And we're live with United's Q4 and FY 2016 earnings call.

Scott Kirby on United's SHARES revenue management system - "it's clunkier than we would prefer... but it's absolutely not a limiting factor." This is toning down some more aggressively negative commentary at the investor day.

Some choice words from Scott Kirby about the lack of "partnership" from the global distribution systems (GDS). Plus good commentary on the focus on communicating Basic Economy clearly to customers. I think Delta has done a relatively bad job of this, whereas LCCs like Frontier and JetBlue have been good about clearly demarcating the different fare bundles.

Interesting to hear that the shift of Easter into April this year (i.e. Q2) has more impact on (heavily Catholic) Latin American routes than domestic ones. 

More discussion around the impact of the stronger dollar on United and other US carriers in the Pacific. Interesting contrast with Trump's commentary recently about the US needing a weaker dollar. 

More shuffling of the feet from United on margin improvement. Its various profit initiatives may be in good shape but broader economic environment volatility has created a lot of noise around that, and it isn't able to improve margins as a result.

So here's United's commentary on its move towards positive PRASM. The headline is that supply issues (read capacity) are a bigger driver than currency issues, and this is a function of United's elevated international exposure. While in the domestic market, Wall Street has browbeaten airlines into submission in terms of moderating capacity growth, there is no such control on the international market. While the US-China bilateral will be filled by the middle of 2017, there are many other markets in which there isn't any sort of limit to capacity growth. This is how you get United clinging desperately to second derivative improvements in PRASM (the rate of decline is coming down) until at least Q2/Q3 while Delta will be at positive PRASM in January

United has $850 million in debt coming due this year, and leverage will increase slightly this year.

Looking beyond 2017 in terms of swapping out  50-seat RJs (hallelujah).

Scott Kirby - "We believe the 50-seater (RJ) has a long term place in our fleet... We know that the optimal amount of 70/76-seat regional jets is maximizing the limit in our scope clause."

"if you're asking if we're going to close a hub, the answer is no."

United's current balance of net operating losses was $3.4 billion

United expects $250 million of net incremental profit from "segmentation" (all Basic economy in 2017, premium-side segmentation moving forward) and $1 billion in 2020.

Fuel prices going up will help drive United towards positive PRASM according to Scott Kirby, and he thinks the PRASM environment has moderated. Kirby also notes that United's Basic Economy initiative will help 

In Q4 United outperformed Delta in each region in terms of PRASM - in Q1 they will underperform despite easier YOY comps. It's reasonable to argue that United's financial situation is getting somewhat worse. 

"So far in January, RASM has been up every day except for two." - I don't think I've ever heard an airline talk about day over day RASM....

"Other than the 747 fleet, we do not have any retirement plans for the rest of the fleet." This makes sense for United - the 767-300ERs are pretty much the only jets getting really long in the tooth, maybe the A319s and A320s to an extent. The 777s are recently refurbished, and the 757s don't have a replacement yet [(cough) 737 MAX 10X (cough)].

The huge labor cost increase in Q1 17 is going to push United's profits way, way down. Margin expansion isn't off the table for United this year apparently, but it sounds like it won't happen in Q1 or Q2 if it does at all. 

Some tension here talking about United's Atlantic PRASM performance in Q1, with an analyst not understanding how it can be that poor given easier YOY comps. Aggressive statement from Scott Kirby: "You spend a lot more time trying to get the forecast right for your model, I focus on maximizing revenue." That's pithy...

Interestingly United thinks that segmentation will help drive up paid first class tickets. The premise is that right now a customer only sees what is functionally a basic economy ticket (the main cabin economy fare right now) and then the price differential is huge. When you have a spread from Basic Economy, to normal economy, to economy plus, maybe to premium economy, then to first class, then the differential doesn't feel as rough for passengers, so it might increase the attractiveness of Paid F.

United will start selling Basic Economy later this quarter for first travel at some point in Q2. The first rollout of Basic Economy is going to be in Minneapolis, where United will work out the kinks. From there it will be rolled out to the domestic market, and to "near international" routes such as the Carribean. Longer haul routes however are still up in the air.

For basic economy, carry on bags will be collected at check in, if not at the gate and then the customer will be charged for a checked bag fee and a handling fee for gate checking bags. 

United is adding new service from Chicago O'Hare to a few more destinations and a few more frequencies on existing destinations for the Summer 2017 schedule. 

"We do have a better product than American Airlines" says Scott Kirby, who would know. I'm not sure I'd agree as someone who's been both an American and a United frequent flyer over the past couple of years. 

United is going to be re-assigning the team doing fuel hedging  to other initiatives. Overall, there is a plan to reduce management headcount, but that will mainly be middle-management. Front line headcount won't be affected. 

United's Q1 is seasonally weaker than peer carriers because it has less exposure to Florida, the Southeast, and the Caribbean. 

The biggest drag on United's growth in San Francisco is access to gates.

Overall Q4 was pretty solid for United, but there are some worrisome signs and trends in the guidance for Q1 2017. Single digit margins, even with United's Q1 seasonality is a worrisome sign in this profit environment (though I'm sure United shareholders in 2006 would have killed for high single digits on that metric). The headline PRASM and capacity projections are pretty reasonable, with 1-2% consolidated capacity growth for both Q1 and the full year, and the sequential PRASM improvement to (1) - 1 % in Q! is a happy sign. There's a big geographic split in that PRASM figure though - Q1 will probably be flat or positive in the domestic and Latin markets, but down at least 2.5% in the Atlantic and the Pacific. That's rough for a carrier with little Latin exposure and more Pacific and Atlantic flights than any other carrier save Delta (and without Delta's counter-balancing access to the lucrative London Heathrow market). United is solidly positioned no doubt, but 2017 is going to present more of the same churn we've seen the last couple of years.

And of course there's the huge CASM increase (+ 6.6% to 8.2%) YOY. That's due primarily to the new labor agreements, and while unavoidable, alarm bells should be going off for anyone with a sense of history in the US airline industry.