United Airlines' Q2 2025 Earnings Call: Exploring Contradictions in Recession Preparedness, Cost Management, and Demand Outlook

Supply Adjustment and Demand Recovery:
- United's consolidated TRASM for Q2 was down 4% on a 5.9% increase in capacity. Adjusted for Newark disruptions, TRASM would have been down 2% to 3%.
- The decline in TRASM is due to weak RASM results across the industry, leading to supply cuts set for mid-August, similar to the pattern seen a year ago.
- Demand, which was about 5% weaker in the first half, stabilized as uncertainties such as the tax situation, geopolitical stability, and tariffs improved, leading to a meaningful inflection point.

Newark Airport Recovery:
- United's Newark operations had the fewest cancellations and most on-time flights of any airport in the New York area in June, indicating a strong recovery after previous disruptions.
- The turnaround was due to completed runway construction, upgraded FAA fiber optic technology, and implemented hourly flight caps to prevent schedule exceeding airport capacity.
- The improved operations at Newark are attributed to partnerships with agencies like the FAA and the Port Authority, which resolved capacity issues and enhanced operational efficiency.

Premium Capacity and Revenue Strategy:
- Premium cabin revenues increased 5.6% year-over-year, with premium RASMs 6 points better than non-premium RASMs.
- United plans to lean into premium products and capacity, aiming to increase premium seats on new aircraft, such as the 787-9 with 99 premium seats.
- This strategy is driven by the consistency and resilience of premium capacity, which is seen as a key to future revenue growth and margin expansion.

Capacity Discipline and Revenue Outlook:
- Published industry domestic capacity indicates a 4% decrease in August and September compared to previous projections of a 4% increase.
- United expects normalized Newark sales and lower margins from Newark disruptions to have a temporary impact on Q3 revenue results.
- The reduced industry capacity, along with strong bookings in July, sets up an improved revenue backdrop, especially for Q4, similar to the positive outcome seen in the second half of 2024.