Good morning and welcome to United Airlines Holdings Earnings Conference Call for the Second Quarter 2023. My name is Silas and I will be your conference facilitator today. Following the initial remarks from management, we will open the lines for questions. [Operator Instructions] This call is being recorded and is copyrighted. Please note that no portion of the call may be recorded, transcribed, or rebroadcast without the company's permission. Your participation implies your consent to our recording of this call. If you do not agree with these terms, simply drop off the line. I will now turn the presentation over to your host for today's call, Kristina Munoz, Director of Investor Relations. Please go ahead.

Thank you, Silas. Good morning, everyone, and welcome to United's second quarter 2023 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 10-Q and other reports filed with the SEC by United Airlines Holdings and United Airlines for a more thorough description of these factors. Unless otherwise noted, we will be discussing our financial metrics on a non-GAAP basis on this call. Please refer to the related definitions and reconciliations in our press release. 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 the Q&A. And now, I'd like to turn the call over to Scott.

Thank you, Kristina, and thanks to everyone for joining us this morning. Before I discuss our financial performance for the second quarter, I'd like to first address the operational challenges at Newark at the end of last month. I am extremely proud of the people of United for all they did to recover under very challenging circumstances. Our pilots, flight attendants, gate agents, contact center teams and others went above and beyond to inform and assist our customers in an extremely stressful situation. We are now doing more than ever to mitigate the impact of weather, congestion and other infrastructure constraints at Newark, and frankly, to build a schedule at Newark is more manageable given the frequency of weather events and the very real operating constraints that exist there even on blue sky day. Brett will highlight just a few of those changes shortly. But we have already put them in motion, we’ve already starting to improve the working experience for our people and travel experience for our customers. A bigger picture, this quarter was yet another proof point that our United Next strategy was correct and is working almost exactly as we expected. Over the past couple of years, I've talked a lot about three exogenous constraints facing the industry. But also the fact that those very constraints and challenges are going to set the table for improved financial results for the airline industry. One, pilot shortages; two, supply chain disruptions; and three, infrastructure limitations. At United, we have control over the first two constraints, pilot and supply chain, and we mostly got ahead of the curve and had minimal issues there. But we're probably as exposed or the most exposed to the infrastructure constraint since our hubs are in some of the largest and most crowded airports in…

Thank you, Scott. Thank you to our United team for their hard work this quarter. As Scott mentioned, during the last week of June, we experienced one of the most challenging operational environments in United's history, impacting primarily our largest international departure hub, Newark. Our hub locations make us disproportionately prone to weather and then in the second quarter, weather was particularly challenging, with 25 major irregular operation days accounting for 75% of our second quarter cancellations. Despite this, we are focused on setting United up for success, and being able to recover more quickly in the future. We are implementing a few new initiatives in Newark that will improve our operation. First, we are reducing the total flying in the peak hours to align better with the capabilities of today's constrained operating environment. Second, we expect to have additional gating as we bring the remaining six gates in Terminal A online, two of which are additional wide-body gates as well as make additional tactical changes at United. Third, we are adjusting our schedules to increase our out-and-back flying to limit the downline system impact of any cancellations or delays. Fourth, we are increasing our resources and crew scheduling and accelerating the timeline of our technology enhancements and automation. Lastly and importantly, our partnerships with the FAA and Port Authority are essential to the airline's success. Collaboration and communication amongst these groups has never been stronger. To that end, Scott and our government affairs team continue to remain actively engaged in working with the administration and leaders in Congress to pass an FAA reauthorization bill. Legislation that equips the FAA with the resources, tools and funding they need isn't just essential to the success of our industry, it's among the best investments that we could make for the traveling public…

Thanks, Brett. I'd like to start off today by thanking the entire United team for their hard work and dedication in taking care of our customers, particularly during the final week of the quarter. Our financial results provide proof that our United Next plans are working and that the demand environment remains robust. United finished the second quarter with top line record quarterly revenues of [$14.2 billion]. Total revenues in the quarter were up 17%, ahead of our guidance of 14% to 16%. June was exceptionally strong and was our best revenue month ever. Since the start of June, we've had 13 of our 16 highest flown gross revenue days. TRASM in the quarter was down 0.4% and PRASM was up 2.2% with capacity up 17.5%. International results were exceptionally strong with passenger revenues up 44% year-over-year. International PRASM increased 13.3% year-over-year. Year-over-year PRASM results were strongest in the Pacific followed by the Atlantic and then Latin America. The resurgence of the United Pacific entity has been the most transformative. Margins for our global long-haul flying continued to outpace domestic margins. Our second quarter capacity deployment plans leaned in international flying with 27% more capacity year-over-year, which proved advantageous. International ASMs represent 45.4% of United's 2Q capacity, up 2 points from 2019. Domestic passenger revenues were up 7.8% on 10.5% more capacity year-over-year, largely in line with our expectations at the start of the quarter. Domestic PRASM was down 2.4%, but that was a fantastic outcome as it compares to an exceptionally strong Q2 of '22. We expect similar or slightly better results for domestic PRASM in the third quarter. Our RM setup for the quarter proved to be the right one. We held back seats early in the booking curve, saving them for higher yields and closing bookings, and…

Thanks, Andrew, and good morning, everyone. I am pleased to report that for the second quarter, we delivered the highest quarterly pretax earnings in the United's history of $2.2 billion. Our earnings per share of $5.03 was also an all-time record. And in addition, we produced a record second quarter pretax margin of 15.3%, 3 points higher than second quarter of 2019 and ahead of our expectations. This exceptional performance was driven by stronger-than-expected revenue and lower-than-expected fuel prices. The severe weather at the end of June, which drove multiple consecutive days of strained operations, did lead to a 1 point reduction in capacity for the quarter. We also incurred incremental disruption related costs that weren't anticipated at the time of our guidance. The capacity loss and added costs led to a CASM-ex impact of approximately 1.5 points for the quarter. Excluding this impact, until June 24, we were trending below the midpoint of our CASM-ex range for the quarter, an indication that our core costs remain under control. And for the rest of the year, the operational and scheduling changes that Brett discussed have reduced our full year capacity plans from our prior expectations, and we now expect full year capacity to be up approximately 18% versus 2022. Additionally, our CASM-ex guidance now incorporates an expectation of additional incremental costs in order to address the operational challenges. Specifically, for the third quarter, we expect CASM-ex to be up 2% to 3% with capacity up approximately 16%, both versus the third quarter of last year. When combined with our results for the second quarter and our expectations for the fourth quarter, we now anticipate our full-year CASM-ex to be up approximately 1% to 2% versus last year. However, just like the second quarter, outside of the revisions I discussed, our…

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

[Operator Instructions] The first question comes from Dave Vernon from Bernstein.

So Scott and Gerry, maybe a bigger picture level question for you. We're kind of coming up to $11 to $12 in earnings this year, can you help point out the two or three things that are unique to your strategy that are going to make it possible to kind of grow from that level? And there's a lot of concern about domestic slowing down. There's a concern about peak earnings. I'm just wondering how do we think about sustaining this level of earnings power or even building on it on a one or two-year view, conceptually? Not trying to get guidance for '24. Just trying to think about conceptually what's going to help us kind of build from these record levels of profitability.

I guess I'll start and maybe let Andrew give you some details to follow. But at its core, two to three years ago, we started describing United Next, we started describing the intellectual framework for United Next, what we thought was going to change in the industry. And in particular, we thought that the international market was going to be really, really good because we thought demand would recover. And we were literally the only large airline in the world that decided to keep all our airplanes and actually took more airplanes during the pandemic and grow. That has, in fact, happened. Domestically, we thought that the cost convergence was likely to happen. One, because of inflation, we probably think that two or three years ago, about 18 months ago, we thought that, that inflation was going to drive cost convergence and that the expectations for capacity were going to be unfulfilled because supply chain constraints, pilot shortages and infrastructure constraints. And to fix that particular issue, all three of those things have to come together. It's not enough if you get the supply chain remedied. It's not enough to get pilots remedied. All three of them have to happen. And so kind of from a big picture level, like this is playing out exactly like we thought it would. And it's a fair question. We get the question we've gotten into at least six or seven quarters in a row. And the results just keep getting better because the industry backdrop is getting better, particularly for large airlines that have international exposure and they are at the top of the food chain for hiring pilots and for supply chain issue, which is where United sits. And you further that with United -- so that's the industry backdrop. But United specifically thought this was going to happen, and we made a really big bet on this happening. And the truth is we're the only ones in the world to do that. While everyone else was shrinking and retiring airplanes, we started betting on the growth and getting ready for United Next. And we thought it would play out like this. It is playing out like this. I really am confident that our margins are set to grow 1 to 2 points a year for each of the next -- at least through 2026, and that this is the new normal. Andrew?

I guess I'll add on a few more details. First, I think we're in the really early stages of the United Next plan, and our results this quarter give us a lot of confidence. We're on the right path. But I really look at all the details. And when I look at them all, what I would tell you is, one, the MAX 10 and the A321 are really important to our plan. They're large single-aisle narrow-body jets that everybody knows has superior economics, and we don't have a single one in our fleet today, and that's a gap we will close. We've already increased gauge by 20% since 2019, more than any other U.S. airline and 8 points more than the industry and yet we lead in unit revenue performance. The United network has been under-gauged and we've said that over and over again. And our ability to add low unit cost planes at high marginal RASMs is now well proven and will drive earnings. Larger gauge, of course, gives us the ability to manage our overall unit cost down in a way others just don't have the ability to do, in our opinion, and this again is a unique advantage to us. We think our gauge growth in the coming years will be faster than any of our competitors based on the public [sheet plans] (ph) that are out there. Of course, all of our mainline jets will eventually have a signature interior with seat-back screens and Wi-Fi. These jets have higher NPS scores as a result. These jets also come with larger first class cabins, more economy plus seats. They provide our customers with more options to upgrade and choose their ideal onboard experience while generating increasing levels of ancillary revenues. The pandemic clearly created a boom…

All right, well David, that was a lot, but you can tell we feel confident.

Our next question comes from Conor Cunningham from Melius Research.

On the -- LCCs right now are ramping back capacity [Indiscernible] fare sales. That seems to be out there. So that seems to be having like a little impact on you right now. I'm just curious on what's actually -- what changes the mindset around your unwillingness to match these fares? Or is it premium, coastal? Just any thoughts there would be helpful.

Well, that's largely a domestic question. And I think our domestic environment has done well. As you know, in Q2, we really just hit it right on the head in terms of our guidance for the domestic entity. And in Q3, our performance looks to be very, very similar. So we're pretty pleased by how Q3 is setting up. I just think with where we are with our brand, our network, our upgauge, we're carefully from an RM point of view, determined in our policy. And as we started Q2, we decided to hold out and book later in the curve. I think that proves right. And as we go into Q3, I think this guidance would tell you that we don't see a change. So I'm sure there are other things happening in the environment that are both positive or negative. But we don't see a change in the Q3 environment of down a little bit for domestic PRASM is entirely consistent with the Q2. And so we don't see a change, and we see steady and strong demand.

And then just on the international landscape, you obviously are taking a huge advantage there. Just curious on what's next for the Atlantic. Are you comfortable with that network? And then just on the Pacific build-out, there seems to be a lot of upside there. I'm just curious on your expectations for that fall launch.

Sure. I think that's a really good question. Look, what I would tell you is our international RASM in Q2 and profitability was well above even our very lofty expectations from April. As we head into Q3, the year-over-year comparison is different than Q2. And during Q3, most of the world was already easy to travel to. Where in Q2 '22, travel was still limited. And that will make a difference in our year-over-year comps. When we compare versus 2019, it's easy to see that Q3 is tracking very, very close to Q2. So it looks really good. So not unlike domestic, we go into Q3, expect an amazing performance but tougher RASM comps year-over-year and RASMs that are roughly flat. Profitability is going to be amazingly strong. Latin America is going to be the weakest. But to your question about the Atlantic, it looks really good, particularly demand to Southern Europe. And that's motivated to a lesser extent our seasonal flying to Southern Europe well into Q4, which we didn't normally do. But as you can imagine, and again, to your question about the Pacific, given our announcement earlier this week, on adding four new Trans - direct routes this fall, you can imagine we're most bullish on Asia. As a result, we moved capacity into the Pacific, including our first-ever nonstop flight from San Francisco to Manila, a third daily flight to Hong Kong, the second daily flight to Taipei, and we're resuming our L.A. Narita flight. We also expect that Japan is going to remain strong well into 2024 as it did not fully reopen until this spring. So in summary, we see - Asia is going gangbusters, and we're really happy with where it's at, and we've leaned into it. And overall, for international exposure, what I can tell you is we were -- in Q2, we were up 2.3 points in terms of percent of international ASMs of the company versus 2019. And in Q4, we're going to be up 3.1 to 3.4 points to show you how much we're leaning into the global long-haul environment because that's where we think the revenue is right now.

Our next question comes from Catherine O'Brien from Goldman Sachs.

Can you help us think about the total impact of operational issues at the end of the second quarter into the third, plus the impact of the changes you're making to shore up operations going forward? Like what that is to third quarter and full year EPS outlook? It sounds like the 1 to 2-point headwind to CASM is all tied to this. But just wondering -- correct me if I'm wrong there. I'm just wondering if you can you take into account any revenue impact? I'm asking mainly is because of the move in the full year midpoint EPS is a bit smaller than the 2Q beat. So I would just love to get some color.

Hi, Catie, let me take a crack at that. So let me talk first on the cost side, where -- what you saw us do for the second quarter, third quarter full year is adjusted CASM entirely related to the operational disruptions, which is why I wanted to emphasize that costs aside from that, our core costs are trending right in line with our expectations. So the variance versus our prior guidance is all attributable to this. So the way to think about it is about 1/3 of that CASM variance is related to the actual incurred costs from the disruptions and 2/3 just related to the capacity adjustment. The overall impact in the second quarter versus our forecast prior to June 24, I would call it about 1 point of margin is what we lost in the second quarter because of the events. And we've incorporated our expectation on lower capacity in our EPS guidance for the third quarter and full year. And so it's fair to say that -- but for those adjustments, our guidance for the full year of top half of the range, yes, it could have been a little bit higher because of those changes. But that's the way to look at it.

That's really helpful. And then maybe one for Andrew. Can you just walk us through some of the assumptions you're making underlying the view that domestic RASM performance is steady or better 3Q versus 2Q? What's the corporate assumption? And really just asking because that's different from what some of your peers are expecting. So just wondering what's unique to United that that's going to hold in a little bit better than some others are seeing?

Well, I won't go through my long list of what's unique to United, again, I think that may be a little bit too much. I would love to, but look, we're looking at the numbers for Q3. What I would tell you is that there's clearly been some shift out of Q3 into Q4. October is, I think, setting up to be a stronger month of the year than it was in 2019. And June is now the strongest month of the year itself. So that is causing some shifts in seasonality and margin, I think, for United and for the industry. But overall, we just -- I think we have a really good setup. Our international system is just performing outstandingly. There's not like a single part of the globe, a single part of the network that's not working. And we've leaned into it really strongly. And I think that's shown up in the results. And on the domestic front, I think this is just -- we have the right aircraft in the right places. New York City, in particular, is doing dramatically better than it had been in the past for us. So we're really pleased by that. And all the hubs, as I said, are profitable and performing well. So we just think very good capacity plan and a really strong environment.

Our next question comes from Ravi Shanker from Morgan Stanley.

So just to kind of follow up on the July 4 disruptions. I don't know if it's a fair question, but are you able to quantify kind of what percentage of the disruption was sort of in your hands or factors within your control versus like what was fostered upon you, if you will, or externally imposed? And also kind of in the near term, it does make sense to draw down capacity, but kind of what is the long-term plan to make sure that Newark serves as an effective hub for you?

Well, first, most important thing is to get Newark working effectively. And we've done some tactical things at United already. We've got some more changes that are coming that are in the schedule that are kind of embedded in the cost that Gerry talked about. But I think the biggest thing that has happened in Newark just this month is a level of communication, coordination with the FAA is the highest it's ever been. That does it was planned. And our thunderstorms are tough. And if there's thunderstorms, they close departure routes in an airport, you're going to be canceling all flight. But if you can plan in advance and not have airplanes in the air, you wind up not having to divert airplanes. And that's where you get in trouble as we have to do that. And the best stat to me is, this past weekend, our team would tell you that the weather in Newark was worse than it was that last week of June. But because we were closely coordinated with the FAA, we had advanced planning. We had to cancel a lot of flights while the weather was over Newark but we were able to immediately start the recovery as soon as the weather was passed. And in total, we canceled 77% fewer flights. And so Newark is going to always be a difficult airport. It's got two parallel runways, 40 departures on one runway, 40 arrivals per hour on another. That's a flight every 1.5 minutes. It's about the most we can do. And it's in the most crowded airspace in the world. But I feel really good about where we are and where the FAA is with us on getting the most out of Newark when those events do happen.

Understood. And then maybe as a follow-up, I think it was mentioned earlier, and I agree that your comment on 3Q PRASM domestic being flat to up slightly is a pretty differentiated message from your peers. Do you have enough visibility into what 4Q might look like relative to 2Q?

We're not going to give guidance for Q4 today. And look, what I'll tell you is that and I already hinted, October, I think, is seasonally strong relative to 2019. We spent a lot of time refining our third quarter forecast. We're obviously already at the top half of the range, and we look forward to refining our Q4 forecast, but we're not going to do that today.

Our next question comes from Jamie Baker from JP Morgan.

Thorough conference call thus far, just a couple of quick ones for Gerry. The comment on free cash flow for the year being inclusive of the AIP. Just to be clear, you're including retropay not merely wages and work rules?

We're including all cash going out the door, Jamie.

And second, your profit-sharing formula isn't harmonized across working groups, at least not yet. If we think about the third quarter earnings guideposts or goalposts, excuse me, can you give us the approximate blended rate that you are using?

No, Jamie, that's -- we can't right now because it really depends on the forecast. We can help you and anyone else offline with your spreadsheets on how to think about how profit sharing might best be sort of incorporated if you want.

Our next question comes from Scott Group from Wolfe Research

Sorry about my voice. Hopefully, you guys can hear me okay. Just to clarify just that last question. Is it -- I know you're not giving a number, but is it right that there's a pretty meaningful step-up in profit share from Q2 to Q3?

Scott, all we can tell you is that all profit sharing that we expect are incorporated in our full year numbers. That's the best way to look at it.

I'll follow up with you offline, Scott…

Fair enough. And then -- just -- I know it's early, but how are you thinking about overall capacity growth for next year, domestic versus international? And then is there any way to just think about some of the puts and takes for CASM for next year?

Sure. Let me answer that. It's very early in the planning process. So this is all very preliminary. But we do know about some of the headwinds and tailwinds that we're going to see as we start putting together the plan on the cost side. Headwinds would include the full year impact of the labor contracts and contractual increases. Inflation, which, by the way, what we're seeing now is a moderation in inflation. We've got constraints on growth due to infrastructure. And one of the big ones, and you'll actually see when we file the Q our expectation for aircraft deliveries next year. Back in December, you may recall when we announced the wide-body order, we gave some multiyear expectations on deliveries and CapEx. On the narrow-body side, now that we're that much further in, we have a -- what I describe is a clear expectation on aircraft deliveries. I think for the total, including eight 787s, about 110 aircraft next year. That's down from what we showed you in December. But by the way, if you recall, that CapEx number of $11 billion for next year we had in December, just counting aircraft, that's going to be closer to $9 billion and $11 billion of CapEx, a good guide, particularly when we are looking at free cash flow for next year. But bottom line, I would say that with a variety of tailwinds we have as well, which would include improved utilization, improved productivity as our junior workforce begins to gain some experience. Putting it all together, right now, six months ahead of next year, I would say we're targeting high single-digit capacity growth, and in that context, targeting flat CASM-ex for next year. But much more to come as we get into the planning process.

Our next question comes from Duane Pfennigwerth with Evercore ISI.

So I agree with your differentiated bet on international recovery, you're winning the jump ball this summer, winning customers in summer 2023. A question would be, how do you think about keeping those customers as international carriers restore their capacity over time? What investments are you making to keep those customers beyond just metal, especially when we think about periods of operational disruption.

Well, I'll start, maybe Scott wants to add on to it. First of all, we think there's just been a structural change in the international capacity relative to GDP that's very different from 2019, and it will take years of changes of fleet growth by the industry and us to actually make that change. So there's nothing that we see that's really going to change the structure back to what it was pre-pandemic, anytime soon, if ever. So it's a really good reset of the ball. We're investing a lot in our product. We actually -- we talked about the elimination of the old business class seats million times at United. Well, as of today, we are only flying the new Polaris seat on all of our wide-body jets all over the world. So I think that's a lot of progress. And we continue to focus on the customer and doing the right thing on high-speed WiFi, you name it. And I think our brand is better and better positioned to compete not only here in the United States but around the globe with an award -- just leading partners in every part of the world recently adding Virgin Australia in the South Pacific, which is new and very helpful to our growth down there, and of course, Emirates in the Middle East for that region of the world. So we've set this up really well, and we are confident that the international environment is our strongest long-term opportunity. We have a lot to do domestically in the short and medium term as well, but the international environment is really set up well.

And just a quick one for Gerry. Can you speak to how much sale-leaseback activity you'd expect to utilize this year? And can you just help us bridge, just remind us what's the difference between net CapEx and an all-in gross CapEx?

Yes, I'm just trying to add together the sale-leasebacks we're doing. It's probably 20 or -- 20 to 30 aircraft. Keep in mind, we use sale-leasebacks just as another form of financing, where even if it's a sale-leaseback, we're going to maintain control over that aircraft for its remaining useful life. And net CapEx, meaning CapEx net of financing or what you're asking there?

Just the guidance is a net CapEx guidance. So how would that CapEx guidance compare to just the value of the fleet that you're bringing on?

No, it’s $8.5 billion total CapEx. Yes, it's gross.

Our next question comes from Helane Becker from TD Cowen

So lately, we've been seeing a lot of articles about pilots refusing to move from the right seat to the left seat and being short captains. And that's something that existed for the regionals. But I didn't -- I was surprised to see it exists for major airlines as well. And I'm just wondering if the new contract addresses that and how you think about having enough captains to fly what you're intending to do?

The short answer is, yes, the new contract does address that. It is also -- it's interesting, it's the first time that I've ever known it to happen in the airline industry. And it's one of those interesting artifacts of so much growth at United. In the past, you spent 10, 12 years sometimes before you get your first shot at captain. If you didn't take it on the first shot, it might be another five or six before we came around again and so everyone took it. But now our pilots have enough confidence in the future, I think, as they should in that they can wait and let their seniority go up a little more, which helps the quality of life. And so we have had not as many captains as we’d hope upgrading. It hasn't affected capacity yet. It is going to impact capacity in the fourth quarter. That's all in our numbers, by the way, already. But the good news is the contract, I think, fixes that. It depends. I'm not sure how long we do we get 100% back. I think it will be the second half of next year. The union leadership thinks it will be a lot faster than that. But somewhere in that timeframe, we'll get back to a full level of captains. That's a transitory issue that's already in our numbers, but we're on a good path. And the one data point I have is our first captain -- our most recent captain gate closed last night, and it was meaningfully better, and they haven't even seen the new country yet. They just know that there is direct. It's already made a difference. And this is a unique issue that will be in the rearview mirror sometime next year.

That's very helpful. And then my other question is kind of unrelated. The app that allows people where you're -- I guess you're pushing meal vouchers or hotel vouchers or whatever to customers, how does that figure into your costs? Like how do you know what the impact of those that -- I don't know how to ask the question -- of that technology. Like how do you figure out the impact of that on operations by pushing to customers rather than making them, I guess, go to a gate agent for a voucher?

Hi, Helane. This is Linda Jojo. I think the way to think about these vouchers is it's a more customer-friendly way and a more efficient way for our operations to deliver to them what they would already get. So this is more about letting our agents be able to serve other aspects of the disruption versus this piece and making it much easier for our customers to actually receive them.

Helane, just as a reminder, that kind of cost, which improves customer experience is also in our guidance.

Our next question comes from Sheila Kahyaoglu from Jefferies.

I wanted to ask about margins that you guys alluded to in the opening remarks. Just great performance. Obviously, domestic margins in Q2 return to 2019 levels, while international remained above 2019 levels. I guess on a comparative basis, can you let us -- give us an idea of the delta between the two today and how you think about it longer term? Does it reach equilibrium? Is there international runway from here?

I'm not going to give you the exact number. I'm going to say they are well above domestic margins, and we expect for this cycle for them to remain well above domestic margins. So look, our domestic margins are very solid, too. So I don't want to say anything too negative about that. I think international is just performing really well because of the structural change that happened during the pandemic.

We will now switch to the media portion of the call. [Operator Instructions] The first question comes from Alison Sider from The Wall Street Journal.

Scott, could you say anything about what crossed you to take that private flight during the operational problems at Newark, like what was so urgent? And then if you've had any kind of conversations or feedback or consequences from the Board since then?

It was a mistake. And the best thing I learned at the Air Force Academy was to say no excuses sir or no excuses ma'am in this case and move forward, and that's we'll do here.

Our next question comes from Mary Schlangenstein from Bloomberg.

Can you guys put a full dollar value on the cost of the Newark disruptions like a dollar value of lost revenue or the cost? And are you also providing figures at this point in terms of how you're adjusting the flight if you're cutting flights by 5% or you're cutting 30 flights a day or whatever. Can you provide more specifics on that?

Let me just talk about the financial impact first. So as I mentioned earlier, that disruption effectively cost us 1 point of margin in the second quarter.

In regards to the flights, our summer schedule normally is about 435 flights per day. In August, we expect our schedule to be well below 400, somewhere in the -- I think, the 390 range.

Our next question comes from Leslie Josephs from CNBC.

Can you just repeat a bit on Newark, you were going from 435 planes per day to 390? I just go over like the two in the firm and the cut and does it go into September? And then broadly, just considering all the weather that we've had in Newark, are you considering pulling back from that hub this year, next year and then maybe over the coming five years, how do you see Newark in your strategy?

Sure. Let me five it a try. The normal schedule in Newark in summer, which has been the same schedule for many, many years pre-pandemic is about 435 flights per day. This summer, we are scheduling about 410. And this August, we're going to bring that down to 390. We are in constant conversation with the FAA about Newark and its overall ability to handle capacity, and we're going to work collaboratively with them to try and figure out the overall level of flight activity. I expect that level of flight activity will be down from our traditional 430 flights per day in the summer until we can come up with a creative solution to the constraints that we're all facing there. So hopefully, we will return to that bigger schedule in the future. But for next summer, I do think that we will have a smaller schedule, and we will operate a reliable schedule, and we're going to do that in cooperation with our partners at the port and the FAA and the Department of Transportation to make sure that we get it right for all of the customers that fly in and out of Newark and New York City.

I will now turn the call back over to Kristina Munoz for closing remarks.

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

Thank you all. This concludes today's conference. You may now disconnect.