Good morning, and welcome to the United Continental Holdings Earnings Conference Call for the First Quarter of 2012. My name is Brandon, and I'll be your conference facilitator today. [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, simply drop off the line. I would now like to turn the presentation over to your host for today's call, Nene Foxhall and Tyler Reddian. Please go ahead.

Thank you, Brandon. Good morning, everyone and welcome to United's first quarter 2012 earnings conference call. Joining us here in Chicago to discuss our results are President and CEO, Jeff Smisek; Executive Vice President and Chief Revenue Officer, Jim Compton; Executive Vice President and CFO, John Rainey; and Senior Vice President, Finance and Treasurer, Gerry Laderman. Jeff will begin with some overview comments, after which Jim will review capacity and revenue results. John will follow with a discussion of our cost structure, balance sheet and guidance. Jeff will make a few closing remarks, and then we will open the call for questions, first from analysts and then from the media. We would appreciate if each of you would limit yourself to one question and one follow-up. With that, I'll turn it over to Tyler.

Thank you, Nene. Our earnings release and separate investor update were issued this morning and are available on our website at ir.united.com. Let me point out that information in this morning's earnings press release and investor update 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 press release, Form 10-K and other reports filed with the SEC by United Continental Holdings, United Airlines and Continental Airlines for a more thorough description of these factors. Also during the course of the call, we will be discussing several non-GAAP financial measures. For a reconciliation of these non-GAAP measures to GAAP measures, please refer to the tables at the end of our earnings release, a copy of which is available on our website. Unless otherwise noted, as we walk you through our numbers for the quarter, we will be excluding special charges and/or fuel-hedged, noncash net mark-to-market gains and losses. These items are detailed in our earnings release. And now I'd like to turn the call over to Jeff Smisek, President and CEO of United.

Thanks, Nene and Tyler, and good morning and thank you, all, for joining us on our first quarter 2012 earnings call. I want to take the opportunity to thank Zane Rowe, our former CFO, for his leadership over the past 19 years. I wish him all the best in his new role with Apple. We have a strong and deep management team, and John Rainey was the clear choice to take over this important role. John is a seasoned finance professional, with many years of airline experience, and my entire team looks forward to working together with him in his new role as CFO. Moving on to our financial results for the quarter. Today, we reported a net loss of $286 million or an $0.87 loss per share. This was a challenging quarter for United, marked by rising fuel prices and revenue challenges. While we are disappointed to report a loss for this quarter, we remain focused on turning United into a business that sustainably generates returns in excess of our cost of capital, and is able to weather and adapt to any economic environment in which we find ourselves. We remain committed to being the airline that customers want to fly, co-workers want to work for and investors want to invest in. During the quarter, we successfully completed the most complex milestone of our integration, the conversion to a single passenger service system, a single loyalty program and a single website, the largest technology conversion in aviation history. I cannot overstate the importance of this conversion and the value that will be created now that it is complete. With this conversion behind us, we now market under a single code, and we can flow our aircraft freely across the network, matching the right aircraft to the right route, which…

Thanks, Jeff. I join Jeff in thanking our co-workers for their hard work this quarter and our customers for choosing to fly United. United's first quarter consolidated passenger unit revenue increased 5.2%, and mainline PRASM improved 4.1% versus the first quarter of 2011. Yield improvements again drove our revenue gains this quarter. We faced a number of headwinds and challenges in the first quarter that put pressure on our PRASM results, including challenging comps, higher completion factor and our systems conversion. We are not satisfied with our results this quarter and are very focused on improving our performance in the future. Over the past few months, we took significant steps in integrating our revenue management and booking system, including moving to a single inventory management system and completing our conversion to Shares. With these tools in place, our revenue management and network planning team can now seamlessly manage our inventory, identify better route opportunities and gather a robust history of data, which we will use to make better demand forecast and revenue management decisions. Technology deployments of this scale are never easy, and we have learned much in the process. Our new inventory management system is the leading technology available to support revenue management activities. But after the conversion to the single system, we saw a decline in connecting traffic as we were in the learning phase of the new system, which negatively affected our load factors in the first quarter. I am pleased to say that based on our recent booking data, we believe the issue is behind us and we are now seeing connecting traffic builds consistent with historical patterns. To support the operations around our conversion to Shares, we took steps to reduce overbooking to minimize customer disruption as our co-workers got up to speed on the…

Thanks, Jim. This was a challenging quarter, with significant integration efforts across the company. And I want to thank the United team for doing a great job of managing through the complexities of our systems integration. I'm excited for the opportunity ahead of me in my new role, and I want to take a moment to thank my predecessor, Zane Rowe. I worked with Zane for most of my 15 years at Continental and United. There are very few people who have given more of themselves to this company than he has. He's been a great mentor and a great friend, and we will miss him. Moving to our results. United's consolidated operating expense increased 7.6% or $618 million year-over-year in the first quarter. Fuel costs represented over $550 million of that increase, as jet fuel prices rose 20% versus 2011. First quarter consolidated and mainline unit costs increased more than 7% year-over-year. Our first quarter consolidated CASM, excluding fuel and third-party business expense, increased 0.7% versus 2011. Holding fuel rate and profit-sharing constant, and excluding third-party business expense, consolidated unit costs increased only 0.6% year-over-year in the quarter. Nonoperating expense for the quarter was $176 million, nearly $70 million lower than the first quarter of 2011. The biggest single contributor to the decrease was a reduction in interest expense of roughly $40 million, as we continue our focus on strengthening the balance sheet. As Jim discussed, our revenue growth faced headwinds this quarter, both from integration-related activities and from more difficult comparisons to the first quarter of 2011, a period where we realized very strong revenue growth. In January 2011, we implemented FASB rule ASU 2009-13, a required change to our frequent flyer revenue recognition policy. This resulted in a reduction in the amount of passenger revenue that is…

Thanks, John. This was a pivotal quarter for our company. We now have our largest integration milestones behind us, and we can focus on unlocking United's full potential, becoming the airline that customers want to fly, co-workers want to work for and investors want to invest in. Sustained and sufficient profitability is the only path forward, and we're confident that we'll deliver. I'll now turn it over to Tyler to open up the call for questions.

Thanks, Jeff. First, we'll take questions from the analyst community, then we'll take questions from the media. [Operator Instructions] Brandon, please describe the procedure to ask a question.

[Operator Instructions] Our first question comes from Michael Linenberg from Deutsche Bank.

Yes, actually 2 questions here. Actually, John, you touched on -- you talked about some of the regional costs. So the situation with Pinnacle and the fact that it looks like they're going away and it looks like someone else is going to pick up those airplanes and it seems like you may be bringing back -- maybe you've already brought back some Embraer 135s, how should we think about that as it relates to -- think about it being as a cost wind -- a cost headwind. It appears that Pinnacle may have had a better deal that wasn't sustainable over the long-term. Is there going to be, not just a cost hit, but are we going to see sort of any revenue hiccup from them leaving?

Yes. Mike, I'd say there's 2 things that will affect our regional costs going forward. One, as you mentioned, Pinnacle is going through a restructuring and we will transition a lot of the flying that they're doing for the balance of the year. The second piece of that, as part of the transition flying that they're doing, in the first quarter, we restructured the Saab 340 flying they were doing from us -- doing for us, from a pro-rate agreement to a capacity purchase agreement. The effect that, that has is we now pick up the associated expenses in our regional line but we also pick up the associated revenue in our revenue line where that wasn't there before. So you'll see a similar trend year-over-year through the following quarters this year that you saw in the first quarter.

Who is picking up the flying? Is it a household name or I see this little company Silver may be picking it up? What can you say on that?

Well, we have a transition agreement with Colgan right now and we have not disclosed. We're actually still negotiating who's going to do that flying for us.

Okay, very good. And then just my second question. Back, Jim made the comment, Jim, you said it was a -- the cutover impacted your unit revenue by, I think, you said a point. Was that just for the month or the quarter or is that a full year impact? I wasn't sure the timeframe.

Mike, this is Jim. Yes, it was a quarter impact, the 1 point.

From Rodman & Renshaw, we have Dan McKenzie on the line. Daniel McKenzie - Rodman & Renshaw, LLC, Research Division: New products, new revenue streams. Can you talk about the timing for implementing some of those and perhaps some idea of the materiality?

Dan, this is Jim. With the conversion to Shares and the migration to the subsidiary, continental.com site, now known as the united.com. As we mentioned, there were certain products that were sold on the sub-United side that weren't on the Continental side. So there were about half a dozen, 6 or 7. An example is, for instance, United had an Economy Plus subscription that drove ancillary revenue. Or another one is United Club online onetime passes at the clubs and so forth. Those are gaps that we have right now, and the team is working over the next several months to close those gaps, to capture those revenues going forward. Daniel McKenzie - Rodman & Renshaw, LLC, Research Division: Got it. Okay. And then I guess just a follow-up question on the reservation system cutover, how much of a hangover effect from the inventory holdback is there, if any, as we look at April PRASM here? I think it was 1%, if I understood correctly, for the month of March?

Yes, Dan. It's -- in terms of what we -- the teams work across the company in terms of overbooking, so I'd say that impact is behind us. It was early in the month of March with the March 3 date, as well as some of the spring break peak periods, what we did is we lowered the authorization levels on overbooking to support some of the heavy volumes that we expected over spring break and the learning curve on the new system. That tends to be most behind us. The other piece of it that I mentioned on connecting traffic might have a little bit of a tail in April as we rebuild that. We made some changes to our revenue management system kind of mid-March to begin to correct for that. So there might be a little bit of it -- there might be some tail on the connecting traffic as we kind of look at April.

From Barclays, we have David Fintzen on the line.

Just a question on -- if I sort of read the headlines on Europe and Asia, you'd almost think that your commentary on the entities will be a bit flipped. And I know that there's kind of capacity differences and growth differences. But can you kind of help us reconcile why you're seeing a sort of strength in premium Europe and maybe how that compares to the cabin performance in Asia, sort of premium versus non-premium?

Yes. I think kind of a general statement, I would say, is that our premium cabin traffic is doing very well across all the entities. And if you break down the entities, when you look at Japan, first of all, I talked about -- about 38% of our capacity is in Japan and 60% non-Japan markets. And as I mentioned, that 38%, actually 15%, was our RASM growth in those Japan markets. If our capacity was similar, quite frankly, people compare us to Delta. If our capacity were Delta, 78% of its ASMs in Japan, we would've added 9 points in PRASM to our Pacific entity and so forth. So there really is a real structural piece, and that structural piece is the Asia piece. Particularly in Hong Kong. We faced -- we've talked about increased competition in Chicago-Hong Kong. But Hong Kong, in general, the industry capacity is about up 20% in the first quarter, we're down about 2%. We managed capacity down a little bit with some holiday cancellations and so forth. Quite frankly, that's put pressure on our PRASM in that part of the world in Asia. As we think about that part of the world, we think our footprint, historically, has been terrific there, it's again, a very profitable entity for us, Pacific as well as Asia. It's unmatched, our portfolio, and with the growing economy in China, we think we're well positioned in Asia. But it was a tough quarter and it was a tough quarter partly with the industry capacity growth. In addition, we're improving our product, so that many of those flights with the 747 have been updated to IPTE, but we're not done. For instance, we'll be putting streaming video within the cabin beginning this summer, into the coach cabin that still…

And just as you look at the Trans-Atlantic, I mean, are there point-of-sale differences that, strength the U.S. economy is maybe offsetting the recession in a lot of Europe? Is there anything sort of visible from sort of that macro perspective?

Yes. The U.S. point-of-sale continues to be very strong for us and that's -- as my comments on the premium cabin really drives that, we're seeing strong strength in the premium cabin driven by the corporate business revenue going forward, but a good U.S. sale -- U.S. point-of-sale.

Okay. Just a quick one on that 15% redeployment statistic you had for 2Q, how should we think about that long-term? I mean, does it ultimately become -- is it 40% of the network when you get it fully optimized and where kind of are we in that process?

Well, the team -- we're very early in the process, obviously, with the second quarter being 15%, which is one of our -- as we get excited about the ability with this network to drive the synergies. Quite frankly, we're working through those numbers. It will accelerate, particularly in the second half of the year, but the network -- ultimately, we'll watch the marketplace and keep managing that. So I wouldn't want to commit to where that actually ends up, but will accelerate in the second half of the year.

From Morgan Stanley, we have Bill Greene on the line.

I'm wondering if you can talk a little bit about the New York market. Delta talked about some big wins that they feel they're getting as a result of the slot swap. Do you think maybe the cutover caused you to have some market share slippage at all in New York? Or was -- are you not really seeing an effect from them? I'm just curious how New York is performing?

Bill, this is Jim. Actually, no we're not. Our strong New York base with the -- with our hub in Newark has worked well for us, and actually we've seen corporate revenue in the fourth quarter grow out of New York, as well as our share. And so we're seeing good progress as the sales team gets out and talks about the value of this new network. We're getting great response from our corporate partners across the system, but also particularly in New York.

Okay. And then secondly, if US Air were to leave the Star Alliance, does that have a material impact at all on your P&L?

Bill, this is Jeff. I'm not going to speculate on whatever should happen there. But U.S. Airways is a good partner of ours, and if they were to leave the Star Alliance, it would have an impact on us and that would be, on that piece, negative to us. On the other hand, if they left as a result of a consolidation, I think that'd be very good. It'd be very good for the business and very good for the industry. And consolidation, as you know, has worked well for this business. And I think net to us, if US Airways were leaving for a consolidation that seems to be in the lot -- in the news today, I think net-net that'd be positive for United Airlines.

From Wolfe Trahan we have Hunter Keay online. Hunter K. Keay - Wolfe Trahan & Co.: A couple of questions for you on -- well, I guess just one on costs. On fuel specifically, fuel price is up about 20%, guidance looks a little unfavorable, which I realize could be a timing issue when you price it out where the strip was. But yesterday I asked US Airways if they would change their position on hedging, if they were involved in consolidation, and it seemed to me like their answer was basically no, we think hedging doesn't make a lot of sense. So I guess my question for you is, given your balance sheet particularly, which I think should invite a little bit of commercial risk-taking, do competitor-hedged books factor into your decision to hedge to the degree that you do? Or is it more an internal risk tolerance decision?

Well, that's a great question, Hunter. And they absolutely do. I mean, fundamentally, I think, like you believe as well, we think that fares in this industry over a longer period of time need to respond to cost inputs, and our competitors need to have the same pressure in terms of those cost inputs for that to happen. And so clearly, we don't want to get too far out of balance with what our competitors are doing. That said, we have a pretty consistent policy with respect to our hedging. It's not really taking speculative positions, it's one more of risk management. I think that in this industry, when you're selling tickets out 6 to 12 months in advance, you're then exposed for movements in fuel prices after those tickets are sold, and that's why you see us hedged in that time period to protect against that and guard against volatility in our earnings. Hunter K. Keay - Wolfe Trahan & Co.: Okay, John. And a couple of years ago when Spirit -- maybe it was 1.5 years ago or so, when Spirit announced they were charging for carry-ons, Congress summoned a number of airlines CEOs to basically promise Congress that they would never do the same thing. Jeff, you were running Continental at the time, you were conspicuously absent, was that a scheduling conflict or is there any particular reason why you didn't show up for that hearing?

I guess I never received the call. I don't recollect.

From Evercore Partners, we have Duane Pfennigwerth online.

Just following up on the regional question. Can you talk about your commitment to the Q, to the Q400 specifically, and is that some of the flying that you're transitioning or would you expect that to be replaced with RJs?

Well, the Q400 is a plane that works very well for us, particularly in some of the shorter haul markets and some of our hubs like Houston and Newark. I think that we're going to continue to have that product in terms of the mix of that versus RJs. I can't speculate on that right now.

So even though Pinnacle's winding it down and returning them, you'd expect to have Qs in your fleet, is that fair?

Yes. Yes.

Okay. And then just on the Asia Pac capacity trends, any relief on the horizon as you look over the June and September quarters?

Duane, I'm sorry I missed that.

Just the competing capacity trends, the pressure that you're seeing in Asia Pac, do you see any favorable relief on the horizon as you look out over the next couple of quarters with respect to...

The competitive pressure will be there. I think our prospective LA-Shanghai, we lap [ph] in May. So a little bit of an offset there. But Chicago-Hong Kong, for instance, Cathay started last September. So that pressure will be there in the near term.

From Dahlman Rose, we have Helane Becker. Helane R. Becker - Dahlman Rose & Company, LLC, Research Division: Can you just -- maybe this is for Jeff. There is a bit of a battle brewing in Houston with the city council set to consider next month whether or not they will approve the airport at Hobby's suggestion that they build an international terminal. Can you just talk about your thoughts with the opposition that you've talked about and so on, and how that changes your views towards Latin expansion?

Sure, Helane. And just to be clear, this isn't us fighting Southwest flying internationally. I mean we clearly compete against Southwest, and we do it very well every day. Intercontinental Airport is obviously a significant hub and a tremendous engine of the economy in Houston. And we and other airlines and the city have made a lot of investments in IAH, and it's become a premier international gateway, it's a superb hub and it works very well. And it has a great deal of connectivity, it's a high-connecting hub. And we need those connections, we and the other carriers who operate there, to fill the planes, obviously, to make all of the broad array of flights that we offer and competitors offer at IAH. And that airport has clearly has excess capacity for international flying. I mean, there are gates there that have only one flight a day, literally. So there's plenty of capacity and plenty of FIS capacity as well for the traffic. Our issue really is splitting the hub, turning -- having 2 hubs in effect, Houston competing against Houston, versus Houston competing against Atlanta or Miami or DFW. From a public policy perspective, it's a huge mistake. It will, clearly if that were to occur, it would reduce the flight opportunities at IAH, it would result in loss of air service, it would result in loss of jobs and it would result in wasteful spending and it would be extremely bad public policy for the city of Houston to do that. Helane R. Becker - Dahlman Rose & Company, LLC, Research Division: Okay. Got you. The other question I have is with respect to your unit revenue growth, and maybe this is one for Jim or John. Are you concerned about the fact that your unit revenue is growing kind of half the industry average right now?

Helane, this is Jim. I think, obviously, we're always focused on our relative performance. But I also think that we are historically a high RASM carrier that ran historically high RASMs last year. So when I think about percentage growth and our relative percent, I actually want to think about it over a longer period of time. And so when I think about that, I think about where we're at in the integration, as I mentioned very early in the redeployment and so forth. So I think we're obviously very focused on that. From my perspective, I'm comfortable with it. And because of where we've come from, our high levels, and what we have coming forward, we get really excited about.

Helane, this is John. I would just add to that, that the change in frequent flyer accounting for us does affect our year-over-year RASM results. For the full year, it's a little bit less than a point. But the effect of that will become more pronounced in the second quarter where it's over a point of RASM headwind, and then it abates as we go through the balance of the year. Helane R. Becker - Dahlman Rose & Company, LLC, Research Division: Okay. And then, when does TSA PreCheck come to Newark? By any chance, do you know that?

Helane, it's rolling out, and we'd like it in all of our hubs as quickly as we can get it. I think it's a tremendous program, and I've got to commend John Pistole for focusing on the importance of thoughtful security. So I think that we're big supporters of it, and we want to and we want and will be participating in it and we're working closely with TSA to get it done as quickly as we can.

From JPMorgan, we have Jamie Baker online. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Actually, I was also going to ask about PreCheck, just because it seems like you did with Wi-Fi, you've sort of ceded a competitive advantage to American and Delta, but I assume that's not a permanent decision then, Jeff?

No, absolutely not. No. I mean, now that we're in a position to do it now, and we will be doing it and Jamie, I hope you qualify. Jamie N. Baker - JP Morgan Chase & Co, Research Division: My primary question is to Jim, you've obviously guided to an April RASM figure that looks like it'll be among the worst in the industry, so the statement that things are snapping back and returning to normal is a little bit difficult for me to reconcile only because we've been assuming that portions of the RASM deficiency were self-inflicted. You add some helpful disclosures on Asia, and I appreciate that. The competition has suggested that May is tougher than April, but June should at least equal April, maybe even improve on April's results, I know you don’t want to give RASM guidance, but -- structurally for the next quarter, is there anything unique to United that wouldn't allow you to kind of move along the RASM change trajectory that the competition has laid out?

Jamie, it's Jim. I think obviously there were industry comps last year, they were very strong, they were the comps that John just talked about. So to -- obviously, you're right, not commenting about RASM going forward. May was a very strong industry RASM last year and, for the industry, more so than June as you described. So I think from that sense, we based kind of the same profile for us, and then the question is are some of the other comps that are unique to us, how that fits into that.

Thank you, ladies and gentlemen, this concludes the analyst and investor portion of our call today. We will now take calls from the media. [Operator Instructions] And our first question comes from Josh Freed from the Associated Press.

You mentioned that there are some of the ancillary products that, if I understood you right, that are not available right now on the new -- kind of newly revamped website. So to the extent that, that's the case, does that mean that those products sort of don't exist right now for -- in terms of being available for new sales or are they still available through other channels or...

Yes, this is Jim. They're not available through other channels. What we want to do is move them to the web as well as to kiosks at the airport, and that's the PSS gap that the team's working really hard to close. I want to say that -- again, we're excited about it because the ancillary products that we have are actually growing at a extremely strong rate. And so, overall, ancillary revenue is growing at a very strong rate, as we mentioned, at 7% in the first quarter.

Sure. Do you have an estimate then for how much it's hurting that growth or hurting revenue, to not have those available right now?

Yes. We wouldn't disclose that. It's not a really significant number, but it's part of a portfolio of products that customers enjoy in terms building the experience. Really, the goal for us is to bring the products so that the customer can participate and have choices. And so there's about half a dozen of them, all at different levels of performance. But I wouldn't want to mention what those are doing.

From Wall Street Journal, we have Susan Carey online.

This is probably a question for Jim. I'm trying to -- I just want to make sure I understand this. You're saying you had a 1 percentage point of RASM reduction in the first quarter due to these various issues, the Shares conversion, what's going on in Asia Pacific and the revenue management cutover. But I'm wondering if you could just help me a little bit more on the latter. I guess you integrated the CAL revenue management system into the United system, I'm wondering when you did that and what caused this sort of reduction in your connecting traffic and how much was that a factor in this 1% reduction in RASM?

So it's about half of the effect in terms of the connecting traffic of the total. And we can work with you offline. It's very technical, not to skirt the question. But revenue management systems are very sophisticated systems, and I think I'd use a lot of time trying to explain it, but we could probably help with that.

And from Bloomberg News, we have Mary Jane Credeur online.

I want to elaborate on Jamie Baker's question. I think a number of us still have a little bit of bafflement over the explanation for that April RASM forecast. Can you talk a little bit more about what your biggest concern is about those underlying trends or are there 1 or 2 facets you can point to that give you the most heartache about it? I mean that's less than half of what your next biggest peer forecast, it's significantly smaller than what Airways forecast?

This is Jim. My concerns are really kind of how quickly we can begin to innovate and chase the synergies and so forth, which we're actually starting to do now. So the underlying trends in April, that's where we're at. We actually are comfortable with where they're at given where we are in the migration -- in the merger and so forth. What the team is really focused on is one, closing what Jeff mentioned a lot, about gaps that we've learned about customer service due to the cutover, as well as spooling up the synergies that are associated with optimizing the network, that I mentioned in my comments, that we're moving to 15% of the flights -- of the mainline flights in the second quarter will be redeployment. So concerns I have are really just the team staying focused on achieving the things that we said we're going to achieve, and we feel really good about that, where we're at, and very excited about what we have coming forward.

Okay. With that, we're out of time, so we're going to conclude. Thanks to all of you on the call for joining us today. Please call Media Relations if you have any further questions. We look forward to talking to you next quarter. Goodbye.

Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect.