Thank you, David, and thank you for inviting me to join you today.

Today is the first anniversary of United’s emergence from restructuring in Chapter 11.

We accomplished much during our restructuring: eliminating some $13 billion in debt; resizing our fleet, eliminating unprofitable routes and redeploying our fleet with an international focus. 

We achieved average annual cost savings of some $7 billion, which reflects long-term, consensual agreements with all of our unions that give us greater flexibility in work rules and scope.

As we restructured, we never lost of sight of the business, or our customers. We launched service to new destinations and became the first U.S. commercial carrier in 30 years to serve Vietnam.

We built up Dulles, our East coast hub, which coincidentally many had said we should eliminate, adding flights to Kuwait and Rome, and beginning next month, we plan to start our capital to capital service, connecting Washington with Beijing.

Our restructuring and subsequent work has put us in the position we are in today, able to compete with the best U.S. carriers.   Our costs and revenues are now competitive and for the first time since the year 2000, we generated a full year operating profit.

We have accomplished much against our performance agenda to control costs, improve revenue  and deliver improved customer experience… we have demonstrated what we can do, and the opportunities that are now available to United, as we build upon the foundation created for our investors, customers and our employees.

All of our constituents contributed to get us to where we are today -- in somewhat of an extraordinary position, when you think that of the 162 airlines who have filed for Chapter 11 protection since deregulation, only five have emerged successfully. 

As you might imagine, navigating through a $23 billion restructuring gave me a chance to spend a lot of time with lawyers. I am delighted to be here with all of you this morning and especially pleased that I don’t have to worry about your “billable hours”.

The title of this Forum, “The winds of change” has been appropriate for the aviation industry for some time…with the winds blowing hard for nearly 30 years and reaching gale force over the last five… in what has been characterized by some as the Perfect Storm.

And, we will continue to be buffeted by the same strong forces: domestic and global competition; volatile fuel prices; ongoing security and infrastructure challenges; and the competing agendas of our constituents.

The real question today is whether all of us who have a stake in this industry have the resolve to find a way forward that will enable us to better navigate these winds of change… or will we default to the same cycle of dysfunction and bankruptcies, and continue to lose ground to our foreign competitors?

This is not a hypothetical question – and it is a question that has created much debate in Washington in recent months. 

• Last week many of these familiar issues resurfaced, as the Senate held hearings focused on industry consolidation… including the issue of whether deregulation should be allowed to continue to do its work.

• This week the U.S. government is meeting with the Chinese to discuss further opening that important market.

• Next week we will be hosting the European Commission here in Washington to try to make progress in opening the transatlantic market.
• And, last year saw heated debate over the question of foreign ownership and control.

It is ironic but not too surprising that all this change has created a sense of nostalgia for the perceived “golden days” of aviation… days when planes weren’t crowded, excellent cuisine on fine china was served on every flight, and nothing was seemingly as hard as it is today.

Of course some may remember the good old days as perhaps not so golden:

• Fares were higher – much higher
• There were dramatically fewer flights to choose from
• And service to small communities was not that great – in the 10 years leading to deregulation, 137 small communities in the U.S. lost all commercial air service.

The resolution of such issues, and many more, has a major impact on the ability of U.S. network carriers to compete.  In the obvious absence of consensus… even among carriers themselves… as to what “success” might look like for U.S. aviation, we are each left to determine a way forward in the current environment:

• An environment that remains highly competitive domestically, low-cost carriers now in over 80 percent of United’s markets and 35 percent of total market share.
• An environment where our international competitors are merging across borders, expanding, growing more profitable and investing in new more fuel efficient and environmentally friendly aircraft.

• An environment where deregulation has delivered significant benefits to the U.S. economy but has yet to be comparably effective in the international arena; where U.S. carriers are losing competitiveness globally because of such international restrictions. 

At United we have been very clear about the direction we think the industry should take – we believe we need to finish the job of deregulation and allow the aviation industry to function in the same type of economically deregulated environment that benefits other industries.

We believe that completing the job of deregulation gives the industry the best chance of breaking out of the cycle of financial crisis and bankruptcy, and is the best way to meet the needs of the three groups with the most at stake in our well being: our employees, our investors and our customers, including the communities we serve.

Balancing the needs of customers, employees and investors has never been a strength of this industry.

We have been through multiple phases when one group or another has been advantaged disproportionately at the expense of the other two.  

• Customers have enjoyed many short term gains as the industry has priced its services well below costs.  The ramifications of such practices are all too obvious for the other two constituents, but it is also detrimental to customers in the longer term as network carriers have been unable to earn the cost of capital to invest in new aircraft or improve on board product.

• Employees have sporadically enjoyed periods of relative prosperity only to be followed by dramatic layoffs and restructuring; a boom and bust cycle that can have devastating consequences.
• As a result, the industry has not been capable of creating long term shareholder value.

Any enterprise that panders to one constituent to the detriment of others will ultimately fail. Going forward we need as an industry to better balance our constituents interests and their expectations.

While the competitive market place may not be what some might wish for, it is the competitive market place we have… and it is the one in which we compete.

• Deregulation, particularly the dramatic growth of low-cost carriers and the very low barriers to entry, has created a strong competitive domestic market. 

• All constituents are benefited by a more stable and enduring financial platform.  That means removing the restrictions that prevent us from expanding abroad through organic growth, but also through acquisition of an interest in carriers that give us better access to the fastest growing regions of the world. 

We need to lift the limits on foreign ownership to give U.S. carriers a better chance to expand globally and diversify our business geographically.

These ideas have met great resistance over the last year, and those who favor the status quo are having some success. 

A status quo that since August of 2001 has resulted in a loss of 170,000 jobs in the network carriers, offset by only some 15,500 at low cost carriers and regional airlines; $35 billion in losses to the U.S. industry; and a noticeable lack of investment in new product to improve the customer experience. 

The only winners in this situation are our foreign competitors, who would enjoy nothing more than to see the U.S. network carriers remain in a state of fragmentation and relative weakness, unable to invest in our product and aircraft, falling further behind in the competition for the global passenger.

In other words, the status quo has detrimental consequences for our customers, our employees and our investors alike. 

The status quo will not guide us out of the punishing cycles we have been in. 

One should therefore ask: Is this a status quo really worth defending? 

To those celebrating the disruption in the U.S.-EU negotiations;

To those who successfully fought to kill the Department Of Transportation’s initiative to reduce the arcane limits of foreign ownership;

And, to those fighting to prevent consolidation in the domestic industry…

One should simply ask: What do you propose? 

As I said at the beginning of my remarks, the real question today is whether all of us who have a stake in this industry will change direction and find a way forward that will enable us to better navigate these winds of change… to the benefit of our industry’s global competitiveness… as well as our constituent groups: our employees, our investors, our customers and the communities we serve.

Or rather, do we want to continue in the same vicious cycle of occasional prosperity and frequent failure, and continue to lose ground to our foreign competitors?

In closing, we cannot prevent the acceleration of change in the world of international aviation, it is up to us in the U.S. to acknowledge that fact… and then decide if we wish to be participants… or spectators.

I will now be happy to take your questions.