Jul 21, 2021
Operator
Good morning, and welcome to United Airlines Holdings Earnings Conference Call for the Second Quarter 2021. My name is Brandon, and I'll be your conference facilitator today.
Following the initial remarks from management, we will open the lines for questions.
Kristina Munoz
Thanks, Brandon. Good morning, everyone, and welcome to United's second quarter 2021 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 expectation.
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. Also, during the course of our call, we will discuss several non-GAAP financial measures.
For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to the tables at the end of our earnings release. Joining us on the call today to discuss our results and outlook are Chief Executive Officer, Scott Kirby; President, Brett Hart; Executive Vice President and Chief Commercial Officer, Andrew Nocella; and Executive Vice President and Chief Financial Officer, Gerry Laderman.
In addition, we have other members of the executive team on the line available to assist with the Q&A. And now, I'd like to turn the call over to Scott.
Scott Kirby
Thanks, Kristina. Good morning, everyone, and thanks for joining us today.
It was great to see many of you in person at our United Next event last month in New York. And personally, it's been great to be back out on the road during the quarter, talking to employees and customers and hearing anecdote after anecdote about how great it is to be back traveling.
Thank you also to all the people of United Airlines for all that they did to take care of our customers and each other through the crisis and for all that they're doing now to really and truly change the customer experience at United Airlines.
Brett Hart
Thanks, Scott. I want to start by congratulating the entire United family on our expected return to profitability in the second half of this year.
United teams worked towards this milestone of achieving positive adjusted pre-tax income for over a year and could not be more proud. During the second quarter, United continued our work to make the travel experience safer and more convenient for our customers.
We recently made new enhancements to our already industry-leading app to allow customers to schedule COVID-19 tests and have results directly verified through the Travel-Ready Center platform within the United app. In May, we announced a first of its kind collaboration to use Abbotts COVID-19 home tests and app to enable our customers to self-administer a rapid antigen test and use the verified negative test result to board an international flight to the United States.
As borders continue to open, we're working to make the return to international travel as convenient as possible for our customers. These initiatives make us uniquely ready to facilitate international travel and further position us as a leading international airline in the U.S.
In addition, we recently launched our “Your Shot to Fly” sweepstakes, working effectively with the Federal government to creatively encourage people to get vaccinated and ultimately get back on planes again. We feel optimistic from the recent progress among European countries allowing U.S.
tourists to enter the various vaccine and testing requirements. Countries such as Iceland, Croatia, Greece, Italy, France and Spain, have all began accepting U.S.
travelers for the summer tourist season. And we look forward to more destination options for our customers in the coming months.
We continue to encourage the Biden administration to open up international travel and appreciate the bipartisan as well as industry support to ease international travel restrictions. Andrew will detail further the demand surges we've seen to countries once restrictions are loosened gives us even greater confidence regarding the long-term outlook for international travel.
On the domestic side, all states have reopened local economies and removed travel restrictions enabling the surge in domestic leisure travel that we are currently seeing. We remain focused on United's transformation to be the airline customers choose to fly.
We have already eliminated change fees. And with our new aircraft order, we will improve the customer experience.
We're adding feedback entertainment all of our aircraft, improving Wi-Fi and innovating with customer-friendly technology like ConnectionSaver. We saved over 140,000 connections in the second quarter.
Andrew Nocella
Thanks, Brett. I'm going to start off today by thanking the best commercial team in the business.
Our combined efforts and agility over the last 18 months led us to this moment today, announcing the generally positive TRASM and PRASM and yield outlook for the second half of 2021, something hard to imagine just 12 months ago. The revenue outlook is allowing for a much improved and profitable financial results on an adjusted pre-tax basis for the second half of the year.
And Gerry will talk about that in just a bit. Our realistic view of the pandemic's impact on our business and industry was sometimes questioned.
However, a realistic assessment from day one combined with capacity corresponding to real demand, not what we hoped demand would be for the keys and prepared us for what comes next.
Gerry Laderman
Thanks, Andrew. Good morning, everyone.
For the second quarter of 2021. We reported a pre-tax loss of $600 million and an adjusted pre-tax loss of $1.6 billion.
Our adjusted EBITDA margin for the second quarter ended down 10.7% in line with our prior guidance, with our adjusted EBITDA margin a positive 9% for the month of June. Our adjusted operating expenses for the second quarter ended down 32% versus the second quarter of 2019, which was slightly worse than prior guidance of down 33%.
The entire difference though is attributable to greater fuel consumption, higher fuel prices, as compared to what we anticipated when we provided second quarter guidance. All of our other costs came in as we expected, giving us continuing confidence in our ability to achieve our near-term and long-term cost targets.
As previously noted, as the demand environment continues to improve, we expect to generate positive adjusted pre-tax income in the month of July. In fact, as we have said we expect to generate positive adjusted pre-tax income for both the third quarter and fourth quarter this year.
Despite business and long haul international demand not being fully recovered, we are pleased that our return to profitability is expected to occur well before prior expectations. And we anticipated another step function improvement once business and international demand fully return.
Turning to our outlook on costs, we expect our third quarter CASM x to be up approximately 17% versus the same period in 2019, with capacity down 26% versus 2019. To put the CASM x number in perspective, while capacity may be down 26%, we are not simply flying 26% less of the same network given our current international domestic mix, where we are currently flying more short haul domestic flights and combined with the temporary grounding of our fleet of prep power with 777 widebody aircraft.
This has created an incremental 6 points headwind to our CASM x because of lower stage length and lower gauge versus 2019. Our cost outlook additionally includes investments necessary for future flying, such as training and maintenance costs.
On the positive side, embedded in this outlook is also the early success from our $2 billion structural cost savings plan. We expect CASM x will better represent our true cost performance once our capacity reverts back to 2019 level and when the network begins to be reshaped with our United Next plan, and we achieve the full implementation of our cost initiatives.
We are currently in our 2022 planning process and that we won't share details today, we feel confident that our 2022 CASM x will be lower than 2019. We expect that our 2022 outlook demonstrates substantial progress towards hitting our long term CASM x target of down 4% in 2023, and down 8% in 2026 versus 2019.
In addition to the structural cost reductions, our United Next targets are enabled by our recent announced order for 270 new narrowbody aircraft, which when added to our existing order book, provide them with 500 narrowbody aircraft on firm order. We expect 191 of these aircraft to be delivered through the end of 2023.
And for those of you in the aircraft financing community, this includes 13, 737 MAX 8 through the remainder of this year 20 MAX 8 and 20 MAX 9s in 2022 and 56 MAX 8, 16 MAX 9, 50 MAX 10 and 16 A321 NEOs in 2023. Regarding capital expenditures this year, we currently expected adjusted CapEx for the full year to run about $4.5 billion.
This assumes we take delivery of all 8, 787-10 aircrafts scheduled for later this year. With Boeing's recent announcement regarding delays in delivering 787, it is possible to some of these aircrafts and the related CapEx may slip into next year.
In closing, our expectation for adjusted pre-tax profitability in both the third and fourth quarters represent a milestone that the entire United family has worked towards the beginning of the pandemic. Gone are the days of talking about empty aircraft, cash burn and job losses.
We have now shifted our focus fully towards the long-term path for United Airlines and the United Next plan. We believe our achievements throughout the crisis fully prepared us to execute on our plan to both maximize earnings power and be the airline that customers choose to fly.
And with that, I'll hand it over to Kristina to start the Q&A.
Kristina Munoz
Thank you, Gerry. We will now take analyst questions, please limit yourself to one question and if needed one follow up question.
Brandon, please describe the procedure to ask a question.
Operator
Thanks, Kristina. The question-and-answer session will be conducted electronically.
And from Raymond James, we have Savanthi Syth. Please go ahead.
Savanthi Syth
Hey, good morning, everyone. Your 3Q revenue guide is very strong and both relative to 2Q and compared to one of your peers.
I was wondering, what factors are driving that strength and what assumptions you are building in for that business demand recovery? Thanks.
Andrew Nocella
Hi, Savi, it’s Andrew. Good morning.
What I’d say about our guide is that, when I said this, I think over the last few conference calls that, in particular, our coastal hubs have really suffered during the pandemic, traffic goes down. And those hubs are a lot more than mid-cons and small community -- mid-con hubs and small communities around the country.
We really see an acceleration in demand now, out of those hubs, including leisure and business for domestic in particular, which is really great to see. And it goes to say again, that those headwinds, which were so significant during the crisis, are going to flip to tailwinds for United and provide us, I think, a lot of opportunity kind of going forward.
A little more color, for example, Newark in Q2 of this year. So it was really our worst performing revenue hub.
And we expect Newark in Q3 to be one of our best to give you a little bit more color on what we're seeing there. So there's a lot more to come.
I think I'm really excited about this, because these headwinds were just so significant during the crisis and I think there'll be tailwinds as we come out of the crisis.
Savanthi Syth
Andrew, just a follow-up, too, just it seems like you did a lot better job of also kind of tilting towards leisure EFR lately, maybe not similarly at some other airlines. But just wondering, what mix of those new markets or capacity remain on as things normalize and just really trying to understand if there's an opportunity here to change the seasonality of the network?
Andrew Nocella
Excellent question, and thank you for the vote of confidence there. I'm sure our scheduling folks really appreciate it.
We did, as I would say, tilt our capacity towards more leisure-oriented markets during the crisis. And we continue to do so and will do so for at least the rest of this year.
And tilting of those ASMs towards more leisure-oriented markets, I think, has helped us during this recovery. To the extent, we did that better than others.
I think our revenue forecast will be better than others. And so we're pretty proud of that.
We do intend to keep a bigger footprint in these leisure markets going forward, in particular, Florida, where United was undersized. And that undersizing had led to Q1 results for United that could seasonally trail others.
And we're hopeful that on the other side of this crisis as we rebuild the airline and we rebuild the network, we're going to build this better. And we're going to be a bigger player in these leisure-oriented markets in the Q1 time period than we have historically been.
Operator
And from Bank of America, we have Andrew Didora. Please go ahead.
Andrew Didora
Good morning, everyone. Just really kind of a follow-on to Savi's question on revenues.
Maybe Andrew, can maybe talk about how the booking curve has sort of changed over the course of 2Q now into 3Q, I would assume you have a lot more visibility today in terms of your 3Q revenue outlook as compared to back in April? And is there any color you can maybe give us in terms of what percentage of your anticipated 3Q revenues are already booked right now and how that compares to normal periods?
Andrew Nocella
Sure, everything is starting to return to normal, which is great to see. So right now, about 60% of our revenue for Q3 is on the books.
And we have, obviously, I think really good visibility in July and August. And, in particular, I'd say August looks really quite good.
September, we have less visibility into, but we still feel very bullish about that as business traffic returned. So overall, things are returning to normal.
The booking curve isn't exactly normal yet, but it is quickly getting there, particularly from the domestic point of view. So hopefully, that takes care of your question.
But again, about 60% is booked. And I'll also add that we do expect positive PRASM in all three months for the domestic entity for the quarter.
Andrew Didora
Got it. That's helpful.
And then, Gerry, you called out the CASM impact from the stage engaged differentials here in in 3Q of the 6 points. Should we think about that as a similar impact on TRASM as well?
Gerry Laderman
Yes. Stage and gauge, obviously impact all those stats.
So there is going to be some impact as well on TRASM.
Andrew Nocella
I will add. There is -- the dilemma we faced from a capacity point of view is the 777 aircrafts that are grounded are large capacity domestic movers.
And we used those for Hawaii and hub-to-hub. And so right now, we're flying well below where we like to be in Hawaii.
And it goes without saying that Hawaii is an incredibly strong part of our network. And so we would have absorbed that and I think we would have still done very well in Hawaii, even with those extra seats.
So we are really disappointed, they are missing. And then, domestically, within the continental United States on the hub-to-hub missions, where our load factors are just off the charts, we are, the simple way to describe it is like clog in the system because we don't have enough gauge between our hubs to flow the appropriate number of passengers over them.
So we really want those aircraft back. And we think those aircraft are really important to our CASM.
But they also unlock, at least right now in Hawaii better results and they unlock a lot more connecting traffic through our domestic system. So hopefully, that gives you color as to how we think it impacts CASM as well as TRASM.
Operator
And from JPMorgan, we have Jamie Baker. Please go ahead.
Jamie Baker
Hey, good morning, everybody. So Scott, kind of a follow-up to a question I asked you in New York with the event a couple of weeks ago.
I noticed that bad things seem to happen to the industry every 10 years or so. So as it relates to the 2026 guide, it looks like we're probably in the clear.
Anyhow, the follow-up here…
Scott Kirby
That’s a definitely glass half-full perspective.
Jamie Baker
So you have these financial targets. You have your largest aircraft order in history.
If we do hit some sort of a speed bump, do you sacrifice the targets? Or do you adjust the CapEx and the delivery schedule?
Basically, is the order book sacred? Or is it a lever you can pull to protect the financial targets just trying to better understand the priority there?
Scott Kirby
Well, I’d like to let Gerry start.
Jamie Baker
Okay.
Gerry Laderman
Yes. Jamie, as we said at that event, certainly starting in 2024, we have enough flexibility in the order book to be able to adjust based on what the macro environment would dictate.
So that's a decision we can make as we approach the later years of it.
Scott Kirby
And I just would add also that we -- I think we've created a track record and it is certainly true that we are committed to target. When we put targets out there, we're committed to achieving those targets and we're going to achieve our 2023 and 2026 targets.
And if that requires adjustments in the plan one way or another, we'll make adjustments to make sure that we achieve those targets.
Gerry Laderman
And Jamie, yes, one of the nice things about this order as well as our fleet that has some aircraft, as you know, that are aging, simply replacing those aircraft and not doing anything out, helps us with gauge which helps us with those targets.
Jamie Baker
Okay, that's helpful. Thank you both.
And then, just a bit of a modeling question. There wasn't a huge change in fuel efficiency, just looking at $0.08 per gallon from the first quarter to the second quarter.
I mean, a little bit of an improvement. But with more international turning on in the current quarter, can you give us some consumption guidance, fourth quarter as well if you happen to have it.
Gerry Laderman
Jamie, I can give you a precise number right now, but keep in mind just given the mix with a higher proportion of regional flying by definition as -- the widebodies come back and become a -- revert back to normal that will help the fuel efficiency.
Operator
From Goldman Sachs, we have Catherine O'Brien.
Catherine O'Brien
So maybe one more on cost, as we move to unit cost being down from 2019 levels next year, outside of capacity, what are the other tailwinds we should be thinking about? I know, you called out the 6-point impact from gauge and the 777 grounding.
But outside of that, or are there some ramp up headwinds today that we should think about abating as we move into the fourth quarter in 2022. And just any color on the size of that impact?
Thanks.
Gerry Laderman
I think the most significant tailwind actually aside from gauge and stage length kind of reverting back is the ramp up of the structural cost saving. So if you want to model something right now, we'll give you some more color as we finalize '22.
But right now, you could model that about half of those savings are in our numbers for the rest of this year. And then starting in 2022 early in the year, first quarter, let's say that 80% ramping up to 100% by mid-year.
So that's probably the most significant tailwind I can think of, as we normalize the business.
Catherine O'Brien
Okay, great, that's really helpful. And then, one maybe for Andrew, throwing it back to 2020.
In February 2021, you got the Chase extension you entered into, I believe at the time of the announcement, you noted a drive 400 million increase in annual cash and when we were about to get some more details on that, and then COVID hit. So we didn't really -- I don't remember getting a timeframe for one you hit that.
I'm guessing the pandemic maybe hit pause and the ramp up. But can you give us some color on what portion of that uplift, you've seen flow through your P&L to-date and how you expect that to trend over the next year or two?
Thanks.
Andrew Nocella
Yes. Definitely everything has been interrupted by the pandemic, although, we have seen recently, where are our numbers are now equal to or greater than 2019.
So we're pretty excited about that. With our new agreement with Chase was effective then and it's impacted in our everything we do here in our financials already.
But the real, I think the real value in this is our working relationship with Chase is just incredibly good right now. And we're coming up with all creative ideas, new products, and that's fueling the card growth and the new number of cards we're putting out there and spend on the historic cards.
So that's maybe not every answer to the question you'd like to hear. But what I would say is that the relationship has gone well, which gives me great faith that we're going to hit the targets we put out there.
I don't have the exact timeline as to when that will happen. It was clearly interrupted by the pandemic, but we're back on course.
Operator
From Jefferies, we have to look Sheila Kahyaoglu.
Sheila Kahyaoglu
So maybe, it seems like capacity additions are coming back at a faster rate. And I appreciate the coastal hub.
Can you maybe provide a little bit more color around CASM x below 2019 and 2022? What are your assumptions around capacity and maybe mix of international and domestic?
Gerry Laderman
So it's still a little early to give you the capacity guidance, we will do that in the normal course but I can tell you, just given the size of the fleet, as it stands today, we expect 2022 capacity to be higher than 2019. But we'll give you more precise numbers in the normal course.
Andrew Nocella
I think with the incremental widebody jets that we have available, along with our expectation about what the transatlantic market is going to look like next year, it wouldn't shock me that we see international growth faster than domestic growth for next summer.
Sheila Kahyaoglu
Yes. I guess on that note, somewhat related to that big picture, you mentioned in your prepared remarks, on the international side, you're one of the carriers that have kept your widebodies going.
So that supply/demand picture might look more attractive as international comes back. But domestically, what we're seeing as low-cost carriers are doubling their fleet or expanding their fleet substantially, as you guys are to and increase engage, how do you think the supply/demand picture plays out through 2026?
How do you think United is positioned with that?
Andrew Nocella
Well, I'll just go back to our United next plan, where I think we thoughtfully talked about all the details there. We are working to make sure that we build our connectivity, our schedule, depth, and most importantly, our gauge.
And we think those factors along, of course, with our customer focus are really going to drive our profitability in really unique ways relative to many of our competitors over the next few years in industry, where we absolutely expect elevated domestic capacity growth for everybody over the next few years. So we feel really good that we've identified this, we've articulated a way to manage it here at United together from a revenue and a cost perspective and a customer perspective to make sure that we can meet the targets that Scott laid out in New York a few weeks ago, and he laid out in just a few minutes ago here.
Operator
From Wolfe Research, we have Hunter Keay.
Hunter Keay
Do you think that investors, Scott, should just ratchet down our permanent expectations for pricing power for this industry?
Scott Kirby
No.
Hunter Keay
Why not? I mean, it's so clear that the market puts multiples on the industries that can price and the decision to deflate pricing and outrun it with lower CASM.
It's hard to see why that makes sense, when it is such a clear track record for this industry works is when they're pushing price. And look what he just did right now with the yield performance, not suggesting you're going to be down 25% forever, but I'm sure it was pretty satisfying to be able to push that price.
Scott Kirby
First, I disagree with the premise of the question. And look I recognize you've got a perspective respect that.
But we had a pretty good track record in 2018, 2019. I think it was your research report to pointed out we grew EPS by 74%.
This is in a large degree a continuation of the strategies is working well, with the improvement. I think that we're really focused on decommoditizing air travel and getting customer choice.
So it's about far more than growth. But even the 2018, 2019 plan was working.
It is in your research report. It seems like the best evidence that we can do this without disinflating, I think was the term you used.
I'm confident that we're going to do that, I'm particularly confident that when you take the mix of what the international market is going to look like and the percentage of our revenues, combined with I think our ability to decommoditize travel domestically that our targets for 2023, 2026 are arguably conservative and that's going to ultimately be good for our shareholders.
Hunter Keay
Okay. Yes, thanks for the time, Scott.
I don't want to be disrespectful here. I'd appreciate the conversation.
A quick modeling question for you, too, I have you, Gerry. Should we assume that the SWB CASM is going to be in ‘22 and ‘23 above or below 2019, if you are willing to help us out with that?
Kristina Munoz
I'll follow up with you offline Hunter.
Gerry Laderman
Sorry. No, we'll get to those numbers.
Operator
From Cowen and Company, we have Helane Becker.
Helane Becker
So kind of a different question. You have an open contract with your pilots.
And I know you have the letter agreement to agree to the differentials, so that you are able to ramp up as the recovery occurs. Can you just talk about how you're thinking about entering those negotiations again?
And I don't know whether it's 2021 or 2022. But when should we think about that contract again?
Brett Hart
I think part of the underlying premise of your question also points out that we, obviously, we've had a really good working relationship with our pilots throughout the pandemic, work hand in hand with them. And at the end of the day, we are confident that we do get to an agreement, that will be one of the work for our pilots, and for the overall company.
But as you can, I'm sure appreciate -- we don't get into discussing the specifics of our discussions or negotiations or the timeframe for reaching agreements in public or on earnings calls. But I appreciate the question.
Helane Becker
Okay, well, that's helpful. Thank you.
Just the other question is, as we think about the improvements that you're talking about, and efficiency, I don't know, Andrew or Gerry? How should we think about it, like working through the next 2.5 years?
Are you just going to give us guidance every quarter for how we should think about those deficiencies? Or is there some number beyond minus 4% in 2023 that we'll be able to mark to?
Gerry Laderman
Helane that's really the heart of the $2 billion of structural cost saving. And as I said earlier, by next summer, I would expect 100% of those in the numbers.
And then, you know, we will continue and will continue to provide guidance. Keep in mind those structural savings include savings that will continue to grow as we grow the airline.
So, it'll come out through our continuing CASM guidance over the next few years.
Operator
From Evercore ISI, we have Duane Pfennigwerth.
Duane Pfennigwerth
Just a couple from me on cargo. And, Andrew, I think you said no more dedicated freighters.
I assume this is just a function of passenger demand coming back. But maybe you could just expand on that.
And if we think about sort of your cargo capacity in total, maybe no more freighters, but more longer haul flights coming back. How do you think about your cargo capacity in total?
Andrew Nocella
Sure, correct. We are not going to be able to do more cargo only flights, we're obviously disappointed by that, given where yields currently stand.
The reason for that is the aircraft can be better deployed in passenger markets. However, many of those passenger markets are also not exactly optimal cargo markets, they do have cargo, but they're not optimal cargo markets.
The 52 777s that are grounded means we just have less flexibility on this front than we would otherwise had. If those aircraft are flying, we clearly would continue our program missions because we'd have the ability to do both.
So then when we look at capacity available to fly is still really significant as we put all these passenger planes back in the air, and we think we've got this properly accounted for in our forecasts and we think we're going to have another great cargo quarter in Q3 and it's already gotten off to a really good start. That being said, it's going to be different in the amount of cargo flights.
So when I tell you it's all -- we don't really know those details, but all the numbers are in there. And hopefully we can do a little better on cargo than we are currently planning.
But there is a marked change in our cargo footprint starting today -- really starting a few weeks ago obviously and we'll see where it goes. But we're feel very bullish on cargo for the remaining half of this year.
Duane Pfennigwerth
That's super helpful. And just for my follow up on Scope.
Scope is something that United talked a lot about in the past, obviously in the recent investor update you talked about big upgauge from 50 seaters. But I have to think, just thinking about high frequency with 50 seaters going fully to Main Line, maybe that implies less frequency, I have to think there are many markets where a 70 or 76 seater would be optimal.
How should we be interpreting a kind of a lack of commentary around Scope? And is it something maybe longer term maybe beyond the forecast period that you're offered, that you think still makes sense.
Andrew Nocella
To be clear, when we induct a MAX 10, or an A321 NEO, it's not replacing the 50 seat CRJ out. There's a cascade it starts at the top that goes all the way down.
So 50 seater routes today will often go to 70, 60, to route in the new United Next vision. So just the economics of that are a little bit different than maybe you described, I'm not 100% sure, but so we still will do that.
As we look at our fleet counts and hubs and scheduled depth. It is not our intention to reduce service to smaller communities in the United next plan.
And we've laid that this out in great detail. That being said, it's also really not going to increase our scheduled depth, or size and smaller communities, either we're going to grow by a gauge, which we think is the right way to do it.
Given where our hubs stand, particularly our mid-continent hubs, where again, most of the growth is gauged, there's a little bit of frequency, but most of the growth is gauged. So hopefully that helps answer the question.
Operator
From UBS, we have Myles Walton.
Myles Walton
It's a bit of a follow up to high risk question again. But I'm curious guys, if you've thought about perhaps using a return on invested capital or efficiency metric to go alongside your pre-tax margin, your pre-tax income, financial metrics, which govern your long-term incentive schemes as a way to sort of answer the question around the efficiency of assets being put underutilization?
Gerry Laderman
We actually always look at the return on investments we want to make and kind of our rule of thumb is kind of mid-teens to justify making those investments. So that's always part of the equation.
But I do think, at the end of the day, pre-tax, ultimately, is the best way to look at things. The other components of it just all go into that but we do look at returns on investments we're making.
Myles Walton
Okay. But not in the form scheme, just pre-tax income is the governing metric?
Gerry Laderman
I think it's just the one that reflects how we expect to do.
Mike Leskinen
Hey, Myles, this is Mike Leskinen. I would just add that even if you think about replacing some of the older aircraft with new technology, you look into 727 MAX aircraft.
Even in that scenario, you're getting a mid-teen return on invested capital. And so the return on invested capital, the gating item, we are driving pre-tax margin, but ROICs are well ahead of our weighted average cost of capital and it is a hurdle.
Operator
From Bernstein, we have David Vernon.
David Vernon
So Scott, I wanted to talk kind of at a high level here about how investors should think about the upside you see in decommoditizing travel, we get a little pushback that, that this is just a buzzword, if you will. I'm just wondering if you can talk about how much whether this is just about a revenue premium that you can earn for having higher priced seats on a departure.
And if so, if there's a way to think about that relative to kind of maybe the revenue you might have earned without the strategy. And also, if you could talk a little bit about whether this is also about limiting how much of the inventory that you put out in the market is actually exposed to low-cost competition on a day-to-day basis, and how that might be changing over the next couple of years since you implement this United Next strategy.
Scott Kirby
Well, I'll start and Andrew can add on if you want. On the point about decommoditizing air travel.
It's hard to put a precise quantification on it today. But I think customers do care about quality and do care about product.
If you get on airplanes and talk to customers or just watch airplanes and people flying. I think that is an inescapable conclusion.
There's at least one airline in the U.S. that embarked on this a decade ago and it was quite successful.
There's certainly room for two of us in the United States. It's the largest travel market in the country, for two of us to pursue that strategy.
And, frankly, United has, I think the most opportunity because our hubs happen to be in the biggest premium markets where our seven hubs are. And so I think there's more upside for us than there is for anyone to pursue this strategy.
And so, I don't know for sure how much that turns into in terms of a revenue premium or growth that is faster than the rest of the industry, because it's not as easy to quantify some of the work that we do, but confident that it will lead to stronger results for United.
Andrew Nocella
The only thing I would add is that, flying approximately 300 single class 50 seaters with no premium product on board at all, up against competitors that had premium products is just a step change function for United as we take that number down. We already saw with the introduction of the CRJ 550, which is our 50 seat, dual class aircraft, really great progress prior to the pandemic on being able to monetize those premium seats.
We see our competitors do it all day long. And we were simply underrepresented in this category and flying the wrong aircraft into big cities with no premium seats.
And by the way, our hubs have a lot of premium demand. And we just under indexed to it.
And that was wrong and we're going to correct it and we're going to correct it really quickly.
Operator
From Stifel, we have Joseph DeNardi.
Joseph DeNardi
Scott or Gerry, can you talk about CapEx needs on the widebody side? When do you need to address that with an order?
When does the delivery start do you think? And then based on that, in what year do you see yourselves getting below 7 billion in CapEx?
Gerry Laderman
Actually, I'm looking at Andrew, who always wants to ask me for aircraft. But keep in mind, over the last few years, we've taken 20, some odd, widebody aircraft, we haven't retired and we have a lot of widebody aircraft, Andrews talked about that.
And so the focus right now is really on the narrowbody. And Andrew can provide some color, but I can tell you that it really depends on both the speed of recovery throughout the world.
And then the opportunities that Andrew and his team has come with.
Andrew Nocella
Yes, Gerry, I'll just add what I think I've said, but I just saw reiterated that because we took delivery of a large number of widebody aircraft, or we ordered some right prior to the pandemic, those aircraft are coming online over the next 12 months. So we'll have available to schedule up to 30 incremental widebody jets for the summer of 2022.
So that really does provide a lot of growth and possibly for a number of years, depending on market conditions. So we'll watch this carefully.
The second thing that I said a few weeks ago that I'll say again, is we're carefully looking at the economic lifespan of these widebody jets. And I can tell you prior to the pandemic, we were thinking, many of them particularly the 777 and 767 fleet could go 30 years or more.
And I'll give kudos to our maintenance team for keeping these aircraft in great shape. So to allow us to have that optionality.
So we do have optionality to fly these aircraft longer than I think people automatically assume. And then, the last thing I'll add is, the interiors on all these aircraft, including the older ones we just been describing have been recently retrofitted, we've completed our entire 777 fleet.
And we're close to completing the 767 fleet with brand new interiors, from nose to tail to give a great, great customer experience on board. So with that, we have a lot to think about the widebodies that have just arrived.
And we have a lot of brand new aircraft on the inside that are have a long lifespan left. And so we have a lot of optionality and to the extent we want to grow.
It will be because we have growth opportunities but we'll monitor that over the next few years. So that's a lot more details than you probably wanted.
But that kind of explains where we are from a widebody point of view.
Gerry Laderman
And I'll just add, the fairly straightforward analysis to justify that growth, it goes back to the financial targets that we just talked about, that they need to demonstrate that we can hit those, those returns, which they do.
Andrew Nocella
And I'll add one more because I feel so passionate about this point. The retention of the 767-300 I think gives sending of the airline that has done that a structural competitive advantage.
These aircraft between their size and trip costs, CASM and passenger comfort are really amazing machines. And they enabled as I said earlier, this new route to Croatia and many new routes that we're talking about that could otherwise I don't think be flown over the next few years, profitably.
Joseph DeNardi
Okay. So this 2025 CapEx, come back down to the $3 billion to $4 billion range or is it still elevated.
And then Scott, you talked, I think, last call or the call before about doubling loyalty. EBITDA haven't heard much on that.
Is that like an aspirational goal that we should kind of discount significantly? What are the drivers behind being able to do that?
Thank you.
Scott Kirby
Well, it's our goal, I wouldn't discount it, because I think we're going to do it. But you can choose too, if you want.
And this is one of those that, until we have something to announce, it's another one of those that we're not going to have something to announce until we have something to announce, though, I saw the team meeting earlier this morning on it, and they're looking for me later today to get an update. So we are doing, there's a lot of activity on it.
But we're not going to have anything to say publicly until we're ready to make probably a big announcement.
Gerry Laderman
And pay on CapEx, it's too early to really give CapEx projections beyond 2023.
Operator
We will now take questions from the media at this time. Okay.
From Wall Street Journal, we have