Good morning, and welcome to United Continental Holdings Earnings Conference Call for the Fourth Quarter and Full Year 2013. My name is Brandon, and I will be your conference facilitator today. Following the initial remarks from management, we will open the lines for questions. [Operator Instructions] This call is being recorded and is copyrighted. Please note that no portion of the call may be recorded, transcribed or rebroadcast without the company's permission. Your participation implies your consent to our recording of this call. If you do not agree with these terms, simply drop off the line. I will now turn the presentation over to your host for today's call, Nene Foxhall and Sarah Murphy. Please go ahead.

Thank you, Brandon. Good morning, everyone, and welcome to United's Fourth Quarter and Full Year 2013 Earnings Conference Call. Joining us here in Chicago to discuss our results are Chairman, President and CEO, Jeff Smisek; Vice Chairman and Chief Revenue Officer, Jim Compton; Executive Vice President and Chief Financial Officer, John Rainey; and Senior Vice President, Operations, Greg Hart. Jeff will begin with some overview comments, after which Jim will review operational performance, capacity and revenue. John will follow with a discussion of our cost, fleet and capital structure. Jeff will make a few closing remarks, and then we will open the call for questions, first from analysts and then from the media. [Operator Instructions] I'll now turn it over to Sarah Murphy.

Thanks, Nene. This morning, we issued our earnings release and separate investor update. Both are available on our website at ir.united.com. Information in this morning's earnings 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 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 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, special charges are excluded as we walk you through our numbers for the quarter and the full year. These items are detailed in our earnings release. And now, I'd like to turn the call over to Jeff Smisek, Chairman, President and CEO of United.

Thanks, Nene and Sarah, and thank you, all, for joining us on our fourth quarter and full year 2013 earnings call. Today, we reported a full year profit of $1.1 billion, an 84% improvement year-over-year, or $2.84 per diluted share. At the beginning of 2013, we outlined 3 goals for United: run a reliable airline, improve our customer service and achieve our return on invested capital goal of 10%. We achieved all 3 goals for 2013 and I'd like to thank our employees for working together to make that happen. We ran a reliable operation in 2013. We improved our on-time performance year-over-year in every quarter and achieved top-tier on-time performance among our peers in the fourth quarter. Our entire team worked together to minimize the customer impact of the severe winter weather we experienced in December and again this month. We made tremendous progress on our customer service in 2013, including improving our customer satisfaction scores significantly. We continued to invest in our onboard product as well, outfitting our aircraft with the best seating options for our customers. We now have more than 35,000 Economy Plus seats installed in our airplanes and offer flat-bed seats on every long-haul international aircraft. We also began installing lighter-weight next-generation slimline economy seats on a number of our narrow-body and regional aircraft, providing a good product for our customers while improving our operating economics. In addition to improving our seating options, we've also installed Wi-Fi on nearly 170 aircraft, added larger bins and refreshed the interiors on the majority of our 152 Airbus aircraft and installed in-seat power on more than half of our mainline fleet. We completely retrofitted the interiors of all of our p.s. aircraft, which fly between New York's Kennedy Airport and our hubs in San Francisco and Los Angeles.…

Thanks, Jeff. I'd like to take a moment and thank our employees for all they did to improve United's performance in 2013. We ran a good operation and delivered better customer service, both of which are critical for our customers and for our success. At United, we strive to be flyer-friendly by running a reliable operation and giving great customer service. I'd also like to recognize the men and women on the front line, who managed through the extreme winter weather earlier this month. The storms and subzero temperatures that began on January 1 and lasted 7 days were among the worst weather events in our history and resulted in more than 6,300 canceled flights. Thank you for taking care of and re-accommodating our customers and taking care of each other during a very tough operational period. 2013 was a foundational year for United, and we made solid improvements in our operations and revenue results. We invested in our people, operations, customer service, technology, product and network. This year, we will continue to invest and we will further leverage our existing assets to improve the quality of our airline. We are already seeing early returns from many of our investments, but we have much more work to do to reach our full potential. We ran a consistently reliable operation in 2013. We exceeded our goals for on-time performance in 6 months of the year. Our fourth quarter mainline on-time performance was 80.6%, which was top-tier among our peers. We recognized our employees' great work with $19 million in on-time incentive payouts for the 4th quarter and $54 million for the full year. We are also improving our customers' experience by reducing controllable delays and cancellations. For example, in the fourth quarter, we reduced maintenance cancellations by 14% year-over-year. In 2014,…

Thanks, Jim. I also want to thank our employees for their great work in 2013. Due to their efforts, we made substantial improvements in our operational reliability and service that we deliver for our customers. Today, we reported $1.1 billion of net income for 2013, generating a pretax margin of 2.8% for the year and a return on invested capital of 10%. We made significant progress in 2013 in building the foundation for sustainable profits in excess of our cost of capital. We invested further in our people, product, technology and fleet. We strengthened our balance sheet and we laid the groundwork to become much more efficient in 2014 and beyond. For the fourth quarter and full year 2013, our consolidated operating expenses increased 2.3% and 2%, respectively. Fourth quarter consolidated CASM, excluding fuel, third-party business expense and profit sharing, increased only 0.6% year-over-year. For the full year 2013, our consolidated CASM, again, excluding fuel and third party business experience and profit-sharing, increased 6.3% year-over-year on 1.4% lower capacity. In each successive quarter in 2013, we slowed our year-over-year nonfuel CASM growth, an early sign of a cost discipline we're instilling throughout the business. For the full year, our operating margin increased by 1 percentage point to 4.6% in 2013. Our fourth quarter operating margin improved by more than 4.5 points year-over-year to 4.3%, marking our best fourth quarter operating margin since 2010. While we made meaningful strides in performance as the year progressed, we are not yet even close to where we want to be. Our team is committed to increasing returns and reducing cost for the long term. As Jeff mentioned, we are focused on improving the efficiency and quality of everything we do through project quality. This effort is designed to make fundamental, permanent changes to the…

While I'm pleased with our accomplishments in 2013, I and my management team are far from satisfied. We know that we can produce better operational and customer service results and far better financial results from the terrific people and assets at United. And we're very excited about 2014 and beyond. Our goal is to make United employee-friendly by being a great place to work, customer-friendly by offering top-tier reliability, a competitive product and consistently strong customer service and investor-friendly by delivering improved financial results. We are dedicated to doing just that. I'll now turn it over to Sarah to open up the call for questions.

Thank you, Jeff. First, we will take questions from the analyst community, then we will take questions from the media. [Operator Instructions] Brandon, please describe the procedure to ask their question.

[Operator Instructions] From Wolfe Research, we have Hunter Keay on the line.

John, question for you. So you got about $3 billion of CapEx scheduled, you got about $1.5 billion sized in debt maturities. That's $4.5 billion right there between the 2 of cash obligation. How much of that $4.5 billion -- you can talk directionally if you want. How much of that $4.5 billion is going to come from cash from operations or cash on hand versus new debt you're going to raise?

Hunter, we're optimistic about 2014 in what we can do in terms of operating cash flow. We've -- as I mentioned in my prepared remarks, we issued 2 unsecured notes last year, each of $300 million, which in part are intended to provide a little bit more liquidity as we look at some of the refinancing opportunities that we have in the back half of the year and, specifically, I'm referring to the $800 million of notes that we can prepay beginning this September. And with respect to CapEx, the guidance that we've given of $2.9 billion to $3.1 billion certainly puts pressure on free cash flow. But I want to emphasize that those are the right investments for our business. Those investments are going to enable us to achieve the returns that we expect over time.

Sure. I guess what I'm trying to get at is, is there a scenario that you might possibly not raise debt this year?

Yes, there is a scenario, absolutely.

Great.

Hunter, other than aircraft debt.

Okay. A question on the JV. You guys have a revenue share, Delta has a P&L share. I'm talking specifically on the trans-Atlantic A++. Lufthansa runs A380s on that route and I think that's a big CASM tailwind that they get but it's probably dilutive to yields because it's such a big plane. So I guess it's a 2-part question. One, has there been some talk of maybe down-gauging some of the A380s on Lufthansa's side? And, two, is there a possibility that you guys may shift to a full-scale P&L share as opposed just revenue share to maybe capture some of those unit cost savings from the 380s that they're running?

Hunter, this is Jim. A couple of points. One is without specifically I will tell you that the network teams from both sides clearly talked in great detail about capacity and what's best for the JV, as well as delivering a great product for our customers. And I'll use an example of the holiday period, which is a great example, where, in the past, you might find both carriers canceling on the same day and then you look up and the next day both carriers are flying. Well, this year, with that coordination, what you do you is you work with each other to make sure that one cancels on one day, one flies and the other one -- and vice versa, all delivering a great product and things like that. So that's just an example that says how detail a level of conversations and how we manage that capacity and understanding what our partners' needs are and the challenges that they face as they try to place capacity around their network. As it relate, again, the second phase is that we're always working with our JV partners about how to improve the JV. And so, we, right now, think the revenue share model is the one that works for us. We actually think that within that we have a lot of work to do to again make the product much more transparent to our customers and drive results on that. So we're comfortable with where we're at. That being said, we're always discussing kind of what's the JV look like in the future.

From Evercore, we have Duane Pfennigwerth on line.

Just in terms of your stronger margin improvement in the fourth quarter, of that 4 points, how much would you say is a result of nonrecurring accounting true ups and can you talk about was there any region in particular that drove that acceleration in margin improvement?

Duane, this is John. Very little of what I attribute to nonrecurring items within the quarter. There's obviously some lumpiness from one month to the next. But we're really pleased with how it closed out the year. We had -- we're pushing hard internally to achieve some of the goals and we had broad support from all the divisions. And I think it's an early indication of what we expect for 2014 and why we're pretty optimistic looking into the year. And as far as regional strength, Jim might want to chime in, domestic continues to be a pretty good balance between supply and demand as that was stronger, particularly in December. But other than that, nothing really stands out.

Duane, I would add just a little detail. The team did an amazing job of managing the holiday period, both from a capacity side, as well as managing the yield and the mix. So just a terrific job that exceeded our expectations on the top line.

And then just a little detail. I may have missed it in the release. What was operating cash flow in the quarter?

Operating cash flow -- I don't have that. Let's see, it was -- for the fourth quarter, it was negative 3 34.

From Deutsche Bank, we have Michael Linenberg on line.

Just 2 here. On the pension piece, John, you talked about how the expense, you have a bit of a tailwind. At your Investor Day, I think at the end of the third quarter, the liability was $1.8 billion. Where was that liability at year end? How did that settle off?

Just our pension? It was around $4 billion of the -- just the liability. Obviously that's offset by the plan assets. So the net liability was a little more than $1.5 billion.

Okay. Nice, a few more hundred million of improvement from the third quarter.

Right. I'll just add that we also saw a fairly significant decline in our other postretirement benefit obligation as well.

Okay. Good. And then just my second question. When we look at the CASM guidance, we have a little bit of a bump up in the March quarter and then it looks like it moderates through the year and it looks like it's a bit of a repeat from a year ago. And I'm just curious, is that weather? Is that cost maybe associated with some of these employee buyouts or potential furloughs? What's driving that bump in the early part of the year?

Mike, I'd probably point to 3 things. One is we have a fairly significant escalation in one of our labor agreements at the beginning of this year that was hitting us in the first quarter. We also have more lumpiness than usual, and I'll give you an example of that with respect to some of our other cost items. Our maintenance expense, a significant portion of that is airframes. Well in the first half of the year, we're going to spend twice as much on airframes as we will in the back half of the year. And a lot of that is just driven by the timing of checks. But the third thing, and perhaps most importantly, is there's a ramp-up to a lot of the efficiency initiatives that we have in 2014. As you can appreciate, not all of those begin on January 1. But we're excited about the early returns there. I think our fourth quarter results give you some indication about the progress and we're optimistic for how that rolls out in 2014.

From Morgan Stanley, we have John Godyn on line.

Jim, I just wanted to follow up on the PRASM guidance. Just given the strong fourth quarter result versus your guidance, the optimism that we're hearing on the turnaround, your comments about accelerating improvement in yield mix, I can't help but wonder if some of the choppiness we experienced last year has caused the team to maybe add a bit more of a layer of conservatism to the PRASM guidance? Your thoughts?

John, I think that's a fair assessment. As we look at our first quarter guidance, a little bit of color around it. As we guide to that flat to 2% up, last year, we ran a 5.9% RASM growth in the first quarter and far exceeded our peers in the industry on average. And so we are up against a little bit more difficult comps versus how we performed last year. The second piece is, as I mentioned, the weather impact of about 0.4 points of RASM to the downside to us. What we found is, in this weather event that was severe and of the 6,300 cancellation, a majority of those happened to be in Chicago. Normally, with a short weather event in a leisure period, you pretty much capture the traffic. But this is the time of year that we did recapture leisure traffic coming home from the holidays, but a lot of the business traffic that historically starts that first week of January heading out, particularly in Chicago, we didn't see the mix that we would have expected on a normal year given the severity of the weather. The third piece to our first quarter and maybe different from what other carriers are talking about, we actually see a point shift of RASM from March into April given the Easter effect and how our network operates within on that Easter so moving into the second quarter. And then the fourth piece maybe kind of tied to your comment, John. The team is really, really focused on the booking curve right now. I will tell you that on the revenue side, whether in it's any division, it's always about how do you better and how do you beat and so forth. But we are seeing the benefits of the mix change there and we do expect that to accelerate as we move through the first half of the year. So when you put it all back together, what we really see is terrific momentum coming off of the fourth quarter and a lot of excitement about 2014, but capturing some of those realities around the first quarter that leads to our guidance.

That's really helpful. And John, if I could actually ask a question about costs. Some of the commentary that you gave on productivity improvements that are sort of being driven through the organization sounded pretty impressive. And when we think about the sort of walk in CASM x fuel throughout the year and where we are starting at in the first quarter and what the full year guidance looks like, I wonder, as we look towards the end of the year, could we actually be seeing flat to down CASM x fuel given the productivity improvements? Anything you can offer there?

Yes. I think that's a very reasonable assumption. As was mentioned in an earlier question, there's a lot more pressure in the first quarter. But we're pretty excited about the productivity improvements we're seeing. In the fourth quarter alone, we saw a 5.5% improvement in productivity with our labor forces. And as we continue to improve our operations, reduce our reliance on overtime, reduce call volume, things of that nature, we'll see those improvements bleed through into 2014. And you might remember, at our Investor Day, we talked about a multiyear goal of a 15% to 20% improvement and we are targeting a 3.5% improvement in 2014.

From JPMorgan, we have Jamie Baker on line. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Jim, a follow-up to what you're saying just now about RASM. I certainly understand the point you're making about business travel getting off to a slow start in January because of the weather. But my view, which isn't necessarily correct, but my view nonetheless has always been that most business travel does get recaptured within a month or 2, perhaps not if you just missed the annual auto show, but if the role was to visit clients or do whatever one does for a living, you've still got to do that meeting in Chicago. Did you not incorporate any recapture in the guidance or did you incorporate that in the guidance? In other words, is it gone for good?

Well, that's a great question, Jamie. I think what we do with our guidance is we take the information that we have at hand and try to make some assumptions to -- does business traffic that we would gone that first week of January or some portion of that start up later on in the quarter, I would agree with you, I think it does and so forth. And so it's a matter again to your point of what percent of that happens. We've tried to incorporate that in there. If that traffic is coming, it may or may not be seen in the yields that we see right now because it's still to be booked. But we clearly try to anticipate for that and our guidance kind of reflects our best look at what that data is saying right now. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Sure. And a follow-up to the question that I actually touched on I believe last quarter, maybe it's the third quarter. But the New York market, Delta's indicated they hope to bring JFK up to a profit for this year. And it sounds like aircraft gauge and transcon flying are the driving factors for them as opposed to just a rising industry tide. I'm wondering how your Newark plan compares to this? I realize that hub is already profitable, but is the rate of improvement in Newark for 2014 consistent with your consolidated outlook or possibly the hub becomes a little bit less profitable as others improve their corporate share here in New York? Any updated thoughts on this topic?

Jamie, so for us, New York is obviously a terrific profit center for us. It has been a while. We think that as we've talked about in the past, the advantage for us is that true connecting hub. So if something is changing in the local market, we have the ability to connect high-yield flow across that. But that being said, I'll point to our 7% corporate revenue growth in the fourth quarter. That was our strongest growth of any quarter during 2013. It gets back to why we're excited about the momentum as we head into 2014. So whether it's New York or across the system, we think that what we're seeing is great momentum across the system. I will add that in the transcon, we see some of our pressures, particularly in Newark, began last April with Virgin America's entry in [indiscernible]. And so, as we kind of manage and try to optimize revenue around that, we actually see upside as we go through the year as we lap some of that experience that happened in 2013. So we're very excited. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Got it. If I could just quickly squeeze in something for John, just on the fuel efficiency. Based on the consumption guidance that you gave, it looks like ASM's per gallon will improve this year by about 1.7%. You indicated 1.5%. So it sounds like we're on the same page. But as we look at the 2015 fleet plan that you provided, should the rate of improvement slow or stay roughly the same?

Jamie, when we talk about the $1 billion in nonfuel cost savings, I've been asked this question quite a bit, most of that -- sorry, fuel cost savings -- most of that is through the efficiency of new planes. There are some operational initiatives that we have. But I think it's a fair assumption for your modeling perspective to assume that the savings are fairly ratable with our delivery of airplanes over that period of time.

From Cowen and Company, we have Helane Becker on line.

Just a couple of questions. One, what is the amount of cash you have trapped in Venezuela? And have you been able to shift point of sale away from that market? What's your thought about that given today's devaluation?

Yes. It's a very topical question, Helane. We've got about $80 million of cash that's trapped there in Venezuela right now. Obviously, we, along with other carriers, have had trouble repatriating that in a timely fashion. In terms of point-of-sale shift, I'm going to turn that over to Jim.

Hey, Helane, Jim. This is one where John and I are connected at the hip, because what we do is obviously manage the economics, so as the devaluation effects the overall results of the economics, the team understands that and tries to make the correct point of sale from a revenue management and a network perspective. It's a very strong point of sale out of Venezuela, but we do try to adjust for the impact of things such as devaluation. We work very closely with John's team on that.

And I would add, we are still waiting to hear based upon yesterday's announcement from the government if the cash that we have there can be repatriated at the older rate or the -- it's got to be repatriated at the new rate.

Right. Okay. And then can I just ask about the San Francisco hub? I think I read that they're closing the runways this summer like on an alternating basis to do maintenance. So can you just talk about that and how that's going to affect your operation and from an on-time perspective and so on?

Sure, Helane, this is Greg. Obviously, we're aware of the impact that's going to have in San Francisco and we a proactively gone out and reduced our schedule a little bit to help facilitate better performance of the hub in anticipation of some issues related to the runway closures.

Okay. Great. So that's all included in the full year guidance?

Yes, Helane, this is Jim. Our guidance incorporates the runway closures.

From Goldman Sachs, we have Thomas Kim on line.

What are your thoughts about industry capacity continuously ramping up in Asia, particularly in the view of the soft yield environment? For example, are there any signs of demand accelerating or should we be concerned here at all about further headwinds with regard to the overall impact on PRASM?

Tom, this is Jim. A couple of comments. One, it's a very strong performing part of our network and continues to be, so given the economic growth in China in particular. We're excited about here is that we know the competitive challenges out there and, for instance, 20% growth of capacity we've seen in China, most of that -- really that capacity growth is into Beijing and Shanghai, which is why we talked about a second phase of our Pacific strategy of secondary cities, so the San Francisco-Chengdu point. The other piece is as we move through the year, we have a lot of initiatives in terms of getting the right aircraft on the right market. If you remember, we've talked about our 747 in the tech ops team has built back in tremendous reliability into that fleet. Whereas last year, we concentrated in San Francisco, this year we'll be able to place it in markets that better fit the demand. So for instance, Chicago to Shanghai and Chicago, Tokyo will be on the 74 and one of the 74s will actually go Chicago-Frankfurt. So the point being was from us, we have many initiatives to kind of optimize the network out there, and that's in kind of understanding the competitive pressures that are out there and working with what we think is the best footprint, the conversation about San Francisco earlier, there is no better gateway in terms of serving the Pacific. And we think with the moves we're making with the fleet, with our second phase of our Pacific strategy of secondary cities, we are well-positioned in an entity that operates at a really high level.

Great. What is your capacity growth plan for trans-Pac this year?

We don't break out the entities. So all we've guided to is that system of 1% to 2% for 2014.

Okay. And John, can I ask you just a question with regard to GAAP-based taxes. How shall we be thinking about how that's going to be evolving as earnings continue to improve?

Sure, Tom. There's not a bright line test on when we begin booking taxes. At the end of 2014, we'll get with our accountants and we'll look at the various metrics that they evaluate. And for example, one of the things that looked -- that is evaluated is a cumulative 3-year earnings on a GAAP basis. And as we had a significant number of special charges in 2012, that actually put us into a GAAP loss position. But it's something that we'll evaluate at the end of 2014. And it would be a few years likely before we would pay cash taxes because we do have significant NOLs.

This concludes our investor analyst and investor portion of our call today. We will now take calls from the media. [Operator Instructions] From Bloomberg News, we have Mary Schlangenstein on line.

I just wanted to see if you had any impact during the quarter or the full year from the valuation changes in the yen?

We did. We've had the depreciation of the yen hurt our results. In fact, in the fourth quarter, it resulted in about a half a point decline in our consolidated RASM because of what happened there with the yen. We are hedged a little bit more into 2014. We've got about 30% of our exposure hedged at a little bit less than where the market is today. So it's a slight gain position.

And from the Associated Press, we have Josh Freed on the line.

You'd mentioned a little bit earlier about the storm impact in January. Did you give that in dollar terms and if you didn't, could you?

Sure, Josh. This is John Rainey. The storm impact on a revenue basis, gross revenue, was about $80 million. Obviously, as we canceled over 6,000 flights, we didn't consume as much fuel and we had some cost savings, which muted that impact. So the net impact to us in January was about $60 million.

And that is our final question, I will now turn it back over to our speakers for any final remarks.

With that, actually, 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 and we look forward to talking to you next quarter. Thanks.

And this concludes today's conference. Thank you for joining. You may now disconnect.