Good morning, and welcome to United Airlines Holdings Earnings Conference Call for the Second Quarter 2020. My name is Brandon and I’ll 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, Kristina Munoz, Director of Investor Relations. Please, go ahead.

Thank you, operator. Good morning, everyone, and welcome to United’s second quarter 2020 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 Form 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 a 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 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 now, I’d like to turn the call over to Scott

Thanks, Kristina, and thank you all for joining our call today. This, obviously, was not the environment that I expected for my first call as CEO. But I have to say that I've never been more proud than I am as a team at United, and I want to thank everyone for their leadership, support and dedication to the company that we all love during what is the most difficult time any of us experienced, both for our airline and our families. Our frontline hasn't allowed dramatic reduction in our schedules or headlines about potential furloughs or new mass requirements to interfere with their commitment to taking care of our customers and each other. In fact, our customer satisfaction scores in June improved nearly 30 points year-over-year. There's just no better evidence of our determined commitment to care for our customers and keep them safe. It's what the United Together is all about. And Brett will talk in some more detail about how our core four values have informed our industry-leading commitment to safety of our customers and employees. The second quarter of 2020 was historic for the airline industry for all the wrong reasons. At the beginning of April, we saw the sharpest, deepest drop in demand in history, far worse than 9/11 or the Great Recession or any other stress test scenario that anyone had modeled. And near the end of the quarter, just as optimism about our recovery was beginning to build, we watched demand fade once again as COVID-19 spiked in the Sunbelt. But we will make it through this crisis. And I've never been more confident that we will make it through this crisis. I think we'll look back on the second quarter of 2020 as an extraordinary three-month period filled with achievement that I…

Thanks, Scott, for that kind introduction. I also appreciate your long-term commitment to action on diversity, equity and inclusion. And I'm excited about how our partnership can bring about meaningful and lasting change at United and in the communities we serve. Let me begin by saying how proud I am of what our team has accomplished over the last few months in the face of near-zero demand for air travel back in April. While we have a long road ahead of us, we believe the $16.1 billion of liquidity we have raised since the start of the crisis and our dramatic reduction in cash burn have set us up to not only survive this crisis but to emerge in a position of strength during the recovery. Throughout this crisis, we have never lost sight of the fact that the very first pillar of our core four is and always will be safety. With this guiding principle, we have introduced a number of industry-leading safety measures to do our part to prevent the spread of the coronavirus and to protect our employees and customers, including requiring all flight attendants and passengers to wear masks, asking all passengers to complete a health assessment during check-in, offering customers the option to change flights for free, if their flight is expected to be at least 70% full and partnering with Clorox and the Cleveland Clinic, just to name a few. Along with our unwavering commitment to safety, at the very outset of the pandemic, our former CEO and current Chairman, Oscar Munoz, and Scott made it clear that our number one priority was to preserve as many United jobs as possible for the long term. To this end, very early in the crisis, we began efforts to reduce our non-labor expenses and eliminate any…

Thanks, Brett. The second quarter was clearly the most difficult quarter in United's history. We acted quickly and decisively to confront demand changes. In fact, our change in total revenue in the quarter of down 87% wind up being consistent with our total capacity being down 88%. Our network peers flew more capacity than United, and we believe our careful management of capacity, pricing and cargo during the quarter is the primary driver of our good results relative to our network peers in terms of absolute losses and cash burn. We feel as good as we can about these relative results. In a world of limited demand, driving our cash burn down is absolutely a function of the amount of capacity we offer. We clearly have a long way to go as we navigate COVID-19, but we got off to a relatively good start. At the start of the pandemic, many feared our outsized exposure to business traffic, international traffic and our coastal hubs would have been a drag on performance relative to other network carriers, but this was not the case as we made smart decisions about capacity. We'll not be focusing on market share during the worst financial crisis the industry has ever faced. Instead, our focus is on ending cash burn and returning United to profitability. As we look towards an eventual recovery, international demand will be slower to recover than domestic. When international demand does recover, we believe United's coastal gateway hub will recover quicker than others, a benefit of having the best U.S. gateways to start with. Orders are up around the world now and international revenue is low. We believe at United that we have already felt the worst of the international passenger revenue decline impact. Borders will open someday and we believe United…

Thanks, Andrew. For the second quarter of 2020, we reported a pre-tax loss of $2 billion and an adjusted pre-tax loss of $3.2 billion. These results represent how this global pandemic continues to materially disrupt our business in unprecedented ways and, therefore, requires unprecedented responses to ensure we come out of the crisis as strong as possible. Since the start of the crisis, we focused on aggressive cost-cutting to minimize our daily cash burn and aggressively pursued opportunities to bolster our liquidity position. Since March, we have raised a total of $16.1 billion of additional liquidity, largely through debt offerings, stock issuances and the CARES Act, Payroll Support Program grant and loan. Included in our capital raising actions was the truly first of its kind debt financing using our MileagePlus program, which brought in $6.8 billion in liquidity. Working with Goldman Sachs, our lead underwriter, we were able to formulate an innovative structure that allowed us to unlock some of the inherent value in the program. We were able to achieve our key objective of raising a substantial amount of liquidity at attractive interest rates in a manner, which doesn't impair our flexibility to use MileagePlus to support our business going forward. I certainly appreciate comments made by one of my peers recently, who recognize that this structure will serve as a model for the use of loyalty programs to raise liquidity by the industry in the future. We continue to target over $18 billion in available liquidity by the end of the third quarter. We believe this level of liquidity will position us to manage the airline well, if the crisis continues to depress demand far into 2021 and even beyond, depending on the pace of recovery. While we view this as enough liquidity, should we desire to raise…

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

Thank you. And the question-and-answer session will be conducted electronically. [Operator Instructions] And from Bernstein, we have David Vernon. Please, go ahead.

Hey, good morning. So, I wanted to ask you about the headcount plans. Obviously, the 6,000 employees that have signed up for the voluntary out is well below the numbers that have been commented on before in terms of reductions that might be required to right-size the network. How should we be expecting this to play out over the course of the next couple of months? I mean, obviously, the CARES loan closes off in September, or the CARES provisions anyway. What can you tell us about sort of the scope of expected actions here and the timing on when these announcements might be made?

Hey, David, good to talk to you. What I'd say is the 6,000 voluntary, first, I'd like to thank everyone at United, all the 6,000. And there's another approximately 26,000 people, who've taken temporary voluntary programs at United so far. So thank all of them for their selfless action and doing what they can to help United and their fellow coworkers get through this. It's a testament to how much people care about this company and doing the right thing. But look, I think of it is, there's 32,000 people so far who've raised their hands and taken a voluntary program. We are still working with some of our other unions as well. So I expect, if we get those deals done, we will have opportunity to have any more. But at least I think of it as that 32,000 number is probably the more relevant metric, because some of those are temporary. And look, we know that there's going to be a recovery. And if we can keep people temporarily, maybe not on the payroll full-time, but engaged, connected to the company, certified, trained and ready to bounce back, because the bounce -- the recovery is going to be quick, that's really important to us. So we feel pretty good – we feel really good actually about where we are in the voluntary program so far.

And can you comment on – I know these are difficult discussions. But as far as kind of the tone and tenor and the relationship with labor, can you give us some feel for the status of the relationship there? Is this -- is it competitive? Is it collaborative? Like, how is the tone of the negotiations so far in terms of mitigating furlough actions and maybe getting some additional help from labor side to get through that?

Look, I'm not going to comment on the specifics of the negotiations. But I would say, we've been transparent and honest with everyone from the beginning, including our employees and our labor union and all of you. And that helps set the foundation. And this is a situation where our interests are aligned. This is not a traditional kind of adversarial types of discussions. We all share the goal of getting through what we all know is a temporary crisis and getting to the other side. We wish that there was going to be no pain to get through it, but we all now recognize that this pandemic is deeper, and it's going to last longer than we would have hoped. And because of that, there is going to be some pain. And so the discussions are about how do we minimize that in the most humane way jointly with our people and I feel good -- I feel really good about where we are.

And from Evercore ISI, we have Duane Pfennigwerth. Please go ahead.

Hey thanks. Just in terms of the cash burn improvement sequentially, maybe you could provide some detail there. So, your capacity is up meaningfully and appreciate those capacity plans have a downward bias, given changes in demand. But higher capacity up, call it, 190%, which will drive higher variable costs, and yet demand feels like it's taken a bit of a step backward. So, is this a function of recovery you expect later in the quarter? Is this cost driven or is this all working capital driven?

Hey, it's Gerry. So, the short answer is it's a combination of everything. And I think you're referring to our prior guidance, which had third quarter cash burn a little higher than what we're currently expecting. And I would say, versus when we established that guidance, while demand has taken a turn, it's still a little higher than what we assumed back then. We're also doing a nice job on continuing on savings on costs, including -- well, cash costs, so including in that would be some CapEx that we're saving. So, it's sort of a combination of everything that has driven us to be able to refine our forecast and estimate a lower cash burn than we assumed a few months ago for the quarter.

Okay. Thanks Gerry. And then just for a follow-up. Appreciate the long-term commentary about sort of plateauing it down 50 until we get a vaccine. But what is the path from down 83 to down 50? How do we get there? Is it -- you expect corporate to maybe perk up a little bit as we get beyond summer leisure or what is that path from down 83 to down 50 look like? How do we get there? Thanks for taking the questions.

Yes. Hey Duane, I'll try that. I don't think we know what the exact path will be and we'll acknowledge that we don't know what the exact path will be. But what I would say is we've been reasonably accurate, very much center of the fairway in forecasting both the course of the pandemic and the impact of demand so far and we expect it to be jagged like this. For what it's worth, I also think that while we took a step back in the last few weeks, as Andrew said, that has plateaued, I think that we, as a country and a society, have learned some lessons about what we should do, particularly wearing masks. And that we'll be more up from here. The kind of demand that I think is going to come back, but one, also, I think it's important for people to understand, and I said this earlier on TV today that an aircraft actually is a uniquely safe environment. And that is confusing to people because you hear all -- you hear about being an indoor spaces and the transmission of a virus. But aircraft are designed as to have airflow that goes from the ceiling down to the floor and out. And that air is taken -- either 50% of the air that's coming back into the cabin has been re-filtered through a HEPA-grade filter, and 50% is coming from the outside. And that, combined with our mask policies and our cleaning policies, makes an aircraft a uniquely safe environment. And so for people that are wanting to go on a business trip or on a vacation or to visit family and relatives, one of the safest parts of their journey is going to be on an airplane, that's really important for us…

From Wolfe Research we have Hunter Keay. Please go ahead.

Hi, everybody. Good morning, thank you. So you had 196 wide-bodies at year-end '19. Knowing what we know now, which admittedly isn't much, do you think you have more or less than 100 in the fleet at the end of 2023?

Andrew?

I guess I'll take that. Scott described how this is going to come back. And by the way, I think our international gateways are going to comeback quicker. And I think our international gateways naturally have a lot of place that other gateways don't have, which you see in our numbers, so the answer is more.

More than 100. Okay. Got it. And then, thank you. If you fly the same amount of capacity in the fourth quarter as you do in the third quarter, can you generate more revenue in the fourth quarter than you do in the third quarter, knowing what you know now about like corporate and VFR mix and all that stuff?

What I would say, Hunter is we're – we did a pretty good job of it in Q2. We've got a little bit ahead of ourselves in July, but that's really based on how demand changed and some -- the pricing environment that we see out there. But I think the think the answer to your question is, yes because we're going to get better and better at forecasting this. And we're now getting results in that we're looking at everyday about where we're making more and less money, both domestically and overseas. And we're refining the forecast. And we're tilting our capacity more towards what we'd say VFR markets and leisure market, which is also going to help. So I think as we optimize and refine the schedule, we can continue to push the numbers in the right direction.

And Hunter, I want to take a minute to brag on the commercial team. Andrew may not have been as direct about it. United Airlines and our – the whole company, but led by our commercial team has done a better job, I think, than any airline in the entire world and be -- recognizing what the pandemic has meant for demand and taking advantage of opportunities where they present themselves, whether that was for passenger demand. Andrew mentioned some of the places internationally that we're the only airline flying. Our cargo team, led by Jan Krems, 36% increase in cargo. I mean, who would have ever thought we could do something like that. And I know some of the stuff that they're working on that is creative. And I have confidence that the United team uniquely is going to be able to find opportunities to more appropriately match capacity to demand, but also to uniquely outperform by finding the pockets of demand where there is real opportunity.

From Vertical Research Partners, we have Darryl Genovesi. Please go ahead.

Hi. Thanks for time everybody. Can you guys just give us a sense -- your OpEx was down 54% in the second quarter. Can you just give us a sense of how that number phased intra quarter? And then to that end, give us a sense of how you're thinking about the Q4 cash burn, either in your 50% revenue scenario, or in the scenario where nothing gets better like the framework that you gave with Q1 results?

Gerry?

Yeah. For the third quarter, I would say that number is going to be around down 45% just given where we are with capacity. Too early to tell going forward until we set capacity beyond the third quarter, but it gives you a sense of where we are.

Okay. And then, I guess, Gerry, just on the nature of this CapEx change, is this driven by United, or is it more related to slippage on the MAX certification and does the $700 million that you're taking out of 2020 now show up in 2021? Thank you.

The answer is no. The $700 million does not show up in 2021. It's really three things. It's the impact of our agreement to move aircraft out of 2022. So instead of taking a fair number of MAX in 2022, we're now committed to take zero. That has an impact on pre-delivery deposits. There are also a couple of aircraft -- some number of aircraft that were in the capital expenditure forecast that were Embraer 175 later this year that we now expect will be taken by a regional partner, so that's out of our CapEx. And then there is also just a little bit of other work done. So that's what brought the number down. I would point out that of that $3.7 billion we're now forecasting for the year, about $1 billion of that is actually the present value of aircraft lease expense. We're taking a fair number of these new aircraft under operating leases that we are accounting as CapEx, the present value of those leases. That's about it. But if you back that out, and you remember that $2 billion of CapEx was spent in the first quarter, so excluding the leases, our CapEx for the last nine months of the year is down to about $700 million.

From JPMorgan, we have Jamie Baker. Please go ahead.

Hey, good morning everybody. Gerry, can you give us some more clarity on the air traffic liability right now in terms of its composition, and whether there's been any appreciable increase in refund requests following the flattening demand in the quarantine here in my home state?

Hi, Jamie, it's Andrew. It's just shy of $5 billion. But there are some stats there, what's coming in as our new revenue and what's coming in is the redemption of the EPCs and other instruments like that. And it's about two-thirds new revenue and one-third redemption of previous tickets. Refunds, as we get further and further into the pandemic, less and less of the booking curve was – are booked, obviously, in the past, best effectiveness now. So the refund rates are coming down. And those numbers, I think, are all kind of moving in the right direction, but roughly a two-third, one-third split and just shy of $5 billion right now for ATL.

Okay. Perfect. Second question, and probably for Gerry. Now that loyalty has been successfully monetized, can you share the collateral that you've pledged or believe you will pledge in the event that you draw a treasury loan? And also what the remaining unencumbered asset will look like should we draw that loan?

Sure. I expect that we would use as collateral for the CARES Act loan, if we choose to take it and draw down the available route slots and gates. And so I mentioned that the remaining collateral not counting MileagePlus or the pool of routes that we're going to hold available for U.S. treasury is at least $9 billion. And that's a combination of remaining routes, hard assets, equipment and the like as well as equity in assets that are encumbered but where there's availability of second lien. I should point out, that does not include some other assets that other airlines have actually used successfully as collateral. For example, United brand itself has value. It does not include the brand. It does not include the value of the domestic hub network. Those are things that have real value. We have not included those yet, but we do know that since other airlines have used those assets, that would be available on top of the $9 billion I just described.

And from Cowen, we have Helane Becker. Please go ahead.

Thanks very much operator. Hi, everybody. And thank you very much for the time. So I have two questions. My first question is, when you're looking at your bookings and people who are actually flying, I know, Scott, I think you said that there wasn't a lot of corporate travel. But are you seeing that your high-value loyalty customers are flying, or is it just more one-off customers who may not be as tied to the airline because they're not loyal members of MileagePlus?

Hi, Helane, it's Andrew. Actually, the good news on that front is we are seeing an ever-increasing rate of our premier members in the frequent flier program flying again, maybe not for business but for personal reasons. So they're getting back on an airplane. Obviously, if you go way back to April, that number was incredibly low. But we're seeing really nice progress in that front. So it's all moving in the right direction. Is it back to where it was before the crisis in terms of percentages? No, we do have a higher percentage of nonmembers on board than we used to. But that number, to me, looks like it's recovering very nicely as people get more comfortable flying on airplanes.

And I'm wondering, if you're able to convert some of those nonmembers to members?

We always work at that and also to get them to hold our credit card, obviously, which has done extraordinarily well during the crisis as well. Our credit card situation is completely diverse at this point from our passenger revenue situation. So that's going well. But we will continue to work to convert them, but it definitely is a different makeup of passengers, as we look back in time. But as we look forward in time, it seems to be moving back towards normal. But again, normal won't be achieved until I think there's a vaccine.

From Stifel, we have Joseph DeNardi. Please, go ahead.

Thanks. Good morning. Scott, is Luc's compensation, his budget for talent and the level of investment in the MileagePlus consistent with it being a $25 billion asset?

I'm not going to talk about Luc's compensation on a public call. But Luc and his team have done a truly phenomenal job, not just what they've done on what they and Mike Leskinen and the whole finance and legal teams getting the MileagePlus Holdings deal done. But Luc went through a great negotiation, collaborative negotiation with Chase, which we announced like literally two days before the Italy news, so really good timing on our renewed deal with Chase. And as Andrew said, that's been a partnership that's working really well. And Luc is a great asset and his whole team for United. We make sure they get the resources they need to keep growing this business. And we also appreciate the partnership with JPMorgan Chase, who invest a lot in also growing this partnership.

How do you use the organizational structure and the commercial agreement you've established between the airline and the loyalty program to build a competitive advantage relative to your peers, more appropriately allocate capital, and then maybe most importantly, improve the profitability of the core airlines, so it earns an adequate return on capital post COVID?

Well, I'll let Andrew add to this, if you want. I'm not really 100% sure what you're getting at. But what I would say is, we were already kind of working down a road to more appropriately, at least internally, split out the financials and understand the real economics of the card, core airline. They do go together. They're not separable in the sense that you could have one without the other. They are – they mutually support each other in a positive and a good way. But we accelerated that effort, obviously, through the pandemic. And I don't know what all the answers are going to be yet. But I think that separation and that even clearer delineation will create new opportunities for Luc, Andrew and their teams to push on the non-airline side, which will also help the airline side. So it's a symbiotic relationship. Andrew, do you have anything to add?

The only thing I would add is that, the transparency that others now see, we always saw internally. And we always recognize the enormous value there, and we'll continue to push it. And Luc is the right guy for the job and has a lot of creative ideas. We've seen that over the last year, and we'll see even more of it going forward. And I'm sure he'll be talking about his compensation with me right after this call. So thanks a lot.

He's texting me as we speak, by the way.

And from Raymond James, we have Savi Syth. Please go ahead.

Hey, good morning. Just on the average daily cash burn, I wonder if you could help me kind of walk through as you get from 3Q to 4Q, what some of the key components do? I understand a portion of that is tied to variable. So, what revenue does? If you kind of take away that component, I think in the last call, there was kind of a discussion on maybe that coming down about $20 million from the level that we saw back then just on some of the costs coming out. I was wondering if you could help me understand just how that progresses.

So, Savi, I'll at least try, and I probably won't give you the answer you want, which is I'll start by saying, I think it's not correct to try to disaggregate the various components, whether it's cost, capacity, demand as separate variables because they're not independent variables, they're combined. And what we think will happen moving from the third quarter into the fourth quarter is we'll continue to make progress on costs, which will be a little bit of a tailwind. And we think the net effect of capacity and -- or cost efficiency -- the net effect of capacity and demand is going to continue to get better. We don't know that. Nobody can really give you an accurate forecast, but we'll be flexible. But if we just had to guess -- if I had to guess on what cash burn is going to be for the fourth quarter, I would guess it's going to average in the $15 million to $20 million range. A little bit of that at cost, but mostly about an improving demand environment and an improving demand environment relative to the amount of capacity you have to deploy to generate the demand. But if demand is stronger, there'll be more capacity and therefore, more cost. If demand is weaker, there'll be less capacity and less cost. But I actually have a higher degree of confidence in our ability to forecast maybe even too strong a word, but have an expectation of cash burn, than I do the other variable. And if I had to make a bet today, I'd bet on somewhere in the $15 million to $20 million range for the fourth quarter.

That makes sense and super-helpful. Just on the CapEx side, and maybe for Gerry. Just 2021, 2022, based on what you're kind of thinking today, how does that level look like from a kind of gross standpoint? And I'm guessing from a cash CapEx, it's very small then.

Yes. So, in any given year, cash CapEx, when you take into account aircraft financing is always going to be pretty small relative to the total number since most of our CapEx has historically been for new aircraft, and those are always financed. 2022 is just too far out to speculate right now. I can tell you, though, that for the next few years, CapEx is going to be lower than what historically has been because we have other priorities as we come out of this crisis, principally restoring our balance sheet before we make significant investments. For next year, because we still have aircraft where the metal was effectively being cut when this crisis has started, we will take delivery of. It's still going to be a couple of billion dollars. $2 billion-ish is our target right now. And we'll have more clarity on that over the next few months.

From Credit Suisse, we have Joe Caiado.

Hey thanks very much. Good morning. First, a quick question for Gerry, just a clarification, actually. Do you still have the ability to borrow more against MileagePlus, or has that exhausted the source of collateral? And can you talk about the relative attractiveness of doing more of that versus taking the federal loan that you're approved?

Yes. So, we were able to, as you may remember, in that transaction, upsize the transaction from what we originally went to the market with, which basically used up the availability of the first-lien capacity. The way that deal is structured though, because it is amortizing starting in year 3, as it amortizes, we're able to re-borrow against that collateral. So it becomes a facility if we want that we can continue to borrow against in the future.

Got it. Okay, thanks for that color. Second question is just a quick one for Andrew. Cargo revenue clearly a bright spot, good job pivoting to go capture that in the second quarter, can you just talk about the outlook for that in the third quarter and what's sort of a sustainable run rate? Do you sort of have to pivot back away from cargo as you add back more passenger service, just your thoughts there? Thank you.

Well, first, what I would say is that, we did have an advantage in that, cargo tends to go to and from our hubs. So we have a well-established network with our people and our distributors and that just was really humming. I would say – and the other thing I'll point out is that, our cargo revenue in the second quarter and the first month was actually kind of flattish. So you can just imagine what May and June looked like. They were just really off the charts. Cargo revenue does come in rather close to departure time. So it's a little bit more difficult to predict, but we expect it to have another great quarter. And really, as long as the global fleet of wide-bodies is not flying like it normally is industry-wide, we think cargo is going to be pretty strong in terms of the yield production which it is and our ability do cargo only charters. But again, a big thanks to our team. And again, really, this is one of the advantages of our hub system because cargo wants to go from our gateways to around the world. And so we can easily take advantage of it. And we did so expect more of that in the third quarter. Whether it's at the levels of 2Q, I think it's a little bit early to tell, but it definitely will outperform year-over-year based on what we're seeing here in July already.

From Goldman Sachs, we have Catherine O'Brien. Please go ahead.

Hey good morning everyone. Thanks again for your time. One quick clarification for Gerry first, on the down 45% recent cost, is that all in adjusted operating costs or something else?

Yes. That's all in ex-specials. Yes.

Okay. Great. And so it sounds like it's maybe too early to nail down 4Q costs, given the uncertainty around demand capacity outlook. But how should we think about costs sequentially from that down 45% level you're expecting in 3Q? If we just assume capacity stays level with August as you're currently expecting, I'm assuming the changes to your labor force will be, you be forced to make to potentially drive those costs lower in 4Q versus 3Q, or are there other cost buckets that you cut spending temporarily that maybe come back and offset that labor impact?

Cathy actually, I'm not focused so much on those cost numbers as I am on cash burn. So I think in terms of cash burn, more than anything else. But to try to answer your question I would say that, with your assumptions I would say that, costs are going to be about the same as what we're seeing now. So basically, that decline is flat going to the fourth quarter. Two things I would mention, by the way about the fourth quarter on cash burn. We do have in addition to our normal debt amortization, $300 million maturity in the quarter. So principal payments in the fourth quarter will be higher than, for instance, in the third quarter. And, of course, there would be some one-time costs as we rightsize the labor force that we'll also have in the fourth quarter.

From Deutsche Bank, we have Michael Linenberg. Please go ahead.

Hey, good morning, everyone. Just two quick ones here. Gerry, the $15.2 billion liquidity as of July 20th, does that include the last PSP installment? I think that's like $500 million or so. Is that in that number?

No. No. That typically would come at the end of the month.

Okay, great. And then just -- great. And then just my second question and this is probably to Andrew. When you look at some of the IATA data, they talked about tickets purchased within the three days, I think for the month of May, it was over 40% a year ago. It was probably closer to like 15% to 18%. Are you guys seeing numbers that are similar, at least maybe in May or June? And are those numbers starting to normalize, or are they still very high close in, and I'm sure that's obviously having some impact on your ability to plan. Maybe you can just provide some color on that? Thank you.

Yeah, Mike, I would say forecasting is a little bit more challenging these days than normal. We definitely saw very high close-in demand in May, in particular, in early June, which quite frankly, it was nice to see, got the load factors and revenue moving in the right direction. I will say that tapered off a bit as the quarantine hit in New York City and then Chicago and elsewhere and borders got even more restricted. So I don't know where it is on the realm of normalcy, but it was very high in May and early June. It's lower now that these events have happened. And once things start to get back on the road to recovery, I do expect that the booking curve will have moved closer in. And all of that's to say, it's really is difficult to predict revenue at this point and get the capacity equation optimized like we'd like to. But I think we're going to get better and better at it as we go forward, but that's where we are. So that is -- what we're seeing what IATA told you, and I think that's consistent, although in recent weeks, that's changed.

From Barclays, we have Matthew Wisniewski. Please go ahead.

Hi. Thanks for taking my question. Just wanted to come back to the fleet real quickly. I appreciate the flexibility on making a decision, but is there a point in time you would need to make a decision, or essentially, how long can you push off deferring, kind of, making a decision on delaying or retiring an aircraft type?

Maybe I'll start, and Gerry can add on. But it's difficult to predict the virus path. We've put a lot of aircraft into some type of storage, whether it be temporary long-term storage or short-term storage. And we are moving aircraft in and out of storage based on maintenance cycles and engine time, and all kinds of things. So when we went into this, we didn't have a plan to necessarily retire any fleet type, and we're going to hesitate to make final decisions on that until we better understand the length and duration of the situation, to be honest. So there are token number of very, very old 757s that had practically the engines on them. Those aircraft have definitely been permanently retired because they were part of our retirement plan. But we are definitely trying to keep our powder dry on the rest of the fleet until we have better visibility of what's going on. But more importantly, we're using that fleet really effectively with green time for both airframe and engine to make sure that we do what's right for cash burn and long-term requirements of the fleet. So I hesitate to make a decision today to retire a fleet when we just don't need to. So that's my perspective on where we are today. And Gerry, do you want to add anything to that?

Yes. Let me just add a couple of things. One, even the Pratt-powered 757s, which if you look at what our original expectation was on their retirement, it is probably likely that they're not going to come back. But even those aircraft would be available if there was a rapid recovery. Just our expectations are those are the first to go. And just in terms of the amount of time, we have plenty of time, measured in years. The aircraft are being cared for properly stored and can be pulled out for the desert when and if we need them.

Okay. Great. Thanks. That's helpful. Just other quick questions. Well, it's probably a little early to be talking about international traffic too much, but maybe you could quickly touch on kind of the conversations you're having with some of your international peers, if there's a concerted effort to be disciplined on capacity eventually, or what that could look like when demand does return?

Well, we're definitely not having that particular conversation because it would be illegal. But what we have been talking to people about is ways to get people flying again and to increase demand. And in fact, yesterday, United Airlines was proud to sign along with Lufthansa, IAG and American Airlines, a letter that went to governments on both sides of the Atlantic, asking that they consider allowing people to begin traveling back and forth between Europe and the U.S., if they get a negative COVID test as a way to start reopening borders and way to safely start reengaging in travel. So our focus, as we've talked internationally, has been about how to get consumers flying again.

Thank you. And we will now take questions from the media. [Operator Instructions] And from Bloomberg, we have Justin Bachman. Please go ahead.

Hi. Thanks for the time today. So this question is for Scott. Scott, I wanted to follow-up on your previous comments about the revenue recovery of about 50% and then a plateau ahead of any virus vaccine. What sort of time frame do you think that would be, does that anticipate going into middle or late next year for that level?

Look, I'm not an expert on when a vaccine is going to be available and widely distributed. But I've been reading a lot about it. It seems pretty clear, it's going to also require multiple vaccines. And when we talk about a vaccine, it needs to be a vaccine that's been tested, found to be effective, manufactured, distributed and given to a wide percentage of the population. So I think that's probably longer than what is in some of the media. I certainly hope its sooner, but we'll let you go to other experts to find what it is. At United though, we're at least planning as a scenario that it takes until late next year before that really happens, and we hope it's better than that.

All right. Thank you.

From Reuters, we have Tracy Rucinski. Please go ahead.

Hi. Good morning. I wanted to ask about that letter that you referenced that you and other airlines sent yesterday to the EU and the White House on a program to test passengers for COVID. Have you received any feedback from the respective governments on that? And how do you see international travel restrictions evolving in the coming months?

Brett, do you want to say anything about anything that we know on what we've seen so far, or heard, if we have?

Yes. This is Brett Hart. Yes. To date, we don't have any formal responses, but we do expect to have productive discussions, and we're hoping to, in fact, to be able to move forward on this policy. We think it's in everyone's best interest, obviously, various countries, including the United States. So we're hopeful. We have strong support across our industry, both in the U.S. and outside of the U.S. And this is something that we think, at the end of the day, will benefit all of our collective countries and our industry. So we're hopeful.

And from The Associated Press, we have David Koenig. Please go ahead.

Yes. Hi, Scott and company. Your press release today on the expanded face mask policy highlights the upgauging you've done to reduce the number of passengers per flight. And I just wondered if you're regretting not having started out at blocking some seats like some of your competitors, because it seems like their policy would be easier to explain to customers. Any regrets on that?

So, look, we, as we said, have been taking significant actions to increase consumer confidence. And we ran, I think, a 35% load factor in the second quarter. We're projecting a 45% load factor in July. And importantly -- but that's about confidence. We have incredible confidence in the safety of the airplane, but that’s about consumer confidence. Importantly, it's at end. We are also notifying customers when we have a 70% load factor or higher and giving them the option to switch to another flight, if they don't feel comfortable. And, to date, fewer than 1% of our customers are taking us up on that. Earlier in the call, I talked about why an airplane is safe, and we have high confidence in the safety of an aircraft. It is not the same as be in another indoor space. It's not the same as being in a restaurant. It's not the same as being in an office building, or even a hospital, because the air comes in from the ceiling, it goes past the customer down to the floorboard, back into the ventilation system and then is either filtered through HEPA-grade air filters or 50% of the air re-circulated into the cabin is from the outside. And that is a uniquely safe environment that exists nowhere other than on an aircraft. And you combine that with our mask policies and our cleaning protocols and it really is one of the safest places you can be if you're going to leave your house and we have high, high confidence in that. And other steps that we take -- because we have high confidence in the safety, the other steps that we're taking are about consumers -- getting consumers confident. And so that's why our policy has been with -- what it has been. We kept load factors low intentionally to help build confidence, to help explain the story that aircrafts are safe.

And from New York Times, we have Niraj Chokshi. Please go ahead. Niraj, your line is open.

Sorry about that. Thanks for taking this. I just wanted to ask about the mask policy. I guess I was curious to hear what -- how uptake on that has been. Can you guys say how many people have been barred from future flights, how that's going?

So the vast majority of our employees and customers already follow the mask policy because they recognize it's the right thing to do for the safety of everyone. And so we have very high compliance. Since the mask policy has been in place, we've carried in the millions of customers, and we've had fewer than 30 that we have had to actually take action against. So, the vast majority of people are compliant, agree, appreciate. It is a distinctly small minority that are few -- that don't want to wear a mask. And look, we'll welcome them back when this is all over and masks not required, but they're not going to be flying on United during the pandemic if they won't wear a mask.

Thank you. And we'll now turn we'll now turn it back to Kristina Munoz for closing remarks.

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

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