Good morning, and welcome to United Continental Holdings Earnings Conference Call for the Fourth Quarter of 2015. My name is Brandon and I will be your operator for today. [Operator Instructions] This call is being recorded and is copyrighted. Please note that no portion of the call maybe 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, Jonathan Ireland. You may begin, sir.

Thank you, Brandon. Good morning, everyone and welcome to United’s fourth quarter and full year 2015 earnings conference call. 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 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 and investor update. Copies of which are 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. Joining us here in Chicago to discuss the results are President and CEO, Oscar Munoz; acting CEO, Brett Hart; Vice Chairman and Chief Revenue Officer, Jim Compton; Executive Vice President and Chief Operations Officer, Greg Hart; and Senior Vice President, Finance and Acting Chief Financial Officer, Gerry Laderman. Oscar will begin with some overview comments followed by Brett’s discussion of 2015 performance. Next, Greg will provide an update on our operations. Jim will follow the discussion on revenue and capacity. Gerry will review our costs, fleet and capital structure, after which we will open the call for questions, first from analysts and then from the media. We would appreciate if you would limit yourself to one question and one follow-up. And now I would like to turn the call over to Oscar.

Thank you, Jonathan and thank you all for joining us today. I am certainly darn glad to be here and I look forward to reengaging with all of you across all our stakeholder network. But today, let me start frankly by extending my thanks for all the well wishes I have received from across my United family during my situation. I am pleased to report that I feel great. My recovery is progressing very nicely. Already this week, in fact, over the course of the last month, I am beginning to participate in meetings and certainly plan to increase my involvement each week going forward. As far as expectation of full return, I certainly will be back full-time by the end of the first quarter, if not sooner and I am incredibly energized by that prospect. So again, I look forward to seeing all of you out on the road. As I am thanking people, I want to thank Brett and my entire United team for their excellent work and implementing our shared purpose and vision for United. We really have made significant progress in both our operation and our financial performance. I am frankly excited to be here today that we announced record profits for the fourth quarter and full year 2015. And this I tell you could not have been done without the renewed engagement, excitement and energy that exist with our frontline employees. I am very proud of what they do each and everyday and we are going to leverage and use this increased level of engagement to continue the momentum into 2016 and beyond. So, with that, let me turn the call over to Brett.

Thanks, Oscar and thank you all for joining us on our fourth quarter and full year 2015 earnings call. The entire United family is very pleased to have Oscar in the room with us today. And like him, we are all looking forward to his full-time return. In the meantime, I and the management team want to thank our employees for making 2015 a great year for United. We achieved record financial and operational performance, made meaningful strides towards enhancing the customer experience and this fall we committed to continuously earning the trust of customers and employees. While we are – while we still have more work to do, I am proud of the tangible measures of success we have already demonstrated, none of which could have been accomplished without the hard work and commitment from the entire United team. Over the last 3 months, I have visited each of our hubs and I am consistently impressed by our employees’ enthusiasm, dedication and strong desire to win and it is an honor to work alongside them as we take the next steps toward improving United. Today, we reported 2015 pre-tax earnings of $4.5 billion, our highest level of earnings in United’s history. I am pleased to announce that through our profit sharing program, employees will be able to share in the success as we pay out $698 million, our largest distribution ever. For the year, we achieved a return on invested capital of 21%, also marking the highest ROIC ever reported by United. These numbers represent a meaningful improvement year-over-year as well as progress closing the gap in financial performance of our two closest competitors. A major contributor to our strong financial performance is the improvement in our operation. When compared to last year, our completion rate improved by more…

Thanks, Brett and thank you to everyone for joining the call this morning. I would like to take this opportunity to thank our employees for their efforts this year, particularly during the busy holiday travel season. As Brett mentioned, we have made meaningful improvements to our operation and we couldn’t have done it without the continued hard work and dedication of our employees. Due to the great work of the United team in 2015, we had the best on-time arrival performance since the merger. Additionally, we had a better completion rate than our network competitors in both New York and Chicago and better completion in Houston than our network competitor in Dallas. We also continue to deliver well on bag performance. In fact, during 2015, we achieved record bag performance for 7 of the 12 months in the year. As reflection of our commitment to operational excellence, we recently launched a new United Global Performance Commitment for corporate customers in 2016. With this program, we will compensate eligible corporate accounts if we fail to meet our operational targets for the year. This clearly demonstrates our level of confidence and commitment to continue to improve United’s operational performance. Looking forward to 2016, we have a number of opportunities to further improve the operation. One change we implemented earlier this month was an increase in the amount of out-and-back flying we do. Said differently, we are increasing the amount of flying that begins at a hub and then travels to another station before returning directly back to the originating hub. In 2015, approximately 35% of our flights followed an out-and-back pattern. At the beginning of this year, we transitioned to approximately 70% of our flights that now follow this pattern, although which is more consistent with that of our peers. This does two things for us. First, it dramatically reduces the complexity of the operation. In addition, it helps to isolate the impact of weather and aircraft control related events to the impacted hub while mitigating the impact on our other hubs. We believe that reducing this complexity and limiting the impact of weather on our operations will drive improved reliability and efficiency and provide a better experience for our customers and our employees. In closing, I want to thank the entire operations team for all their hard work in 2015. I am proud of the significant progress we made this year and I look forward to building on these successes in 2016. With that, I will turn the call over to Jim.

Thanks Greg. I would also like to thank our customers for their business in 2015. As Brett indicated earlier, we want to be our customers’ first choice on every trip they take. And we will achieve this by continually building their trust. Accomplishing this won’t be easy and won’t happen overnight, but the entire team is committed to this goal. In the fourth quarter, our consolidated unit revenue declined 6%. The four primary factors we identified at the beginning of the quarter impacted our revenue performance as expected; strong U.S. dollar, the effects of lower oil prices, pressure as a result of margin accretive initiatives and competitive pricing actions. However, we also faced some unanticipated headwinds during the quarter. First, the attacks in Paris put pressure on bookings across the Atlantic during the weeks that followed the event. Second, our strong operational performance resulted in more completed flights than initially planned. While this is beneficial to margin and excellent for our customers, the additional capacity provided a tailwind to unit costs, but a headwind to PRASM. Additionally, in the quarter, we saw oil prices continue to fall. We have provided incremental pressure to our Houston hub and corporate energy business, while ultimately being a tailwind to our fuel expense and overall earnings. Finally, demand declined throughout the quarter as demonstrated by downward revisions to fourth quarter GDP expectations. Turning to the first quarter, we expect our unit revenue to decline approximately 6% to 8% year-over-year with domestic PRASM down approximately 4% to 6% and international PRASM down approximately 8% to 10%. The major drivers for the first quarter revenue performance are expected to be largely the same as the fourth quarter. For the consolidated system, we expect foreign exchange impacts will account for 1 point of year-over-year PRASM pressure. Given…

Thanks Jim. I would also like to thank our employees for helping to make 2015 a record year for United. Their hard work led to our success this year and I know they will bring the same energy and dedication to our efforts in 2016. For the fourth quarter, we reported net income of $934 million or $2.54 per share excluding special items. This is double what we earned in the fourth quarter of 2014 and marks the seventh straight quarter of record earnings. For the full year 2015, we reported $4.5 billion of net income or $11.88 per share excluding special items and we achieved the pretax margin of 11.9%, a 6.8 point increase versus last year and the highest in United’s history. Disciplined cost management has been the key contributor to our results this year. For the full year, our unit costs excluding fuel, profit sharing and third party expenses decreased 0.7%, more than 1 point lower than our initial 2015 guidance, despite nearly 0.5 point of capacity reduction from our original plans. As Jim mentioned, our up-gauging strategy was a meaningful contributor to our CASM performance in 2015 and we expect this contribution will continue as we ramp up the program through 2019. Looking forward to 2016, we expect our CASM, excluding the impact of new labor deals to increase approximately 1%. The new labor agreements with our pilots and technicians, currently open for both, would add approximately 2.5 points of CASM for the year. This is consistent with our commitment to maintain CASM growth below inflation over planning cycles. 2 years ago, we set a goal to achieve $1 billion in annual non-fuel savings by 2017. We now expect to achieve this goal in 2016, a full year in advance of our original timeline. This focus…

Thank you, Gerry. 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.

Thank you, Jonathan. [Operator Instructions] From Stifel, we have Joseph DeNardi on line. Please go ahead.

Hey, thanks. Good morning. Hey, Jim, just on your comments around demand weakening through the quarter kind of tied to the revisions to GDP. So, are you seeing that show up in forward bookings? And does the guidance for first quarter assume that demand continues to weaken from here or that kind of starts to stabilize at some point?

Hey, Joe, this is Jim. As you look at first quarter, our guidance is obviously based on the information that we have today both a yield perspective and a booking perspective. What I would say is that the pressures that we saw in the fourth quarter, which are mainly yield, continue in the first quarter. So, we see strong demand. I have to always separate a little about what Houston and the energy, there are certain sectors that in high-yield demand we are seeing weakness. But overall, our bookings, both factors look where they were last year in terms of the load factor point of view. It’s the yield pressure that we see in the first quarter.

Okay. And then Gerry, just on the profit sharing accrual in first quarter that’s I think about 60% higher than first quarter on a much less increase in op income. So, have there been any changes to that just based on some of the new labor contracts or how should we think about in 2016?

There have been some minor changes. For example, we added a layer for our M&A employees at 10% over a certain threshold. Other than that, it’s pretty similar.

Okay, thanks.

From Cowen & Company, we have Helane Becker on line. Please go ahead.

Thanks very much, operator. Oscar, welcome back. Do you guys ever release or tell us and this is probably for Jim, what percent of the cabin, the front of the cabin is being sold versus used for upgrades?

Hey, Helane. We haven’t released that. It’s one of those we have talked about in the past growing our pay versus load factor and we continue to do that. I will tell you we are also focused on making sure that we keep that in balance with our loyalty customers. There is a lifetime value with our MileagePlus customers. That’s very important to the overall economics as we go forward. So, it’s a balance. And so internally, we continue to debate what that is, whether it’s pure products to offer to get into the first class, lower price points in first class, but also balancing that with the upgrades to our loyal customers.

Helane, this is Oscar. Let me just add my suspicions. As I traveled on our network and system, I spent a lot of time on our aircraft and spent a lot of time with some of our high-value customers and that is a particular sore subject with them. And so that balance that Jim speaks about, I think is a very important one that we have to strike.

Okay. Thanks very much, gentlemen. Those are really all my questions for now.

From Wolfe Research, we have Hunter Keay on line. Please go ahead.

Good morning. So Gerry, it’s nice to see the buyback pick up and thank you for the update. But if we assume you guys have significantly more cash of which to dispose this year, which I am putting at about $6 billion to $7 billion factoring in pension contributions, assumptions around finance CapEx and maybe a little bit of excess cash, should it be a fairly obvious decision to make that the level of buybacks this year exceeds your capital spending given the immediate accretion that you get to EPS, not to mention the signal you will send to your long-term shareholders about the trajectory of earnings beyond this year?

Hunter, that’s a good question. Let me talk about capital allocation generally, just as sort of set the stage. We have really the three components to it. So we are very focused on making the investments we have to make. To paraphrase an old friend of mine, I know what happens when you take the cheese off the pizza. So we will, first and foremost, make the right investment, but they have to drive the value that we expect or we would stop making some of them. Let me turn to the balance sheet and in securing the future, we are in a pretty good spot with the balance sheet, so I would not anticipate the level of debt prepayment that you have seen in the past. Having said that, the way we will continue to manage the balance sheet is through the amount of new aircraft financing. So I would expect this year to finance some, probably not all of the aircraft this year and that’s going to potentially leave some cash. I would say first and foremost, I want to see that cash before I spend the cash. But as we continue to manage our cash sort of down to the target range that we feel comfortable with, that sort of $5 billion to $6 billion of liquidity that we have stated as sort of comfortable target range, there is absolutely the opportunity for additional cash in the buyback. And as I have said in my comments, that $750 million is the minimum, so we will continue to have this dialogue through the year. But I hope you are right. I hope that this is a year that generates those significant cash flows.

Hunter, if I can just – if you don’t mind, if I can just weigh in on that subject as well. I think if you check my history, you will see the willingness to allocate capital to shareowners in a very broad and distributed way, I don’t think that changes with regards to this. I think it would be at least up sort of qualifier to 750 was added on purpose. And I don’t necessarily disagree with the premise and thesis behind the concept, but we do have to strike a balance. And so this is one of the places where I have been engaged to a little bit and we will keep them more increasingly engaged and you will get more definitive direction in about two months on that going forward.

Okay. Yes. I know, Oscar, I am glad you are here because you do have a bit of a reputation of being a capital deployer, so I think it would be helpful for everybody, including your owners, who have been sweating out a pretty difficult year. It’s very hard to buy an airline stock. It is very hard to do that I mean as an investor. And a lot of your owners feel like it’s kind of been sort of hung out to dry a little bit. So I think you would go a long way Oscar if you would commit that barring any sort of major change in the environment, which is I think an easy enough for you to make right here on this call to come out and say barring no major changes in the economy or anything like that exogenous that we will spend more buying back stock than we will on capital spending this year, I think that would go a long way if you would be willing to make that commitment here today?

We are going to look – we are going to spend a lot of time with our shareholders directly and individually and discuss all their viewpoints and we will make proper public commitments as we see fit. But again, history does tend to repeat itself and I am very excited to get back into this conversation and debate because it’s a great one. Thanks Hunter.

Okay. Thanks for your time.

From Buckingham Research, we have Dan McKenzie on line. Please go ahead.

Hey, good morning. Thanks for the time here. One quick housecleaning question, what were the NOLs at the year end 2015?

About $9 billion.

Okay. And so I guess just kind of extrapolating forward, is perhaps 2018 the first year you might conceivably become a taxpayer, if that’s the case or should we think about cash taxes sooner than that?

So I can tell you that we are working hard now that we are in a mode of booking taxes and seeing a future of being a tax – cash taxpayer. And we were doing some good tax planning. I don’t want to at this point tell you when we anticipate being a cash taxpayer. Obviously, that depends on future earnings, but it’s reasonable to anticipate if the earnings trends continue, you would see a relatively rapid utilization of those NOLs.

I see, okay. And then as a follow-up question here, this one is for Jim. You mentioned sequential quarter-over-quarter revenue improvement, which I believe was on business travel spend. And so is the right way to think about that is 20% of the passenger revenue getting sequentially better each quarter and the reason for the clarification here is we do have some FX headwinds and some competitive headwinds, so I am just trying to reconcile the comment with other revenue externalities?

Hi, Dan. There is a couple of things happening as you think about 2016 and as we move through the year. You touched on a couple of them just now. But currency, obviously is a big driver of what we look going forward. So kind of where currencies are at today, we would begin to lap some of the currency effects in the second quarter this year. When you look at things such as surcharges and as you know over the past year, we have talked a lot about surcharges particularly in Japan that by law are tied to where oil trades. We will begin to lap those pretty significantly in the third quarter of this year. But again, there are still some sort of charges out in Japan that most recently have come down, so the full effect of that will be more towards the end of the first quarter of 2017. Pricing – the competitive pricing actions we have talked about through the year, based on where they are at today, we will begin to lap those in the third quarter of 2016. And then lastly oil, we have reported on our corporate energy portfolio through the year being down 20% in the first quarter, 30% in the second quarter, 35% in the third quarter and we saw it drop to 40% in the fourth quarter. So that lapping, given where the current oil prices are and the expectations that oil prices will stay low longer, that lapping affect will take longer than what we have talked about in the past. All being said, there are things that as we lap through the year are –will have less headwind on our RASM performance and that’s why we have talked about quarter-to-quarter improvement based on the factors I described. Always qualify it because as I mentioned in the fourth quarter, we saw GDP expectations come down from our initial expectations, so that and the volatility of oil prices is still that one thing that we don’t like to talk about as specific. But I think given what we have see lapping during the year, we feel good about quarter-over-quarter improvement as we move through 2016.

Okay, very good. Thanks for that perspective.

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

Yes. Hey. Good morning everybody and welcome back, Oscar.

Thank you.

I mean to start off, maybe to Jim. Jim, you guys are the biggest carrier to China and we have seen a more significant devaluation of that currency over the past few months, is there anything just given your footprint in that market, are you seeing anything, anything on the trends. And I would sort of say that within the context of some of your commentary about the revenue weakness you talked about yield softness in the international markets as well as domestic and I didn’t know if you were calling out China or other markets in total, what’s – can you address that?

Hey, Mike. I think there are things that are getting to us obviously Houston that I have talked about already. And as you mentioned our exposure to China, I would tell you, demand in China continues to grow at the pace of industry capacity. We have seen a little bit lower yield, but we are actually seeing – obviously, it’s been very profitable for us and that profitability maintained. So from the demand perspective, we are seeing demand keep pace with the capacity that we have talked about over the past several quarters. Again in the first quarter, we see about 19% industry capacity from China to the U.S., but yet we are also seeing bookings for the industry going at that rate. You put that with our strength in San Francisco, the best gateway to Asia, we feel really good about our current position and quite frankly long-term position for China going forward.

Okay, great. And then just the second question, when you look at your overall revenue performance and you compare yourself versus notably the other big two, American and Delta and you have looked at yourselves on even unit revenue basis. I appreciate the fact that obviously there are some initiatives that you are pursuing that are obviously margin accretive and ROIC accretive and therefore one consequence is that they may be RASM or PRASM dilutive. But I think there is another view out there, at least the perception that maybe strategically you are falling a bit behind your peers and whether it’s on the alliance front or the joint venture front, you look at some of the announcements and some of the relationships and how some of your competitors have grown those relationships. And yet when you look at United, you have a strong – or at least I believe you have a strong relationship with Lufthansa and you have a good relationship with Air China and you also have a relationship with ANA. But a lot of times, we don’t hear much commentary on it and it doesn’t look like it’s showing up in the numbers. I mean, is that perception real or are there things that over the next year or so that you plan to roll out that maybe will help mitigate some of those revenue sort of differences?

Hey, Mike. Well, a couple of thoughts. One is you mentioned Lufthansa in the Trans-Atlantic, which was a terrific partner for us and the performance in the fourth quarter, albeit down in the 2% RASM decline was really industry-leading performance – and our relative performance in the Trans-Atlantic is our peers. We have widened our RASM premium versus our peers in that. That’s with the great work of our team in terms of seasonally balancing the network, and quite frankly, working very closely with Lufthansa. So, that JV for us, in that particular, is obviously very much forward. It goes back into the 1990s relationship. And so we have had great success in that. If you look – and so – and then if you look at the Pacific, which is really a growth market for us, ANA plays a big part of that and that relationship from a JV, a little bit younger, but we have made great strides and we have talked about some of the Tokyo when you are flying to places in Asia that we now connect into ANA, which has allowed us to grow our San Francisco hub long-haul. So, I think we have used the JVs to help leverage our market and grow our relative performance both in the Trans-Atlantic as well as into Asia. Recently, our investment and our commercial agreement with Azul, although Brazil is the challenged market right now over the long term, we think that’s going to play terrific. And it’s already generating connecting traffic at numbers that are exceeding our expectations, albeit at lower yields given what’s happening in Brazil as well as the currency situation. So, I think we are very focused on the alliance side to make sure we have the right partners to extend our network and we will do it in a way that obviously allows our customers to have more choice and more opportunities.

Okay, great. Thanks, Jim. Thanks for that comprehensive answer.

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

Hey, good morning and warm welcome back to Oscar. First question probably for Gerry and Oscar, that incremental 2.5% of potential labor-related CASM, was that for – I apologize, for all working groups or just the two TAs that are out for ratification right now, one of which comes back tomorrow?

No, Jamie, that was just for the two that are out for ratification.

Okay. And for Oscar, you have talked with us about winning back the frontline. Do these increases in wages accomplish this in your mind or are there still incremental expenses that are required that might not be captured in the labor line, whether that’s I don’t know better tools for employee, new uniforms, that sort of thing that could pressure CASM a little bit further?

You know what, Jamie, it’s probably a little early for me to actually quantify what the impacts of these are, but my commitment is to balance both our commitment to our employees and make the appropriate investments and prioritize investments while understanding that we have broader stockholder base. And so it’s a delicate balance between those two. And again, the more time I spend out in the field understanding the needs, the needs aren’t as great as you think expense wise. So certainly, comp is one. But beyond that, I think building the right systems tools, uniforms, things like coffee and peanuts and all add up, but they are just at appropriate level investments that will strike a balance with. But again, I can’t quantify anything at this point in time.

Jamie, let me just add that, that process has started. It started last year. And the CASM guidance you see for this year includes some of that already, some of the tools and some of the other investments, we are making that’s rolling into the CASM guidance that you see. And let me just, by the way, I need to clarify to Dan on the NOL, as of 12/31/15, the remaining NOL is a little closer to $8 billion and $9 billion. Sorry to interrupt you.

Yes, no, no, that’s fine. Actually for follow-up, while I have you, Gerry, the 73-700 is a larger gauge than I have been at least I thought you were looking at in terms of potential bridging that gap between 76 CRJs and I guess, the A319s. So, what shifted in terms of the decision-making process? Does this entirely eliminate the need for something smaller than the 319 at the mainline? How did the price of fuel impact the calculus? Any additional color there?

Sure. I would say, the price of fuel really doesn’t impact our decisions on long-term fleet orders, but I would say that for this batch of aircraft, where we looked at all the variations, in fact, the 319 as well as the 737 and the 100-seat opportunities from both Embraer and Bombardier for this batch of aircraft, the 700 was the winner. As I mentioned, we will continue to look at aircraft and we will continue to look at each of those aircraft types going forward.

Okay, I appreciate it. Thanks very much, gentlemen.

Credit Suisse, we have Julie Yates on line. Please go ahead.

Good morning and welcome back, Oscar.

Thank you.

Gerry, a follow-up on the buyback, how should we think about just the seasonality of cash flow generation and then the timing of other cash requirements like debt payments and pension fund and just as the year progresses?

So, it depends on the type. So, for pension funding, we have a fair amount of flexibility. So, I would assume right now relatively even through at least the first three quarters. On aircraft CapEx, we have some in the first quarter. There is a bit of a lag and then some in the back half of the year. And everything else is fairly flat through the year.

Okay. And then Jim, one for you, you noted competitive capacity actions at about 1.5 point headwind again in the first quarter. You noticed any changes in competitive pricing actions either domestically or internationally? And do you worry that those worsen in a lower fuel environment?

Julie, I don’t want to comment on competitive pricing. It’s obviously it’s a – this business is very competitive and we obviously match capacity in our demand given the pricing structures that are out there, but I don’t want to make any comments on competitive pricing actions. We will, as I mentioned in the script, that given where competitive pricing actions are today that the hypothetical the assumption that’s where we are today. We begin to lap some of that effect by the time we hit the third quarter.

Okay, understood. And then just on the phases of cabin segmentation, that was certainly helpful. At some point, do you anticipate being able to put some quantification around what that can add in terms of revenues?

Yes, we look forward to doing that. That segmentation that we talked about we have been working hard on it in 2015 and so we are excited about rolling it out going forward. What that will do for us is a couple of things. One it will allow us to compete with ultra-low cost carriers much more effectively, which means more pure product for customers that are looking for just that price point. And it will also, as I mentioned, help us remove some of the dilution that we have in our pricing structure today. And so I am not ready yet to kind of quantify, but as we rollout the second half of the year, I look forward to updating you on that.

Okay, great. Thanks very much.

From Evercore ISI, we have Duane Pfennigwerth on line. Please go ahead.

Hey, thanks. Good morning. Just a couple of questions for me. We get a lot of questions from investors about closing the gap from a margin perspective to the industry. It looks like based on the 1Q guidance and certainly 1Q is not the year and you have got some hedge impact there, but it looks like that gap actually widens in the March quarter. So, is closing that gap still a goal for the company? What should we be advising investors in that regard and if so, over what timeframe?

Hey, Duane, I will start. It’s Gerry. So it is still a goal. We have never put a timeframe on it, but we are very focused on doing what we can do both on the costs side and the revenue side to continue to maximize our margin, but we haven’t at this point, put a timeframe on it.

So I think form the network side, we are very focused on growing efficiently. And so we talked about up-gauging a lot over the past year and 2015 was the first phase of that where we are seeing growth with the use of slim line. And as Gerry mentioned contributed to the CASM side, comes at a lower RASM, it had significant contribution to the CASM side. We will continue to do that as we also look at frequency reduction and up-gauging into the mainline aircraft from the regional aircraft. And we can do that seat neutral in certain markets. As we have up-gauge that and we drive lower departures actually it’s really efficient growth and it comes with efficient fuel costs. And so it all kind of works together and we are very much focused on driving that this year.

Duane, if I could just maybe slightly more definitive on the issue of industry comparisons and all of that, it’s a competitive industry and I am a competitive guy. And so lest anything else we said, we will always have our eyesight on folks that are maybe at this point in time and sort of performing a little better than us. I will tell you what the most critical question around that is, do you have the potential, do you have the capacity, do you have the ability with your network, with your people with all of that. And one of the things I have seen in the relatively short time I have been here is a tremendous amount of all of those things starting with the energy, excitement of our front-line employees, frankly it’s where it really starts. So at the end of the day, over the long-term, we certainly believe our relative earnings profile will improve and when and how and all that, that’s more than I am trying to get done here over the next few months.

And Duane, it’s right on up-gauging remember that 2016 is a year where there is a dip in that process from 2015. It’s just the cadence of new aircraft orders. That ramps up again in 2017 and continues nicely through 2019.

I appreciate that comment. And Oscar, personally we are all amazed that you are on this call and wish you a continued strong recovery. Just on the network side, I had one question. Please check us on this. But we went back and looked at utilization changes, aircraft hours per day over the course of 2015 and many had a nice year-to-year improvement in that and frankly that was what was driving capacity growth. In the case of United, it looks like utilization was actually modestly down. We assume this is an effort to improve reliability, maybe more spares, can you just talk about it, this is the case and the reasons behind it and if there is any cost opportunity there longer term? Thanks for taking the questions.

Yes. The – one of the things we are driving is our seats per aircraft are going up, so we are driving growth that way. But clearly, as we reinvested in reliability, we want to make sure that the network is driving the right results from the reliability stage. In addition, part of our strategy of growing seats is to lower our stage length, I mean so some of that utilization to drive it an improved network is from a lower stage lengths which is driving block down. So it’s a combination of couple of things, both investment in reliability as well as our network strategy going forward to set us up to grow efficiently.

Thank you.

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 Flightglobal, we have Edward Russell on line. Please go ahead.

Hi, I was wondering if you could elaborate a bit on where you are cutting capacity out of Houston and where you plan to grow in San Francisco and Denver for the network side?

Hi Edward, this is Jim. I think if you think about what we were looking at for Houston in 2016, we are going to grow Houston approximately slightly up about 2%. I think given what we are seeing in the market and as my comments on energy and what’s happening in the Houston hub, we will probably keep that relatively flat for the year. And so that capacity, as we look at places of strength, San Fran and Denver to the East Coast, what we are focused on, to fill in some holes that we don’t serve today, that will be clearly focused on business markets. And you will see the strong commitment in Houston just adjusted slightly to use that capacity in markets that are performing better right now.

Okay. And that’s you are keeping growth in Houston at 2% this year, that’s what – that’s correct?

I am sorry, could you say that again?

You said you are keeping growth in Houston at about – capacity growth at about 2% in 2016?

No, our plan was to grow at about 2%. I think you will see it relatively flat in 2016 given the market.

Thank you.

We have no further questions at this time. Jonathan I will turn it back to you for closing remarks.

Okay. As we are out of time, we will conclude. Thanks to all of you on the call for joining us today. Please call Media Relations or Investor Relations if you have any further questions. And we look forward to talking to you next quarter. Goodbye.