Good morning, and welcome to the United Continental Holdings Earnings Conference Call for Second Quarter 2013. My name is Brandon, and I'll be the 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 will now turn the presentation over to your hosts for today's call, Nene Foxhall and Sarah Murphy. Please go ahead.

Thank you, Brandon. Good morning, everyone, and welcome to United's second quarter 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 and Treasurer, Gerry Laderman. Jack will begin with some overview comments, after which, Jim will review operational performance, capacity and revenue results. John will follow with a discussion of our costs, 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] With that, I'll turn it over to Sarah Murphy.

Thank you, 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 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. 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 second quarter 2013 earnings call. Today, we report a profit of $521 million for the second quarter or $1.35 per diluted share. I want to thank all of my coworkers for their effort and professionalism as they work together to serve our customers and improve our operational and financial results. I would also like to thank our customers for choosing United, as we continue to build the world's leading airline. During the second quarter, we demonstrated progress across all of our top priorities for 2013. We operated a more reliable airline this quarter, despite experiencing moderate to severe weather and air traffic control delays during almost half the days in the quarter. We generated record second quarter revenue of $10 billion and posted a profit of more than $0.5 billion. Heading into the second-half of the year, United is well-positioned to continue delivering solid operational performance and excellent customer service and to achieve our return on invested capital target of at least 10% this year. Our frontline coworkers are focused on making our customers' experience more comfortable and less stressful. The investments we've made to support our operations and train our people are paying off. In the second quarter, we improved our on-time departure rate, reduced our maintenance-related cancellations and substantially closed the gap to the industry in relative on-time arrival performance. Our customer service is clearly improving, and customers are taking notice as customer satisfaction scores are up substantially versus last summer. As of today, approximately 80% of our 46,000 mainline and United Express flight attendants, airport agents and reservation agents have completed our new customer service training called It's Our Job. And we are on track to complete the training in the fourth quarter. Delivering…

Thanks, Jeff. I'd like to thank my coworkers for managing our operations in the face of difficult weather conditions this quarter. I also want to thank all of our customers for choosing United. We are working hard to win your business each and every day. We are consistently running a reliable airline with good customer service, and are now focused on becoming even more dependable and your carrier of choice. The weather in the second quarter was extreme. To put it in context, our operations were impacted by moderate to severe weather, 41 delays during the quarter, which was 25% higher than average. Despite these challenges, all of our frontline coworkers focused on minimizing the impact on our customers, providing good service and maintaining as normal a schedule as possible. Excluding the impact of weather, we ran a solid operation and saw significant year-over-year improvements in our controllable completion and long delay rates. Our investment in spare parts and return of spare aircraft to prior levels are paying off, and our maintenance-related cancellations declined by 37% year-over-year in the second quarter. We continue to define our best-in-class network to the driver turns by introducing new service to meet demand and eliminating unprofitable routes. This quarter, we initiated 3 new long-haul international routes, including Denver to Narita service using our Dreamliner, and recently announced, we will cease our Newark to Istanbul and Newark to Buenos Aires flights this fall, as they did not meet our return expectations. United has the best global network for U.S. travelers, and we will continue to find new, profitable opportunities to expand the breadth of our service for customers. Our second quarter consolidated capacity decreased 2.1% year-over-year, and we reduced our capacity in each entity, except Latin America. We expect third quarter consolidated capacity will decline…

Thanks, Jim. I first want to thank all of my coworkers for working together to help United get further down the path to achieving its full potential and making this a better airline for the 140 million customers we serve each year. Today, we reported net income of $521 million and a pre-tax margin of 5.2% for the second quarter. We continue to make progress executing on our plan. On a monthly basis, we've improved our pre-tax margin year-over-year in 3 of the last 4 months. Our second quarter operating margin was 8.2%, which was an improvement from the second quarter of 2012. During the second quarter, we ran a solid operation with better customer service; made progress in improving our cost performance; made prudent, long-term investments in our aircraft, facilities and technology; and improved our balance sheet by paying off a significant amount of debt. These are the right steps toward laying the foundation we need to generate sufficient long-term returns. Our second quarter consolidated operating expenses were flat year-over-year. Second quarter consolidated CASM, excluding fuel, third-party business expense and profit sharing, increased 7% versus second quarter 2012, in part due to a 2.1% reduction in consolidated capacity, a much greater capacity reduction than that of our peers. We expect our unit cost pressure to substantially subside in the back half of the year. We anticipate that in the second half of 2013, our CASM, excluding fuel, profit sharing and third-party business expense, will increase between 2% and 4% year-over-year and continue to expect our full-year, nonfuel unit cost to increase between 5.5% and 6.5%. We're committed to running a more efficient operation and are making progress with new initiatives that will contribute to our goal of keeping our annual unit cost growth at appropriate levels going forward. One…

Thanks, John. This quarter, we began to demonstrate the capability of the new United. We ran a competitive and reliable operation despite challenging weather conditions. We made significant strides in improving our customer service. We showed the strength, breadth and balance of our global network, with industry-leading unit revenue improvements. We made prudent long-term investments in our fleet, our product, our technology and our people. We've improved our balance sheet to the strongest point it's been in years. At United, we're building the airline that customers want to fly, investors want to invest in and our coworkers want to work for. We have clearly turned the corner post-merger, and I'm confident we're on the path to becoming the world's leading airline. With that, I'll turn it over to Sarah to open up the call for questions.

Thanks, 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 a question.

[Operator Instructions] From Cowen Securities, we have Helane Becker online.

I just wanted to get little more color on the corporate business that you said. I think you talked about seeing small increases. I don't remember the adjective you used, but I was wondering if you could go through, maybe, where you're seeing the increases?

Helane, this is Jim -- yes, this is Jim. As I talked about it, we saw about a modest growth of 2% in corporate revenue in the second quarter, fairly consistent with the growth we saw in the first quarter in terms of growth rate. In terms of where we're seeing -- if I broke it down into kind of strong performers versus some weak different industries, obviously, we're seeing good strength in business services, computer services, IT, electronics, financial services and the pharmaceuticals. Some of the more kind of lagging or slower performance would be in the areas like aerospace and defense and some in manufacturing. But good strength in the pharmaceuticals and financial services, in particular.

From Deutsche Bank, we have Michael Linenberg online.

Yes. Just a couple of questions here. Jim, when we look at your Pacific PRASM, and it was down, how much of that would be attributable to the weakness of the yen? What was the currency impact?

Yes, Mike, this is Jim. About 2% of that RASM decline was due to the depreciation in the yen.

And then you mentioned that the impact was $30 million, and I -- presumably, that's more translation than demand. But as the weaker yen persists, will it be a bigger impact going forward than the $30 million? Or will it not be as bad because you'll mitigate it through capacity reduction or reallocation of seats? How should we think about that?

I think we see the impact kind of being consistent to what we've seen in the second quarter as we look out into the third quarter. From a demand perspective, you're right. In the Micronesia area, where it's strong, point of sale. Japan, obviously, as the travelers make it into the U.S., the demand side gets affected a little and so forth. But we kind of expecting the same trend that we've seen in the second quarter.

Okay, great. My second question, just for John. When we look in the miscellaneous expense of $123 million, in the footnote there was an $80 million -- $81 million mark-to-market hit on the hedge. How much of that is out of period? And then what else is in that bucket?

Mike, $80 million of the $81 million are mark-to-market hedge losses that are out-of-period. $1 million was in effectiveness, which is recognized this period. And there are 2 other items, I guess, I would call out in non-op that are also anomalous and more onetime in nature. One is the write-off of a sale of investment we had. That was about $10 million, and then there was a similar amount for -- cost related to the early conversion of our convertible securities that were -- that we converted during the quarter. So those 3 items accounted for the majority of that. And again, I think that it's one of the reasons that while we improved year-over-year on an operating margin, our pre-tax margin did not, and we can point to those onetime items.

From Evercore Partners, we have Duane Pfennigwerth online.

I'm wondering if you could give some detail on the other revenue growth line and help us think about maybe the offset in the guidance regarding the third-party business expense. What's going on with that third-party business expense line? And if we actually strip that out, how should we think -- be thinking about the growth rate in, I guess, the high margin of the revenue growth?

Sure, Duane. This is John. In the second quarter, our other revenue grew in excess of 20%. We saw a strong growth there. But to your point, part of that is related to a third-party contract we have where we sell fuel, and the expense for that is down in other operating expense, but associated revenue is also in the other revenue line. If we were to strip that out, the year-over-year increase is in the high -- mid- to high-single digits in terms of other revenue. But I think that, that somewhat obscures some of the real progress that we're making just in the general ancillary revenue category. You might remember, we had a goal at the beginning of the year to grow ancillary revenue by 9%. As Jim said in his remarks, we're up 13% in the second quarter, and we're expecting that to continue through the balance of the year.

That's helpful, John. And then, you're probably unwilling to talk about CapEx longer-term, and I do appreciate the detail that you put out in that recent filing. But maybe you could talk about how we should think about, what we should add to, I guess, the aircraft and IT CapEx that you put forth. How do we think about maybe the other bucket of CapEx and maybe the growth or decline from the $2.5 billion level this year?

You bet, Duane. So allow me to categorize that into 2 separate buckets, aircraft and nonaircraft. With respect to aircraft, we have 700 mainline jets today, more or less. If we fly those planes for an average of 25 to 30 years, then we need to replace 23 to 28 planes a year just to stay at the same level. And that's what we're striving for, a maintenance level of CapEx with respect to our fleet. As we've discussed, we do not intend to grow our fleet in our planning horizon. So that's the level that I would assume there. With respect to the non-aircraft CapEx, we're spending in excess of $1 billion in that category this year. And as I said at the beginning of the year, about half of that is -- are items that are sort of "once in a generation type" items, things like building a data center here in Chicago, 2 new maintenance hangars this year. So I would expect that to abate over time. Our run rate level is probably somewhere between $700 million to $800 million, maybe something slightly higher than that. But certainly not this level that we've been this year.

So when you add all that up, is growth CapEx -- or gross CapEx higher or lower next year?

We haven't commented on that. We'll give some guidance towards the end of the year.

From Wolfe Research, we have Hunter Keay.

So, I'm struggling to come up with how to think about this choppy PRASM. It feels like almost 2 steps forward, 2 steps back a lot over the last like 6 to 9 months. I thought you kind of pulled out of this in the early year, and then you had a tough April and May. And I thought June was a little better. Now July looks a little soft. And you gave 3Q PRASM guidance, which you don't typically do, so you obviously feel pretty good about what you're seeing in the bookings. But I mean, why is it so choppy? Because -- is it an operations issue? Because I thought that was already resolved. The on-time is there. The pilots seem to be happy, they're not slowing flights sites or anything. Why is it so choppy? And how should we be confident modeling in PRASM outperformance based on anything other than just either easy comps going forward?

Hunter, this is Jim. First of all, it's -- the choppiness in RASM is not an operational impact or so forth. So it's -- what we've seen in the past is adjustments to revenue and so forth that sometimes can drive some of that choppiness. There's -- we've had capacity adjustments that, for instance, in the first quarter, being down approximately 5% and -- which would obviously drive a little bit better RASM growth and stuff versus the second quarter, where capacity was down 2.1%. The intent of talking about 3Q guidance of 3% to 5% was really -- and I'm going to refer back to Jeff's point about turning the corner. If you look at our second quarter RASM growth of about 1% that we reported today, 2.1% capacity decline, the 3% to 5% RASM growth, slightly less capacity decline, is another indicator of us turning the corner. And so our goal this year is clearly kind of driving great customer service, the reliability that we've talked about. And internally, we talk about it as beating the plan, and I will tell you, when we talk about beating the plan, it means that everything that we do, right? So the team is very focused on hitting that 3% to 5% guidance I gave, as well as constantly trying to beat that number. That's kind of what we do, but I think the intent was, to your point, was to kind of point -- take out a little bit of that choppiness that comes in a month-to-month reporting and give you a little guidance on the third quarter total, particularly relative to the second quarter.

Okay. Yes, I just -- I don't know, it feels to me like, to some extent on the revenue line, there might be some struggles going on the corporate side, sort of get to Helane's first question. And I see Delta adding routes like Newark-Paris, and to me, it's an indicator which, I believe, is probably a pretty lucrative pharmaceutical-corporate route for you. And to me, it implies that Delta thinks that they can take advantage of your weakness. And I don't know how you would respond to something like that, but obviously, you have network challenges everyday. But, I mean, did you feel like you're communicating enough with your corporates in your key markets to the point where threats like that shouldn't necessarily concern us?

I think -- so one, we're communicating all the time with our corporate. And I've talked about this in the past that the conversation with our corporate's very different than 1 year ago, the conversations about the value of the network and what we can do in partnership for your travel needs and what you're trying to do going forward. So that communication is constant and going on. As we look at different competitive -- the Sky Team, some of that capacity has been there before from Air France, and so now Delta is flying it and so forth. But again, we're really comfortable with our position in New York. As I mentioned on the call, as we've been maturing our systems here, particularly with ORION and our SHARES system, what we're being able to do is better manage higher-yielding traffic across our hubs, particularly in San Francisco and New York. So that allows us to kind of make the best decision on what type of traffic is going over Newark, whether it be lower-yielding local traffic versus higher-yielding flow traffic. So we're really, really excited and feel really good about our competitive position in New York. So we've had -- we have competitive capacity challenges all the time. What we do is we have a really strong plan that we're focused on and focus on hitting it.

From JP Morgan, we have Jamie Baker online. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Jeff, I'm going to assume that the results in the first half of this year didn't quite measure up to what the internal targets were on, say, January 1. Of course, I don't know that for a fact, so you can correct me if I'm mistaken. But if, in fact, results were below what was internally forecast, can you review for us each of the substantive steps that you've taken to get results back on track? And will these initiatives actually make up for lost ground or simply, and hopefully, drive improvement from here?

Jamie, the most important this for us this year, I mean, we really focused this year on 3 things. One, we had to get our operation back on track, which we did, and it's been quite successful. We've had many initiatives do that. We're running a competitive operation today. It's a good operation, and it's improving. A second piece we're focusing on was customer service, because our customer service fell away last year. There's no question about that. And we needed to get our customer service back to a, not only competitive level, but a level of excellence. So we've spent a lot of time with our own folks, not only in training, but giving them the tools they need to make sure that we can get good customer service, our flights off on time. And changes in a lot of procedures where things that passengers can see and experience, for example, the boarding process or procedures in terms of marshaling aircraft, marshaling them in, getting them out. Having jet bridges on time, that sort of thing. So there's been a lot of improvement in the customer service and the operational liability. And the third part has been to beat the plan, and we continue to be focused on that. Are we satisfied with our financial results this quarter year-to-date? Absolutely not. We are not satisfied with them. They do not represent what we can and will be, and we're really focused on that. But we have a host of activities that are going on, not only in terms of the operations and the customer service, as Jim has talked about, making sure that our conversations -- and our conversations with our corporate customers today are very different than they were last year. Last year, it was a year of…

Jamie, this is John. This is a slow process. It's one where we are making good progress. Believe me, we all here wish it were to happen overnight. But the important thing for us is to continue to see improvement. And one area that Jeff talked -- did not mention is the area of cost. I mean, obviously, our level of unit cost increase this year is unacceptable to me and to many others. But we've got tremendous initiatives underway. And I'll just -- I'll point to a couple of different examples. I mean, I talked about, in my prepared remarks, the Early Out. This is something that is very good for employees. It allows them to transition to another career or retire early. And also, it's an opportunity for us to lower our wages, as well rightsize the workforce in particular locations. Maintenance is another issue. This is an area where, as we have been dealing with some of the issues with an older fleet and an unreliable fleet, we spent more there than we plan to going forward. It's one of the key areas that we will see improvements in as we begin to take delivery of new planes. And then I would point to fuel as well. I've talked about the capital investment we're making on winglets. This is a capital investment that provides a return on invested capital many times in excess of our 10% goal, and it pays back very promptly. So there are a lot of different areas where we believe we can really begin to improve relative to our competitors. That said, we recognize that, like a lot of this merger, it will take some time.

From Bank of America Merrill Lynch, we have Glenn Engel online.

Two questions, please. One is for Latin America and for Asia and Europe. Can you go through which of the countries outperformed or did worse than the average, like Heathrow versus rest of Europe? And the second question is on the wage side. When you look at this year, how much of the labor cost impact has been from harmonizing contracts? And what percent of the labor cost has that represented so far?

Glenn, this is Jim. Let me take the entity performance first. Starting with the trans-Atlantic. We actually thought that strong trans-Atlantic routes and growth was pretty well spread, but particularly to London, as you mentioned, as well as to Germany. We've worked really hard with our partners, the team with Lufthansa. So we're seeing good strength to our German markets. But also, quite frankly, the strength is pretty widespread within Europe, both London to Paris and so forth. So we're very happy with that. In Latin America, the weakness was more in South America, with the rest of Latin America actually performing quite well. But in South America with some yield pressures, with -- as a result of some of the capacity, put some pressure on us in the Latin America division. But it was mostly in South America, the weakness.

And Asia?

I'm sorry. Oh, in Asia? It was -- we saw yield pressure into Australia. Obviously, we've already talked a little bit about the yen and the impact of the Japan. Our Asia or China particularly held up pretty well. And -- but between the Japan with the yen depreciation, and to Micronesia and the impact of the trans-Pac with that, as well as the -- some yield pressure in the Australian market.

Glenn, on your question about wages. Approximately 2/3 of the increase in our wages line this year is related to collective bargaining agreements. We are committed, though, to getting to market base pay with all of our labor groups. That's been the approach that we've taken from day 1. But just as so, we are committed to getting to a market-based allocation of resources as well. And this is an area of opportunity for us going forward as we begin to become more efficient in our operations.

So the 2/3 of the labor cost tied to the wage increases, but you've only increased pay in roughly half of your workforce levels?

No, Glenn, we've actually -- with the exception of our airport agents, which we do have an accrual on the books for, we have reached collective bargaining agreements with all of our major work groups. And in those, they received a pay increase. We still need to go through the JCBA process with some remaining work groups, but that should not result in the type of pay increase that you saw with the pilots. The pilots, we took a different approach where the first step was to get the JCBA.

And you're saying going forward, at some point, we should start seeing productivity to offset the further wage increases?

That's correct. A lot of the investment we made in the operation took place with more hedge in the third quarter last year. In the third quarter of this year, we should get pretty close to our productivity level last year. But in the fourth quarter, you'll begin to see year-over-year improvement.

From Barclays, we have Dave Fintzen online.

Just to follow-up a bit on some of the cost questions and just maybe take a little bit of a step back. John, you mentioned sort of 2% to 4% CASM x fuel in the second half. Obviously, there's a lot of structural initiatives underway. I mean, did you think out over the next couple of years? Obviously, old United was through bankruptcy, you've been in -- through the merger for a while. Are those structural initiatives enough that we should be thinking inflation -- less than inflation on CASM x fuel with the kind of capacity declines maybe we'll see? Or is it -- is that 2% to 4% more the run rate we should be thinking about or something inflation-plus over the next couple of years on CASM? Can you just kind of help us -- not even in '14, specifically, just the next -- enough of a horizon, so we just have some sense of the run rate?

Sure, Dave. We're not going to manage this business on a run-rate basis with 4% annual CASM growth. Period. We absolutely need to have, in a capacity-flat world, CASM growing at something less than inflation. We're going to see cost pressures in all the normal areas that are more difficult to control, like landing fees and other rent. But with different initiatives, like the fuel efficiency, putting technology in the hands of our employees and customers, we can drive huge savings to the bottom line each year. And we've got several of those initiatives already in place and hope to begin to see those take effect next year. So on a run-rate basis, we should absolutely be held to the standard of keeping our CASM x fuel growth at something less than inflation each year.

From Morgan Stanley, we have John Godyn online.

Jeff and Jim, both of you mentioned a lot of commentary about the attractiveness of the network to business travelers and improvements that you're making to appeal to corporate travel. We've certainly seen Delta make improvements of their own and the Virgin Atlantic concept that they have going on, and we know that new American is on the horizon and some of their synergies are related to taking corporate travel market share back. I was hoping that you guys could just shed some light on how you see the corporate travel competitive landscape evolving from here. And should we be envisioning a more competitive corporate travel market? Or is the pie getting bigger? Any color there will be helpful.

John, this is Jim. I'll start. I think that the way I think about it from our perspective and a capacity discipline philosophy is that as -- demand is measured by GDP growth faster than capacity. I think the pie is growing, and obviously that's dependent on the strength in the economy. That allows us to then manage that demand much more appropriately and manage the mix up. And that's just business traffic in general, but corporate's obviously a piece of that. Within that, the way we think about corporate is, again, our conversations with our corporate travel partners are about the value proposition that we bring to them and trying to price it accordingly to that value proposition. And so it will -- it is competitive. It will be competitive. But we think that our value proposition is, when it's our turn in front of the travel managers, a pretty powerful one, given our network, given the systems that we have in order to make sure that the capacity is there for them and so forth. So I don't know if that answers your question other than that it will be competitive. We do think we have a terrific value proposition with that leading network that will give us a really good position in that competitive environment.

Thank you, ladies and gentlemen. This concludes the analyst and investor portion of our call today. We will now take questions from the media. [Operator Instructions] From Wall Street Journal, we have Susan Carey online.

Jim, I just wanted to verify a couple of points on your RASM guidance I -- maybe I misunderstood. You're saying that you're having -- your third quarter forecast is PRASM growth of 3% to 5%?

Susan. Yes, our guidance on the third quarter is 3% to 5%, that's the range. And I mentioned that July was running at approximately 3%.

And did you give us a full year?

No. No, we only went out through the -- the guidance was only through the third quarter.

And your third quarter capacity is going to fall by 0.4% to 1.4%?

That's correct.

And full year, 0.75% to 1.75% decline?

Yes. Yes, that's correct.

Okay. I just want to make sure. And my second question, I guess, will be for John. I'm just not aware of these 2 programs you announced on the labor side, the Early Out programs, the voluntary Early Outs for CSAs and ramp. And I believe you said these elective programs are subject to new JCBAs or just CBAs? And also I wanted to know a little bit more about the modification program for half the management and admin folk. Can you spell those out a little bit more?

Sure, Susan. The Early Out program, you're correct, it's contingent upon achieving a joint collective bargaining agreement. Both the dollar amount and the number of employees that will participate in that is yet to be determined. We've just announced that. But this is an opportunity where the company can benefit immediately through lower wages, and it provides good options at the election of our employees. So we're very excited about that. With respect to the pension, you're seeing a general trend across all industries and companies moving to defined contribution programs. And as part of the merger, we needed to align the retirement programs for all of our management and administrative coworkers. This was a step in that direction, and what we've elected to do is move the Continental side of the management and administrative to defined contribution programs well.

And on identical terms as the UAL side?

Yes, that's correct.

Okay, so there -- the Continental folks are moving to the United DB plan?

United defined contribution plan...

The DC plan. Okay. And this has already been done?

Yes, we just announced this. It will begin to take effect next year.

From Bloomberg News, we have Mary Jane Credeur online.

Could you elaborate a little bit more about your thinking on capacity? Some of your peers across the industry -- most of your peers across the industry are going to be up a little bit the back end of this year, granted some of that is issues unique to them, upgauging aircraft, some longer stage lengths. But why is this decline right for you? And are you risking potentially leaving some business on the table?

Mary Jane, this is Jim. Our capacity guidance and philosophy hasn't changed at all. It's geared toward that capacity discipline and making sure that supply and demand are in line. As you mentioned, we had some impacts, obviously, last year from Superstorm Sandy on the East Coast in our base, so that we have -- we do have some capacity growth in the fourth quarter coming this year with nearly half of that the result of that. But if you look over the long-term, our long view, as John also mentioned, that our fleet count will remain relatively stable over the next 5 years, that our capacity is also going to be very stable. So nothing about our approach to capacity has changed and don't anticipate that to change, given our fleet order and our 5-year plan. So -- but we do have that issue in the fourth quarter where the comps from last year are driving some capacity growth.

And we have time for one more question from the media. From the Associated Press, we have Josh Freed online.

Can you say a little more about what you have in mind when you talk about doing revenue management on ancillary products as you've done on Economy Plus? Can you help me understand sort of where you're headed with that?

Josh, this is Jim. The ancillary group and the merchandising group works very closely and actually have brought in some of the talent from revenue management into that group to assist in this area. Some of these things we're doing -- 1 year ago, for instance, in Economy Plus, we would have had one price point, right? And today, we have multiple price points, that's the results of our transition to the SHARES PSS system, giving us the ability to begin to segment the customers and offer different price by where the seat is, by day of week, by market and so forth. So some very initial kind of revenue management principles, particularly on the pricing side, we're already applying. And I think we're seeing great results as we talked about the 37% growth in Economy Plus sales that I talked about earlier. Our goal is to continue to build on that and to -- without giving any kind of specific initiatives, revenue management is all about appropriately segmenting the -- what customers are looking for and what they value and pricing that accordingly, understanding that demand and pricing that. And we think some of the revenue techniques that we do in the traditional way in terms of managing fare and inventory, we're going to be able to do in the ancillary side and drive some of that great results even further.

Okay. We're out of time now, so we'll 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. Thanks.

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