聯合航空 (UAL) 2021 Q3 法說會逐字稿

Good morning, and welcome to United Airlines Holdings' Earnings Conference Call for the Third Quarter 2021.

My name is Brandon, and I'll be your conference facilitator today.

Following the initial remarks from management, we will open the lines for questions.

(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, please drop off the line.

I will now turn the presentation over to your host for today's call, Kristina Munoz, Director of Investor Relations.

Please go ahead.

Thank you, Brandon.

Good morning, everyone, and welcome to United's Third Quarter 2021 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 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 expectations.

Please refer to our earnings releases, 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.

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

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 in Chicago today to discuss our results and outlook are 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, Gerry Laderman.

In addition, we have other members of the executive team on the line in order to assist with Q&A.

And now I'd like to turn the call over to Scott.

Good morning, everyone, and thanks for joining us today.

I want to start by expressing my thanks to the team at United for taking care of our customers and each other during an eventful summer.

And what we've done in the last 19 months stands out even more than in normal times as we've also been a part of the humanitarian relief efforts around the world, flying over 160 million doses of vaccines, returning thousands of refugees from Afghanistan and delivering thousands of tons of oxygen canisters and medical equipment to India, among many other things.

Despite the personal stress and strain from the pandemic, our people have continued to run a reliable operation and deliver phenomenal customer service, avoiding the significant issues that have placed far too many in the aviation industry.

The United team is emerging from COVID as the leader in global aviation, most prominently leading on safety by effectively and efficiently implementing our early vaccine requirement.

We kicked off the third quarter with strong momentum as pent-up leisure demand soared, and bookings remain -- to get the business bookings begin moving in the right direction, though we obviously knew that the Delta variant was a risk.

Andrew will give you more details about the ups and downs for the second half of this year.

But from my perspective, the long-term recovery remains on track with the opening of Europe, Australia and Singapore and an expected inflection point in business demand now anticipated in January.

Before we move to the traditional discussion about the near-term environment, I want to take a few minutes to at least lay out our view of 4 big picture trends that we believe make United Airlines the airline investment choice for longer-term shareholders.

Number one, we will lead on costs.

Inflation is high but within our expectations, and we remain on track for CASM-ex down in 2022, down approximately 4% in 2023 and down approximately 8% in 2026 versus 2019.

I know there are some skeptics on this, but it really is just the math of 30% planned gauge growth.

But there are also real industry-leading, unique, structural technology and efficiency changes that were implemented at United.

I can see it as I just walk through the airports or read press comments about hiring struggles at other airlines, some things that's not happening at United because we really have become much more efficient during COVID.

Number two, geography becomes a competitive advantage.

During the pandemic, United's geography has been a greater headwind than any other U.S. airlines, given our largest business, coastal hubs and international exposure.

Domestic and Latin revenues, where United is the smallest in percentage terms, have been running in the 70% to 90% range versus 2019, while the Atlantic and Pacific, where United is the largest, have been down 20% or more.

However, despite those significant geographical headwinds, we've managed to produce results in line with or better than the industry in terms of minimizing losses.

But most importantly for investors, we expect those headwinds to become long-term tailwinds as the supply of international wide-body aircraft is significantly different than the domestic narrowbody supply post-pandemic.

We expect the Atlantic and the Pacific to significantly outperform the domestic market for many years to come, which will turn a current geographic disadvantage during COVID into a sustainable, long-term advantage for United global network.

Number three, unlocking the power of United Next and growing our revenue premium.

Higher connectivity, a noticeably improving product, and the extraordinary service of the United professionals I mentioned at the top are already driving rapidly improving NPS scores and customer choice.

We expect that improvement will accelerate as we take delivery of hundreds of new customer-friendly, narrow-body aircraft and retrofit all of our remaining narrowbodies in the next several years.

This will make United the airline customers choose to fly and help us drive premium revenues.

Number four, ESG.

United today is a leader in global aviation with our unique and real, not greenwashing, commitments to climate change actions and the work we're doing on diversity as exemplified by the United Aviate Academy.

And this already matters to customers, employees and regulators.

And I think you'll see it reflected in customer choice and perhaps even valuation in the years to come.

And all of that leads to our United Next financial outlook.

We will absolutely hit our CASM-ex target, and we remain on track.

And on the revenue front, our United Next targets assume that it takes all the way until 2026 to return to 2019 TRASM level.

While we're hopeful, and I actually expect that TRASM trajectory will be stronger than that, that hopefully conservative assumption still leads to an adjusted pretax margin of around 14% and adjusted EPS of around 20 at our current share count.

In closing, COVID appears to be playing out remarkably close to what we expected in May of last year.

Our expectation back then was that demand will probably remain depressed until Christmas of 2021, and that the business demand wouldn't start in earnest until January of 2022.

But we always believe that total demand, including international, would ultimately fully recover.

That forecast now looks remarkably pressured, and we found new and successful international markets in India and Africa.

We anticipate a robust European recovery, and we're just now beginning to see the openings across the Pacific, starting with Australia and Singapore.

United's perspective was singularly unique, both on the depth of the crisis, but also on the ultimate strength of the recovery.

That put us in a position to make long-term decisions on fleet and permanent changes to our cost structure, and we're now uniquely set up to reap the rewards of those decisions.

And with that, I'll hand it over to Brett.

Thanks, Scott.

I'd also like to thank our employees for their hard work in the quarter.

July was our busiest month since the start of the pandemic.

Despite regularly changing mandates, restrictions and new protocols that have been part of commercial air travel in 2021, our team did a fantastic job helping our customers get to their destination as seamlessly as possible as evidenced by our record high NPS scores year-to-date.

We are now past what we believe is the worst of the booking impact from this wave of the Delta variant.

And looking ahead, there are some recently announced regulatory changes that are driving momentum in bookings.

We were pleased by the announcement that the U.S. entry restrictions on travelers from Europe, U.K., India and other international locations, the so-called 212(f) restrictions, will be lifted by November 8 and replaced by a global proof-of-vaccination requirement for all international visitors entering the U.S. We look forward to more specific details, including the effective date of the changes to avoid any confusion about the new requirements for our customers and employees.

Since the announcement, we have seen a 35 point increase in year-over-2-year system bookings from international point-of-sale agencies for travel in November and December.

This gives us even more confidence in our expectation that summer 2022, particularly over the Atlantic, will be robust.

Additionally, we have repeatedly innovated and upgraded our United app, our industry-leading tool, which outlines for our customers the travel recommendations and requirements as it relates to quarantines, vaccination or COVID-19 tests.

This tool gives United customers an advantage as they navigate the evolving path work of rules and regulations and reduces as much stress as possible at the airport.

We are ready for returning international travelers.

Lastly, as Scott mentioned, with the exception of a small number of employees who sought a religious or medical accommodation, more than 99.7% of our U.S. employees chose to get vaccinated.

We're committed to providing the safest environment possible.

It also means that our customers can book with confidence knowing that United's operation and their travel experience will not be hampered by changes to government vaccine regulations.

Speaking of the reliability of our operations, we have been proactive on the hiring front.

During the first 3 quarters of 2021, we have hired nearly 1,000 pilots, which is more that we hired in all of 2019, and welcome 3 new classes of flight attendants.

On ESG, in the third quarter, we partnered with Honeywell to make yet another investment that contributes to our journey to become 100% green by 2050.

Last month, we announced the industry's largest sustainable aviation fuel agreement in which we commit to purchase 1.5 billion gallons of SAF over 20 years, making our total commitment more than double the combined total of the rest of the world's airline's public SAF commitments.

Last week, we also became the first airline with flight on 100% sustainable aviation fuel.

These are both important steps in our goal of reducing our emissions by 50% on carbon-intensity basis by 2035 and to net zero by 2050.

The third quarter was also punctuated by the crisis in Afghanistan.

You'll recall upon we assist the U.S. military in bringing 15,000 Afghans to the U.S. and troops back home.

We've operated approximately 40 civil reserve air fleet or craft flights to date.

We also converted our maintenance tanker at Dulles Airport to a temporary shelter where travel-weary evacuees could rest, get a warm meal and take a breath after enduring such a remarkable journey.

More than 8,000 employees raised their hands to participate in these missions, working as crew members, translators, medics and more.

Many volunteers have personal ties to Afghanistan or our military veterans.

I want to take this opportunity to extend my heartfelt thanks for their service.

We're also helping Afghans to begin their new lives in the U.S. through our partnership with Miles4Migrants, where we have donated 15 million miles and continue to support and incentivize donations from our MileagePlus members.

As you can see, the spirit of innovation at United has not been deemed by the pandemic.

In fact, we've relied on it to adapt to the changing economic and regulatory environment and put our expertise to work to help those in need.

That makes me incredibly proud of this company, and it gives us -- gives all us more confidence in our ability to meet the financial targets we've laid out.

I'll now hand it off to Andrew to describe in more detail how we plan to do that.

Thanks, Brett.

Before talking about the third quarter results and the fourth quarter outlook, it's important to acknowledge that the impact of the Delta variant on our business was substantial.

However, we expect the worst of this wave is now passed.

In the last 2 weeks, we've seen on several of our leading business indicators return to where we were in July or better.

Those indicators include: Number one, passenger cancellation rates are close to 2019 levels and consistent with pre-Delta levels.

Two, positive domestic co-brand spend for the quarter, new card acquisitions above 2019 levels and retention level's better than 2019.

Three, passenger bookings for November and beyond travel have been above 2019 levels for the last week, a strong bounce back from a few weeks ago.

Four, demand for Atlantic travel is consistent with 2019 levels since the announcement of lower travel restrictions, and yesterday was up 19%.

Five, domestic business demand has rebounded to those pre-Delta levels or better, and our largest accounts are now increasing at a similar rate to our smallest.

Six, business traffic across the Atlantic is now tracking consistent with or slightly better than domestic business traffic.

Seven, Brazilian demand has rebounded quickly, matching the strength we've seen in -- for months in near-Latin demand.

Eight, book yields for upcoming holidays are positive as well as early '22 are positive.

Nine, award booking levels have exceeded 2019 levels this week for the first time.

While we believe these leading indicators are solid evidence of a bright outlook for United, another set of positive indicators we've been tracking in recent months is the relative strength of our premium leisure business during the pandemic.

These indicators include: One, domestic first half revenue reached 2019 levels this summer, with paid load factors 5 points above.

50% of our revenue in Transatlantic leisure markets came from the premium cabins in 2021, a 13-point improvement versus 2019.

Three, paid load factors for Economy Plus increased by 10 points relative to 2019 this summer.

And four, ancillary seat revenues in Q3 were a record $9.17 per plane passenger, and that's basically at 2019 levels despite 28% less capacity.

Whenever I talk about United Next, our long-term strategy, I tend to focus on domestic gauge growth of 30% and its importance.

However, United Next also grew premium seating counts across our domestic fleet, simply closing gaps we've had to our primary competitors are matching demand in our 7 hubs that we've missed in the past few years.

This recent trend of increased premium leisure demand is a material incremental revenues for us -- for our long-term outlook and has the potential to increase overall leisure yields by 2 to 3 points versus our original long-term outlook.

While we still believe business traffic will return in full, our plan will succeed even if it only returns to 85% to 90% of these levels given these leisure yield gains if they prove permanent.

Further in our revenue segmentation and premium leisure efforts, we've made the decision to outfit our 14 remaining 77-300s with our new mid-tier Premium Plus product so that all 767s now includes this product.

We can also confirm that we'll offer this separate mid-tier cabin on future deliveries of the A321XLR jet in 2024.

Relative to 2019, Premium Plus performance across Atlantic was our best-performing cabin.

Our revenue segmentation strategies have always been about offering a range of products customers want to choose, from Polaris to Premium Plus to Basic Economy.

Effective segmentation makes our business model more durable when faced with elevated levels of competition, something we anticipate domestically in the coming years.

I'll now turn to my normal updated performance in the quarter and our near-term outlook.

I'll also provide an early preview of our internationally focused 2022 capacity plans.

Traveling for the third quarter (inaudible) 5%, and total revenues were down 32% versus 2019.

United did achieve positive year-over-2 TRASM for July, as expected.

Passenger yields were positive in July and August versus '19, but fell by 10% in September, given the large but temporary industry supply/demand imbalance caused by the Delta variant.

The impact of lower pricing and yields will continue into the part of the fourth quarter, with October performance only marginally better than September.

Closed-in bookings continue to track below 2019 levels but are again better week-over-week for the last few weeks.

Just as in previous quarters, our cargo operation again delivered a record quarter for United.

Total cargo revenue was up 84% from 2019 and was the best third quarter on record.

United cargo has once again resumed all cargo flights on available wide-body jets for the remainder of the year, which we expect will once again result in leading cargo performance.

Turning to our fourth quarter outlook.

We now expect total revenue to be down 25% to 30% versus 4Q 2019, with November and December at the top end of the range.

Though the Delta variant impact on leisure demand is now gone, its impact on business travel and yields in the fourth quarter continues.

We expect capacity to be down 23% in the fourth quarter versus 2019, down 13% for domestic and 35% for international.

We continue to slowly add back capacity consistent with our capabilities to deliver a consistent operation for our customers while also matching our expectations for demand.

By December, we expect domestic capacity will only be down 9% as we prepare for a very strong holiday season.

Our fleet of 52 Pratt & Whitney-powered 777s are not expected to fly this quarter, and we continue to have 57 idle narrowbody jets temporarily grounded.

We expect most of these grounded jets to return to service by June 2022, in time for a strong summer demand.

As I indicated earlier, bookings to Latin America and across the Atlantic have reacted well to the lower restrictions for travel on November 8 and beyond.

We remain optimistic that our Latin and Atlantic client will gradually go to 2019 levels and above by summer 2022, and business traffic will accelerate early next year.

We currently expect capacity for 2022 to be up approximately 5% versus 2019.

Our plans consider our expectations of [mapper] demand, supply and pricing and focus 100% of our growth in the international markets where we expect capacity to be up about 10% versus 2019.

As a result, we expect domestic capacity for 2022 to be approximately flat.

We remain agile to new planes to ground as needed or even ground unneeded wide-body jets if conditions warrant.

Consistent with our planned international growth for 2022, last week, we announced 10 new Atlantic routes that are focused on premium leisure destinations such as Bergen, Azores and Italy.

Most of our new routes have a constant theme of premium leisure business as we continue to diversify our global revenue streams, which in the past were very business-centric.

We're also diversifying our geographic scope across the Atlantic to India, Africa and the Middle East.

Many of our new routes also have low historic shares by United and our Star partners.

One additional common feature of all these routes is the potential of our leading gateways in New York and Washington.

We have 1 more significant international network announcements planned for later this month as we work towards finalizing our 2022 outlook.

As a leading U.S. airline across the Pacific, we do expect slower demand recovery versus other parts of the world.

We've seen some really great news in recent days with a partial opening of Australia and Singapore.

Most of our capacity across the Pacific in Q4 is being supported by partner revenues.

We continue to expect international long-haul flights will lead to a strong period of margin improvement versus the last cycle, and we are positioning our capacity to take advantage of that trend.

Not only have many wide-body jets can retire across the industry, but we expect that the industry premium seat capacity for the largest Atlantic carriers will be down approximately 10% per departure to 46 seats, as many aircraft, including the 747s and A380s with large premium cabins have been grounded.

United widebody jets have an average of 46 seats, approximately the same number as our primary Atlantic competitors.

As we rebuild our global network, our Polaris lounges are now set to reopen over the next few months, starting with our brand-new at Washington, Dulles tomorrow.

Briefly, I wanted to talk about our United Next signature interior.

We now have taken delivery of 13 MAX 8s with the signature interior and is a hit with our team and our customers.

Each of these planes had NPS scores materially higher than any other domestic mainline jet we fly and has a large economy cabins with seat-back monitors at every seat.

We will soon begin modifications of the remainder of the narrowbody jets, so that by early 2025, the entire mainline fleet has this consistent, superior look and feel.

Thanks for indulging me in this rather long explanation of where things stand, but more importantly, where we're taking United.

I have to give thanks to the entire United team for delivering this summer in a pretty difficult conditions.

And with that, I'm going to hand it off to Gerry to discuss our financial results and outlook.

Thanks, Andrew.

Good morning, everyone.

Andrew, we truly enjoy your remarks, but everyone can take comfort in the fact that I will be shorter.

For the third quarter of 2021, we reported pretax income of around $600 million and an adjusted pretax loss of around $500 million.

This was obviously different from our expectations when we spoke to you in July.

But as Scott and Andrew discussed, this loss is solely attributable to the impact of the Delta variant on customer travel in the months of August and September.

The good news is that our third quarter CASM-ex of up 15% was better than our guidance, and we are on track for further improvement in the fourth quarter.

We currently expect CASM-ex in the fourth quarter to increase 12% to 14% versus the fourth quarter of 2019 on capacity down around 23% versus the fourth quarter of 2019.

Looking beyond this year, we are in the middle of putting together our financial plan for 2022 and expect to share more color with you in January.

However, I wanted to highlight a few items now that give us confidence in our CASM-ex outlook.

First, we are exceeding our target on structural cost savings as we have identified approximately $2.2 billion in initiatives, which we expect to fully benefit from by next summer.

As a proof point of this success, we estimate that we can fly at schedule 10% larger than 2019 with the same number of employees we needed in 2019.

This includes a significant and permanent reduction in management employees.

Second, we expect to return all 52 grounded 777 to service in the first half of next year.

This allows us to more appropriately match the right aircraft to the right markets, which will ultimately drive the step-function CASM-ex improvement as these low CASM and high gauge aircraft return to the fleet.

Third, our outlook for 2022 includes the higher inflationary pressure we are seeing today across all aspects of our business, ranging from vendor [range] pressures to supply chain bottlenecks.

It is for these 3 reasons that I am confident that our 2022 outlook of CASM-ex lower than 2019 is both fair and achievable.

Importantly, it also sets a firm foundation for achieving a negative 4% and negative 8% CASM-ex goals for 2023 and 2026, which we have already discussed.

In fact, I feel more confident today that our 2023 and 2026 goals than I did back in June.

Importantly, we are committed to achieving these cost targets while also investing in a superior product and experience for our customers.

For example, all of our new narrow-body aircraft are being delivered with state-of-the-art interiors, including overhead bins that fit everyone's carry-on bags and Bluetooth-enabled seatback entertainment with a long list of choices displayed on large HD quality screens.

We are also retrofitting the rest of our fleet to be consistent with these standards.

In fact, I was recently on a new 737 MAX 8 flying home from Newark to Houston with all those bells and whistles.

The flight was completely full, and everyone found room for their bags.

The flight crew make sure that customers knew about all the amenities as the crew was engaged with everyone from preboarding throughout the flight and as the customers deplane, 15 minutes early, by the way.

As I scroll through the cabin during the flight by my count, at least 2/3 of the passengers were enjoying the seatback system.

And I even noticed several children entertained with our new children's amenity kit.

After this flight, I was curious about the Net Promoter Score.

And sure enough, the NPS for the flight was over 40% higher than the system average last year.

We will continue to make these types of revenue-enhancing product investments while we continue to reduce unit costs because of our plans for efficient gauge-driven growth as well as our $2.2 billion structural cost savings program.

Turning to capital expenditures.

We currently expect to take delivery of 3 737 MAX aircraft and 1 787 aircraft through the end of this year, in addition to the 24 mainline aircraft already delivered this year.

A number of 787 deliveries previously expected this year are now expected to occur next year, which results in the related CapEx shifted out of 2021 into 2022.

Including this change, we now expect adjusted CapEx to be around $3 billion in 2021.

We expect to use a mix of debt financing, leases and cash to fund the acquisition of new aircraft and will balance the mix with our United Next financial targets in mind, including adjusted total debt to adjusted EBITDA below 4x in 2023 and below 2.5x in 2026.

As the recovery progresses, we expect to economically pursue deleveraging while balancing our capital commitments.

In the third quarter, we made a $375 million voluntary contribution to our pension, which will drive PBGC premium savings and access to returns on the funds added.

While we are not required to make any meaningful contribution to our pensions for several years, we view our pension obligations as just another format of debt.

This is effectively the most expensive prepayable debt we currently have when we took the opportunity to pay it.

In closing, as the impact of the Delta variant appears to be receiving, we continue our focus on managing the business efficiently to maximize our earnings power for the long term.

Our focus on cost and revenue initiatives will drive improving margin, leading to a 2026 adjusted pretax margin of around 14% and adjusted EPS of around $20 at current quarter end share count.

While we have never expected the recovery from the pandemic be linear, we are confident that United's best days are ahead as we execute on our United Next strategy in the coming years.

And with that, I'll pass it to Kristina to start the Q&A.

Thanks, Gerry.

We will now take questions from the analyst community.

(Operator Instructions) Brandon, please describe the procedure to ask questions.

Thank you, Kristina.

(Operator Instructions) And from Barclays, we have Brandon Oglenski.

So Gerry, speaking of CapEx, can you talk to us about what 2022 could look like here?

And then maybe a longer-term question for you or Scott.

Like how do you manage the balance sheet risk here versus what is a very ambitious outlook and obviously, trying to improve profitability by leveraging those things you put out there?

So we'll have some more detail on 2022 CapEx in January, but I can tell you that the bulk of the reduction this year is just shifting into next year.

Those 787s in particular, that caused reduction this year, would just be additive for next year.

So when you add those to the 48 narrow-bodies we have, you'll see a step up in CapEx.

So I think if you took this year and next year together, blended, sort of consistent.

But you should assume that most of the CapEx reduction this year simply got moved into the first half of next year.

Longer term, we are laser-focused on reducing that debt balance and deleveraging.

We could have done some more if we had more prepayable debt, we simply don't.

So we are going to, over the next few years, focus on reducing that debt as we have the opportunity to economically prepay that debt.

That's a critical component of our United Next plan.

I guess if I can follow-up on that, Gerry, is it -- if you get upside to earnings, you can get margins faster based on getting a yield premium and leveraging the international network.

Is that how you plan to manage the balance sheet and potentially get leverage down faster?

So the -- yes, the answer is, yes, as we implement the plan, we see the return, that profitability is going to go directly into paying down the debt.

And keep in mind, we also have the flexibility, if recovery takes a little bit longer over the next few years, we have the flexibility to manage aircraft deliveries and retirements to adjust to whatever the environment is.

From Bank of America, we have Andrew Didora.

So Scott or maybe Andrew, I think the consensus out there to this point is that the international recovery is expected to take a bit longer than the domestic recovery.

So just curious, if you could maybe elaborate on your plans to grow -- to get international capacity back above pre-pandemic levels before domestic?

And then also just curious on how you think about your Pacific growth as it relates to that 10% international growth next year.

Sure.

I'll take that.

Definitely, the growth rates and the recovery will be different by the different regions of the world.

And the Pacific is going to be the slowest, and we've said that a number of times.

However, when you go through all of our data, what I would tell you is that we really need to start to break down our entities into a little bit more detail, particularly going across the Atlantic.

We expect -- and again, I said already today, that our bookings across the Atlantic are now approaching the past 2019 levels.

We expect a very strong bounce back next year, in particular, starting in the spring and summer.

And then, the second point I'll point out is that a lot of our Atlantic capacity is not going to the traditional core European markets.

We've gone aggressively into the Middle East and in Africa as well.

And for example, we have a new flight to Oman, our plane to Cape Town and Johannesburg, Lego and to Ghana.

So our numbers, while appear elevated across the Atlantic, are going into new revenue pools that we feel very good about.

We feel very good about the pricing in those revenue pools, and we feel really good about the bounce back in those revenue pools.

And we're seeing that data already today.

So we're accounting for a slow pacific recovery.

We're accounting for a strong Atlantic because that strong Atlantic really is across multiple different entities within the Atlantic today, which allows that kind of bounce back that we're anticipating.

And again, the numbers over the last few weeks have just been -- or really in the last week have been incredible growing across the Atlantic.

So we remain really bullish.

We think we have the right plan, and we think we've pointed the aircraft to where we can make the most money next year.

Got it.

Understood.

And then just my second question is the operational challenges have been increasing at a lot of your competitors, yet you haven't seen the same type of disruptions.

One, why do you think that is?

And then I guess more importantly, what do you see as the biggest operational risks as you begin to ramp capacity back up to those 2019 levels?

Well, thanks for noticing that.

And you're right, it has been uniquely different at United than at many other airlines and including all of our large competitors who, at different times, have had operational challenges in the past year.

And really, the reason it starts, I think, going back to the realistic assessment that we had all the way in February -- in last week in February of last year.

Because we thought this pandemic was going to last all the way through the end of 2021, it caused a different planning mentality, and it caused a different management process, a very collaborative managing from a process to drive the easy increase, I suspect, but we do 3 times a week now, 3 hours, so 9 hours a week, where we are all together either in person or on a team's meeting.

Every single one of us knows what is happening at every single other department.

And in many cases, you just step into each other's job, if we have to.

But that collaborative process in a really complex environment, because this environment is really complicated.

I mean you brought the airline down 90% and then try to bring it back up, that's really difficult to do.

None of us in aviation have experience to do it.

That process and that realistic assessment set us up well.

It allowed us to make different decisions.

We're the only airline out there that wasn't negotiated deal with pilots, for example.

And then because of that, we can pull the airline down to keep everyone in their seats, keep everyone in their positions and bring the airlines back up without having the kind of crew shortages or crew constraints that have affected the other airlines.

We work with our clients on processes on board the aircrafts to avoid escalations and avoid some of the conflict that has happened on other airlines around mass.

And we had over a 50% reduction in mask issues this year, and our flight attendants have just done an amazing job, amazing professional the tone, the environment.

It's not that we have zero issues, but the tone of the environment on United is certainly different than what I read about in the press on other airlines.

And we also metered in the growth.

We didn't try to get out over our SKUs and say demand is starting to come back and grow at a rate that we wouldn't be able to support.

We viewed that as risky to our customers, and we've really changed the customer experience during this.

And we're working to lose it by trying to provide a few more flights.

And so we've just managed it completely different than has happened in other airlines.

And you're talking about the risk going forward.

I mean, I think looking forward, by far, the biggest incremental risk in aviation in the United States are vaccine mandates.

And United, we did our vaccine mandate.

It obviously is before it was a mandate.

We did -- we were done with it before government requirements came in.

So we did it purely for safety reasons.

But listening to other airlines are now backing off those vaccine requirement and are going to encouraging employees to just all apply for exemption, and they're likely to have tens of thousands of employees that need to be tested every week.

This is a rearview mirror for United.

This is not going to be an issue.

But can you imagine, you have tens of thousands of employees, people forget to get their tests, and people do the test wrong, people don't get it done, people test positive.

And if you think whether in 1 state can lead to a meltdown.

Imagine if you have thousands of employees on 1 day calling in and saying, "For some reason, my test didn't pass."

I mean it is going to be a huge challenge for airlines that are not implementing vaccine requirements.

Customers can book with confidence on United, we're done with it.

You can book with confidence on United.

But if you're booking on an airline that doesn't have a vaccine requirement, they got government rules they have to follow and caveat in tour.

From JPMorgan, we have Jamie Baker.

Scott, I like the 4 big picture trends that you discussed in your opening remarks, Question on the expectation for the Atlantic and the Pacific to outperform the domestic over the next several years.

Is that really a comment on how strong the Atlantic and Pacific might be?

Or is it short hand for we expect the domestic to structurally suffer going forward?

Why shouldn't I look at it with that sort of double advocate view?

Well, Jamie, I'll call in Andrew will be better to answer me, mostly supply demand.

The supply-demand balance is just significantly different in the long-haul international widebody market.

Hundreds of airplanes around the globe have been retired, and those take a really long time to change in the supply-demand balance is more balanced, and it's as simple as that.

Jamie, the only thing I can add is that we just have a structural advantage when it comes to global long-haul given where our gateways are.

And this is the time for us to move forward and deploy our capacity in a way that makes sense and is profitable in those regions of the world.

And in some respects, I think, we're uniquely able to do it as a U.S. lab carrier, and we're going to take advantage of it.

Understood.

And a follow-up on that, Andrew, while I got you.

I just wanted to make sure, I haven't missed any changes in the last year or so as it relates to fuel surcharges.

So we do not have a fuel surcharge mechanism domestically, but how broadly do they exist right now in your international markets?

How should we think about that?

Jamie, I don't want to get into a lot of details.

There are certain countries around the world that do have fuel surcharges.

Their government is mandated.

And in fact, they go up and down with the price of oil, and it's kind of set by that country.

So those exist and then in other companies -- in other countries, we take care of it ourselves.

We -- I think we have got this under control, but if the price of fuel, I think, you're going to do is high.

By the way, we view that price of fuel being high as a sign that business demand is recovering, as people get to work in factories around the world or making things.

So that is a good thing and not just completely a bad thing.

And that being said, when can we price through this higher price of fuel?

It's going to take some time.

The supply/demand imbalance was broken temporarily.

We're getting -- I think the industry is -- well, I think United moves in the right direction.

I think the numbers look a lot better as you get into next year, particularly as you get to the President's Day and spring break holidays.

So I'm optimistic about yield quality out then.

And like I said earlier, our yields for these upcoming holidays and early next year are positive, which is great to see.

From Citi, we have even Stephen Trent.

Kind of a follow-up to Jamie's question actually.

Over the past few months, you guys had mentioned doing some domestic point-to-point flying.

How should we think about where you are now and the, let's say, gradual process of maybe phasing that out as some of your international spools up and you move more towards domestic capillarity out of your hubs.

Sure.

It's Andrew.

We did here in the middle of pandemic optimistically look at some point-to-point flying, and we've had that out there.

As we return to normal, which we are doing rapidly now, we are almost 100% focused on our 7 hubs for all kinds of reasons.

We think our best opportunities there and initially our best opportunity for higher margins are there.

And that's where we point the metals.

So that's what you'll see.

We do have a little bit of point-to-point line in our system.

It's proved -- what's left that proved very successful.

So we'll continue to do that.

That is not our strategic focus.

Our focus is on our 7 hubs.

From Raymond James, we Savi Syth.

Just on the capacity, I was wondering if you could help me understand just next year, how that progresses from down 23% currently in the fourth quarter.

I'm guessing a lot of it comes over the summer.

But I was wondering if you could help bridge that kind of getting from down 23% to up 5% next year.

Sure, Savi.

We've timed the capacity to measure or match where we think demand is going to be.

So in early part of the year, it is continuing to be a pretty low number.

And the latter part of the year, it is a higher number.

We haven't finalized our budget for next year.

So we don't have the exact numbers.

And our overall number is an approximate number at this point, as you can tell.

The other thing to note is our delivery for next year are heavily geared towards the latter part of next year.

That won't really -- that's gone in many respects.

You really get started with United Next and changes the age equation going forward.

So we'll have more information on how the capacity be metered in later this year, early next year when we can finalize our budget.

That's helpful.

And then if I may, I know we've not talked a lot about cash flow given that we have strong liquidity and the earnings are trending around here.

But I'm just kind of curious if you could provide some color on just the cash flow components over the next 12 to 18 months, especially how you're kind of thinking about ATL here.

It's Gerry.

So we'll provide some more color in January.

I would say on ACL, as the world returns to normal, ACL will begin to return to normal as well.

You see the normal peaks and valleys that are driven by seasonality.

On sort of other matters, the biggest other thing for us to look at is, as I said earlier, debt repayment.

And when we start seeing those debt maturities kick in and prepayment opportunity to kick in next year, a relatively modest year on debt repayment about $3 billion, about $3 billion of scheduled debt payments, but we're going to focus on other opportunities to use that cash to manage the balance sheet starting as early as next year.

From Evercore ISI, we have Duane Pfennigwerth.

Andrew, in your extensive list, you talked about domestic business demand rebounding to '19 levels.

I'll admit, I missed the context on that.

Was that a premium comment?

And kind of where are we on corporate now relative to kind of the exit rate last quarter?

Yes.

What I said was, over the last week, we've seen our total bookings for domestic and for the Atlantic exceeding the same period in 2019, which is great to see.

We have not recovered fully on business traffic and have a long way to go.

The Atlantic comment was the recovery on Atlantic business traffic is now similar to or, in fact, slightly ahead of the recovery for domestic business traffic, which we obviously feel really good about to see that number and see how quickly the Atlantic business traffic is recovering over the last few weeks in particular.

But look, the numbers are heading towards down 50%, but they're not there just yet.

But just looking at the trends of only the last few days, I would tell you, our level of being bullish about this has increased a lot.

The numbers for the Delta variant cause things to go down quickly.

And now that we're past Delta variant, it appears that they're going to go up hopefully just as quickly.

So it is a bit more volatile than I think we'd otherwise like to see, but we definitely like the upward volatility that we're seeing right now.

That's helpful.

And then just for my follow-up on nonfuel cost.

Can you speak to the cadence?

And I guess the dependency here is when you expect longer stage flying to be more fully restored at these fuel prices.

It seems like March is maybe our best shot at the earliest.

But is the cost story more of a second half at this point?

I appreciate your thoughts there.

Yes, sure.

So the costs will track the capacity.

So what you'll see and what we'll talk about in January is the first half of the year versus second half of the year.

And you'll see as the 777s come back, as the other aircraft come in, as we hit the full run rate on the $2.2 billion initiatives next summer, you'll see the second half of the year being significantly different from the first half of the year.

But you could essentially track the capacity to the CASM.

From Goldman Sachs, we have Catherine O'Brien.

Maybe a bit of a different take on Jamie's question earlier, but has the current demand backdrop or the competitive capacity backdrop in the U.S. change your plans on the domestic expansion at all since you introduced United Next back in June?

Was it your view back then that 2020 domestic capacity will be flat?

Or is it just with some of these international border reopenings has the opportunity set changed?

Yes.

The latter.

The international border opening and the recovery that we're seeing over the last few weeks just leads us to think that the profit maximized an opportunity is to deploy those life overseas, and that's what we've done.

Okay.

Got it.

And then maybe just I'm not sure you can share this yet, but can you give us any just high-level color on what entities are going to drive the 10% international growth?

And maybe are you able to frame the impact some of these new long-read routes you mentioned they're having on that 10% growth?

Sure.

Our current expectations will be more across the Atlantic than the Pacific, obviously, given what I said earlier.

And so we are growing in core in Europe, and we've been in a bunch of new markets that are brand new to United Airlines.

In fact, no other U.S. carrier flies, so we're really excited about those.

But we've also announced more service to the Middle East with Oman, Jordan.

We've announced a lot of service to Africa, which has done really well so far.

So you should expect more of that.

So there's a lot going on there.

As well as South America, which we think is on -- at to recovery, particularly Brazil in recent days, given the change there has looked really good.

Across the Pacific, again, much slower.

We do expect across the South Pacific faster than the North Pacific.

But we're going to be really agile across the Pacific and be able to cancel down or grow, depending on the demand we see.

We have the best Pacific network of any U.S. carrier.

And we expect we'll bounce back first and will bounce back stronger.

But that being said, we're going to be really careful when we choose to load that extra capacity.

From Wolfe Research, we have Hunter Keay.

So it seems like after Labor Day, a lot of folks went back to the office and they were excited to be there.

And now it kind of feels like people are working from home a little bit more again because they realize that commuting is really not fun.

I'm kind of wondering if you're expecting that with business travel next to you, Scott?

Like are you expecting this big pop in pent-up business travel demand that they're once all excited to get back on the road, 100% recovered?

And then maybe slowly, it sort of bleeds back to like a lower watermark as the year progresses as sort of the euphoria wears off?

Hunter, what it's Andrew.

What I would say is that Delta variant clearly delayed some offices return.

United today is here in the Willis Tower.

So we're all back in our office.

And when we talk to our corporate clients, we definitely see hot spots, and some are in and some are not.

But people are generally more and more returning to their office.

And what we've been told, although look, it changes dependent on the week is that we should expect really an acceleration of business traffic next year with a lot of pent-up demand.

We have a lot of clients that need to get back on the road, and they're anxious to do so.

And when they do so, they're glad, they have got it.

And I know, I'm excited to get back on the road, have been traveling a lot more in the last few weeks.

So a lot to know.

It's a TBD.

I can't exactly answer that question other than the feedback we get it's going to be very strong.

We also expect, look, consumer demand next year after being not able to travel as they would like for almost 2 years, we think it's going to be really strong, including here domestically, by the way.

We believe our profit-maximizing opportunities are across the Atlantic right now into India, Africa and the Middle East.

But we also think there's going to be a domestic recovery that's really significant and strong.

And in fact, hopefully, by February, March, April, it's going to overcome this much higher price of fuel.

And that's the trajectory on.

We feel good about it, and that's our plan.

Okay.

And then how do you expect, Andrew, corporates to book travel in 2023?

I know that there's a lot of direct bookings right now, and '22 is probably going to be weird, too.

But is 2023 going to look like 2019?

Are you going to have the same mix of GDS channel, and TMC is just as relevant?

How do you expect that to shake out long-term?

Long-term, I don't know.

Technology is changing rapidly.

But what I would say is we have really great CMC partners, and they greatly help us reach our SME markets.

And we use the GDSs to provide all that content, and we do this successfully and in agreement with our major GDS contractors up to this point.

I don't expect any radical changes.

Clearly, there are those in the distribution network that would like to do things slightly different.

And we'll let those companies and those agencies tell us what they would like.

And we'll do our best, obviously, with all of our clients and all of our customers to give them the best customer service we possibly can.

But I do believe the TMC and GDS model are really strong and help deliver high-quality revenue to United Airlines.

From Cowen, we have Helane Becker.

Just a couple of questions.

One is on the 777s that are coming back, Gerry, what's the cost going to be to bring those back?

And is that included in your CapEx forecast for ['20]?

Or will it be in your CapEx forecast for fourth quarter and for 2022?

So the 777s are aircraft that's already complete.

There's not a CapEx component to bringing them back.

There is an OpEx component of getting them ready.

And so that's included in our forecast.

It's not included in any forecast is whether there's any contribution to that from other parties.

We're assuming in our forecast that we are incurring that cost.

Okay.

That's very helpful.

And then the other question I have is with regard to all these new markets.

A little letter A is, are you concerned that your alliance partners will be put off by the fact that you're overflying their hubs to do this on your own?

And little letter B, can I give you a list of cities I'd like to go to that are on my bucket list?

I would have thought with the cities we've just added, we got to your bucket list, but let me know.

We work with our great alliance partners.

We really do have the best alliance partners in the globe.

And what I'd tell you is about how we came to the conclusion about what city fairs to add for the summer.

Many of the city fairs, United and our Star Alliance partners have very low shares.

So traffic between United States and those markets are carried by other alliances, not ours.

And that's why these markets are great.

And the other thing I'll tell you is sometimes, you have to make the market.

And there's a lot of service to a lot of different places around the world.

But for example, the ASRs is a great opportunity for you firstly and all your colleagues who hit on a great vacation, that was very, very difficult to reach in previous years.

That will be a lot easier to reach on United Airlines nonstop that in New York starting this summer.

From Deutsche Bank, we have Mike Linenberg.

Scott, back to your point about the vaccine mandates being the biggest risk.

Where are you maybe in conversations with the government, and as it pertains to the TSA, which I think latest data is that I think they're only at like 60%, 65% vaccinated.

Are you making any sort of contingency plans?

Or as we approach the holidays, are we going to have additional United people that help staff and kind of get people through the airports?

Just where things stand on that.

Well, I have a lot of confidence that TSA will get there.

They've been working hard.

I think they've been doing a great job here in the pandemic and really tough times.

They also -- the same department was instrumental in bringing the tens of thousands of refugees back from Afghanistan.

So I think we all should give kudos and credit to the Department of Homeland Security, Secretary Marcus and the TSA, for everything they're doing.

I'm pretty confident that we'll get there.

I mean I think they're implementing vaccines -- correct requirements correctly.

I mean at United, we have proven that if you just do it.

If you put the requirement out there and you're not compromising, you're not wishy-wash, you don't waffle, you don't backtrack, you can get over 99%.

And I think, we'll do the same thing, and we'll get there.

Okay.

Very good.

And then just a quick follow-up.

Scott, you talked about hitting your targets with, I think, only 85% to 90% of corporate coming back.

And there's a lot of talk about premium leisure travel.

And I'm just curious, is there something secular going on with that passenger segment?

Or is this just United catching up to the rest of the industry and just having premium seats that are on par with everybody else?

Thoughts there.

Mike, it's Andrew.

I would tell you, it's probably a little go, although we have really not started to materially change the aircraft mix from what we announced United Next just a few months ago.

So we -- a lot of that best is going to come in 2023 and beyond.

But there has been an amazing amount of premium leisure business are being able to sell premium seats in the first class cabin and even in the main cabin with much higher load factors than we've done in the past.

We're anxious to prove out that this is a permanent change.

The part of it is clearly that there is more inventory available closer in for these seats because corporate travel hasn't rebounded completely.

So corporate travel is 100%.

And we'll have to see where the premium leisure yields are.

I think we're going to look to balance both and come out with a better outcome given this change, if any, of it proves permanent, which we're -- again, we're bullish that will be exciting to see.

It is pretty material in such a short period of time.

So we'll have to wait and see for sure because we need to balance that with the corporate demand when it comes back.

But all that being said, in the unlikely event, corporate demand is not 100%.

We do have other levers to push, and this one has become increasingly obvious over the last 3 months as an opportunity to do something a little bit different and get some more revenue on board the aircraft.

From MKM Partners, what Conor Cunningham.

I think you hinted out in the prepared remarks, but when you think about potential swing capacity in 2022, is it fair to assume that the swing capacity in the domestic market could move lower rather than you making an adjustment on the international side, just given the competitive landscape?

I get that demand dictates all that, but just curious on your thoughts on the high level.

To that, we have a lot of flexibility to move aircraft around our aircraft or our factories, and they clearly can be moved around wherever we need them to go, whether they'd be domestically or overseas.

So we're agile.

I think, we've proved that continuously throughout the entire pandemic.

And we look like we're getting based on track and getting back to our normal schedule deployment, which again is why I said, there'll be less point-to-point flying in the future.

But we'll be flexible to do what we need to do both domestically and internationally, and including ground wide-body guests, if they're not needed later this year, but we'll wait and see.

Okay.

And then just a follow-up to what Hunter was talking about on the business side.

So I'm just curious on what sectors you're seeing the most pent-up demand for business travel or maybe like which sectors you're actually most bullish on longer term that you think you can gain share or however, you're thinking about that in the current context?

Well, with everything we've done in United, we tend to gain share everywhere to make that really clear to you and all of our competitors.

That being said, seeing right now is consultant is obviously very strong as they get back on the road and start helping businesses all around the globe.

But we're also seeing rebounds across the board, but we'll -- things are moving on the right direction.

And we will now take questions from the media.

(Operator Instructions) And from Wall Street Journal, we have Alison Sider.

Yes.

I guess 1 of the big complaints we've heard from customers throughout the industry over the course of the last several months is just sort of about the instability of schedules, late close-in changes and everything kind of being up in the air.

And I'm just curious when you think we might see that level out, just see some more stability and get back to kind of normal?

Or if this is part of the new normal going forward?

Alison, it's Andrew.

What I would tell you is that we needed to be really flexible as we went into this crisis.

We took the airline down to basically 10% within a matter of a few weeks.

And we learned a bunch of things about how flexible we can be in our process.

That being said, to run an airline of this size, we need process, we need consistency and we need to load our schedules early for the convenience of our customers, so they can book with certainty.

And we have more or less, as of this week or next, return to a normal scheduled load process, where we load our schedules 90 days in advance.

And the final is close to 90 days as possible.

During the pandemic, that number was dramatically lower, and that caused a level of disruption that was unfortunate but necessary.

And we did talk to our customers about it.

And we did react to it at res, and we react to ensue it in every way possible to make it as simple and easy to change the reservation.

However, that problem should be in the past very, very soon, if not already.

From CNBC, we have Leslie Josephs.

My question is about regional airlines.

Do you know, if the carriers that fly for you, whether your name are going to be subject to the same federal mandate?

Or if not, if it's some of the OSHA rules?

Do you have any operational concerns about getting them into compliance for the next few weeks?

And then also, if you have any information about how you're approaching cargo just given all the supply chain issues going forward, especially before the holidays.

This is Brett Hart.

What we will say is that our regional carriers, we know that they're evaluating the applicability of the executive order on their business.

And we're in discussions with them.

I think it's pretty clear where we stand with respect to the importance of vaccinations, but they're in the process of working through that now.

We will certainly be in the process of helping them in that process to the extent that we can.

Andrew, do you want to add?

Yes.

In terms of cargo, we've obviously had a record quarter, a record year.

We expect that to continue well into the fourth quarter and actually beyond.

Given where the country stands in terms of the backup of supports, but also in terms of consumer demand, we're transporting things by airplanes today that we traditionally have not.

And in talking to the entire cargo team, we expect that to continue well into next year, if not all of next year based on where demand is for these products and again, where the ports are and the services that we provide, which are just, I think, second to none on the cargo front.

And Leslie, if you look at our numbers, you can see here in our numbers every quarter.

Okay.

Did you ask the regional airlines to -- if they're the same vaccine mandate that you have?

And do they say no?

Just for uniformity, names on the plane.

No.

At present, we haven't asked or required our recent carriers to adopt our same policy.

And you understand from a legal perspective, we don't have right to require them to do it.

But this is a process that they will work through in the same way that we did, and we know that they're very focused on it.

And we're confident that at the end of the day, they'll get to a good place on it.

But we have and are strongly encouraging them and pushing them to do it.

We think it's the right thing for them to do as well.

We just aren't in control.

(Operator Instructions) And from Bloomberg News, we have Justin Bachman.

I wanted to go back to the earlier comment about United being the U.S. flag carrier.

And that sort of structural change that you see on the international widebody front, and how that makes long haul more profitable.

I wanted to get your thoughts on the thesis, though, because it seems to rest on the idea that other carriers can't or won't add wide-body capacity, if they can get some decent yields on that.

And I just wanted to get your thoughts on that because some of these airlines you've accused in the past of being government subsidized, and it seems that they could add capacity, if they chose to.

Justin, it's Andrew.

There's really 2 components.

One is the fleet and how long it takes to get wide-body aircraft and configure them and put them in the air.

And that is, having done it here at United, it takes a couple of years.

So when you choose to retire aircraft, it's very difficult to reverse that decision, get trained up and acquire new aircraft to replace them.

So it just cannot happen immediately.

But secondly and more importantly, is the fact that we're flying from what are 7 [major] hubs here in the United States that just represent both of international travel to and from the country, not only leisure business, but business in a regular corporate business.

And so we just have a structural advantage on this front.

We're already the largest international carrier by far.

We're able to successfully fly not only to our partner hubs, but to spokes all over the world.

And you saw that with our recent announcement, including a new place like Oman and Jordan.

And so, we're simply taking advantage of the structural advantage we have at United that we just haven't been able to, in the past, properly do.

But now we can, and we're doing so in a era of, I think, tailwinds based on the fact that demand is back, comes in back rapidly, and our competitors across the board that regard many, many large aircraft, many of them with large business class cabins.

From CNN, we have Chris Isidore.

Getting back to the cargo and supply chain issues.

Are you still flying any old cargo flights?

And are you considering any purchases of freighter -- traditional freighter aircraft, either used or new as you're seeing more cargo demand?

I'll take that.

We stopped -- we had stopped or plan to stop all cargo flights to be more breadth as we were going through the summer because of the rebound in traffic and the lack of our Pratt & Whitney 777s to fly.

As we went through the Delta variant phase and demand fell, we did allocate a small number of widebodies to our cargo team, and they've taken them, and they are flying as all cargo through the end of this year, and that is doing extremely well.

We will likely bring that to an end, again, sometime late this year, early next year.

All that depends on the return to service of our Pratt & Whitney 777s.

So we do see a lot of demand on the carbon front.

The team is doing a great job, and we're going to have a record year.

And for your aircraft, is that something that's -- you're weighing and considering?

Or is that just not something that you see being a mix long-term?

Sure.

We have a fleet of about 220-or-so wide-body jets on -- at United Airlines.

They all have large bellies with room for a lot of cargo.

We just haven't seen the need to supplement those aircraft with any all freighter versions of those aircraft at this point in time, just from a business model perspective, we can obviously pick months or years where that makes sense are a few individual routes.

But the fact that we operate, I think, the second largest wide-body fleet in the world, we have a ton of belly capacity that more than meets our needs.

From The Associated Press, we have David Koenig.

Scott, following up on your caveat and tour comment earlier, I wondered if you have any evidence that people are booking to United because of your mandate?

And I guess, are you counting on some of your rivals struggling to have enough staff over the holidays.

Well, the short -- I think it would be hard to sort that out even if it was happening.

But I would also say, I don't want that to happen.

I mean, I don't -- because I want everyone to get vaccinated.

I mean that's the right answer for safety, that's the right answer for the country.

I hope that every airline will stop backtracking and we'll, in fact, get everyone back to days like United Airlines has done.

And so that it will not be a competitive advantage for us because it is, without question, the right thing to do.

Is it a competitive disadvantage if they seem to settle for less and have some sort of testing alternative to vaccination?

Well, look, again, I hope that they will, again, backtrack and get all their employees back because it is the right thing to do.

But it is unquestionably going to be operationally, really, really difficult to get tens of thousands of employees tested every week.

From Reuters, we have [Ricet].

I want to -- I have 2 questions.

First, I want to clarify your comments on 777.

You said that you expect them to return to service in the first half of next year.

Is that your assumption?

Or has FAA cleared the ground to return to service in the first half of 2022?

This is Brett.

We haven't heard that from the FAA, but we have been working tirelessly with Boeing, Pratt & Whitney and the FAA over the past 6 months.

And we do expect the aircraft to return to service in the first quarter of next year, [same].

And my second question is about supply chain bottlenecks.

You alluded to the supply chain pressures and your comments on (inaudible).

Can you share some color and details on these bottlenecks?

And how are you navigating from them?

It's Gerry.

So I'd say, we're not seeing anything different from what others are seeing.

And where we are seeing shortages and potential shortages, we're just trying to stay ahead of it.

So it's not at all impacting the operation or the product but it does have some impact just on cost.

It's just more expensive as the whole world is seeing sometimes to get the supply that you need.

And from Washington Post, we have an Hannah Sampson.

On the question of premium, increased demand for (inaudible) customers for premium products, how are you seeing that play out?

Are they just kind of booking those upfront using miles for upgrades?

Are they getting free upgrades?

I guess I'm curious, have your travelers been like dying to book these seats all along and just didn't have the chance?

Or do they have more cash to work with now?

What do you see playing out there?

Well, we'll let -- this is Andrew speaking.

We'll let it play out over time.

But what we've seen over the last few months, in particular, is more of a willingness to spend a few extra dollars to upgrade to a premium seat in the main cabin or to fly in the first-class cabin.

All across the Atlantic, we've seen a better rebound our business class cabin to our leisure-oriented routes such as Athens or Italy this summer than we did in the main cabin.

And I think people -- a lot of consumers have saved up too money during the pandemic and maybe they're perking a little bit.

But it's also these are great upgrades to the product.

A big thing here at United is to make sure that we have a product for all of our customers from the top of the scale in terms of Polaris, down to a basic economy customer.

And we can provide the products across that range, and that's exactly what we're doing.

We expect to do more of that over time, by the way.

And we absolutely know that there are certain customers that want that elevated experience.

While there are others that don't, and we will offer a range of product types that allow us to do that.

Okay.

And then, if I could slip another one in real quick.

How are you feeling prepared for the holiday staffing-wise, not just pilots and flight attendants, but across the board, key agents, people to answer the phone as people have questions or problems?

How prepared are you feeling for that?

We're in good shape, and customers can book with confidence at United Airlines.

Thank you.

We will now turn it back to Kristina Munoz for closing remarks.

Thanks, everyone, for joining the call today.

Please contact Investor or Media Relations, if you have any further questions, and we look forward to talking next year.

Thanks, everyone.

Thank you.

Ladies and gentlemen, this concludes today's conference.

Thank you for joining.

You may now disconnect.