Categories Earnings Call Transcripts, Industrials

United Airlines Holdings Inc. (UAL) Q2 2022 Earnings Call Transcript

UAL Earnings Call - Final Transcript

United Airlines Holdings Inc. (NASDAQ: UAL) Q2 2022 earnings call dated Jul. 21, 2022

Corporate Participants:

Kristina Munoz — Director of Investor Relations

Scott Kirby — Chief Executive Officer

Brett Hart — President

Toby Enqvist — Executive Vice President & Chief Operating Officer

Andrew Nocella — Executive Vice President & Chief Commercial Officer

Gerald Laderman — Executive Vice President & Chief Financial Officer

Analysts:

Michael Linenberg — Deutsche Bank — Analyst

Helane Becker — Cowen and Company — Analyst

Andrew Diadora — Bank of America — Analyst

Savanthi Syth — Raymond James — Analyst

Jamie Baker — JP Morgan — Analyst

David Vernon — Bernstein — Analyst

Christopher Stathoulopoulos — Susquehanna International Group — Analyst

Sheila Kahyaoglu — Jefferies — Analyst

Duane Pfennigwerth — Evercore ISI — Analyst

Alison Sider — Wall Street Journal — Analyst

Mary Schlangenstein — Bloomberg News — Analyst

Leslie Joseph — CNBC — Analyst

Lori Aratani — The Washington Post — Analyst

Presentation:

Operator

Good morning and welcome to United Airlines Holdings Earnings Conference Call for the Second Quarter 2022. My name is. Hilda, and I will be your conference facilitator today. Following the initial remarks from management, we will open the lines for questions. Please note that no portion of the call may be recorded, transcribed or rebroadcast without the Company’s permission. Your participation implies your consent to our recording of this call. If you do not agree with these terms, simply drop off the line. I will now turn the presentation over to your host for today’s call, Kristina Munoz, Director of Investor Relations. Please go ahead.

Kristina Munoz — Director of Investor Relations

Thank you, Hilda. Good morning, everyone, and welcome to United’s second quarter 2022 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 release Form 10-K and 10-Q and other reports filed with the SEC by United Airlines Holdings and United Airlines for a more thorough description of these factors. Also, during the course of our call, we will discuss several non-GAAP financial measures. For reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to the tables at the end of our earnings release.

Joining us on the call today to discuss our results and outlook are Chief Executive Officer. Scott Kirby; President, Brett Hart; Executive Vice President and Chief Operating Officer, Toby Enqvist; 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, available to assist with Q&A. And with that, I’ll hand it over to Scott.

Scott Kirby — Chief Executive Officer

Thanks, Kristina. And good morning, everyone, and thanks for joining our call today. I’d like to start by thanking our employees for navigating an unprecedented return of customers this quarter, as well as managing through challenges seen around the world in an infrastructure that supports global aviation. It’s great to return to profitability for the first time since the start of the pandemic. Despite the legitimate worries about rising fuel prices and the growing risk of a slowdown or recession, we expect continuing improvement in revenue, earnings and margin going forward. We’re still short of our pre-pandemic margins. We remain focused on first getting back to 2019 levels of profitability. And then on achieving our 2023 and 2026 United Next adjusted pretax margin target.

During 2Q, three storm clouds emerged that will drive the narrative around united and our industry for the next six to 18 months. And here at United we’re prepared for the risk they pose. First, we’ve seen industry-wide constraints that have created significant operational disruptions and imposed constraints on the industry’s ability to grow. Second, sharply elevated fuel prices. And third, the growing likelihood of an economic slowdown or recession.

First, to address the challenges posed by commercial aviation ecosystem that is straining to handle the number of planes operating today. We’ve elected to keep United Airlines smaller and over staffed in order to give us more buffer against these external constraints that we just can’t control. We’ll also continue to prioritize reliability by over staffing until the entire aviation infrastructure returns to normal, but it means that there will be cost pressures until that catches up and we can return to traditional utilization and staffing.

The second macro trend is, of course, fuel price. At current fuel prices, United’s fuel bill would be $9 billion higher than 2019. For what it’s worth, we’re building our long-term plans, assuming that this is the new normal for fuel price. The good news is the rising fuel costs are something that affects all airlines, and at least for United we’ve seen this largely become a pass-through expense today.

And finally, there is the question about what’s going to happen with demand. We continue to see strong demand, and one thing that is unique for United particularly and aviation in general, is that we’re still probably in the sixth or seventh inning of the COVID recovery. So there are two macro demand trends; recession versus continuing COVID recovery, working at cross purposes. And for now, at least, the COVID recovery trend is at least canceling out the arguably exceeding the economic headwinds. So where does that leave us as we look to the future? Clearly, all three looming risk, industry infrastructure constraints, significantly higher fuel prices and an economic slowdown biased [Phonetic] toward reducing capacity over the next six to 18 months. But the truth is 8% is about as much as we think it’s physically possible for us to fly given the shortfall on regionals, reduction in long-haul Asia flying, and aircraft delivery delays and other infrastructure constraints that are impacting all of aviation.

Perhaps what’s most amazing about all this is despite the three nodes storm clouds however, we remain optimistic about the near and short-term. You can see that our 3Q results are expected to continue to accelerate back towards 2019 margins. Lower stage link does lead to lower ASM growth and pressures CASM-ex. And Gerry will detail what that means shortly. However, these same factors also lead to higher RASM in order to hit our adjusted pretax margin of 9% next year. TRASM could decelerate by 8 points from current levels and we still hit the target. That translates to about loan dollars per share and adjusted EPS. And that perhaps is the most important point. At United, we will do whatever it takes to hit our margin target. We made a huge step up in 2Q and we continue to closer to 2019 levels here in 3Q. We believe utilization will return to normal and Boeing deliveries will get back on track, which are the keys to CASM-ex, but we’re going to get to our pre-tax margin next year regardless.

Thank you again to our employees for all they’ve done to help our customers during this busy summer travel season. It’s been tough, but I’m encouraged to see the improvement in operating results, in customer NPS so far in June and July. And with that, I’ll turn it over to Brett.

Brett Hart — President

Thank you, Scott. I want to start by thanking the entire United team for their hard work, the past few months. We are pleased to see how the recovery is taking hold and progress made in our international business as border and testing requirements began to loosen up. As Scott mentioned, through weather and air traffic constraints severely impacted the entire industry over the last few months. However, because of the United team’s unwavering hard work, we were able to return to 2019 levels of operational performance in the second quarter for most of our network with the exception of Newark. While June completion was the most challenging since 2019, our mainline operation was ranked number 1 among legacy peers for the quarter. The good news is the biggest constraint we have seen at United, congestion at Newark has improved, but we’ll need to operate at lower utilization and higher staffing levels until the broader aviation infrastructure improves.

United continues to collaborate with the US Department of Transportation on the operational disruptions and challenges impacting the aviation industry and our customers. By having an active partnership with the government and FAA, we hope to address the main drivers of these challenges and find solutions together. We’ve seen early signs of progress and are grateful for the partnership and leadership the FAA has demonstrated.

Late last month, we received a waiver to proactively reduce our schedule in Newark to ease operational disruption for our customers. Also, our on-time hard to [Phonetic] performs in Newark has improved significantly, nearly 14 points month over month so far. As we continue to manage the infrastructure challenges that face the aviation industry and the broader economy, we are strategically maintaining higher staffing levels and will need to operate at lower utilization. We continue to adjust our near-term capacity plans to fly the most reliable schedule we can.

Finally, we are hiring to support a larger operation so that our new United team members can receive proper classroom and on job training in advance of when they are needed, as we plan to grow the schedule towards our long-term goals. The pilot shortage continues to impact broader airline industry. United remains dedicated to hiring at least 200 pilots a month. And with our international routes, widebody aircraft, and higher career — and high career earning potential, we are confident United is the best place for pilots to build a career.

In closing, I want to extend my most sincere gratitude to the entire team at United for their hard work this quarter. Our employees are truly the good that leads the way for our airline. And now, I’d like to hand the call over to my colleague, friend, and our new Chief Operating Officer, Toby Enqvist.

Toby Enqvist — Executive Vice President & Chief Operating Officer

Thank you, Brett, for that kind introduction. After working for this great airline for over 25 years, and most recently, as the Chief Customer Officer, the thing that the customers value the most has not changed; we need to get them to their destination safely and on-time. Hence, running a reliable operation is critical to our success and with the recent wave of industry-wide operational disruptions across the globe, it was the innovative tools such as the connection saver and agent-on-demand from our team that helped moderate the stress, not only for our customers but for our employees as well. We will continue to innovate to make data driven decisions to improve efficiency and reliability of our operation in the future.

At United, we’ve been preparing for this bounce-back in demand for some time, we were the only airline that signed a letter of agreement with our pilots in the fall of 2020 to ensure that when demand returned, and it has, in a more meaningful way than we could have ever imagine we’d be ready. For example, today we have 10% more pilots available for block-hour versus prior to the pandemic. Further, we broke ground on 12 new simulator base to support the amount of pilots [Technical Issue]

Operator

Your conference will resume shortly. Please standby. We will resume shortly Please standby your conference will resume shortly. Thank you for your patience and please standby your conference will resume shortly Thank you for your patience and please standby, we are experiencing technical difficulties your event will resume momentarily. Thank you for your patience. Please standby. We will resume shortly.

Kristina Munoz — Director of Investor Relations

Thank you, everyone. Sorry, we had some technical difficulties. We’re going to start with Toby.

Scott Kirby — Chief Executive Officer

Toby, finish.

Kristina Munoz — Director of Investor Relations

If people didn’t hear, and so we’re going to start with Toby.

Toby Enqvist — Executive Vice President & Chief Operating Officer

All right. I did really went on. So thank you, Brett, for the kind introduction. After working for this great airline for over 25 years, and most recently, as the Chief Customer Officer, the thing that our customers value the most has not changed; we need to get them sort the destination safely and on-time. Hence, running a reliable operation is critical to our success, and with the recent wave of industry-wide operational disruptions across the globe, it was the innovated tools such as connection saver and agent-on-demand from our team that helped moderate the stress, not only for our customers but for our employees as well. We will continue to innovate and make data driven decisions to improve efficiency and reliability of our operations in the future. At United, we’ve preparing for this bounce-back in demand for some time. We were the only airline that signed a letter of agreement with our pilots in the fall of 2020 to ensure that when demand returns and it has in a more meaningful way than we could have ever imagined, we’d be ready. For example, today we have 10% more pilots available per block-hours versus prior to the pandemic.

Further, we broke ground on 12 new simulator base to support the amount of pilot training that we expect will be required in the near, medium and long-term to meet our growth plan. We also began actively addressing our infrastructure well before demand started to come back. During COVID, we focused on the big airport infrastructure projects to support the future. We completed or broke ground on new projects that are Newark, Chicago Air, Houston and Denver. There are many other infrastructure constraints outside of our control and we are working with those partners to get them returned to normal.

Finally, the July 4 weekend was our best completions in CD [Phonetic] zero performance for that weekend since 2017. In partnership with the FAA, our Newark operation has significantly improved in this month. As of July 15, we have seen a 78% reduction, which is our highest post-pandemic month in FAA capacity to [Indecipherable] which means an additional 12,000 customers are on time each and every day and delays are less likely to impact the rest of our system.

I look forward to being even more ingrained in the day to day operations of this airline. And hopefully, by the next time I’m on this call, the operational challenges that our whole industry faces today will be in the rear view mirror. I’ll now pass it on to Andrew to discuss our great revenue results.

Andrew Nocella — Executive Vice President & Chief Commercial Officer

Thanks, Toby. I’m pleased to report revenues accelerated in the quarter versus Q1. TRASM finished 24% higher with capacity down 15% versus Q2 ’19. Topline revenues for June of $4.6 billion or 12% or above our previous best month ever on 14% less capacity.

Q2 leisure demand was exceptionally strong and we successfully revenue managed our capacity, largely compensating for higher fuel cost and inflationary pressures. Passenger yields were up 20%. Business demand continued to rebound in to the quarter to 75% of 2Q ’19 volume levels and 80% of revenues. Business demand continues to grow, but the rate of progress has slowed in the last few weeks from the growth we thought early in the quarter. With the economy potentially worsening, business travels recovery is something we’ll be watching carefully.

Cargo demand remained strong in Q2. Yields remained 107% above 2019 levels and total cargo revenue was up 95% versus ’19. As we see, the industry pull back up to normal passenger schedules, we expect cargo yields will decline in the future months but remained solidly above 2019 levels. I want to also note that our cargo volumes remained strong and are only constrained by available space now being used by passenger luggage. If a drop off in cargo revenues is an early sign of a recession, we don’t see it. Mileage Plus had a strong quarter with revenues up 23% versus 2Q ’19. Our co-branded credit card broke just about every record you can think of in terms of spend, retention and new cards issued.

Our ancillary and premium revenue streams are also doing great. Ancillary revenue per onboard passenger was up almost 30% versus ’19. Additionally, our seat product revenues per passenger were almost up 40%. As I’ve mentioned before, premium leisure continues to be a bright spot with the premium cabin domestic revenue growth, outpacing the economy cabin in the second quarter. This trend is really important as our United Next capacity plans grows premiums even faster than Main Cabin over the next few years.

For Q2, Pacific PRASM increased 15%, albeit on a capacity downed 67%. Atlantic PRASM was up 6% even the backdrop of a 9% capacity growth versus ’19, and Latin PRASM was up 14% in the quarter on 8% more capacity. Overall, international PRASM was up 13%.

Domestic PRASM increased 25% and that’s with a backdrop of an 8% increase in gauge versus Q2 ’19. A material reduction in RJ feeder traffic and many other constraints that limit optimal capacity deployment. The strength of the post COVID recovery, combined with capacity constraints are offset in any macroeconomic headwinds enabling record TRASM results.

Now, turning to the third quarter, we’re focused on carefully managing our capacity, yield and operation with schedules we can reliably and profitably deliver. We expect third quarter capacity will be down approximately 11% versus third quarter of ’19. Q3 TRASM is expected to improve by 24% to 26% versus the same period in 2019. International TRASM is now spooling up further. We’re well into the Q3 booking curve and pleased with the revenue trends. We’re not counting on a material rebound in business book in the quarter to meet our TRASM guide.

United’s capacity in the fourth quarter will also remain below our original targets at approximately down 11%. The revenue environment for passengers, ancillary fees, domestic premium seating and Mileage Plus and cargo are all just materially different in a positive way than 2019. It appears to us that the airline industry revenues are rapidly returning to the 2019 GDP relationship which is really important to our 2023 capacity plan and outlook. We continue to assess capacity plans for 2023 and now expect United capacity will up be up about 8%. To be transparent, our outlook for growth — 8% growth is significantly lower than our previous plan growth. We at United are going to be able to execute our plan and do it comfortably. We feel 8% growth is the right choice and achievable for United. At United, taking care of our customers is our number one focus and we believe that moderating capacity growth will allow us to deliver service levels our customers expect.

The entire industry faces at least three core challenges over the next 18 to 24 months. One, industry infrastructure shortfall; two, high fuel prices; and three, macroeconomic concerns. Some airlines, including United, faced the fourth risk, that not all others may face, delivery delays from Boeing. These constraints are clearly having a material positive impact on revenue production, higher fuel prices and macroeconomic concerns alone may not have impacted industry capacity.

However, infrastructure constraints and Boeing delivery delays will take time to fix and cannot be ignored. Pilot recruiting, training and retention, we believe are real constraints for the industry for years to come. As Scott had said early, the calculation of how we get to our 2023 margin guidance has changed. We will have higher cost, higher fuel, lower capacity, but most importantly, higher revenues. Thanks to the entire United team.

And with that I will hand it over to Gerry to discuss our financial results.

Gerald Laderman — Executive Vice President & Chief Financial Officer

Thanks, Andrew, and good morning, everyone. First, I would like to add my thanks to the entire United team for achieving our first quarter of profitability since the start of the pandemic. For the second quarter of 2022, we reported pretax income of $459 million, $611 million on an adjusted basis. Our second quarter CASM-ex ended up 17% versus the second quarter of 2019, which was in line with our prior guidance despite capacity coming in lower than previously expected. But the cost story for the quarter was not about CASM-ex, it was about fuel and the ability of our industry while in the midst of recovering from the pandemic to withstand record high fuel prices.

The fuel price volatility was exacerbated by unusual pressure on jet fuel prices in certain geographic regions where we had limited opportunity to mitigate our exposure. For example, in April and May, the cost of jet fuel based on New York Harbor pricing was off in several dollars higher per gallon than Gulf Coast jet fuel. Nonetheless, our strong unit revenue performance enabled us to offset most of the fuel-pressure as we obtain an adjusted operating margin in the second quarter of just over 8%. While lower than our May guidance of 10%, the difference is mostly due to approximately $150 million of incremental fuel expense for the quarter versus what we forecasted in May.

Turning to our forward outlook. We currently expect CASM-ex to be up approximately 16% to 17% in the third quarter on capacity down 11%, both versus the third quarter of 2019. Our third quarter costs are impacted by the current operating environment. During the recovery period, were supply chain issues, labor shortages, and COVID variants, create challenges throughout the economy. We are mitigating the impact of our operation and our customers by over staffing and limiting capacity. While this creates near term CASM headwind, we believe it is the right thing to do for our customers and ultimately for our profitability.

We also have to manage more closely in cancellations due to various infrastructure issues. For example, for several weeks in September, we are reducing our schedule in Newark by about 200 flights per day as a result of runway construction. These types of cancellations result in additional CASM-ex pressure, as many variable costs simply cannot be avoided due this — due to the short lead time for the schedule adjustments. Nonetheless, we once again expect to be profitable in the third quarter and expect that our adjusted operating margin to be 10%, based on a fuel price per gallon of $3.81. Additionally, we continue to expect an adjusted pretax profit for the full year 2022.

Looking beyond the third quarter, we will continue to manage our capacity growth into next year prudently. We currently expect our fourth quarter capacity down 10% with our CASM-ex up 14%. In addition, as Andrew described, we now expect full year 2023 capacity to be up no more than approximately 8% versus 2019, down from the original United Next goal of 20%. Even if it’s lower capacity for next year, we feel good about achieving our United Next adjusted pretax margin target.

After taking into account the impact of lower capacity causing, for example, fixed cost to be spread among fewer ASMs and about three points of inflationary pressure we’ve seen, we would expect CASM-ex to be up about 5% versus 2019, using a fuel price per gallon of $3.40 based on the current forward curve, unit revenue can decline by as much as 8 point from current levels and we would still achieve the 9% United Next adjusted pretax margin target. And as Scott mentioned, as our assumptions change, we would do what it takes to deliver on our commitment.

Turning to fleet, our new aircraft delivery scheduled for this year continues to shift a little to the right. We now expect to take delivery of no more than 46 MAX aircraft and five 787s during the year. We currently expect full-year 2022 adjusted capex of about $5.2 billion, which we lower, to the extent, fewer aircraft are actually delivered. We finally started taking delivery of our first new aircraft of the year during the last week in June. And in the last few weeks, we have taken delivery of four 737 MAX aircraft. We continue to evaluate the most appropriate way to pay for our new aircraft deliveries in the context of our liquidity position, other potential uses of our cash in the current macro environment.

Given that we ended the second quarter was about [Phonetic] $22 billion of liquidity, we used cash-on-hand to purchase the four aircraft already delivered this year. And currently we expect to pay for more than half of our total 2022 aircraft deliveries with cash-on-hand, though we remain flexible as we continue to monitor the economy in the recovery. Paying for these aircraft with cash while paying down current maturities and opportunistically prepaying certain debt [Technical Issue] to build our unencumbered asset base, a win-win for the balance sheet.

So far this year we have reduced our total debt by over $1 billion and with scheduled debt payments between 3 and 4 billion dollars annually for the next several years, we will continue to have the ability to delever our balance sheet through normal amortization. In conclusion, as we execute our network, cost and balance sheet plans, which form the core of our United Next Strategy, we grow more confident every day that we will deliver on our 2023 and 2026 adjusted pretax margin target. And with that, I will hand it over to Kristina to start the Q&A.

Kristina Munoz — Director of Investor Relations

Thank you, Gerry. We will now take questions from the analyst community. Please limit yourself to one question, and if needed, one follow up question. Hilda, please describe the procedure to ask a question.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We have a question from Mike Linenberg from Deutsche Bank. Please go ahead.

Michael Linenberg — Deutsche Bank — Analyst

Okay. Good morning, everyone, and congrats on getting back to profitability. Scott, you touched on the capacity change and maybe this is to you or to Andrew, but based on our math, it looked like you were going to probably be up about 20% under the previous plan from a year ago, and now, it’s at 8. 12 points, obviously that’s a lot, and obviously it’s a sizable headwind for CASM, but can you give us a little bit more drill down, is that maybe a slower improvement or increase in gauge? Is that a more gradual restoration of bringing back triple-sevens? Like, what’s driving those changes? If you can just dig into that. Thanks.

Andrew Nocella — Executive Vice President & Chief Commercial Officer

Hi, Mike. It’s Andrew. Let me give it a shot here. As we looked out into the year, there are a couple of big buckets that are different and get us from the 20% that you are referring to where we’re currently projecting. The first one is the change at United Express. We’re simply flying dramatically fewer airplanes and we’re flying them at lower utilization. So that definitely lowered our ASMs. And think of that as 4 to 5 points in total. There is a, as part of that 4 to 5 points, because that’s really substantial, is the fact that United mainline aircraft have taken over flying on many of these shorter haul routes and those shorter haul routes simply produce left ASMs. So that explains I think one of the bigger buckets of the difference.

The second significant bucket of difference is our assumptions about global long-haul flying and the recovery of our Asian network and our ability to over fly Russian airspace. So relative to what we originally thought in terms of the recovery in Asia and our ability to over fly Russian airspace. I think of it is another 3, potentially 4 points of difference as we take the aircraft that we’re flying very, very long haul routes and now have them fly what are much shorter haul routes. They simply produce fewer ASMs, although a similar number of departures. Those are the two big buckets that represent a material different there relative to what we expect in the second half of next year.

So, we do plan on flying the full airline in the second half of next year but those two buckets materially change the structure of our ASM productivity. And it’s worth noting that we were going to get to this point on the RJs anyway in the United Next plan. This is where we were going. So this is an acceleration to it. So it does not change our 2026 ASMs, our CASM-ex or the productivity of the airline then.

And the second thing that I think is really important, there are certain parts of the Asian network that have not come back and we don’t believe it will be coming back in the near future. While we had very low CASM, they also had lower RASM. And so, while we look forward to bringing these routes back, we look forward to bringing them back in such a way that they come back at a higher margin. And in fact, if you look at our Asian performance and our TRASM performance in the quarter, you’ll notice that’s exactly what we’re doing. So we think those are two moves they don’t change the endpoint at all, which is a critical part of the answer here to where we’ll be in 2026. United Express part is an acceleration and the long-haul global route is just a deferral given some of the geopolitical issues that we face today.

Michael Linenberg — Deutsche Bank — Analyst

Okay, great. Just a quick follow-up. Just on the pre-tax target for next year and CASM guide that assumes a pilot deal is done, is that right or not? Thank you.

Scott Kirby — Chief Executive Officer

So our CASM numbers assume all the costs that we would expect for next year.

Michael Linenberg — Deutsche Bank — Analyst

Okay. Okay, thanks.

Gerald Laderman — Executive Vice President & Chief Financial Officer

Yes, it includes labor deals.

Michael Linenberg — Deutsche Bank — Analyst

Great. Thanks, Scott. Thanks, Gerry.

Operator

Thank you. Our next question comes from Helane Becker from Cowen. Please go ahead.

Helane Becker — Cowen and Company — Analyst

Thanks very much, operator. Hi, everybody. Thanks for the time. Could you talk a little bit about the new routes that you started, the leisure focused Atlantic routes and how they’re performing relative to expectations and whether or not you know that part of the strategic plan to increase capacity in other markets like that will continue?

Andrew Nocella — Executive Vice President & Chief Commercial Officer

Hi, Helane, it’s Andrew. Let me give that a try as well. We started these routes at the beginning of this last season, and they’re all new and they’re all spooling up. And one of the things we all noticed, I think they all did incredibly well for their first few weeks of operation, including never in flying to these destinations in the past. When you look at our RASM guide, TRASM guide for the next quarter, embedded in that is an acceleration of international RASM where we are spooling up and catching up and it looks really good as we go into the third quarter. So we’re pleased with how they’re tracking. We wanted to try something a little bit different given where business traffic was heading in the summer, and we think it’s going to be successful. And we think you can see that based on our Q3 guide where international RASM growth is accelerating.

Helane Becker — Cowen and Company — Analyst

Got it. Thank you. And then just on the Newark runway situation, how is that going relative to their plan? And the construction at Terminal A, that I think was also impacting operations. I’m not sure where they are relative to what they were — when they were thinking they would be finished.

Scott Kirby — Chief Executive Officer

Wall and Toby, correct me if I miss something wrong here. But the runway construction is going to take one of the runway out of service for a few weeks in September. That’s a big chunk. We’re going to take 200 flights a day out during that time in September. So that’s a reasonable chunk of our capacity. Obviously, the cost basically all stay in place when you do that. And we have our fingers crossed that while it’s been delayed several times that there won’t be any more delays for the new terminal, which is beautiful [Phonetic], new terminals can be great for our customers when it’s done. But that Airport is already got 10 pounds and a 5 pound bag and trying to do it with one fewer terminal is a nightmare. And so, hopefully it will be on schedule for the fourth quarter.

Helane Becker — Cowen and Company — Analyst

That’s perfect. Thank you.

Operator

Thank you. The next question comes from Andrew Diadora from Bank of America. Please go ahead.

Andrew Diadora — Bank of America — Analyst

Hey, good morning, everyone. So. Andrew, I think you mentioned in your prepared remarks, maybe some softer corporate bookings of late. How do you think the operational difficulties across the industry influence the way corporates are traveling or booking right now? I guess, you or Scott, have you had any conversations with your big corporate clients concerned about the dynamic that you’re in right now?

Andrew Nocella — Executive Vice President & Chief Commercial Officer

We have. And I can tell you there is a level of frustration out there, particularly with the London Heathrow situation where we have a large amount of, 22 flights per day out of London Heathrow. And this is clearly having some level of impact on bookings. That being said, our bookings are still off the chart good going across the Atlantic and our RASMs are accelerating. So we look forward to get this getting resolved, but I do think it’s having a negative impact on the return to business. And in the short run, these headlines are just really disturbing to read and we at United are taking the appropriate action to make sure that we can get our customers to where they want to be on time and safely obviously and we hope that these airports quickly catch up.

Andrew Diadora — Bank of America — Analyst

Got it. And just on your corporate business. Sorry if I missed this in your prepared remarks. How much recovered was it in 2Q and what are your expectations as we head into 3Q In the back half of the year? Thanks.

Andrew Nocella — Executive Vice President & Chief Commercial Officer

It was 80% on volume and 75% — or sorry, 75% on volume, 80% on revenue. And while it is still improving, the rate of improvement has slowed for domestic. The rate of improvement for international still looks really good even with the headlines about London Heathrow. So we’re really excited obviously about the international network and how it’s going to perform in the quarter. So again, it is frustrating. And as I said in my prepared remarks, we weren’t counting on to reach our target, some type of heroic change in the current trajectory in September. While I do think there is some upside there for a bigger rebound in business based on the feedback we’ve gotten when the kids go back to school. Again, our TRASM outlook does not count on a significant change. We’re assuming it’s going to be slow at this point.

Andrew Diadora — Bank of America — Analyst

That’s great. Thank you.

Operator

Thank you. Our next question comes from Savi Syth from Raymond James. Please go ahead.

Savanthi Syth — Raymond James — Analyst

Hey, good morning. Thank you. You mentioned regional shortfall is one of the factors impacting the 2023 outlook though maybe not really different versus 2026. I think we’ve all been expecting labor inflation, but recently one of your competitors provided very large pay increase that essentially eliminates the historical pay gap between regional and mainline pilots, which I thought was an important component of making the economics on those routes work with those small aircrafts. I was curious what your view was on the impact of this assuming the rest of the regional industry also followed suit?

Andrew Nocella — Executive Vice President & Chief Commercial Officer

Savi. I’ll say that this is a big change but a change that we anticipated. So RJ ASMs used to be 7.0 something, 7.5 I think percent of our ASMs. As we head to 2026, think of if it as 3.5% to 4% percent of our ASMs because the economics of this business were going to change. We didn’t know exactly how and when it would happen, but now we know. And so, I think we prepared for this, we planned for this, and we’re not going to be relying on RJs as much as we used to because the economic profile of the aircraft has materially changed. And that means service to small communities is going to be different. Here at United, it means more mainline aircraft with lower scheduled depth and we think that’s a profit-maximizing opportunity, and we also think that our customers in those markets are going to appreciate the mainline aircraft at the end of the day.

So we’re on plan, but the size and scope of RJ operations and their profitability will have changed. And the smaller communities’ ability to offer, have differential yields that can support these higher cost structures will be stressed and strained to the point where we don’t think it makes sense to fly as many RJs in the future as we did in the past. So this is a shift. We think it’s a permanent shift. This is not a temporary cost increase for RJs. This is a permanent cost increase for RJs.

Savanthi Syth — Raymond James — Analyst

That’s helpful, Andrew. And if I might follow up just much of the United Next Plan is really a lot about up gauging and I guess — but do you have enough smaller narrow-body aircraft then to address that regional market or do you have the right fleet mix to address it?

Andrew Nocella — Executive Vice President & Chief Commercial Officer

As we looked at our fleet mix, and we can always make a change to it, and we look at the profitability by aircraft type and what we need to do to hit our financial targets, we will simply have a different shape network in 2026 than we did in 2018 or 2019. And again, very small communities will have less frequency, but bigger aircraft, and we think that is the profit-maximizing opportunity. And so, we are not anxious to jump into a 120 feet narrowbody to fill that gap at this point. Obviously, we can change our mind at any time. But at this point in time, we think the MAX 10 and the 321 are the way to maximize our profitability and we will make the appropriate adjustments to our network to make sure we can do that. And there may be some cities, and we’ve already shut down 17 or 18 because of lack of RJs, that we can’t fly to. It’s an unfortunate outcome, but where we are. But that is what the outlook looks like at this point.

Savanthi Syth — Raymond James — Analyst

Got it. Thank you. Thank you. The next question comes from Jamie Baker from JP Morgan. Please go ahead.

Jamie Baker — JP Morgan — Analyst

Hey, good morning, everybody. And Andrew, just continuing on Savi’s topic, was scope relief initially envisioned as part of United Next?

Andrew Nocella — Executive Vice President & Chief Commercial Officer

The United Next and our plan never had more than 255-276 seat RJs in it.

Jamie Baker — JP Morgan — Analyst

Okay. So I guess that would explain why there was no change in scope as part of the PA, right?

Andrew Nocella — Executive Vice President & Chief Commercial Officer

We ask for what we need and we collaborate to get to the right answer. And we — I’m going to say, as a team, we figured this out a number of years ago and we got it right.

Jamie Baker — JP Morgan — Analyst

Okay. Yes. No, cool. Okay. No, I just wanted to double check that. Second question for Gerry. Cutting planned growth and actually reducing capacity are two different things. Obviously, I’m not suggesting that United should be shrinking in the current environment. But my question is whether the operational strains, the training pipeline, simulator, all the pressures that exist right now, does that make it harder or easier to actually reduce capacity if there was some need to do so? If that makes sense?

Gerald Laderman — Executive Vice President & Chief Financial Officer

Those are temporary issues and the key for us is ensuring that we have full utilization of all the aircraft on-premises. So, any aircraft that we have, we want to fly the appropriate amount of hours. So really reducing capacity is all about the treatment. And as we’ve said before, we have plenty of flexibility there. If Andrew decides he doesn’t want as many aircraft flying, we will look at the retirement of the oldest aircraft and we’ll look at the flexibility that we have on adjusting the delivery schedule and [Technical Issue] with that right.

Jamie Baker — JP Morgan — Analyst

Well, let me ask the question slightly differently, if I may. If you think in the past, the level of economic strain that had to be applied to an airline before they decided to reduce capacity, where does that bar rest today relative to where it was in the past? It seems higher to me, but I would like to like to hear what you have to say?

Scott Kirby — Chief Executive Officer

Jamie, I’d like to try on this.

Jamie Baker — JP Morgan — Analyst

Okay.

Scott Kirby — Chief Executive Officer

I just think the constraint is more physical constraint. I mean Andrew sort of hinted at it and said it in his — capacity for us and everyone else in the industry is not so much about trying to maximize next quarter’s profitability or margin, it’s — we’ll be more profitable if we are flying more right now. This is about physical constraints. The physical constraints on being able to fly are the current constraint. They happen to, at the moment, align with what everyone’s worried about on fuel prices and the economy, but the physical constraints are the factor.

Jamie Baker — JP Morgan — Analyst

Got it. Okay. Thanks for the color, gentlemen. Take care.

Operator

Thank you. The next question comes from David Vernon from Bernstein. Please go ahead.

David Vernon — Bernstein — Analyst

Hey, good morning, guys. So Andrew, you mentioned you were encouraged by what we’re seeing in bookings in 3Q. Can you talk a little bit more about how that’s shaping up areas of strength or weakness and anything out of the ordinary, relative to what you might normally see in a September quarter?

Andrew Nocella — Executive Vice President & Chief Commercial Officer

Sure. We’re almost 2/3 through the booking curve here for the quarter. So we have a lot of visibility into what we’re looking at. And I think the first biggest thing I would say is we do you see the acceleration on our international network across the board, which is great to see. Second, I’ll really point out Asia. Asia is leading the way. I think we’re bringing that back in a way that it comes back more profitable than where we were in 2019. And for me, that’s absolutely critical to closing the margin gap that we had historically had of international versus domestic by bringing back Asia equal to the rest of it are in fact maybe even better.

The other thing I would tell you, as we go into September, which I think everybody is looking towards, is this pivotal moment where we switch from less leisure focused demand to more business focused demand. As we go into the September month, I can tell you all of our curves are better than they were for July and August and even June. So as we approach September, we approach it better booked with better yields. And so, we remain really bullish and optimistic. And we gave you, I think, a really fantastic TRASM guide for the quarter that September is shaping up really well right now. Obviously, we have a long way to go, but what I can tell you is the leading indicators right now are I think really positive.

The only place where we see lower yields in the quarter are in our cargo division. And that’s simply a reflection of a lot more widebody capacity coming back into the marketplace, causing a little bit lower yield in that environment but still substantially higher than where we were in 2019 by many time. So, hopefully, that gives you some color but really good great and fantastic momentum from a TRASM perspective as we head into this quarter, in my opinion.

David Vernon — Bernstein — Analyst

All right, thank you for that. And then, Gerry, as we’re taking down traffic expectations that was shifting some of the targets for when capacity comes into part [Technical Issue] for United Next, is that going to have an impact on the timing of capex plan or are you guys going to keep the fleet plan- as it is?

Gerald Laderman — Executive Vice President & Chief Financial Officer

No, we’re going to keep everything as it is now. Having said that, as everybody knows, we don’t have necessarily 100% confidence in the aircraft delivery schedule, which is the bulk of the capex, so I would expect — my opinion is, we’re not going to take as many aircraft this year. Some shift to next year. Some of next year shift to the following year. So you’ll see some of that but everything else is on track. We need to make those investments now because the airline is going to be as big as we expected in the time frame that we’ve laid out.

David Vernon — Bernstein — Analyst

All right, thank you.

Operator

Thank you. The next question comes from Christopher Stephanopoulos from Susquehanna International Group. Please go ahead.

Christopher Stathoulopoulos — Susquehanna International Group — Analyst

Good morning. So Scott, you sounded you sounded fairly confident in your ASM guide for next year, and is the guide assuming here a slowdown and of the domestic up gauging that you outlined last year in your plan, how much of that is realistically achievable in a recession and should we assume any of the points? I think it was 2 points from new routes in frequency that those really are ultimately a moving target here or derivative of what happens with the economy. Thank you.

Scott Kirby — Chief Executive Officer

Yes. I’ll try. I’m not sure I’ll get the question — I understand the question exactly, then Andrew can correct me as well or you can tell us we didn’t answer the question. The — I think the risk to our capacity guide for next year is Boeing delivery primarily. And so, we’ll see. But we have attempted on this call I think to rip the band aid off on what we think is realistic about capacity for the next 18 months and get to a baseline that we’re going to hit. But we are clearly exposed to Boeing delivery delays. I think the point that is perhaps we haven’t explained as well and somewhat is getting lost in all of this is a huge — there are so many moving parts in capacity and CASM-ex, but a big part of it is two things that Andrew talked about. We have a lot less long-haul flying to Asia, which lowers our stage length and that is very low CASM flying. It’s also low RASM flying.

And the other thing is mainline airplanes are now flying shorter haul which means lower utilization routes that used to be flown by RJs, that also has a increase in CASM. So a lot of what is happening is just the mainline airplanes are being used differently. They’re not flying to Asia and they’re now flying short haul routes that are very high CASM. They also happen to be very high RASM. You’ve seen us bleed [Phonetic] across the industry, I think eight or nine quarters in a row on TRASM. Part of that is we’re proud of what we’re doing. But part of that is just the change in how the airplanes are flying in stage link [Phonetic].

So some of what’s going on here is that switch, which we expected to happen as Andrew said over a longer period of time to gradually come in between now and 2026, but now it’s happening immediately, and that’s a big headwind to CASM, and it’s a big tailwind to RASM. I think you see that reflected in our margin result. If you strip out things like differences in fuels or refineries, our results are at least amongst the best if not the best relative to 2019, our acceleration quarter-to-quarter is. If you look past the headline RASM or headlines single statistic, I think you see what’s most important to us is the margin development and that happening. But a lot of it is because of what is just airplanes are being different, used differently in this moment and in 2023 than we originally expected.

Christopher Stathoulopoulos — Susquehanna International Group — Analyst

Okay, great color. Thank you. And so, Scott or Gerry, second question, in a recession, what are the three or five data points you want on your desk every morning? Is it cash sales, cancellations? Just curious what those are and then versus or how they compare to what you look at every morning currently? Thank you.

Scott Kirby — Chief Executive Officer

I can start. I just look at Andrew’s expression and that tells me what I need to know. Look, I’ll give you an answer, which you’re not going to like, which I look mostly at the same thing. Right now, the thing I look most at is what’s happening operationally to us because we are focused on the long term. We’re going to have recessions. They’re going to happen. They end. And I’m glad that Gerry has built us up a great set of liquidity and balance sheet. I’m glad we’re paying down debt. But you know we’re just nowhere close to like looking at those kinds of metrics. And because of that, we are staying — we will stay focused on the long term. We’re not going to yank the airline back and forth. That’s how screw up because of what’s going to happen in the next six months. And for us, by far, by far, by far, our number one priority is running a great operation.

And look, I’m really proud of the team. To be clear, we were better in every operating metrics that I’ve looked at than our legacy competitors. But that was in a tough environment. And it’s hard on our team. And if you can — newspapers can be hard on aviation. While our team did prepare for it, I think we’ve done a great job. And it’s not good enough just to be better than the others. We’ve got to even higher standard that we want for customers. And so the number one metric, I don’t only look at it in the morning, I now look at it five or six times a day is our operating metrics and how we’re doing and how we’re setting up for the future there.

Christopher Stathoulopoulos — Susquehanna International Group — Analyst

Great, thank you.

Operator

Thank you. Our next question comes from Sheila Kahyaoglu from Jefferies. Please go ahead.

Sheila Kahyaoglu — Jefferies — Analyst

Hi, good morning guys. Thank you so much. You’ve talked about 2023 pretax margin balance being maintained at 9% with the implied TRASM to decelerate by 8 points versus the current levels to keep that guidance, that’s still well above 2019 levels. So can you maybe provide a little bit of color about how you’re thinking about that, that the industry supply demand environment in 2023?

Gerald Laderman — Executive Vice President & Chief Financial Officer

I’ll give it a try. There is just, there is a lot of uncertainty in my opinion about industry capacity next year and I fully expect that we’re going to hit our number. We’ve looked at it carefully. But I also fully expect that the rest of the industry won’t. I don’t even know what the numbers are for the rest of the industry at this point. In the normal year, we would know, we would have an educated guess but I think it’s going to be a relatively small number. And again, as I said in my opening comments, when I look at GDP, where that’s going to be, where I look at our capacity is going to be, and where I look at 0.8 capacity likely will be, again, highly speculative at this point, because I just think that whatever most airlines are saying they think they’re going to achieve next year is probably significantly less than that number. We’ve ripped the band aid off as Scott eloquently just said. And I’m just not sure others have. But we’ll wait and see. So we do think that the GDP ASM numbers match up to what we just described is the appropriate number to get to the TRASM outlook.

Sheila Kahyaoglu — Jefferies — Analyst

Cool. And then I just wanted to follow up on the triple-sevens. Just to clarify, as those come back in, how does that change your incremental capacity and does that have any impact on the cost structure?

Gerald Laderman — Executive Vice President & Chief Financial Officer

Well, I mean we’ve made a decision for the remainder of this year and the first half of next year that overrides that. The 777s, they’re just part of the rest of their airline. There is a few of them that are not flying because they’re waiting for their final maintenance retrofits to get back up in the air. But the bigger issue are the structural constraints that are applying to our business over the next few quarters and that is causing us to underutilize all aircraft types, the 777 is just one of many at this point that are being underutilized. However, as we said, we are pointing towards June 1 of next year for the summer of 2023 to get these aircraft all flying and at full utilization. And that’s what as a team we’re 100% focused on and that will deliver the 8% assuming that Boeing also delivers the planes to us.

Sheila Kahyaoglu — Jefferies — Analyst

Sure. Thank you.

Operator

Thank you. The next question comes from Duane Pfennigwerth from Evercore ISI. Please go ahead.

Duane Pfennigwerth — Evercore ISI — Analyst

Hey, thanks. I appreciate the question. Is it fair to say that the growth plan for next year is lower but the capital plan is the same. I understand a lack of confidence around deliveries, but could we just set a mark for where you think total capex will be in 2023?

Scott Kirby — Chief Executive Officer

So the answer is yes. So aircraft deliveries are the dominant part of it. A non-aircraft I would expect runs about the same as this year in that 1.5 billion [Phonetic] range. We haven’t done our capital plan yet, but just based on what we’re seeing and what we know we spend — basically take aircraft deliveries and then add about 1.5 billion of non-aircraft.

Duane Pfennigwerth — Evercore ISI — Analyst

And so the existing, what is it, 6.5, 7 is the right way to think about it on the aircraft side?

Scott Kirby — Chief Executive Officer

No, it’s higher than that. I’m sorry. It’s about 7 billion to 7.5 billion for next year. No, that’s aircraft. Total aircraft is about 7 billion to 7.5 billion.

Duane Pfennigwerth — Evercore ISI — Analyst

Okay, thank you. And then just on other revenue, you have good growth there relative to ’19 despite no change fees. And so can you just comment on what’s, what are the biggest drivers to other revenue growth? How much lack of change fees are you offsetting? And is there anything sort of non-recurring about that?

Andrew Nocella — Executive Vice President & Chief Commercial Officer

I think the simple answer is we’re offseting all of the change fee loss, which is what, with all the ancillary fees we do, particularly luggage and seat. And seats have been obviously just a boom, and I give all the credit to our digital team and our app and how we’re marketing those things, and we’re accelerating on that front. So we’re very excited about it. But the answer is it’s 100% and it is not — it’s not something that’s going to change in Q3. In Q3, in terms of some of the other revenues, cargo in particular, right, I think we haven’t talked about the yield issue there, but our ancillary revenues look incredibly strong.

Duane Pfennigwerth — Evercore ISI — Analyst

Okay, thank you.

Operator

Thank you. And at this moment, we will switch to take questions from the media [Operator Instructions] we have a question from Alison Sider from Wall Street Journal. Please go ahead.

Alison Sider — Wall Street Journal — Analyst

Hi, thanks. You’ve been outspoken on the issues you’re seeing with staffing and other issues at air traffic control and they’ve been fairly strong pushing back against that. I guess, like, how is the relationship with the FAA right now? Like, is there any progress behind the scenes, or is there any deterioration there?

Scott Kirby — Chief Executive Officer

So, look, we certainly have had challenges, and by the way, everyone in the economy has had challenges, so that’s not a criticism. But it’s really, really important and the airline cannot run without air traffic control staffed and — but what I’d say is really encouraging, by far our biggest issues, by far, by far Newark was the most delayed airport in the country in 2016, 2017, 2018, 2019. It’s structural. There’s only two parallel runways. 79 operations per hour is all the airport’s designed to handle. And if we schedule more than that, it’s a problem. The good news is the FAA was really responsive when we pointed out the problems and the challenges. They A, let us reduce the schedule right now by 50 flights per day, which we very much appreciate. It’s led to huge improvement in performance at that hub and the ripples throughout the system.

And secondly, they’ve really gone to extraordinary lengths to make sure the Newark Air Traffic Control desk is staffed, including over time and having management employees, set tasks and do things. And I forget the exact number, but in the mid 70 something percent reduction in air traffic control delays so far in July compared to where it was just a couple of months ago. So they’ve been very, very responsive. That’s all you can ask from any partner, including the government. And so we’re appreciative of that and we have our fingers crossed that that is going to continue. This is a challenge that affect them, that affect us, and we can only solve it together, and they are working together with us on the solutions.

Alison Sider — Wall Street Journal — Analyst

Got it. So do you — I mean do you feel like that whenever staffing issues that they had been facing, some of those facilities have been addressed or is it still an ongoing issue?

Scott Kirby — Chief Executive Officer

Look, I think everyone is tight everywhere, not unique to them. Everyone is tight everywhere, but the fact that they’re focused on it is really important, and the fact that they’re willing to go to extraordinary lengths when they do have higher COVID sit calls or something happen is really what is critical. The US economy broadly, it’s probably not going to get to a place where we are staffed at comfortable levels for quite some time, but they’re doing a good job of being responsive and that’s the most we can hope for.

Alison Sider — Wall Street Journal — Analyst

Thank you.

Operator

The next question comes from Mary Schlangenstein from Bloomberg News. Please go ahead.

Mary Schlangenstein — Bloomberg News — Analyst

Hi, thank you. I wanted to see if you could talk a little bit about what sort of supply chain issues you continue to face beyond any pilot shortages at the regional level? Are you still facing a lot of shortages of just basic equipment that you need on the planes every day, parts that you need every day? And if you see any indication of when those types of shortages might ease in the future?

Gerald Laderman — Executive Vice President & Chief Financial Officer

Hi, it’s Gerry. The answer is no, not really. Our supply chain teams have done a good job of preparing for that. We recognize where our lead times, we’re going to be extended. And so we’ve done everything, particularly for anything essential for the operation to make sure that we were ahead of the game on that.

Mary Schlangenstein — Bloomberg News — Analyst

And does that include the provisioning supplies for aircraft? And what about like airport personnel that that affects your operation on a daily basis?

Gerald Laderman — Executive Vice President & Chief Financial Officer

Yes, look, I’m probably not the best person talk about this, but there are certain parts of the country where we all know there are more labor challenges than other parts. So I wouldn’t tell you that every airport is fully staffed, but we’ve been managing I think pretty well through the process. At the margin, let’s say, for food, we don’t get necessarily everything we want all the time and we’ve had to make some changes. And maybe one crack instead of another cracker, different type of cheese, but that’s not affecting the operation at all.

Mary Schlangenstein — Bloomberg News — Analyst

Thank you.

Operator

We have a question from Leslie Joseph from CNBC. Please go ahead.

Leslie Joseph — CNBC — Analyst

Hi, thanks for taking my question. I’m just curious how you’re thinking about the network for the rest of the year and into 2023 just given some of the softness in the corporate sector, Apple and other big names lately? And also curious where things stand with pilot negotiations now that it seems like the last TA is kind of on ice. So curious how that’s going? And how Labor Relations broadly are, I mean, how you characterize those now? Thanks.

Andrew Nocella — Executive Vice President & Chief Commercial Officer

Leslie, from a network perspective, obviously the schedule is, I would use the word term thinner, they will be thinner in the fourth quarter and early next year as we have the capacity that we have available to fly reliably. So it will be a little bit different. We are appointed still a little bit more leisure focused than we were in 2019. We also think that’s appropriate until we see business return to 100%. And we also have the issues on regional jet flying from our Express partners, as I’ve said earlier, which are causing even thinner schedules in the smaller communities we serve. I don’t think we have any more communities that we’re going to have to see service to for the remainder of the year based on the current plan. Unfortunately, we’ve already had that removed many from our operation prior to today. So it is, it is a bit different of a network and it’s not our run rate network and it won’t be our run rate network until next summer.

Scott Kirby — Chief Executive Officer

And on the pilot question, I’ll say my more substantive answer for our employees and our pilots, but the short answer, I think the important point is we created a unique partnership with our unions and have great relationships with our employees. Our people feel good about the company and where we’re headed. We only want to do deal with pilots through COVID. We got a deal done in four weeks of negotiations with our pilots. The first airline to even come close to something. It turns out that there are a few things in there that I think enough of the pilots didn’t like that we and the union agreed we ought to fix those things. And so this is not something that’s on ice. We’re trying to quickly get it back and get it back out to the pilots.

Leslie Joseph — CNBC — Analyst

Okay. And if I could just ask one follow-up. Where the booking curve stands now for leisure and corporate travelers and how that compares to early in the pandemic or even 2019?

Andrew Nocella — Executive Vice President & Chief Commercial Officer

What I’d say is the booking curve today is very similar to the booking curve of 2019. They’re really the same.

Leslie Joseph — CNBC — Analyst

Thank you.

Operator

Thank you. The next question comes from Lori Aratani from The Washington Post. Please go ahead.

Lori Aratani — The Washington Post — Analyst

Hi, thank you. I know Alison already touched on this, but I wanted to talk a litte, I wanted to see if you could respond. I know that you’ve gotten some pushback from the FAA and concerns you raised about their staffing and its impact on your operations. They are sort of saying, it’s not us. Yes, we have issues, but it’s the airlines and the stats from the Bureau Transportation statistics seem to bear that out. So I’d like to hear your thoughts on that.

Scott Kirby — Chief Executive Officer

Well, first of all, I’d say is all airlines are not created equal. When I have at least read their comments, they’ve been airline industry and all our lines are not created equal. And we have staffed the airline up. We have 10% more pilots. Our issues — what we’ve had to deal with has been different than what others have deal with. And I don’t think I’ve ever heard them dispute that. I think if there is anything that we did that I — we didn’t mean to have it characterize the way it got characterized was when we send a note to our employees talking about 75% of our delays were from air traffic control delays, which is true, but normally at 50% because of weather because weather is included in all of that. And so that’s kind of what you expect.

And so the difference between those two, it wasn’t that 75% were air traffic control staffing delays and I don’t think it read that way to our employees. It certainly read that way to some people on the outside. And I actually apologized to Secretary Buttigieg for that because that’s not what we intended. But there was an incremental set of air traffic control delays, it was due to staffing. We even read about it up and down the East Coast, it’s not a secret to anyone. But the really good news is, once we started talking about it. He gave the directive and he’s personally keeping up with what’s happening in those challenged areas of the country on the East Coast and we’ve seen a big improvement in July so far. Even with like the issues that are — Heathrow is a disaster and with those kinds of issues, we’re actually running a better airline than we did in 2019. So, incredibly responsive, and glad we had the open honest conversation and appreciate the partnership and the ability to talk openly and honestly and move forward together.

Lori Aratani — The Washington Post — Analyst

Thank you. Do you see — I know that you’ve said that they’ve been very responsive and do you see this if you continuing though for the rest of the year into next year?

Scott Kirby — Chief Executive Officer

Well, look, I think the whole system is strained. I mean there is tight staffing everywhere. I mean, that’s part of — that is the reason that we’re pulling our capacity down and waiting to grow until the whole system catches up. It’s not unique to the FAA. I mean, it’s every everything that touches — well, I mean almost everything in the whole economy, certainly a big chunk of things that touch aviation are tight. And while you’re theoretically scheduled if it’s a good weather day and nobody calls in sick that everything can work, there is weather and people do call in sick and sometimes the jet bridge breaks and the power goes out for 20 minutes and stuff happens, and the system just doesn’t have any buffer to deal with that and that’s — at its core, that’s why we pulled the schedule down to create more buffer, more resiliency for our customers.

Operator

Thank you. And now I would like to turn the call over to Kristina Munoz for closing remarks.

Kristina Munoz — Director of Investor Relations

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

Operator

[Operator Closing Remarks]

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