聯合航空 (UAL) 2009 Q4 法說會逐字稿

Good afternoon and welcome to UAL Corporation's earnings conference call for the fourth quarter of 2009.

I will be your conference facilitator.

Following the prepared remarks from UAL's Management, we will open the lines for questions from analysts.

At the end of the analyst Q&A, at approximately 3 PM Eastern Time, we will take questions from the media.

(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 UAL's permission.

Your participation implies consent to our recording of this call.

If you do not agree with these terms, simply drop off the line.

I would now like to turn the presentation over to your host for today's call, John Gebo.

Please go ahead, sir.

Thank you, Audra.

Welcome to UAL's fourth quarter 2009 earnings conference call.

Our earnings release and separate investor update were issued this morning and are available on our website at www.united.com/ir.

Let me point out that information in the press release and remarks made during this conference call may contain forward-looking statements which represent the company's current expectations or beliefs concerning future events and financial performance.

All forward-looking statements are based upon information currently available to the company.

A number of factors could cause actual results to differ materially from our current expectation.

Please refer to our press release, Form 10-K, and other reports filed with the SEC for a more thorough description of these factors.

Also during the course of our call, we will be discussing several non-GAAP financial measures.

For a reconciliation of these non-GAAP measures to GAAP measures, please refer to the tables at the end of our earnings release.

Unless otherwise noted, as we walk you through our numbers for the quarter, we will be excluding impairment charges, certain other accounting charges, and fuel hedge noncash net mark-to-market gains and losses.

These items are detailed in the table in note six on page thirteen at the end of our earnings release.

And now I would like to turn the call over to Glenn Tilton, UAL's Chairman, President, and CEO.

Thanks, John.

Good afternoon and welcome to everyone on the call.

Joining me today in addition to John and participating on the call are Kathryn Mikells, our CFO; and John Tague, President of United Airlines.

Pete McDonald, our CAO, is also with us and available for questions.

This morning, as you all know, we reported a fourth quarter net loss of some $176 million, an improvement of nearly $400 million over the prior year.

While we're not happy to be reporting a loss, we're pleased with the progress we're making, particularly during the fourth quarter.

We were essentially breakeven on an operating basis, a significant accomplishment in what is seasonally one of our weakest periods.

Our results for the quarter reflect the work and the improvement the United team is making across the company, particularly in cost management, operational deployments, and the management of revenue.

As we've discussed and as John and Kathy will cover in much more detail, we have defined the work necessary to fundamentally improve our performance across the company, and we've aligned the team to deliver against key metrics that drive that outcome.

And we believe we're doing just that.

While the environment continues to be marked by reduced demand and volatile fuel prices, we are pleased to see signs of the economy and business travel improving.

The performance improvements that we have delivered across the board, along with a book of work to ensure that we continue our positive trajectory, put United in a strong competitive position.

With our number one performance in December, we expect we will be first among the network carriers in on-time performance for the fourth quarter.

We also expect we will achieve top performance among network carriers for all of 2009 when the DOT reports results for the year next month.

This is reflective of great work, particularly against high load factors and dramatic challenges from the weather.

And we're reporting what we believe will be industry leading nonfuel unit cost control for the entire year, with mainline CASM excluding fuel down about 0.5% year-over-year.

As John will discuss further, the revenue environment is improving and we are encouraged to see early signs of recovery in business and premium demand and in our own PRASM performance.

Kathryn will discuss in further detail -- we finished the year with $3 billion in unrestricted cash, having completed several successful liquidity raises during the quarter and another earlier this month.

We've managed our liabilities well also.

And our credit spreads have tightened -- acknowledgement from the market of our progress in these areas.

Along with the work we've done to build a competitive liquidity profile, we have taken significant steps to improve the competitive strength of our network.

As you know, during the fourth quarter Continental joined United in the Star Alliance, becoming the first major airline to leave one alliance for another, and adding 63 new destinations to our network.

And, further deepening our relationship, Continental has joined us, Lufthansa, and Air Canada in forming an antitrust immunized alliance across the Atlantic.

And last month United, All Nippon Airways, and Continental applied for antitrust immunity to enable us to create a similarly efficient and comprehensive network across the Pacific.

This first of its kind venture between the US and Asia will generate substantial benefits for consumers and our partners and enable to us compete more effectively with other global alliances, each of which has a significant presence in Japan.

As we've discussed, no carrier can serve every destination, and our work to strengthen our global partnerships provides our customers with a diverse and comprehensive choice of destinations.

It enables us to better compete against global carriers and major US carriers.

There can be perhaps no greater proof point to the economic value and indeed the necessity strategically of strong global partnerships and the competition between American and Delta, or struggling Japan Airlines.

With the bidding up to some $1.4 billion, the perceived value seems clear.

We're all well pleased to have a long-term successful and mutually beneficial relationship with our partner ANA, and we look forward to the benefits to our company and our customers that open skies with Japan will eventually bring.

Most would agree we are likely seeing early signs of a recovery in the airline sector.

But as Bill Greene raised in his first question to Jeff Smisek on Continental's conference call last week, what structural changes have been made that will lead to sustained profitability?

While we echo Jeff's response to Bill's very good question, that growth and unbundling in merchandising and the continued advancement and adoption of technologies that will streamline our customers' travel experience are very important actions we all need to take, and they will make a significant difference in the recovery for future profitability -- we would add however that while we've taken important steps to improve the health and performance of our individual companies, structural issues exist that extend beyond the control of a single airline that will play a considerable role in enabling sustained profitability for this industry.

We can likely all agree that a safe, secure sustainable and profitable airline sector is in the best interest of all stakeholders, including government and the country.

Numerous structural hurdles, such as excessive taxation, inadequate air traffic infrastructure, and outdated regulation must be addressed if we're ultimately going to achieve that goal.

Recognizing the seriousness of the systemic struggles of commercial aviation, Secretary LaHood recently convened a federal advisory committee of all stakeholders, including airlines, airports, labor leaders, investors such as yourselves, analysts, consumer advocates, and manufacturers.

This is an opportunity to get all the issues on the table and to develop the industry roadmap that the Secretary has requested, with all of us participating.

To address the barriers that impede airlines from taking the steps necessary for sustained profitability.

Having said that, I will now turn the call over to Kathryn, who will take us through the numbers in greater detail.

Kathryn, over to you.

Thanks, Glenn.

And good afternoon, everyone who is on the call today.

While we're not yet where we need to be financially, we're clearly encouraged by the significant year-over-year progress that we've made, and we're well positioned to close the gap to profitability as the economy picks up momentum.

For the fourth quarter, we broke even at the operating level, an improvement of $179 million over last year, and we narrowed our net loss for the quarter by $391 million to $176 million.

This translates to a quarterly net loss of $1.05 per share, beating the Street consensus by about $0.42.

Total revenues for the fourth quarter declined by about 8% or $354 million.

At the same time, our operating expense declined by 11.3% or $533 million as we continue to benefit from our capacity reduction, our good cost control, and lower fuel prices.

The sequential improvements in revenue trends that we saw in the third quarter continued into the fourth, and as John will talk about later, we continue to see evidence that the economic recovery, paired with capacity discipline, is beginning to have the desired effect.

Our total passenger traffic volume, as measured by revenue passenger mile, was essentially flat to the year-ago quarter, as strengthening demand drove a 3 percentage point increase in load factor against our capacity reduction of about 3%, with load factors in the Pacific gaining 7 points as Asian economies begin to rebound.

Consolidated passenger unit revenue declined by 5.2% year-over-year, more than 9 percentage points better than the decline that we saw in the third quarter.

We beat our consolidated passenger unit revenue guidance by about 1 point, as both traffic and yield were stronger than we expected through the latter half of December.

Cargo and other revenue was $380 million, essentially flat to last year, as ancillary revenues increased year-over-year and strong signs of recovery in both cargo volume and yield brought cargo revenues to within 8% of last year's performance.

This represents a substantial improvement against the nearly 50% year-over-year reduction in cargo revenues that we saw in the second quarter.

Moving on to costs, as I mentioned a moment ago, we reduced total operating expense by 11.3% or $533 million year-over-year for the fourth quarter, $459 million from lower fuel expense, and $74 million from lower nonfuel costs.

Our total mainline unit costs for the fourth quarter declined by 9% year-over-year on 6% lower capacity.

The impact of settled fuel hedges was significantly improved this quarter.

Our fuel expense reflects $9 million in gains on fuel hedges that settled in the fourth quarter compared to settled hedge losses of $142 million in the fourth quarter of 2008, a year-over-year improvement of about $150 million.

Average mainline jet fuel price for the quarter was $2.04 per gallon, down from $2.83 a gallon last year, a reduction of about 28%, driving about $365 million of the reduction in fuel expense that we experienced, with capacity reductions contributing the difference.

We also recorded $33 million in settled hedge losses in non-operating expense.

Our legacy hedge positions put in place when prices were skyrocketing in 2008 have now effectively fully rolled off.

Consolidated nonfuel expense in the quarter was down about $74 million or about 2.5%.

Our mainline and consolidated nonfuel unit costs were both up about 1% year-over-year, at the low end of our guidance.

Throughout 2009, we aggressively reduced our costs as we cut capacity.

For the full year, we reduced our mainline nonfuel unit costs by 0.6% despite a nearly 10% reduction in mainline capacity.

Even more telling, over the two-year period of 2008 and 2009, our mainline nonfuel unit costs increased by only about 1% while we reduced capacity by about 13%.

This is a tremendous accomplishment by our people throughout the company, and I would like to take a moment to thank them for their hard work, achieving cost savings across the company while also delivering great service to our customers.

Now turning to the balance sheet, we closed the quarter with an unrestricted cash balance of a little more than $3 billion, slightly above our guidance.

During the fourth quarter of 2009, we raised just over $1 billion in new liquidity while at the same time reducing our debt principal and net capital lease obligations for 2010 and 2011 by more than $700 million.

In the fourth quarter, we issued equity and convertible bonds totaling about $480 million, completed a secured financing with one of our regional flying partners for $129 million, and raised about $60 million through asset sales and other private financing transactions.

We also completed the refinancing of two of our EETCs, representing almost $1.5 billion, which significantly reduced our principal obligations in 2010 and 2011.

The refinancings also raised about $380 million of new liquidity, with about $250 million of that realized in January.

Also in January, we completed a first and second lien secured financing on our Japan route franchise for about $700 million, a financing which carries the combined loan to value of about 80% at a very competitive cost.

The proceeds from this financing will be received when the collateral is transferred from our senior secured credit facility in April.

Our significantly enhanced liquidity position affords us a greater degree of financial flexibilities.

Our unrestricted cash balance is comfortably above the reserve threshold in our credit card processing agreement, and we're beginning to see our credit spreads narrow, enabling us to obtain future financing at lower rates.

We generated positive operating cash flow of $88 million in the fourth quarter, an improvement of over $1 billion compared to the fourth quarter of 2008, and we broke even with respect to free cash flow.

We made scheduled debt and net capital lease payments of $221 million during the quarter, and spent $87 million in non aircraft capital.

We closed the quarter with $11.3 billion in total debt, including off balance sheet obligations, and $8.3 billion in net debt.

While our total debt balance is roughly the same as it was at the end of 2008, we reduced our net debt by more than $900 million during 2009.

While we certainly have a ways to go before we see a full recovery, the steps that we've taken over the last quarter have moved us further down the path towards financial stability and a return to profitability.

With our very significant financing activity over the last few months, we've clearly taken the liquidity issue off the table.

And with improved relative unit costs, combined with strong and sequentially improving revenue trends, we're setting the stage for significant margin improvement as the economy picks up pace in 2010.

As John will discuss, our book of work for 2010 will build on the progress we've made running a good airline, with the goal of that work to improve our relative performance versus peers, including our relative financial performance.

However, with history as our guide, we know we will need to do more to generate sufficient returns for shareholders.

This means taking individual accountability to be a participant and a catalyst to address the structural hurdles that the industry faces.

It also means continuing to reach for innovations in our business model that can either set United apart from our industry peers or that can create an avenue to provide a much needed financial lift to all, somewhat like the move that we made back in the second quarter 2008, when we leaned forward to charge a fee for second checked bag.

This catalyst created a high margin revenue stream that's grown to over $300 million for United alone.

And with that, I will turn it over to John.

Thanks, Kathy.

The Focus On Five performance agenda that we laid out in mid-2008 was our commitment to you, our customers, and our coworkers.

The goal was straightforward -- develop a capability and a culture around execution excellence that would lay the foundation for United to achieve its full potential.

From our industry leading on-time performance to our improved cost structure, the team here at United is clearly delivering against that commitment, and we would reiterate that same commitment today.

While the official DOT rankings have not yet come out, based on preliminary data for fourth quarter, we were the number one on-time airline among major network carriers.

In fact, in November the company achieved its best on-time performance since the DOT began tracking on-time in 1987.

This performance, combined with our strong performance earlier in the year, will likely make us number one on-time network carrier for 2009 when the final DOT rankings come out early next month.

This represents a significant improvement from where we have been, and it is a credit to all of United's people for making it happen.

During 2009, we made key investments in customer experience despite an appropriately limited capital budget.

We completed the international premium cabin upgrade on our 767 and 747 fleets, remodeled a number of our Red Carpet Clubs, and invested in the condition of our fleet.

Our customer satisfaction scores, which were up significantly in 2009 are reflecting these investments along with the hard work of all United employees to deliver a quality travel experience to our customers.

Despite very challenging weather conditions in the month of December, our customers rated the service delivery of our employees about 25% higher than they did last year.

Heading into 2010, we continue to make investments in improving the customer experience.

We will begin the work to add new first and fully lie flat business class seating to our fleet of 777s.

We are continuing our work to convert our domestic first class seating to leather, along with a number of other initiatives designed to improve the presentation and the quality of our cabins.

In addition, we are investing in the improvement of our technology capabilities to allow us to continue to expand the product offerings to our customers, improve airport technology and infrastructure, and substantially enhance Mileage Plus redemption option.

On the revenue side, 2009 was marked by one of the most challenging recessions ever experienced.

The impacts on United's core areas of strength, our international network as well as business and premium travel, were severe.

However, during the fourth quarter we clearly saw strong evidence of a recovery trend which accelerated as we progressed through the quarter.

In October, consolidated unit revenues were down about 11% year-over-year.

In November, they were down about 4%, and by December, unit revenues were up slightly compared to last year.

So while our consolidated passenger unit revenues were down 5.2 points year-over-year, our unit revenue performance in the fourth quarter was a vast performance from -- improvement from the double-digit declines in prior quarters.

Most importantly, we like the sequential progress we saw during the quarter ending with modest growth in December.

The revenue trend was especially evident internationally.

Our international unit revenues were down about 4% in the fourth quarter.

Encouragingly, though, they were up significantly year-over-year in December.

Also encouraging is the improvement we are seeing in our premium cabin bookings and corporate revenues.

Premium cabin bookings in the fourth quarter were up about 5% year-over-year in the Atlantic and down only 2% in the Pacific.

As you will recall, this compares to significant declines that approached 40% earlier in the year.

We are also seeing improvements in corporate revenues.

In December, corporate revenues were down about 4% year-over-year, a significant improvement in both bookings and yields off the lows we saw in May 2009, when corporate revenues bottomed 42% below 2008 levels.

For January, I expect corporate revenues will be up about 10% year-on-year, on a lighter schedule.

In the Atlantic, unit revenues increased by 1%, outperforming the industry, driven primarily by a 4 point increase in load factor.

In particular, we are encouraged by the improvements we saw in areas such as London, which was one of the hardest hit markets in the Atlantic last year.

In the Pacific, which has been the most impacted international entity in this recession, our unit revenues declined by 8%, but again we are seeing very encouraging signs of improvement and strong industry outperformance.

Load factors for the quarter were up 7 points, with December load factors up almost 10 points, marking one of the highest December load factors in the Pacific that United has ever seen.

With strong load factors, we are beginning to see improvement in yields.

Early indications are that 1Q unit revenues in the Pacific should be very encouraging.

In fact, international overall is experiencing a very strong recovery.

Our domestic unit revenues declined year-over-year by about 6 points in the fourth quarter, an improvement of about 5 points compared to the third quarter of 2009 on a modest increase in load factor.

Despite capacity reductions in domestic markets, we continue to see pressure on revenues and yields from low-cost carriers.

Ancillary revenues are an ongoing focus for us, having led the way and acted first in creating this essential strategy and revenue stream.

During the quarter, ancillary revenues added $250 million in revenue or about $13 for every passenger.

For the full year, ancillary revenues represented a total of $1.1 billion in revenue.

Earlier this month, we matched our competitor's increase in domestic first and second bag fees, and we expect this to add about $80 million in revenue to our 2010 plan.

We also saw improving trends in cargo during the fourth quarter.

Cargo revenues were down $14 million from the fourth quarter of 2008, a significant improvement in year-over-year performance compared to earlier quarters.

We saw stronger signs of industry demand improving, coupled with reduced capacity, allowing us to generate much better quality traffic and revenue in a number of major United markets.

The trans Pacific market in particular, which felt the greatest negative impact earlier in 2009, saw the greatest overall recovery in both demand and pricing during the quarter.

As we look ahead to the first quarter of 2010, we expect the recovery to drive strong unit revenue growth year-over-year.

While all of us know that easier comps will drive big year-on-year improvements, we are watching year over two performance very closely and we are beginning to like what we see.

Revenue improvement will be driven both by stronger yields and load factors, putting substantial pressure on revenue and traffic related costs going into 2010, as Kathy will discuss in a moment.

For a number of years, our view has been that ultimately capacity discipline forms the essential foundation for revenue improvement and the return of industry profitability.

While we are clearly seeing signs of improvement, we and the rest of the industry have a long way to go before we achieve a full recovery.

At United, we firmly believe that the only way the industry can fully recover and meet its financial targets is through capacity discipline.

Capacity simply must be set at a level that allows for compensatory pricing.

Despite the challenging revenue environment, 2009 truly represented a continuation of fundamental improvements across our business, delivering on the commitments we made when we launched our Focus on Five agenda in 2008.

While we clearly still have more work to do and more opportunity ahead, the accomplishments in 2009 lay the foundation for our aspirations, and we expect the measure of our success to be improved margin performance as the economy recovers.

Now I will turn it back to Kathy.

Thanks, John before.

I begin walking through our guidance, I wanted to announce some changes that we're going to be making to our disclosure practices as we begin this new year.

The changes relate to our monthly traffic releases.

Beginning with the January traffic release in early February, we'll provide an estimate of passenger unit revenue performance for the month, much like a few of our peers have been doing for some time.

We'll also provide our Arrival 14 on-time performance as well as an estimate of our average fuel price per gallon for the month.

These changes are consistent with our commitment to transparency and accountability to our shareholders.

We believe investors will appreciate and benefit from the additional insights that these more fulsome disclosures will provide.

Moving on now to guidance, for the full year 2010, we're reaffirming our prior capacity guidance and continue to expect mainline capacity to be down 0.5% to 1.5% year-over-year and consolidated capacity to be down 0.5% to up 0.5%.

For the first quarter, we expect mainline capacity to be down 4% to 5% year-over-year and consolidated capacity to be down 1.5% to 2.5%.

For the full year 2010, we're expecting both mainline and consolidated unit costs, excluding fuel and profit sharing, to be up 2% to 3%.

Unit cost pressures from revenue recovering and in a few other cost categories are driving the increase that we're seeing year-over-year.

First, a portion of our favorable unit cost performance in 2009 was driven by lower revenue related expenses, as was the case for the rest of the industry.

As a point of reference, the unprecedented drop in revenue due to the recession in 2009 drove our distribution expenses alone down about $175 million year-over-year, or more than 1 full percentage point of unit costs.

Overall, these revenue related tailwinds reduced our full year 2009 unit costs by about 1.6 percentage points.

If we adjust for them and isolate our core nonfuel unit costs, we saw an increase of about 1% year-over-year in 2009.

Current trends suggest that 2010 is likely to be a solid revenue recovery year, and we expect to see revenue related distribution expense and traffic variable costs from modestly higher load factors as well as higher cargo volumes rise as a result.

We expect these revenue related expenses to drive about 1.2 percentage points of increase in overall nonfuel unit costs.

Second, airport rents and landing fees are creating an overall unit cost headwind of about 0.8 percentage points year-over-year in 2010.

In addition to the broader impact that lower capacity has on airport rent and landing fee rates, we're experiencing significant rate increases due to the debt service increases with the completion of two new runways at Chicago O'Hare as well as major airport infrastructure projects at Washington Dulles.

Third, as a result of our announced order for new international wide body aircraft, accounting rules require to us accelerate depreciation on the aircraft that we're planning to retire.

The full-year impact of this noncash item is expected to be about $21 million, or about 0.2 percentage points of increase in nonfuel unit cost.

Finally, as a result of the significant impact of the recession on our financial results in 2009, the company didn't accrue any annual incentive plan bonuses for 2009.

For 2010, the company expects to accrue for incentive plan payments at a level that's consistent with payments in our prior years.

The full-year impact of incentive bonuses on 2010 nonfuel unit costs is expected to be about 0.5 percentage point year-over-year.

For the first quarter, we expect mainline unit costs, excluding fuel and profit sharing, to be up 4.5% to 5.5% on about 5% lower mainline capacity, and we expect consolidated unit costs, excluding fuel and profit sharing, to be up 4% to 5% year-over-year for the first quarter.

Turning to fuel, we've continued to systematically build our fuel hedge book.

We have about 70% of our expected consumption for the first quarter hedged with an average crude equivalent cap of $75 a barrel, and about 40% of our expected fuel consumption for the full year hedged with an average crude equivalent cap of $77 a barrel.

We continue to maintain a conservative hedge book consisting of about 50% calls and 50% swaps, primarily in heating oil.

Providing us a solid hedge coverage in the event that fuel prices rise significantly while allowing to us participate in about 80% of the downside participation if fuel prices fall significantly.

Based on January 22nd closing forward prices, mainline jet fuel price is expected to be $2.22 a gallon for the first quarter.

This price reflects taxes and the impact of hedges that settle in the quarter, including hedge premiums on those positions.

You can find additional information about our hedge positions, our detailed fuel price outlook, and other guidance in the investor update that we issued this morning.

In 2009, we spent about $300 million in capital expenditure, much of which was devoted to our premium international cabin reconfiguration and other customer facing projects.

As we move into 2010, we begin the work to complete the reconfiguration of our 777s, our last remaining international fleet to be reconfigured.

We're maintaining a conservative non aircraft capital budget of $350 million.

In addition, we'll fund about $60 million in pre delivery payments against the wide body aircraft orders that we announced in December.

With the refinancing of two of our EETCs in December, we enjoyed some of the lowest debt obligations among the network carriers, with only about $700 million in debt and net capital lease payments due this year.

In the first quarter of 2010, we have scheduled debt and net capital lease payments of about $168 million.

While we're not yet where we desire to be, we continue to see signs of sequential improvement in the economic environment, and the work we've done to improve our relative cost position, build our liquidity, and run a great airline puts us in a good position to take full advantage of the coming recovery.

And with that, Audra, we'd like to open up the call for questions.

Thank you.

First we will take questions from the analyst community, then we will take questions from the media.

(Operator Instructions).

And we'll go first to Kevin Crissey with UBS.

First of all, I wanted to see -- when you give the monthly traffic and it sounds like the RASM numbers, are you going to make the first month have history?

In fact, John Gebo and I have talked about making sure that we give you guys the historical so you can do the comps, so we're definitely going to do that.

Terrific.

When you think about -- you've probably heard about what the other carriers have said about January's RASM.

Not terrible, but the bias has been slightly disappointing.

Do you have any thoughts as to how you come out?

You only have a few days left in the month relative to a 2% number or somewhere in that vicinity on RASM?

I think as your first question indicated, everybody's comps are going to be different, certainly and have different contributing factors.

But we feel quite strongly that we're going to have a very good performance in January.

Thanks.

Kevin, this is Kathryn.

So just to answer your question about what our prior year performance was, so the year-over-year for us in 1Q 2009 -- on a consolidated passenger unit revenue basis, we were down a little less than 7% in January, about 11% in February, and a little under 15% in March.

So just to give you a little idea of how the quarter progressed in 2009.

So that would be a little bit worse in January and maybe slightly better in the next two months last year, something along those lines?

I think it's early to lay out the progression of the quarter.

We are seeing improvements from week to week.

As I mentioned, the corporate portfolio performance is up almost 10 points in January.

I think that's a strong underlying indication of what we're seeing, but you will be able to watch along with us just in a few short weeks.

Sure.

Switching back to the revenue related costs that you were talking about -- you're forecasting higher fees, and I assume that's credit card fees and agency commissions related to the sale of more tickets.

Is that what we're getting at?

Yes, couple other things that I mentioned, and so now I'm going to basket revenue related costs a little bit more broadly.

But certainly in terms of overall distribution expenses, you are absolutely correct, that's one of the categories I'm pointing to.

We've also seen relatively strong load factors over the last couple of months, and certainly are expecting traffic variable costs to be up a little bit with load factors continuing to be strong.

Cargo is coming back.

John spoke to that in his prepared remarks.

We are going to have cargo handling fees associated with that.

So it's really the collective basket of those type of expenses that I was referring to.

So when I think about -- going back to distribution, if I were to think about your website, most of the airlines have seen an impact from the OTAs getting rid of booking fees.

Is that something we should expect to have some reversion, because now with the higher demand levels hopefully you would be able to be getting more of the business commissions rather than maybe the OTA fees, or ultimately get people back to your website direct?

I think we're a little unique there.

Candidly, we've underperformed historically in terms of the penetration of our website.

So we've seen, as we've taken a number of moves to correct that over the last 12 to 18 months, a dramatic increase in our distribution through that channel.

So I think just that internal optimization is countering those headwinds that others may be experiencing.

Terrific.

Thank you very much.

We'll go next to Bill Greene with Morgan Stanley.

Hi, good afternoon.

Glenn, I'm wondering if you can give some perspective on what you would describe as perhaps the lessons learned from the past cycle?

So if we think about it right, you paid a dividend which maybe looks like it was at the peak, then the industry and you struggled with high fuel prices -- but then low fuel prices, and how that impacted liquidity, and you cut capacity, unbundled.

So a lot of things happened in the last cycle here that I'm wondering if you look -- as we go into this upcycle here, what kind of things do you want to either do the same or do differently as we go forward?

Bill, I think John put his finger on it with respect to capacity discipline.

Clearly in the upcycle we want to understand that this is just that, a cycle.

And he accentuated that again and again.

I would say the second thing is that the structural changes that I mentioned in response to your question with respect to unbundling and merchandising and new sources of revenue and challenging the business model itself should continue, Bill, not only in times of duress, but just in the normal course of restructuring the business that obviously needs restructuring regardless of the cycle.

I think, third, the partnerships and consolidation.

It will not be a surprise to you that I believe this to be true.

It needs to continue as well.

Regardless of what opportunity any particular carrier may have, you need to take advantage of it in the downcycle or the upcycle.

We clearly are a leader in all three here.

I'm very proud of the team's work continuing to challenge the cost structure of the industry.

It is too high.

It is burdensome regardless of the cycle.

We need to continue to take cost out, even in the most robust of times.

And one way to look at that is we need to find new means by which we deliver the product to the market.

I think we can apply technology here in improving efficiency and productivity in the business.

We can also do that in concert with partners, which I think will enhance the industry's ability to withstand downcycles when they come, as they will.

So those are four robust lessons that we've learned.

I'm using your phraseology.

But it's also, frankly, objectives that we hold for ourselves and our Board to continue to pursue.

And we're very aggressively pursuing all of them.

Bill, this is Kathryn.

I would add a couple of things to Glenn's remarks.

I talked about our fuel hedge portfolio.

I think that was clearly for us a bit of a lesson learned.

We had built a book in 2008 that was 100% at-risk collar positions.

We've clearly changed our approach in trying to use a diversity of product that we think gives us a better risk profile, enables to us participate in I'll call it the upside opportunity, to the extent that fuel prices actually go down, at the same time giving us I think a pretty reasonable amount of protection against quick spikes in fuel prices.

And one thing I would comment on that I think we actually did very good, well and is absolutely a part of our go forward plan.

Is we've got to be nimble in terms of capacity and constantly looking at our fleet plan.

Both our mainline fleet and our express fleet that we operate through our contractual relationships, to ensure that every year we've got a number of aircraft that are coming off lease, that are coming out of financing, that we have United express, regional capacity, flexibility, both on the upside as well as in the other direction.

I think those were all things that we managed very, very well, and certainly it is something we'll continue to focus on going forward.

I think the financial community has every right to expect of us and the industry that we eliminate the component of cyclicality that is clearly self-induced.

And that gets back to Glenn's comments around capacity.

We better, as a business, start planning for what our decisions reflect in the bottom of the cycle and not the top of the cycle.

And that may involve leaving some opportunity at the top.

But when we spit back twice as much as the bottom, it's not a very rewarding experience.

I agree with, obviously, what Kathryn and John have added to really a very good question.

But I think a significant lesson learned for us is there is no upside to decision avoidance, regardless of the cycle.

So a lesson that we've learned here very, very well since the restructuring, Bill, is no sacred cows.

This is an industry that's structurally challenged.

This is a Management Team that understands that and will address those issues.

That was very thorough, thank you.

I just want to hit on one point, which is, you didn't mention the dividend, and I'm just curious if you think, in hindsight, that was a right decision or not?

$250 million to our long suffering shareholders, regardless of what the future held for us, was a right decision at the time, and the Board certainly comported with that view.

All right, thank you for all the time.

We'll go next to Michael Linenberg with Bank of America Merrill Lynch.

Good afternoon, everybody.

Two questions here.

One, Kathryn, can you just -- and this may have been actually in the investor update, and I may have missed it, but you have a forecast for what your cash position is at the end of the March quarter, and the unencumbered collateral, the size of the pool that is remaining.

I'm thinking about the recent deal that you did which actually, I think, freed up some of the specific assets.

If could you give us some color on that?

So we have not given guidance with regard to what our cash position is going to be at the end of the first quarter.

A couple of components worth consideration that I did speak to, associated with the refinancing transactions that we did in the fourth quarter, we had about $250 million inflow in January as we closed out those transactions.

And then I had talked a little bit about the large financing that we did in early January.

That doesn't actually close until April.

So that liquidity will be coming in the door in the second quarter, not in the first.

With respect to unencumbered collateral which you also asked, we've got about $200 million of remaining unencumbered collateral.

I would also note that in our large credit facility, it's actually over collateralized by about $300 million.

Then tagging on my comment on fleet flexibility, which we're very mindful of, from a financing perspective we're also very mindful in just trying to look and manage our portfolio so that every year we have some number of refinancing type opportunities or aircraft coming out of financings.

And in fact, in the last couple of EETCs that we refinanced, we took a little different tack to make sure that we could potentially take some aircraft out of those transactions before they actually reached the end of their term.

So that was a little different structural [appraisal], all meant to give us flexibility year in and year out.

That's helpful.

My second question, John, when you talked about domestic revenue trends, yields, you quickly mentioned some yield pressures, I think maybe you specifically said influenced by LCC presence.

Can you shed some additional light on that and maybe which markets or which regions did better than others?

I would say what we've long said, that United has arguably equal to or the best network in the industry.

It's also the most heavily competed network domestically.

We didn't really see what I would characterize as disparate performance between the hubs year-over-year, and I would say that that's both true on the revenue side as well as the financial performance side.

So while the challenges are greater, we're making different decisions to meet those challenges in each one of the hubs.

I don't consider the performance to be, frankly, out of sync with what we normally experience.

I think in a typical strong market, we do tend to outperform on the international side and suffer the risk of modest domestic underperformance.

So really, nothing new in the space.

Very good.

Thank you.

Next we'll move to Gary Chase with Barclays Capital.

Good afternoon, everybody.

Hi, Gary.

Couple things.

First, for Kathryn, if could I, on the cost side for 2010, if you take a look at the performance that you achieved during 2009, obviously a lot of costs came out of the equation, especially when you consider what happened with capacity.

The guidance that you've given would suggest, at least to me, that certainly none of those are going to come back, but that you seem to be towards the end of that opportunity.

And I'm just curious if that's -- if you think those opportunities still exist and you haven't quite gotten around to thinking about quantifying them, or if it's right to think that you've gotten through the bulk of those opportunities?

Clearly, we don't stand here today and suggest we have a lot of easy low-hanging fruit in regards -- with respect to incremental cost opportunities.

That said, I think over the last few years, what we've really demonstrated is if we've got a very strong focus on ensuring that we maintain a competitive cost structure.

We've done a lot of hard work.

We have candidly improved our relative position in this area, and we have got a laser focus on it.

I tell you this morning, as we do on every earnings call day, we actually had a call with our senior -- very broad senior leadership team, about 400 people across the company, and we talked about this particular topic.

Again, just driving accountability, not just for hitting what we tell you we're going to do, but also developing the book of work to see if we can actually better that performance.

So we're seeing obviously in the line items that I spoke to some clear pressures, but we're very focused on this and I think you can expect that we're going to continue to have very good performance.

We're always working hard to beat the plan.

The only other thing I would add is -- cost opportunities don't naturally fall within calendar years.

Just because we've had tremendous performance over the last 24 months, and you're seeing some pressure in 2010, doesn't mean we don't have a book of work not only around trying to improve 2010, but equally as important, things that we can realize in 2011, 2012, 2013, simply either by through the complexity or the time required to get to the opportunity don't happen to fit within this year.

So look, this is far from run out, either in terms of the suite of opportunities we have ahead of us, or equally as important, the cultural and capability change that occurred at United around delivery and tremendous cost performance.

Guys, if could I, really for everybody.

I mean -- if I were to think about, at least, my view of what the industry would have learned in this cycle as opposed to others, I think it's far and away the flexibility issue.

You've got to be ready for just about anything, I think is what we've learned.

So you talk about fleet flexibility, but fleet is only obviously a part of it.

To really have the kind of flexibility that I think is consistent with the volatility you've seen, don't you need to rework labor agreements?

Aren't there a lot of pieces to this puzzle?

How long do you think it will take for you to get to the position where you can have that dynamic in place where you're flexible enough to deal with the changes that are seemingly constant in this business?

If we go back to the response that we offered up as a team, three of us, and there are those in the room who would love to offer their views of the response as well -- we have what we believe to be flexibility is hard earned.

In lessons learned, we wanted to convey, it's important for us to take full advantage of every one of them.

If you go back to what I said here last week at the wings club, given the challenges of this industry, this Management Team and this Board have a fiduciary to take full advantage of every flexibility we have in our tool kit.

And when I said no sacred cows, I meant no sacred cows.

That's exactly what we're going to do.

I subscribe to exactly what Kathryn said, and what John said -- the industry, and I think everybody on the call knows -- they made expedient decisions when it was seemingly affordable or comfortable to do so, and they regretted them thereafter.

We understand the benefit of flexibilities that we might have to deploy competitively.

We're going to take full advantage of them.

We also can't be induced to add in the type of capacity in the upcycle for which, candidly, the industry's employees have paid for in the downcycle.

So I think that's incumbent upon us to be responsible about how we set production levels of the business as well.

We have to take that stewardship responsibility equally as serious.

Okay, thanks.

Thank you.

Next we'll go to Hunter Keay with Stifel Nicolaus.

Thanks, appreciate it.

Domestic capacity rationalization has obviously been a lot stronger than international, but you guys had some very bullish commentary, certainly Atlantic/Pacific specifically.

With regard to PRASM trends, do you think it's possible at some point we could see a convergence or maybe even international overtaking domestic in terms of year-over-year PRASM growth at some point here maybe in the near future?

Or do you think we should probably think about domestic PRASM pretty comfortably outpacing international throughout the course of the year?

I know it's a tough question to answer at this point.

I think for us as we look at the outlook, clearly international strength year-over-year is playing a disproportionate role in the improvements that we see ahead, and when we spent a lot of time during bankruptcy and post bankruptcy, before the downcycle, we actually reached a 12 month period where we generated what I would have consider to be an acceptable financial return internationally, and we brought the domestic system to something that was not a drain on that return.

I'm not forecasting that that will be the case in the future, but I think it gives you the relativity we have experienced historically, and we are seeing very, very significant resumption in the strength of the domestic market -- I mean, the international market.

I would add though that premium cabin pricing is still far from optimized.

The team has done quite a bit of good work with the capacity on improving the mix of traffic on board the airplane.

But our premium cabin fares aren't anywhere near where they were in the peak, and in order for us to optimize the business, we're going to have to find a way to get them there.

Great, thanks for that color.

And just quickly, you outperformed ATA carriers in pretty much every, if not every international geography on PRASM growth.

Was there any kind of benefit on the FX side that was giving you guys company specific tailwinds?

I don't know whether it's unique to us, but let me give you the numbers for the quarter.

In the Atlantic, it improved our PRASM performance year-over-year by 1.7 points.

In the Pacific, it was 2.7.

In Latin, it was 2.8.

In international, it was 2.3.

And on a system, including all entities, including the domestics it was 0.7 points at the system level.

Your FX is generally -- there's been some pretty sizable differences between you and, say, Delta, for example, in Asia, but nothing jumps out that you know of that would be screaming specifically?

We tend to, in Asia, I think, generate more US source of sales than the Delta system does, but other than that I don't think there's anything terribly unique about us other than how our ASMs are split versus somebody else's ASMs.

The only other comment I would make, in terms of that relative comparison -- we also are heavier to China relative to Japan, and sometimes, depending on what's going on with exchange rates with those two countries specifically, you can see a difference.

But they both moved in the same direction in this most recent quarter, so I doubt that's a big change between the two of us.

That's helpful, Kathy.

Thanks a lot, guys, appreciate it.

Next we will go to Jamie Baker at JPMorgan.

Good afternoon, everybody.

Glenn, just to follow up on the lessons learned in the labor dynamic which Gary Chase brought up, I realize that paying labor a percentage of revenue has taken some lumps when it comes to Wall Street compensation.

But I can't help but sit here and wonder if maybe there's a future for the airline industry -- that's actually more of a statement than a question.

My real question for John, though, is I can sense you don't want to give RASM guidance for the first quarter, so let me try to come at it a different way.

With the exception of a year ago, first quarter RASM has -- it's had a fairly consistent relationship to the fourth quarter.

And my question is whether with all of the capacity cuts, with bringing Continental into the mix, if there's been any shift in the seasonality of your RASM performance?

And the reason I ask is that if Q4 RASM does follow that historic trend, then the outcome for Q1 is clearly a double-digit outcome.

Did you sense that I was unprepared to confirm or articulate?

Well no, the guidance you've given is very helpful, and I wasn't expecting to you to come out a number.

I'm trying to back it in.

That amounts to two statements that you've made.

I guess so.

I thought Kathy and John went a pretty long way by telling you we're actually going to give you the number once a month.

But, no, we're seeing very strong sequential recovery now.

As you point out, and frankly, I think for all of us, to be honest with ourselves as we move through this discussion as an industry over the next 12 months, we really need to begin to look at where we are year over two, which was the last time we were even remotely at compensatory unit revenue.

As I did indicate, we're watching that closely and we're beginning to like what we see.

So I think you will get a directional indication here in just a few weeks, but I know where some of the other folks have been, and I know that even one carrier talked about a negative outcome in January.

We're not looking at anything that looks remotely like that.

Okay.

Fair enough.

And a quick actual question this time, a follow-up for Kathryn.

Mark Streeter and I were wondering if it's fair to assume that you're at least looking at a possible refinancing of the 2000-1 EETC just given the near-term payments as part of that deal, or do you feel that you're okay for now given the recent cash build?

Look, if you look at where we ended the year in cash, Jamie, at $3 billion, and on a pro forma basis I mentioned $2.50 coming in the door associated with the EETCs that we refinanced in the fourth quarter, and then the $700 million transaction we did early January -- on a pro forma basis, if you just added that cash to our balance, that would bring us close to $4 billion.

So I would certainly suggest to that you we're very comfortable with our current liquidity position.

That said, we'll continue to look forward at what refinancing opportunities we have.

You're absolutely correct that that transaction is hitting a kind of peak period in terms of us paying it down over the course of the next year.

My perspective is that just gives us more financial flexibility, and clearly we've done a lot of hard work to ensure that we have financial flexibility.

I appreciate that.

Glenn, my statement on variable labor comp for an airline was obviously somewhat facetious, but if you do care to follow up on whether the labor-management dynamic might be different this time, whether that's for United or the industry, I'm sure we'd be interested.

I think that the variable comp model has worked very well in highly cyclical industries.

Communications comes to mind, Jamie.

So I think as a benchmark for the industry where other industries have already moved, it's a very worthy discussion.

Okay, fair enough.

Thank, everyone.

Thanks, Jamie.

We'll move next to Dan McKenzie with Next Generation Equity Research.

Good afternoon, thanks.

John, wondering if you can talk a little bit about what you are seeing from JAL just in terms of the fact that they're in bankruptcy and the fact that Continental is spooling up into the Star Alliance -- wonder if you can talk about what kind of contributions you're seeing at this point from those events?

I told our revenue team the other day that I remember spending multiple trips in Asia being terrorized when United was in bankruptcy about what an awful position that was to be in, within Asia.

Now is our time to go to work and take full advantage of the position that they find themselves in.

As Glenn indicated, we are very fortunate to have a well earned and mutual respectful relationship with ANA.

We're both committed to taking the advantage of this situation within Japan.

My own personal view is the rate of change may be a little bit slower than that that's articulated publicly.

This is going to be something that flows out over the next two to three years and represents, I think, an enormous opportunity, whether it's the ATI filing, the ANA relationship, or strength in Star Alliance throughout Asia, or the moves that we are making independently.

This is a big opportunity for this company, and you can expect we're going to execute very aggressively.

Okay, thanks.

And I guess my second question goes back to your earlier commentary, and one message that comes through loud and clear, of course, is United plans to be disciplined and responsible with capacity in this next cycle.

But for 2010, I'm wondering could you perhaps help quantify that flexibility?

And I guess what I'm getting at is I'm guessing the current capacity plans for this year assume crude futures or jet fuel prices at current levels, but unfortunately the experts are pretty divided on where prices are going to go.

Based on my conversations, investors really worry about another run-up.

I guess my question is if crude does go to $90 or higher, as some experts predict, how much capacity could or would United be willing to cut?

I'd first go back to the question that Kathy handled earlier on what I think looks like a pretty high quality hedge book right now and work that we intend to do to continue to maintain that going forward.

As you know, individual carrier response is only part of the issue.

I would really have to tell you that there's enough volatility at this point on the upside in the revenue environment that it would be very difficult for me to really understand what the revenue/fuel relationship is going to be six to nine months down the road, and all that I could offer you is we will do what we have done before, and we will make the capacity adjustments necessary to maintain the resiliency of the business.

We have flexibility in wholly owned aircraft.

We have flexibility in the regional fleet, and quite surprisingly our utilization levels are actually running near all-time highs right now.

So we have lots of flexibility to down adjust the capacity environment.

But I think the input factors are unclear enough for everyone that I would be unwise to give you a prediction there, and would it probably be equally you unwise to value it very much right now.

Okay.

Understood.

Thanks.

I appreciate that.

And next we'll go to [Helane Becker] with Jesup & Lamont.

Thanks, very much, operator.

Just one question on pricing.

I know that you had tried to raise fares a week or so ago, and that fare increase was rolled back.

And so I'm just kind of wondering -- how much recovery do we really have if a fare increase of $15 or $16 can't hold?

As you know more than any of us -- what shows up in the ATA report in the paper as fare activity is probably 0.01% of what's actually going on in the marketplace on any given day.

And these things historically in good and bad times fail and success.

I will tell you that generally the rate of success over the last three to four months has been improving over prior periods.

We will continue to do everything within our power to optimize the pricing opportunity that we see ahead.

Look, I think there's still some reticence.

We're very early -- not by us necessarily, but in the marketplace at large, and I would say particularly forward flag, we're still very early in this recovery period.

Kevin, who heads up our planning team, is pointing out to me that we have had quite a bit of success in the last several months with creating these peak pricing periods that are getting longer and longer and more frequent, so that's working well in the industry period.

I think you'll see the artificial resistance I hope fade away in the second and third quarter as we see seasonal demand improve against constant capacity levels.

So that's what we're expecting, and that's what we'll be working hard to accomplish.

So I wouldn't read too much into that as being an indicator.

Okay.

That's very helpful, thank you very much.

And next we will go to [Vassily Lukov] with Morningstar.

Thanks for taking my question.

Just a question you mentioned about structural changes in the industry.

And as I look out longer term, you mentioned capacity discipline is important for United as well as the industry.

What's to stop competitors from not maintaining that discipline?

How do you change the industry such that there isn't a new airline entering seemingly when things appear better?

A couple things there.

In terms of new air line entrants, candidly, the credit markets are, I think, helping to be a dampener on what historically has been pretty problematic in terms of lots of new entrants coming into the marketplace.

I don't think it's nearly easy to get capital for that activity today as it has been historically, so I think that is a natural dampener.

With regard to our other industry players and how they're being responsive with capacity, I think another natural thing that we're all doing is seeking to repair our balance sheet, and the only way to do that is to actually get some sustained reasonable profitability.

I think that's going to be another governor on behavior, but certainly we're encouraged by what we're hearing from others on their calls with regard to holding the line on capacity, which is clearly what the industry needs to do.

I think that the entire discussion has been focused in one way or another on performance barriers to entry.

If the industry continues to focus on all of the elements of lessons learned or the elements of cost manage or the application of technology or the use of scope and scale and flexibility, then you don't invite a cannibalization of the business, as we may have in times past.

So all of the issues of performance form a barrier of sorts.

Let's face it -- this industry is performing and consolidating, regardless of the process of consolidation, at a level that makes it a little difficult to replicate everything we've discussed for the past hour.

I would kind of agree with that as far as barriers to entry.

I view them as being very low in normal times, when capital is free flowing or even someone with deep pockets that can use that capital to enter into the industry.

I would just wonder -- it seems to me that's more of a transitory phase where capital markets are tight, then you have high oil prices that is a detriment or makes potential entrants scared, and they don't enter.

But as things improve, then you ultimately -- someone decides to start a new airline, you have a cheaper plane just because they tend to be newer.

I think if you look at the mortality rate of the recent new entrants, that, too, would form a reasonable barrier to capricious entry.

Look, while you raise the risk that we're all cognizant of, I would say that actually new entrants flowing into the business have tended to be driven by excess aircrafts available at unprecedented prices, and, boy, if that hasn't been the case over the last 24 months, I don't know what has.

So a lot of time we've seen those aircraft artificially reenter the market, and I personally have been relatively encouraged over the last few years.

We're not seeing that.

I think the lessons learned question has to go beyond the industry and go to the supplier and the financing base, and I think they've got their own set of lessons learned as well.

Great.

I appreciate it.

Thanks.

Thank you, ladies and gentlemen.

This concludes the analyst and investor portion of our call today.

Before we take questions from the media, I would now like to turn the call back to Mr.

Tilton for closing comments.

Thanks very much, Audra.

We appreciate it.

Thanks everybody on the call both for joining us and for your questions.

As you can see from our rules and you heard from Kathryn and John both during their prepared remarks and during the discussion, the company is delivering against key metrics that we have outlined for ourselves and we're making improvements across the Company.

Simply said, we're controlling our costs.

We're first among network carriers in on-time performance.

Our customer satisfaction scores continue to improve as they must.

And we have significantly and dramatically improved our liquidity.

We've taken the right steps to align ourselves with the right partners, bringing Continental into the Star Alliance and applying for antitrust immunity over the Pacific with All Nippon and with Continental for the first of its kind Pacific joint venture.

The environment continues to be challenging, as we discussed during the last little while.

We're seeing definite signs of business travel improving, and with the work we have underway, we are well positioned at United for success as the economy does, in fact, improve.

With that operator, thanks very much.

We'll open up to questions from the media.

We will now take questions from media.

(Operator Instructions).

We'll go first to Josh Freed with the Associated Press.

Hi there.

I can tell that you we'll endeavor to double our efforts to 0.02 of what's going on in the marketplace on fares.

I wouldn't suggest to you that it would be very rewarding.

Does your 2010 projection include projection for rising labor expense?

You got all those contracts out right now.

All of our contracts are amendable.

Our 2010 cost guidance that we gave includes the continued year-over-year impact associated with the last increases that people received in, I'll call it roughly mid 2009.

While our contracts are open and we are in those conversation with our union, we don't have any further cost escalation.

Okay, and is that because your -- is that because you don't really expect to settle them this year, or is it because you expect to settle but you think that costs will stay neutral?

I think if past history kind of serves as any guidance, we don't necessarily expect to settle them this year.

That said, we're clearly at the table having these conversations with each and every one of our unions, and certainly working hard to settle them as soon as we can in a manner that works for the company and works for our union and ensures that we will be competitive.

Thank you.

We'll go next to Mary Jane Credeur at Bloomberg News.

Mary Jane, how are you?

Very good.

How are all of you?

We're good, thanks.

Thanks you very much for taking my call.

Yesterday on Delta's earnings call, Richard Anderson said that it would be a, quote, significantly positive development for them even if Japan airlines joins SkyTeam and doesn't get antitrust immunity, which, of course we all know would potentially jeopardize OpenSkies.

What do you think of that?

Well, what we think about it is that if we were the partnership, ourselves, Continental, and ANA that did receive antitrust immunity, and that outcome were to take place and they were satisfied with JAL joining SkyTeam without antitrust immunity, we'd be happy for them to be satisfied with it.

Okay.

Can you tell me more -- what do mean by you'd be satisfied with that?

I mean, if it jeopardized OpenSkies, that would -- ?

I think that actually has been the subject of some discussion, Mary Jane.

There has been recent discussion that OpenSkies might not be jeopardized if there were only one approved immunized venture.

So I think there's a shift in that thinking perhaps on both sides of the Pacific.

Okay.

Thank you very much.

You bet.

We'll go next to Julie Johnsson at Chicago Tribune.

Good afternoon, guys.

Hi, Julie.

I've got another question on -- related to the Atlantic and Pacific JVs.

I'm wondering if you have begun revenue sharing with your Star partners in the A++ JV?

And also you had estimated earlier that that would generate about $100 million annually.

Does that still hold, and do you anticipate similar level of gains from the Pacific partnership?

We'll be implementing the revenue sharing agreements during the quarter certainly.

The $100 million that you previously referenced was a figure that we've given associated simply with the Continental joining of Star.

Oh, okay.

And that is going extremely well.

I think I would reiterate what I may have heard on Continental's call.

We've got much of the opportunities really in front of us in terms of customer benefit enhancement as well as customer knowledge around those enhancements.

But nevertheless, we're seeing extremely good performance coming out of the Alliance going forward and have, I think something, close to, is it 0.25 million bookings on -- 2,000 a day, excuse me, in terms of current levels of activity.

I'm sorry, what was that number again?

We're generating about 2,000 passengers a day in terms of the interchange at current levels of activity.

But in terms of the revenue sharing, that is not yet in place across Atlantic?

That is correct at this time.

We expect it to be so shortly.

Great, thank you.

Thanks, Julie.

Thank you, ladies and gentlemen, this concludes our call for today.

You may now disconnect your lines.