United Airlines (UAL)

Capacity Growth as the Teaching Case

United is growing faster than the other two US network carriers, from the lowest ex-fuel unit cost of the three, and the open question is whether it can fill the extra seats. It flew 330,284 million available seat miles (ASMs, one seat flown one mile) in FY2025, 6.1% more than a year earlier. Load factor, the share of seats sold, was 82.2%, against Delta's 84% and American's 83.6%.

Total revenue per ASM (TRASM) was 17.88¢, including 16.18¢ of passenger revenue per ASM (PRASM). GAAP cost per ASM (CASM) was 16.46¢. United's CASM-ex removes fuel, profit sharing (the staff bonus pool paid out of profit), special charges and third-party business expenses, but keeps depreciation and aircraft rent; it came to 12.64¢. TRASM minus CASM-ex gives an ex-fuel unit spread of roughly 5.2¢. The RASM and CASM guide places that above American and Southwest and below Delta's 5.7¢, which is measured on adjusted TRASM.

Global Network Economics

The growth rests on the cost base. United's CASM-ex is the lowest of the three network carriers and sits below Delta's 13.86¢, which is what makes 6.1% capacity growth workable on paper. The question to follow is whether the gap survives new labour contracts and aircraft delivery cycles.

Its hubs (Chicago, Denver, Houston, Newark, San Francisco, Washington Dulles and others) carry international connecting traffic as well as domestic routes. The 1.7¢ gap between TRASM and PRASM is cargo and other revenue, mostly from the loyalty programme. Delta's is wider, so comparisons across carriers must use the same revenue line.

Balance Sheet and FCF

United's leverage has come down to the edge of its target. Net leverage, adjusted net debt over adjusted EBITDAR (EBITDA before aircraft rent), was 2.2× for FY2025 and 2.0× for the twelve months to March 2026, against a target of less than 2.0×. Adjusted net debt was $19,854 million at 31 December 2025 and includes operating lease liabilities, which is why the EBITDAR guide pairs it with an earnings figure that adds rent back.

Free cash flow of $2,710 million in FY2025, on United's own non-GAAP definition, funds the move. The ratio has reached 2.0× once; the test is whether it stays below target through a fuel spike or a recession.

What to Watch in the Financials

Growth needs passenger unit revenue to hold. If PRASM softens while ASMs keep climbing, load factor gives the first warning, before CASM-ex shifts with shorter average flights or a change in mix.

Aircraft deliveries on a 6%-plus capacity path are the main claim on that cash. The FCF guide contrasts United's reconciled FCF with Southwest's computed figure and American's own definition.

The international hubs tie United to transatlantic and Pacific demand. IAG, British Airways' parent, reports passenger revenue per available seat kilometre (PRASK) in euro cents, so convert units and currency before setting it beside United's figures.

Valuation Framework

EV/EBITDAR on normalised earnings is the primary lens, with a screening band of roughly 4–7× and a 5.5× model anchor. For United, normalised EBITDAR has to reflect where load factor settles after the growth, and the rent added back has to match the leases in its adjusted net debt table.

Key Risks

Adding the most seats while filling the fewest leaves United less room than Delta if fares weaken. Fare pressure that hits PRASM before United can slow deliveries squeezes the spread.

Fuel adds a second exposure. Like most US majors, United has largely exited financial fuel hedging, so GAAP CASM carries FY2025's fuel price in full; through-cycle EV/EBITDAR work normalises to a mid-cycle jet price (we use $2.85/gallon, US Gulf Coast).

Leases matter too. Adjusted net debt is materially above balance-sheet debt alone, so a screen on gross debt without operating leases understates what United owes.

Peer Context

Delta has higher unit revenue (adjusted TRASM 19.56¢) and a wider spread (~5.7¢) on 3% capacity growth. American runs a similar network with more net debt ($30.7 billion) and negative FCF. In the Airlines Sector Primer comp set, United is the capacity-growth and global-hub case.