to get good industry-leading contracts and they deserve it. And this recessionary environment, even if it happens, isn't going to change that. And we're getting close, particularly on apply attendance, so fingers crossed that we're near the goal line.

Tom Wadewitz

Okay, so that doesn't affect your view on timing. For the second question, So I think you said, well, we don't assume the cycle is different, or we don't assume things are different. But clearly, United's position is different. You identified that really clearly with the commentary on the market share and the hubs. Do you think that maybe the consumer is different as well? Maybe more of the spend is with high-end consumers that would maybe support resilience on international? Or how do you think about that? I guess I'm just trying to think of in a recession wouldn't naturally international flying come down? I mean, you haven't seen that yet. You just want to see if you have any other comments to offer on that. It's just like consumer makes different, international is more resilient this time around, even if you go on a recession. Thank you.

Andrew Nocella

Yes, international has definitely been more resilient. But I do think there are different types of consumers, and each of those consumer types feels a different level of pressure in the situation that the country faces right now. Discretionary consumer faces more pressure, and that customer was probably less likely to take that vacation to Rome or Tokyo to begin with. So the high-end consumer, which I think from a look at wealth over the a few years, yes, the market's down in recent months, but the high-end consumer, the more wealthy consumer, the one that takes the global vacations, the one that wants to sit in a premium seat, seems to be less impacted so far. and I think that's really good for our business and it's consistent with our brand and one of these customers to begin with.

Michael Leskinen

Hey, Tom. This is Mike. I want to add to that. I think there's also been a real mixed shift at United. I think probably the industry level with a real mixed shift in our premium cabins. We have less corporate and we have more premium leisure. And I believe that piece of our business is showing some great resilience as well. A lot of secular trends are accruing to our benefit.

Tom Wadewitz

Great. Thanks for the insight.

Operator

Duane Pfennigwerth, Evercore ISI.

Duane Pfennigwerth

Hey, thanks. Good morning. I have a book club question for you. You really piqued our interest with a recent book recommendation, Capital Returns. The book covers a lot of ground and we won't do it justice here, but it focuses on supply analysis and the authors advocate for buying equities in sectors when industry returns are low and capacity is exiting. It also makes the point that lower asset growth firms, lower CapEx firms, tend to outperform higher asset growth firms over the long run. So with that long-winded intro, Scott, What were the highlights from your perspective, and maybe from Mike and Andrew, how would this book influence your thinking about growth and capital allocation?

J. Scott Kirby

Well, I'm glad that you read my book recommendations. I have another one that I'm not through reading yet. I actually forget the title. It's by Brian Greene. Anyone that's interested in physics, it's spectacular. Look forward to it. On understanding the search for a unified theory. and it's really good. But capital returns is good also. And there's a lot of good lessons in there of how to think about it. One for me is, which probably appeals to the way I think, but is to be willing to think against the consensus. When everyone else is buying airplanes, it's probably the wrong time to buy airplanes. We did do it at the right time. and COVID, when everyone else thought the world was coming to an end and air travel would never recover. You just heard, and I think about supply like way more than I think about the demand environment. Demand environment's going to go up, demand environment's going to go down. Over time, demand is going to grow a little faster than GDP for air travel, and there's going to be short-term variations like there are right now. I don't stress about those. I follow what's happening with supply. I think this is going to lead to better supply. changes, and also even my answer on the international question. I feel so bulled up about international, not because it's booked well right now, like something could change in the short term, but because I look out a few years, and the supply environment is going to be constrained internationally, and that is the place you want to go. I've been way more frustrated that Boeing didn't get us all of our 787s than that they didn't get us all of our 737s, because we were the only ones in the world that wanted to make that bet, and we made that bet. And it's paying off, but it could have paid off even bigger. But anyway, it's a great book. Everyone should read it. It's the first time I've given a homework assignment to the team, but the finance and network team, I got them all copies. It's hard to get, by the way, because it's not in print, but Aaron got them all copies, and you had some of the lessons I learned. Mike?

Michael Leskinen

Dwayne, I'll make two points that I thought the book emphasized. Number one, CapEx. We need to be thoughtful and disciplined around the investments we make in aircraft. They're 30-year investments to make sure that our expected return through cycle, return on invested capital, is above our cost of capital. Given the constraints to supply that we've been harping on, we feel very strongly about that. We've got some older aircraft, in fact, that if we could get additional deliveries, the return profile of replacing some of those older aircraft is quite strong, nicely exceeding our cost of capital. But the point of the book is we need to maintain discipline, and we need to be willing to think differently and turn right when the market turns left and vice versa. The second point that the book emphasized that I've been passionate about since I left the buy side is that buybacks should be opportunistic. If at some point we don't feel like it should be opportunistic, we can pivot to a dividend. But buybacks, when the shares are on sale because the market is panicked, we should be willing to step in. Within the constraints of managing our balance sheet to drive towards investment grade, we should be willing to step in in a more heavy-handed way. And when the shares close in on intrinsic value, we should just turn it off completely and allow our balance sheet to improve more rapidly. Those would be the two points.

Andrew Nocella

I'll only add the relative point that I thought was most interesting in the book, which is the supply-side forecast. And in this case, I'll just reiterate what Scott said, that the international airports around the globe and the big airports in the United States are really not building runways and we're not building gates. But as GDP grows, we're building demand. And so I can remain very bullish in the big cities that we have our hubs in here in this country and the big cities we fly to around the globe. where it's becoming increasingly difficult, if not impossible, to be able to expand schedules.

Duane Pfennigwerth

Appreciate the thoughts. Thank you.

Operator

Mike Linenberg, Deutsche Bank.

Mike Linenberg

Hey. My question's going to be a little bit more lowbrow. Just touch basic economy here. I think last quarter you gave us a number, maybe it was about 15% of volume. When we look at the year-over-year increase in basic economy revenue relative to your total revenue, it's almost outpacing a two-to-one. Where is that percentage today and is that just largely a function of the up-gauging and next or are you starting to see maybe more intensely competing at the lower part of the fair structure and that's driving a higher volume?

Andrew Nocella

Look, I expect in Q2 you're going to see us be more competitive at the lower end of the fare structure, creating higher volume. It was less true in Q1. Okay. Because the decline in demand happened so quickly at the mid-February and March, and so we didn't have an opportunity to really react quick enough to fill up the seats, and our domestic load factor fell by, I think, 3.3 points. So in Q2, you're going to see us, we'll probably still run a small load factor deficit year-over-year domestically, but it's probably in the order of one point, and it'll be because we've opened up the inventory system to take more basic, more low-yielding customers, and we will simply spill less to the spill airlines as a result when we do that. But I think you'll see it expand in Q2, and it'll go up and down based on market conditions, but we'll decide how much low-end traffic we want to spill and when we want to spill it.

Mike Linenberg

Great, and Andrew, since I have you, just this Real ID deadline, May 7th, I mean, you're the most international of any of the carriers, so passports among your customers shouldn't be an issue, but what sort of impact do we have? I mean, I don't think it impacts your cash since you sold the ticket, but are you going to get a bunch of cancellations where all of a sudden there's some revenue recognition because people show up and they don't have ID? Any thoughts on that?

Andrew Nocella

Look, I think there's a lot going on there, and I kind of hope that date gets extended once again, and I'll hope the same thing when it happens again. but we're working through this with the government and I think we'll have more to say on it but hopefully everybody's prepared and they got the real ID or their passport or their passport card. There's multiple ways to get through TSA security obviously but this is something we are aware of and we continue to talk to the government about it.

Mike Linenberg

Great. Thank you.

Operator

Brandon Oglenski, Barclays.

Brandon Oglenski

Hi, good morning, and thanks for taking my questions. So can you guys dig into how you're defining brand-loyal customers? Because I think this is a pretty important concept. And Scott, I think in your prepared remarks, or maybe it was Andrew, you talked about share of local customers. Is that a way we could start to measure it from the outside looking in?

Andrew Nocella

Absolutely. It's all of the above. So there's a number of ways to do it. Our total market share, and you look at every single one of our hub cities, our market share is up in every single city we fly to. If you look at the origin market share, which is something I highly recommend that you do, and I gave some numbers today for Chicago, for example, where our origin share is better than our total share. In other words, the loyalty of local customers here in Chicago has shifted to United. We've got those customers a co-brand credit card as well to make sure they're incredibly sticky. and they stay with United indefinitely. That was our plan all along. We think it's working and we'll do the same. The other measurement we look at is share amongst the big global travel agencies. Those tend to be higher yielding customers, traveling often for business, and our share in that category continues to go up. And there's probably a bunch of other ways you can do it, but it shows up in our regular revenue premium to the industry and it shows up in our market share. It shows up all over the place. But most importantly, it shows up into our margin and the relative GAAP we have to our competitors. And I think you'll see that our margin GAAP probably increased to others in Q1, did not decrease.

Brandon Oglenski

Well, I appreciate that, Andrew. And I guess, can you put that in the context of how prudent it is right now, growing domestic capacity in the high single-digit level? Because I think that's what your 2Q and summer schedules are showing right now. and especially just given that we saw such a drastic change in unit revenues. You know, we thought 1Q would be positive. It ended up down, I think, 3 or 4% domestically. So is it the right opportunity to be taking a lot of share right now? Or I guess maybe if I rephrase the question, is the focus really just on incremental gaining that share today and worry about the margins later? Or is there more of a focus on margins? And again, is it prudent to be growing that much domestically?

Andrew Nocella

Well, I think it's false to think that we don't focus on both. We are always focused on our margin. But I think we've shown over eight years now that we have a proven track record on our capacity decisions, and all of those decisions have been undeniably good for United. You know, we look back at our absolute and relative performance this Q1 and believe that our choice of growing, which we did focus on peak time of day flying, proved right and created our margins that you saw. We were the first to announce a change to our fleet a few weeks back at the JPMorgan conference. and we've unloaded a bunch of capacity as a result of that. So we were going to fly higher than the number that we're going to fly. We believe the capacity plan we have now for the spring and summer is the best plan for United and we also understand that things change and as usual, we'll stay on top of those things and we remain open to making changes in September and beyond. But at this point, we think we have the right plan. We're not flying we're not going to fly unproductive capacity, but we are also going to balance market share and financial returns. We've given you the EPS guidance. We've given you two guides. I think we're really focused, as Scott said, on a no-excuse culture on delivering on our guide.

Brandon Oglenski

Thank you, Andrew.

Operator

Ravi Shanker, Morgan Stanley.

Ravi Shanker

Great, thanks. Morning, guys. So just to follow up on the multiple scenarios here, but from a loyalty and co-brand standpoint, how do you think that evolves if we do get probably the first broad-based consumer recession we've had since 2008? Obviously, the whole industry and loyalty and co-brand have changed a lot since. Does it stay as resilient as it was during the pandemic, or do you think it has greater risk?

Michael Leskinen

Hey, Robbie, I love that question. The loyalty business and the stream of revenue and profits from that business was resilient through the COVID pandemic. Everything we see in the data shows great resilience right now. If anything, we expect to see secular growth continue through even an economic weak spot. So as we sensitize the model and scenarios, upsides and downsides, That's a piece that is kind of a rock in all scenarios.

Andrew Nocella

I'll just add that we said this word a lot today, the brand-loyal customers makes the difference here. So as we build the premier members of the program, as we increase the penetration rate of those holding credit cards, this cycle just builds on itself like a flywheel. And we're really, really focused on this business. and making sure it does that. And as a result, I think it's getting stronger and will be more resilient in a downturn than it was even in the pandemic.

Ravi Shanker

Understood. That's really helpful. And maybe a quick follow-up for you, Mike. Just wanted to confirm that your fuel price assumptions between your two full-year guide scenarios are not different. And if so, kind of do you think there's potential for more fuel price tailwind in the recession scenario?

Michael Leskinen

Yes, Ravi, I think it's a good point. if revenue falls off as much as we anticipate in the downside scenario, in the recession scenario, there's a solid case to be made that we would see further decline in fuel. That is an assumption you can make, and so we're being very clear and transparent on the assumptions we made, and that is that we don't get an additional offset from fuel.

Tom Wadewitz

Understood. Thank you.

Operator

(Operator Instructions) Mary Schlangenstein, Bloomberg News.

Mary Schlangenstein

Thank you. Hey, Scott, I wanted to ask you, with China saying that they're going to halt Boeing deliveries, and we've got an aircraft engine and parts supplier that says they'll be scrapping shipments that are subject to tariffs, building that on top of the current supply chain issues, is there kind of a crisis developing in the overall aerospace industry? And if so, what are your main concerns there?

J. Scott Kirby

I think it's way too early to be panicking and declaring a crisis. Aerospace is probably the number one example of a successful high-tech manufacturing export powerhouse industry in the United States. And we're still in the early, the opening game. of how all this tariff is going to settle out. And I suspect by the time we get to the end game aerospace is going to be recognized as a clear winning proposition for the United States and things are going to work out. So my recommendation to everyone would just be take a breath and let's wait a little while before you start making panicky moves.

Mary Schlangenstein

Okay. And you said at the start of the call that most of your deliveries are coming from Boeing. But if you face the prospect of having to take an Airbus plane and pay the tariffs on it, will you do that?

J. Scott Kirby

Well, we're in a different position than others. We're mostly Boeing aircraft, as Brett said. We're Boeing's second largest customer, behind only the US government. Most of our Airbus deliveries are coming from Alabama. So this is a pretty minor issue for us. And in fact, I look at it as an opportunity. We had the senior leadership of Airbus was in here with us yesterday as an opportunity to actually strengthen the partnership there. To their credit, Airbus is having to import some parts. They build the airplane in Alabama. Some of the parts come from elsewhere. So far, they have had to pay the tariffs on those airplanes. And they've been a good partner in just dealing with that right now. I think we all think let's take a breath and we'll work these things out. But we view this as an opportunity to kind of work with Airbus. Again, we have much less exposure, so it's easier for us to work with them. We don't need to make any definitive statements about what we will or won't do at this moment in time. We're going to see a few more cards before we start doing that.

Mary Schlangenstein

Great. Thank you very much.

Operator

John Pletz, Crain's Chicago Business.

John Pletz

Good morning. You guys mentioned in the press release this morning about adding additional gates at O'Hare. Can you talk a little bit about how that fits into both the overall strategy for United as well as what it means for the expansion underway at O'Hare?

Andrew Nocella

Sure. Andrew, I'll give it a try. You're correct. We're going to gain six gates later this year. We're very excited to do that. Our current facilities are very full, and we know people want to fly. We know they want to fly in peak periods, and so these six gates will allow us to continue to execute on the United Next growth plan. We're really proud we won the gates through this process. We've been very consistent and our strategy here in Chicago. And as a result of that, we got the six gates and we're going to continue to grow. We think the economics of the hub look really darn good right now. And we're excited about what the future holds in Chicago for United.

John Pletz

Recession have any impact on that, on the growth?

Andrew Nocella

You know, it could potentially, but at this point we're operating a record schedule out of Chicago this summer. We had planned to do that. We're not changing our plan. And our plan is really very consistent with what we devised six months ago before we started the year. But this period shall pass, and we'll get back to doing what we need to do in Chicago. And we remain really confident.

John Pletz

Okay. Thanks.

Operator

This concludes the question-and-answer session. I will now turn the call back over to Kristina Edwards for closing remarks.

Kristina Edwards

Thanks for joining the call today. Please contact Investor or Media Relations if you have any further questions, and we look forward to talking to you next quarter. Happy spring.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect.