UAL 3Q25 - First class full but labor bill coming. What's next? Bull case $149. Bear case $65

Cheat Sheets

October 16, 2025

United Airlines Investment Report - Q3 2025 EPS $2.78 Beat | Premium +6%, Loyalty +9% | Q4 Guide $3.25 Crushes Est

UNITED AIRLINES HOLDINGS (UAL)

✈️ EPS Beat +6% | Rev $15.2B +3% | Pre-Tax Margin 8.2% | Operating Margin 9.2% | Capacity +7%, TRASM -4.3%

Q3 2025: Premium Cabin +6%, Loyalty +9%, Basic Economy +4% | 48M Passengers | Largest Summer Schedule Ever | Lowest Q3 Cancel Rate History

💰 Market Cap: $33.5B | 🏢 Employees: 107K | 🌍 Fleet: 1,065 Aircraft | Founded: 1926
👨‍💼 CEO Scott Kirby | 🎯 #3 Largest US Airline | 💎 Liquidity: $16.3B | Debt: $25.4B
$95.01
📉 -$9.04 (-8.7%) Today
-1.3% YTD (vs DAL +24%)
Price Target Scenarios

18-Month Outlook (Mid-2027) - Today's Price: $95.01

$149.00
Bull Case (+57%)
If Everything Goes Right
🚀 What needs to happen:
Premium demand accelerates further • International routes remain dominant • Starlink drives loyalty explosion • MileagePlus revenue grows 15%+ • Fuel prices stay low • Labor costs controlled • United Next fleet modernization pays off big • Network expansion captures share from rivals
$117.00
Base Case (+23%)
Business as Usual
⚖️ What needs to happen:
Steady demand continues • Premium revenue grows 6-8% annually • Loyalty program momentum sustains • International capacity expansion proceeds as planned • Fuel costs moderate • Labor contracts settled reasonably • Margins improve gradually to 10-11% • Network advantage holds
$65.00
Bear Case (-32%)
If Things Go Wrong
🔻 What could go wrong:
Recession crushes business travel • Premium demand collapses • Oil spikes to $100+ per barrel • Labor strike or massive wage inflation • Boeing delivery delays worsen • Overcapacity continues hurting yields • International travel restrictions return • Economic slowdown hits loyalty spending
The TL;DR for Investors
🎯
They Beat Expectations
EPS $2.78 vs $2.62 expected (6% beat). Revenue slightly missed at $15.23B vs $15.33B expected, but they crushed it where it matters: premium cabin revenue up 6%, loyalty program up 9%, and Q4 guidance of $3.25 midpoint absolutely destroyed the $2.83 estimate. That Q4 guide is the real story here.
💎
Premium Power is Real
Premium cabin revenue jumped 6% YoY. Business class, Polaris, and extra legroom seats are printing money. This is where United makes its margins. Even Basic Economy grew 4%, showing strength across all fare classes. United flew the largest international schedule in its history - that's where the premium money lives.
📱
MileagePlus = Hidden Gold Mine
Loyalty revenue up 9% year-over-year. MileagePlus membership grew 13%, co-brand card spending up 9%. They just paid off the $1.5B remaining balance of MileagePlus bonds - that program is so valuable they once borrowed $6.8B against it. Free Starlink Wi-Fi on every plane by 2027 will make this program even stickier.
⚠️
The Concerns
Unit revenue (TRASM) fell 4.3%. They grew capacity 7% but revenue only 3% - that's the math problem. Domestic passenger revenue down 3.3%, international down 7.1%. Yes, they're growing premium, but they're also adding a lot of seats. Stock up only 7% YTD vs Delta's 24%. Margin pressure is real despite the beat.

📊 Q3 2025 Snapshot

Revenue $15.2B +3% • EPS $2.78 Beat • Q4 Guide $3.25 Destroys $2.83 Est 💪

💰
$15.23B
Revenue
+2.6% YoY
⚡
$2.78
EPS Q3
vs $2.62 (+6%)
🎯
8.2%
Pre-Tax Margin
8.0% Adj
🚀
$3.25
Q4 Guide
vs $2.83 (+15%)

📞 What Matters from the Call

🎊 All Streams Positive
Premium +6% • Loyalty +9% • Basic Economy +4% • Cargo +3% - Every revenue stream growing YoY
🚨 Record Summer Operations
48M passengers (record) • Lowest Q3 cancel rate in history • 6 of 7 hubs ranked #1 or #2 for on-time
💎 Balance Sheet Strong
$16.3B liquidity • Paid off all remaining MileagePlus debt • $612M share buybacks YTD
🔬 Investing $1B+ in Customers
Free Starlink rolling out • Seatback screens on 50%+ of fleet • Customer satisfaction up 15 points

📍 Scott Kirby: "Brand loyalty is structural, permanent, irreversible. Expect 1+ point margin growth annually = low teens, then mid-teens margins."

🎯 All 7 Hubs Profitable: Despite industry losing money on domestic, ALL United hubs made money. Proof of structural advantage over commodity airlines.

💳 Loyalty Doubling: Co-brand card spending +15% YoY. Scott: "Plan to DOUBLE loyalty EBITDA by 2030. Only 2-4 true loyalty programs in US."

⚠️ Premium Leisure > Corporate: Premium leisure yields now EXCEED corporate yields domestically. Secular shift nobody predicted in 2019.

💬 Q4 2025 Outlook & Forward Look

🎯 Q4 Record Revenue Expected: "Q4 will have United's best revenue quarter ever and highest absolute TRASM of any quarter in 2025" - CFO Andrew Nocella. Meaningful improvement in unit revenue YoY vs Q3 as demand environment strengthens.

💸 Strong Booking Momentum: All-time highest business revenue during week ended October 5th. Of top 5 best weeks in history, 3 of remaining 4 occurred in September 2025. Booked couple points ahead entering Q4 vs last year.

📊 Atlantic Turning Positive: Atlantic will absolutely be positive in Q4 YoY despite elevated capacity. Pacific probably the same. Q4 premium cabin share is highest (vs lowest in Q3), which favors United's business-centric model.

💰 2026 Hiring & Labor Contracts: Hiring 2,000+ pilots and 3,200+ flight attendants in 2026. Flight attendant contract negotiations scheduled end of October. Labor bill 2-3 points when all agreements ratify, with some expense hitting 2026.

🚀 Bull Case
👑
Brand Loyalty = Structural Moat
Scott: "This is structural, permanent and irreversible." United has won significant market share in each hub over the past 5 years through billions in consistent investments. Premium leisure yields now EXCEED corporate yields domestically - a secular shift nobody predicted. All 7 hubs profitable despite industry domestic weakness. This separates United from commodity airlines.
💎
Loyalty EBITDA Doubling by 2030
Co-brand card spending +15% YoY. Scott: "We're just beginning to realize the full potential. We have really big ideas. Plan to double EBITDA by end of decade." United is a TRUE loyalty program vs reward program. "Only 2-4 loyalty programs in US." This alone could add several margin points. They once borrowed $6.8B against this asset.
✈️
Margin Expansion Math Works
Scott: "Expect to add at least 1+ point of margin each year in current industry capacity environment = low teen margins. As industry restructuring continues (only in 2nd-3rd inning), expect several more margin points = mid-teens margins. And I'd bet our multiples move up meaningfully as well." Q4 guidance proves the thesis - only airline growing earnings in 2025.
🚀
Gauge Growth = Secret Weapon
Domestic gauge up almost 20% since 2019, accelerating in 2027 as 200-seat A321 fleet reaches critical mass. Retiring smaller, lower-margin A319/A320 aircraft by 2030. Andrew: "Not all capacity created equal - statement only true for brand loyal airlines." Gauge provides 1pt annual CASM-ex tailwind through end of decade. Bigger planes = better unit economics.
🐻 Bear Case
📉
Latin America = Problem Child
Andrew: "Results for Latin were disappointed. Elevated YoY capacity for ~2 more quarters. Most new competitive flying to US is unprofitable and transitory." But they're holding ground in Houston hub. Mexico/Central America competitive capacity pressuring yields. Non-Houston underperforming capacity will be removed but core Houston stays strong.
💸
Labor Bill Coming Due
Mike: "We have a bill to pay on the labor front. Been saying for some time that bill is 2-3 points when all labor agreements ratify. Some of that added expense in 2026." Flight attendant contract negotiations scheduled for late October. Hiring 2,000 pilots + 3,200 flight attendants in 2026. This eats directly into the margin expansion story.
⚠️
Q3 Seasonality = Structural Weakness?
Andrew: "Q3 TRASM trails Q2 and Q4 significantly in 2024-2025 vs historical consistency. Industry issue not specific to United." Making adjustments for 2026 (end summer week early, 15% fewer redeyes, cut July 4 capacity, Atlantic flat). But if Q3 stays structurally weak, that's 25% of the year with compressed margins every year.
🎯
Still Playing Catch-Up
Scott admits United has been working on brand loyalty "almost a decade now, billions of dollars of investments to get there." New competitors can't replicate overnight BUT existing competitors like Delta already have it. Stock +7% YTD vs Delta +24%. United still playing catch-up despite all the investments and bold talk about "irreversible" change.

This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.