United Airlines (NASDAQ:UAL) executives said the carrier delivered a “strong first quarter” while moving quickly to respond to a sharp rise in jet fuel prices tied to the conflict in Iran. Management emphasized efforts to pass higher fuel costs through to customers, trim marginal capacity, and continue investing in product and loyalty initiatives aimed at deepening brand loyalty.
Fuel shock drives pricing and capacity moves
CEO Scott Kirby said jet fuel prices have “doubled” and described the company’s near-term objective as recovering “100% of the increase in jet fuel prices as quickly as possible,” while targeting “double-digit pre-tax margins next year” and “at least 10%” pre-tax margin in 2027. Kirby said reaching full fuel pass-through would likely require yields to rise “about 15%-20%,” and he expects some demand elasticity over time even though the company has not seen it yet.
Record revenue quarter and rising yields
Nocella reported consolidated total operating revenue rose 10.6% year-over-year to a first-quarter record of $14.6 billion, while PRASM increased 6.9% and was positive across all regions. He characterized January and February as “strong for all customer types in all regions,” with business ticketing revenues up about 12% and leisure up 6% before the impact from the war.
Premium demand was a key driver. Nocella said premium revenues increased 13.6% on a 4.4% capacity increase, with premium PRASMs up 8.9% year-over-year and outpacing main cabin by four points. Business demand remained strong, with business revenues up 14% in the quarter, and Nocella later told analysts business revenue was up 25% over the last two weeks as yields increased.
United implemented “five broadly successful price increases” late in the quarter and raised baggage fees, which Nocella said began to offset higher fuel costs. He detailed an acceleration in sell-in yields: up 4% year-over-year in January and February, 12% in the first half of March, 18% in the second half of March, and “up 20% year-over-year” for all future travel in the most recent week. Nocella also noted that United had already sold 23% of second-quarter capacity and 8% of third-quarter capacity at lower price points before fuel rose.
On geographic trends, Nocella said global long-haul price increases have been stronger than domestic and added he was surprised that international pass-through has been “better than domestic” so far.
Earnings, costs, and updated guidance
CFO Mike Leskinen said United posted first-quarter earnings per share of $1.19, within the company’s initial $1.00 to $1.50 guidance range and up 31% year-over-year, despite a $340 million higher fuel bill. Pre-tax margin was 3.4%, a 40 basis point improvement versus the prior year’s first quarter.
Leskinen said unit costs were pressured by storm-related capacity reductions and close-in cancellations, including pulling Tel Aviv and Dubai flights, which together represented 1.5 points of capacity. As a result, CASM-ex increased 5.9% year-over-year in the first quarter. He said additional capacity removals will likely continue to pressure CASM-ex, but are expected to improve profitability and cash flow, emphasizing that United manages for “long-term profits and cash flow,” not CASM-ex.
For the second quarter, United guided to EPS of $1 to $2, assuming an all-in fuel average price of about $4.30 per gallon. For full-year 2026, United updated and widened its EPS outlook to $7 to $11. Leskinen said the company expects to recapture 40%-50% of the increased fuel cost in the second quarter, 70%-80% in the third quarter, and 85%-100% by the fourth quarter. He also said the company expects a “double-digit increase in RASM” in the second quarter and for the full year.
Operational performance and labor update
President Brett Hart said United carried a record number of passengers in the quarter amid “elevated weather events and geopolitical disruptions.” He said United ranked first in on-time departures among the eight largest U.S. carriers and posted a per-seat cancellation rate “44% lower than the next two largest U.S. carriers.” Hart said operational performance supported United’s “highest first quarter on-time Net Promoter Score since the pandemic.”
Hart also highlighted digital engagement, saying day-of-travel app usage reached a record 86%, supported by enhancements like improved bag tracking and live TSA wait times, along with disruption communications that embed live maps in customer messages.
On labor, Hart said United reached a tentative agreement with flight attendants represented by the Association of Flight Attendants, including “industry-leading wages” and other improvements, with voting set to conclude May 12.
Product, fleet, and loyalty initiatives
Nocella outlined a set of commercial initiatives, noting they have been “in the works for years” and span aircraft types and cabins. Among the changes:
- “Nested selling” on United’s website and app, intended to better merchandise products; Nocella said United has already seen “large increases in upselling.”
- Base fares in premium cabins, which include fewer services such as less checked luggage and no early seat assignments, with the option to purchase or obtain seats at check-in.
- Fleet and premium product expansion, including plans for 50 A321 “Coastliners” to extend the Polaris brand on all New York-to-Los Angeles and New York-to-San Francisco flights, and new Airbus A321XLR onboard products tailored for longer crossings.
- Regional service concept expansion, describing a move from the CRJ-550 concept to what United is calling the CRJ-450.
- Relax Row, a product for young families on global routes that transforms three seats into a flat surface with bedding and pillows.
- MileagePlus changes that award more miles to members who hold co-branded credit cards and provide redemption discounts for cardholders.
On the loyalty front, Nocella said total loyalty revenue increased 13% in the quarter and that early results from MileagePlus changes show “incredible” uplift in spend. He added United is at a “record penetration rate of cardholders that are premier members.”
During Q&A, Kirby reiterated the company would not add new details on consolidation rumors. He also said it is “extremely unlikely” United would open a foreign hub, pointing instead to the value of Star Alliance partnerships for reach into smaller markets.
Kirby and Nocella also addressed industry dynamics around pricing. Kirby said fare increases often require a triggering event and suggested pricing may be more durable this time, though he noted it “probably won’t hold 100% if oil normalizes.” Nocella said United is pursuing “self-help” through price and capacity actions rather than relying on competitors.
On balance sheet actions, Leskinen said United paid down more than $3.1 billion in debt in the quarter and returned to the unsecured bond market for the first time since 2019 with $2 billion across two offerings. He also said United generated $2.9 billion in free cash flow during the quarter and reiterated the company’s commitment to achieving an investment-grade rating.
About United Airlines (NASDAQ:UAL)
United Airlines Holdings, Inc operates United Airlines, a major U.S. full-service passenger carrier providing scheduled air transportation for passengers and cargo. The company offers a comprehensive route network that covers domestic markets across the United States as well as extensive international service to Europe, Asia, Latin America, and the Pacific. United operates a mixed fleet of narrow- and wide-body aircraft on point-to-point and hub-and-spoke routes, and supports corporate and leisure travel through offerings such as premium cabins, basic economy, and ancillary services including baggage, seat selection and in-flight amenities.
In addition to passenger operations, United provides cargo services through United Cargo, handling freight, mail and specialized shipments.
