Question-and-Answer Session
Operator
Thank you very much, sir. First, we will take questions from the analyst community, then we will take questions from the media. The question-and-answer session will be conducted electronically. [Operator Instructions]. Our first question comes from the line of Frank Boroch of Bear Stearns. Please proceed.
Frank Boroch - Bear Stearns
Good morning. Glenn, I was hoping maybe you could shed some light on some of the 250 initiatives you alluded to, sort of whatís first up in the five-year strategic plan that you can share with us today?
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Frank, there are two types of initiatives, I appreciate the question, that weíre focusing on. Strategic, as I mentioned in my comments, and I think Jake and John have both referred to. We discussed with the Board, we are further along in developing the possibility of the MRO transaction than we are with Mileage Plus. And weíve said previously that we are focusing on both businesses within the portfolio, businesses at United, so that we can clearly make a distinction as to their value. We hope to have a P&L for Mileage Plus developed by the first of the year and then we will run the business accordingly. But, we are further along with the maintenance division. The 250 initiatives really speak to the issue of the core business. We have initiatives all across the business that were a function of the $4 billion capital budget that we have allocated across the strat plan, and they cover the full spectrum of the margin from revenue, all of Johnís initiatives that he alluded to in his comments, through Peter in the management of the operation, and Graham in the customer experience initiatives that we have underway. The point that we wanted to make about 250 is that we think weíve reached a point at which the improvement that we expect of ourselves throughout the five-year plan is going to come in smaller increments than those that you might be accustomed to, we are a company thatís just come out of restructuring, weíve talked about increments of value in large numbers. These are going to run the full spectrum from managed in the context of tens of thousands up to millions, and I think thatís the point that we wanted to make with 250, we also wanted to make the point that we are very transparent in the way that we account for the accountability around these initiatives, Frank.
Frank Boroch - Bear Stearns
Okay. Great. Thatís helpful. And Glenn, if you could maybe touch on your latest thinking with oil approaching $90 a barrel and some calls for a recession next year, do you think the likelihood of industry consolidation has increased?
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Well, two things, Frank. Number one, I think that oil is going to continue to have a risk premium associated with it that is virtually incalculable. Evidenced by the current situation playing out on the Turkish-Kurdish border, that clearly the market didnít expect. And I think that triangulates then Frank into a financial speculation relative to the risk premium. That probably puts anywhere from $15 to $20 into oil that, frankly, we simply canít account for relative to the fundamentals of supply and demand. You continue to see demand being pulled down, I think I saw a report yesterday, Frank, that talked about Chinese demand coming in lower than expectations. But, sooner or later, the fundamentals obviously are going to have their moment. And I think as well, prices at anywhere between $70 to $90, you can continue to stimulate alternative forms of energy. And that ultimately will have its effect, too. But, right now I think that the market is all about risk in financial players and commodities, we need to recognize that. With respect to recession, John spoke to the fact that in our business anyway, we arenít seeing any evidence of it, Frank, but my view is that at some point we are all going to do the work that we are able to do independent of one another. In some point, we should turn our attention to the synergies that exist between us and the industry, which we would classify in our vernacular here, United is [inaudible].
Frank Boroch - Bear Stearns
Great. Okay, thank you.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
You bet.
Operator
Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of Gary Chase of Lehman Brothers. Please proceed.
Gary Chase - Lehman Brothers
Good morning, everybody.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Good morning, Gary?
Gary Chase - Lehman Brothers
I wanted to see if you guys could give us a little bit more flavor for the capacity plans you put in the release regarding 2008. It looks like the domestic cuts are a bit deeper than weíve been thinking and certainly more than the run rate you are on now. So, incrementally, can you give us a little flavor for whatís happening there? And then, also, John, in the vein of kind of what you were saying, this slavish reliance, I think you call that on marginal economics. Can you just explain it to us? Iím sorry.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thatís exactly what he said.
Gary Chase - Lehman Brothers
Can you explain to us on the international side, whatís the opportunity thatís driving the need to dial up the growth there, because it seems like thatís what you are doing is supplanting domestic for international?
John P. Tague - Executive Vice President and Chief Revenue Officer
Yeah. So, I think as it relates to the capacity guidance, while we are not providing quarterly guidance for next year, you should assume that most of that capacity reduction is coming out in the first six months of next year, as we dialed our capacity down throughout 2007.
Gary Chase - Lehman Brothers
Right.
John P. Tague - Executive Vice President and Chief Revenue Officer
We think thatís the right place to be. I mean that we simply reject the idea that capacity plans should remain stagnant regardless of the price of fuel, itís justÖ it doesnít calculate. We are quite comfortable, but we retain the flexibility, as Jake said, to move up or down. We have been relatively cautious in terms of international growth as compared to some of our peers, but are growing at a rate that is greater than others. I think, as Glenn pointed out, we continue to have significant opportunity to re-optimize within the existing fleet. So, we are eliminating some marginal performing routes in favor of greater opportunities. We are also improving our asset utilization as we re-look at some of our maintenance criteria. So, we are getting good economics out of the existing fleet. We too are cautious as to whether these unit revenue growth rates can continue to run at the level they are and consequently, I think thatís reflected in a relatively modest growth rate for international next year, but international margins are recovering quite nicely.
Gary Chase - Lehman Brothers
Is there any way to characterize what youíre doing domestically, has it come disproportionately from one area?
John P. Tague - Executive Vice President and Chief Revenue Officer
I think as we done really throughout the last three to four years, weíve worked very hard to maintain the depth and breadth of our schedule and the schedule quality, particularly for our corporate customers and thatís been achieved by effectively utilizing the 70-seat regional jet capability, moving our wide bodies into more effective use internationally and consequently, simply down-gauging the domestic network, and thatís been the right answer for us in terms of margin performance. We know that others are pursuing up- gauging in pursuit of lower marginal cost to that again in our view except unprofitable marginal demand. So, we are just going to continue down this path and we are very pleased with the results. I will point out that we donít think we are executing, as well as we will be able to in the future on the revenue side and thereís lots more of make our own luck opportunities on the revenue side at United.
Gary Chase - Lehman Brothers
It didnít sound like there are any big red zones we need to be aware of, right?
John P. Tague - Executive Vice President and Chief Revenue Officer
No. We are seeing a very, very balanced outcome across the entities, which tells us that our capacity allocation is on target right now, but we are very, very keen to constantly reevaluate that, the wonderful things about airplanes is they are moveable.
Gary Chase - Lehman Brothers
And then just a quick net, on the 13% transcon gain, is that in Virgin overlap markets only or is that for the entire transcon entity for United?
John P. Tague - Executive Vice President and Chief Revenue Officer
Thatís for the entire transcon entity for United, but again weíre pretty circumspect about how weíre managing our capacity against LCCs. Weíre not fighting the battle between the titans, weíre trying to offer a product for our corporate customers and to demonstrate that we can produce an acceptable financial return in the phase of continuing LCC competition and thatís where our strategy is focused.
Gary Chase - Lehman Brothers
So, itís not materially different in the Virgin markets?
John P. Tague - Executive Vice President and Chief Revenue Officer
No, I will point out that JFK San Francisco, where we had the most significant Virgin overlap during the quarter, did experience positive unit revenue growth year-over-year.
Gary Chase - Lehman Brothers
Okay, thanks everybody.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thank you.
Operator
Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of Robert Barry of Goldman Sachs. Please proceed.
Robert Barry - Goldman Sachs
Hi, guys. Good morning. Hello?
Operator
Just pause one moment, Mr. Barry, our speakersÖ we have a technical difficulty here. We are going to reestablish in one second. Weíll take your question then, okay?
Robert Barry - Goldman Sachs
Okay.
Operator
Iím actually going to clear you out of the queue, if you can do me a favor and just re-key star one once youÖ once I get you out of the queue here. Hold on one second for me.
Robert Barry - Goldman Sachs
Okay.
Operator
And folks just hold on for me just one second, weíll get our speakers right back online, weíll continue our call. Thank you. Thank you again, ladies and gentlemen, very much for your patience, we do have our speakers back on the line and Robert Barry was next in queue. Sir, you may proceed.
Robert Barry - Goldman Sachs
Okay, great, thanks. Let me see if I can remember my question.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Robert, [inaudible] anything you said.
Robert Barry - Goldman Sachs
Two questions, one is on the fuel hedge fund, could you just update us on your thinking there? It looks certainly versus what weíve seen come through so far. There seems to be lower hedging at United for 4Q and a higher expected oil price?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
This is Jake, I would comment on the last part of that thing. We were obviously having a difficult time with the volatility of fuel, so our higher expected fourth quarter price is driven by the forward curve and I think other people may have driven it out at a different time. With the recent run up in prices, our expectations for the fourth quarter have going up. Having said that, weíre relatively modestly hedged in the fourth quarter, Glenn talked earlier about the risk premium being built into the products out there and weíre looking for opportunities to hedge at some point that we think makes sense and $88 we donít think make sense to lock any fuel at these prices, so we donít think this is the long-term rate, but we are looking to be opportunistic in 2008 hedging, but we have very, very little low hedge positions in 2008 right now.
Robert Barry - Goldman
Was the ë08 capacity plan developed under the assumption that that $15 to $20 would come back out within the relatively short time frame of the fuel price?
John P. Tague - Executive Vice President and Chief Revenue Officer
So ñ this is John here. Our capacity plan continues to be flexible and as we enter the year, we will reassess what the forward curve looks like at that point in time and whether that causes us to consider different capacity plans. Weíve obviously not done that yet.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Robert, as you watch the market go into backwardation, you know that the market is suggesting that it sees the same circumstances close in that we do relative to the risk premium, butÖ and that also gives you pause when a market backwardates.
Robert Barry - Goldman Sachs
Okay, then just finally could you update us on the timing for the mileage business, it sounded like having the P&L done by the first of the year was the next step. And then what happens beyond that? Would you kind of run it a little while before considering successive steps or how are you thinking about that?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Youíre exactly right. We have a goal to get a P&L up by the beginning of 2008, so that we can begin internally looking at the performance of that business unit. Where we go from there, we havenít determined yet, because the first step really want to see what that business unit looks like, what the opportunities are. But we will look at that and move quickly once we have visibility into the P&L and whatís that entity really looks like. So, we donít have a specific timing. We havenít decided what to do and whether to share the P&L information, obviously our bias as to both share the information and to do something that creates shareholder value with that entity. Thatís our bias and we intend to act pretty quickly after January 1st.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Okay, certainly worked our benefit, Robert, to have the management team of the MRO in a position to be able to understand their internal P&L prior to talking to interested parties relative to due diligence and we want to be in the same position with respect to the management team at Mileage Plus.
Robert Barry - Goldman Sachs
Right, fair enough. Okay, thank you.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thanks, Robert. I appreciate it.
Operator
Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of Mike Linenberg of Merrill Lynch. Please proceed.
Michael Linenberg - Merrill Lynch
Yes, gentlemen two questions, good morning.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Good morning, Michael.
Michael Linenberg - Merrill Lynch
First, theÖ what are the CapEx plans in ë08 and the ASM forecast that you provided us, does that anticipate any fleet retirements in 2008?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
The answer to the second question is no. Weíd assume the same fleet going forward, 460 as I mentioned. We do have flexibility too could we have unencumbered aircraft. We also had some aircraft that are coming off lease next year. So, we can adjust downward if we want, given this environment. Itís unlikely that we want to adjust upward, but we also have a flexibility to adjust upward with someÖ by getting some additional regional capacity next year, but obviously our focus is with fuel this high, itís unlikely that we are going to want to do that. The capital plan for next year is for $650 million and, as I said, no aircraft swaps or no aircraft changes, I mean the fleet we have right now is the fleet we intend to have in the next year.
Michael Linenberg - Merrill Lynch
Okay. And then just my second and this touches on a statement made by John where he characterized the London Heathrow performance is quite good. I think he indicated that RASM was up in the low double digits. When you look at your markets and you look at your primary competitor, you both fly from Chicago and LA to Heathrow, you are not in the New York market. Is part of this may be what you have in place with the Star Alliance carriers. Is this BMI feeding you and sort of as a corollary to the question, weíve seen an announcement from Delta and Air France on their JV. Should we anticipate that over the next couple of months that United and maybe its partners over there are going to step up their agreement or not?
John P. Tague - Executive Vice President and Chief Revenue Officer
So, I think we are clearly benefiting in Heathrow from the elimination of our New York service year-over-year. So, thatís a clear indicator. Relative to the Air France-Delta comment, we launched a pretty comprehensive joint venture relationship with Lufthansa in 2000 that creates sales with our preference on both sides, the Atlantic creates pricing management by the respective parties in their home markets and itís been quite effective and driven exceptional revenue performance for us across Europe, but obviously particularly in Germany. So, we think that we are well down that path on a very comprehensive agreement with Lufthansa and that we also possessed by far the broadest antitrust immunity with our partners in the Star Alliance across the transatlantic. So, clearly contributing to our current results, it remains to be seen as to whether this recent agreement has accomplished something we have not yet accomplished. If thatís the case, weíll take that onboard and work with our partners to try and make sure that we equalize competitively.
Michael Linenberg - Merrill Lynch
Hey, John, have you guys ever thrown a number out there about the size of your relationship, revenue number out there, maybe thatís what I am getting at?
John P. Tague - Executive Vice President and Chief Revenue Officer
No, we have not.
Michael Linenberg - Merrill Lynch
Okay. All right. Very good, thanks.
John P. Tague - Executive Vice President and Chief Revenue Officer
Thank you.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thank you, Michael.
Operator
Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of William Greene of Morgan Stanley. Please proceed.
William Greene - Morgan Stanley
Yeah, hi.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Hi, William.
William Greene - Morgan Stanley
Jake, Iím wondering if you can comment a little bit on CASM trends. If we look at the second half of ë07, the CASM ex fuel is rising faster within the first half. So, are you going to be able to offset all of the inflation that weíll have for 2008 or should we assume that it will actually grow that rate or even faster as you make these adjustments?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
We arenít giving specific CASM guidance for 2008 yet. I can tell you that the run rate we are seeing in the third and fourth quarter is not going to happen in 2008, we are going to handle it. So, we areÖ again, we knew going into the year that the back half of the year was going to be difficult on a CASM comp basis could we had some pretty low performance, this fourth quarter maintenance cost last year was unusually low. And so we knew going into the year that the back half was going to be challenged on a CASM basis. We think that full-year CASM at 2.5% is respectable, we clearly want to do better than that, but respectable in this environment especially when we are shrinking capacity. So, next year, weíre not looking at anything like what weíre looking at in the back half of this year.
William Greene - Morgan Stanley
Okay. And then for either Glenn or Jake, on dividends, should we still expect that youíll sort of make some decision here toward year-end and give us sort of an update on what youíre thinking in terms of either a dividend policy or what you may do?
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Yeah, as weíve said, we have spoken to our Board on subsequent occasions on this matter, we have a theme laid out for them, we have committed to them to go back to the Finance Committee and the Board in December of this year, which we will do. We have another meeting this week. Weíll update them then on our thinking. I think we pretty well soaked them in the philosophy of the company, which weíve shared with you. Then toward the end of the year, as Jake, I think, said on a call ago, we will present to the Board our recommendation as to how best to proceed. Jake, you want to add anything there?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Yeah, Iíd just mention that we have covenants in our bank deal that would currently prohibit us from doing a dividend or a buyback. Weíre talking to them right now about that, I obviously donít have a resolution yet. So, we areÖ but weíre pushing the ball down the field in that regard. So, itísÖ obviously with what happened to the.. with the subprime meltdown it didnít help our situation in getting an amendment, but we are trying to work through those issues with the banks.
William Greene - Morgan Stanley
Okay. And then one just quick one. Jake, can you share with us the profit-sharing number that you accrued in the third quarter?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
No, I canít, because we havenít done that and weÖ because of the way we book profit sharing where we make an annual forecast and then we book a percentage of it. If Iíd give you that number, you know where our forecast was and I donít want to do that.
William Greene - Morgan Stanley
And thenÖ well, did I misunderstand you when you said year-to-date, it was $100 million?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
We said that they earned $100 million year-to-date and thatís is simply taking the pre-tax income for the year down to 15%.
William Greene - Morgan Stanley
Okay. Okay. Thank you.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
You bet.
Operator
Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of Ray Neidl of Calyon Securities. Please proceed.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Ray, how are you?
Raymond Neidl - Calyon Securities
Good. How are you doing? Very good quarter, guys.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thank you very much, Ray.
Raymond Neidl - Calyon Securities
TheÖ demand still remains strong as you pointed out all over domestic, international, and so forth. Domestically, what would you say is the main component of increasing prices faster than they have been increasing? I know youíve put some price increase last week and some of itís being pulled back now. Is there any certain airline out there or airlines that are preventing the industry from putting through the prices that the demand justifies?
John P. Tague - Executive Vice President and Chief Revenue Officer
Well, it wouldnít be appropriate for me to comment on that. I would say that we have mixed results with the price increase we put out last week, but nonetheless overall favorable. We continue to believe that a prudent capacity planning is critical to get a long-term revenue model here that deals with these shocks as an expected consequence of our business as opposed to the exception. So, we are driving very, very hard to create more commercial discipline on all of our pricing behavior and believe if the industry accomplished commensurate returns with other businesses, thatís going to have to be the past.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Ray, we also think it triangulates back to the benefit, just aggregating the businesses, so that you donít have the intrinsic subsidy issue in the portfolio, which could actually extend to the subsidizing effect of a fuel hedge.
Raymond Neidl - Calyon Securities
To get back to the flight restrictions that youíve talked about before, if they do put flight restrictions at JFK, will that have any effect on your hub operation in Dulles?
Glenn F. Tilton - Chairman, President and Chief Executive Officer
I would think only positive in terms of the regional impact, but none from a scheduling perspective.
Raymond Neidl - Calyon Securities
Great. And Jake, tax rate going forward about 41%?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Yeah, I could use this rate that we had this quarter.
Raymond Neidl - Calyon Securities
Good. Thank you.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thank you, Ray.
Operator
Thank very much, sir. Ladies and gentlemen, your next question comes from the line of Kevin Crissey of UBS. Please proceed.
Kevin Crissey - UBS
Good morning everyone.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Hi, Kevin.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Good morning, Kevin.
Kevin Crissey ñ UBS
I wanted to focus on the Mileage Plus and try to hopefully get a little more color there. If we think about the miles that are actually purchased between the third party and the airline, is in any way you could give us a sense as to which is larger? And youíve talked about $800 million in third-party revenue a couple of years ago. HowÖ if we look at it in terms of miles rather than in revenue, how would we think about the airline relative to that?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Yeah, I donít think that we are prepared to give any information on that right now, Kevin. WeÖ because there is something that you heard us talk about when we were in Europe together, which is that the economic relationship between the airline and the Mileage company needs to be determined and that can be dialed up or down.
Kevin Crissey ñ UBS
Right.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
So, I donít want to by giving you the number of miles with the airline awards sort of imply anything on what that economic relationship is going to be. So, we are working through that very issue right now as we create a P&L for the Mileage business and I donít want toÖ I donít want to foreshadow that result.
Kevin Crissey ñ UBS
Okay. But when we think about theÖ you creating an internal P&L, itís an internal P&L for not just the third party, but the internal P&L for the entire business, including having some sort of transfer of paymentÖ payment for the airline, is that--?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Yes, yes. And there would also be payments from the Mileage company to the airline to [inaudible].
Kevin Crissey ñ UBS
Right.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
So, that relationshipÖ the amount that the airline pays for miles and not that the Mileage company pays for transportation is yet to be determined, but you are absolutely right, thatís how we think about the business is more than just a third party sale.
Kevin Crissey ñ UBS
Okay. And in terms of the risks of the strategy, do you believe that youÖ you as a management team have identified what all the risks of a spinout might be?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
I donít think we have yet. We are going through that process. We think weíve identified a number of them, but we have not finished our work. So, I wouldnít say that we have identified all of the risks. So, obviously somebody has done this before and Air Canada and Aeroplan have done this. So, thatís helpful in thinking about the risks and itís encouraging that they found a way toÖ they got comfortable with all the risks, but we havenít completed that work yet, Kevin.
Kevin Crissey - UBS
Okay. And would the contract be an evergreen contract or you donít know yet?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
We donít know yet.
Kevin Crissey ñ UBS
Okay. Thank you very much.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
You bet.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thank you, Kevin.
Operator
Thank you very much, sir. Ladies and gentlemen, your next question comes from line of Jamie Baker of JPMorgan. Please proceed.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Good morning, Jamie.
Jamie Baker - JPMorgan
Good morning gentlemen. Your earlier technical delay would have been more entertaining had you piped in Channel 9. Jake, following up to an earlier question, what sort of lead time do you think you require not only in terms of with the banks as it relates to on asset spend or a dividend payment, but also in terms of the labor approval as it relates to spinning off the MRO?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
So, you are focusing on the MRO process?
Jamie Baker ñ JPMorgan
Thatís correct.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Yeah, so that processÖ we have a process underway right now and we are talking to both private equity and to various strategics and theyíre going through their due diligence process now. And I expect that before we get to a labor result, weíre going to have to identify who is the winner, if you will, and what the terms of that are and weíre going to have to go talk to labor about all of that. So, I donít think that that clearly itís not going to happen by the end of this year and itís more likely something thatís in the first quarter by the time you are actuallyÖ toward the end of this year or early in the first quarter by time you are actually talking to labor about a specific deal.
Jamie Baker ñ JPMorgan
But, you are suggesting that interested buyers would step up prior to knowing what an assumed labor buy off would cost?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Well, no, I think, we canÖ they would obviously have their own expectations about what that would cost and whetherÖ and what they could offer and what we could offer to the union, and then we have to go see if we could make that happen.
Jamie Baker ñ JPMorgan
Okay.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Obviously, there wouldnít be any commitment until you actually had a deal with the union.
Jamie Baker ñ JPMorgan
Okay.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Jamie, when you think about it, the answer to your question it probably is contingent upon who the interested party if it succeeds would be and what their perception would be about the economics of such a transaction, including the labor transaction.
Jamie Baker - JPMorgan
Okay. Thank you very much, gentlemen.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
You bet, thank you.
Operator
Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of Daniel McKenzie of Credit Suisse. Please proceed.
Daniel McKenzie - Credit Suisse
Yeah, hi.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Hi, Dan.
Daniel McKenzie - Credit Suisse
Good morning. John, this may be a little bit early, but Iím wondering what kind of preliminary perspective you can provide on ë08 corporate travel trends?
John P. Tague - Executive Vice President and Chief Revenue Officer
Weíre not seeing any statistical evidence nor are we hearing any significant anecdotal discussion around demand concerns from our corporate portfolio. So, we are obviously not oblivious to what you and I read in the paper, and I think that we are being conservative based upon the prospects of that, but weíre not seeing any evidence in fact or in discussion to feedback.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
In fact, Dan, we have been looking for it. Your question posed by a series of other folks on this matter, including our directors and we have actually been looking for signs of our significant corporates cutting back on their business travel. But, it actually seemed that the economic concern is driving them to compete on a face-to-face basis looking for an edge, such at least in the near term in this period as to ñ we are not yet able to call the next economic cycle is to when it begins and when we now experience [inaudible] we are actually seeing a sustaining experience.
Daniel McKenzie - Credit Suisse
Very interesting. And then I guess the next question I guess either for you Glenn or Jake. United has clearly been a strong advocate of industry consolidation, but two counterarguments have been that the political window has closed and then separately a concern is been expressed about consolidating at the peak of the earnings cycle. And then Iím just wondering how do you respond to these investor concerns?
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Two points. First is, I think I said on the last call that we havenít really tested the political window at all other than in the context of a hostile attempt. So, any perception, itís consistent, that which you mentioned a moment ago is hypothetical. We havenít gone to Washington and tested the antitrust and the political window with the proposition of a constructive and accretive to all stakeholdersí transaction, until we do, until the industry does, I donít think we are going to know the answer, but we are not going to know the outcome. I do think that at the smaller airline level there has been some activity that led to constructive consolidation that was resolved with the various regulatory authorities. So, Iím still of a mind that there is a tremendous amount of redundant overhead and redundant expenditure that amounts to waste that we independent of consolidation are all pursuing on our own. It would be hugely accretive to stakeholders if we pursued it in the context of consolidated industry that wrung that waste out of the industry. I donít think that there is a constituency out there that it would poorly serve.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
And Iíd just add that the case where the economy is slowing and fuel is high, thatís all true, that only makes the case for consolidation even stronger.
Daniel McKenzie - Credit Suisse
Okay, great. Thanks a lot guys.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thank you.
Operator
Thank you ladies and gentlemen, this concludes the analyst and investor portion of our call today. Before we take questions from the media, I would now like to turn the call back to Mr. Tilton for closing comments.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thanks very much, Bill. As I said earlier today in a message to our employees, our results at United reflect the continuing work and discipline across the entire company. This quarter we saw significant gains in revenue and profit and our performance clearly sets us apart from our domestic peers. With that having been said and as your questions reflect, we know there is more needs to be done to succeed in an industry that is fast becoming global and weíll see intensified international competition over the next five years in all markets, including the United States and thatís the work that our five-year plan sets out in detail, as we continue to improve this company for all of our stakeholders. And as weíve told you on many occasions and again on this call, weíd be aggressive in looking at all of our opportunities to generate value for our shareholders. At United, we believe that we should aspire to deliver returns competitive with American industry in general, be it by further strengthening United Airlines, unlocking the value of businesses under the UAL umbrella, using our cash for shareholder-friendly actions or by advocating as we did a moment ago for consolidation of the sector. Itís clearly a loss to get United in a different approach if needed if we are to be successful in breaking the historical boom and bust cycle of this industry. At our company, we resolve to talking a different approach, being proactive rather than reactive and creating sustainable value over the long term for shareholders and all of our stakeholders.
With that operator, we are now ready to take questions from the media.
Operator
Thank you very much, sir. We will now take calls from the media. [Operator Instructions]. Our first question comes from the line of Susanna Ray of Bloomberg. Please proceed.
Susanna Ray - Bloomberg
Hi, there. I just have a couple of questions about the maintenance unit. Iím wondering what exactly you mean by various strategics and Iím wondering how many interested parties you are speaking with. And then Iím also wondering what will be done with the proceeds, I know employees are very keen to get some of those proceeds. And then my last question is just whether you are considering selling perhaps your cargo operations or any of your United Express slots or anything else other than maintenance and the Mileage plan? Thanks.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Okay, let me handle that in sort of reverse order. We donít own any of our United Express partners. So, there is no potential for a transaction right there.
Susanna Ray ñ Bloomberg
So, what about the slot?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
I am sorry.
Susanna Ray ñ Bloomberg
What about the slots? I think you are on the slots, right?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Yeah, we are not planning on selling any slots.
Susanna Ray ñ Bloomberg
Okay.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
As to the proceeds, I think itís way premature to talk about the proceeds, weíve gotten a lot of interest from various parties. Iím not going to name them for you, but strategics would be people who are in the MRO business and obviously who private equity is. But, we are not going to name anyone. Weíve agreed to do this confidentially and thatís the way we are proceeding. But, we got a lot of interest, a lot of people are looking at it. And again we donít know at this point whether we are going to be able to push the ball over the goal line or not because of, I am sure youíve heard the conversation we had with Jamie Baker a little while ago. We had some issues to work out with labor and itís not clear whether we are going to be able to work those issues out. The maintenance business for us is something that as an airline, we donít think we can invest a lot of capital in it and make it grow. And so in order to have that business grow, we think it makes some sense to get a third party involved, we canít invest the capital to grow that business. So, we think over the long term it could be quite a good business.
Susanna Ray ñ Bloomberg
And just one last question about the timeline, you mentioned something at the end of the year or beginning of the next year, youíll have a specific deal to take to labor. Does that mean you would anticipate selling it in the first quarter of 2008?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
I think that the timingÖ the timing of the process is going to be a little bit unpredictable, because we obviously are going to have to engage labor in a discussion if we got proposals from someone that we find acceptable, first of all. So, we havenít got to that point yet, but we first of all have to get a proposal that we find acceptable, then we have to go and see if we can work things out with labor and having done all that, then we can give you a timeline. But right now, itíd be way premature to talk about a specific timeline.
Susanna Ray ñ Bloomberg
Okay, thank you.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thank you.
Operator
Thank you very much, maíam. Ladies and gentlemen, your next question comes from the line of Barbara De Lollis of USA Today. Please proceed.
Barbara De Lollis - USA Today
Thank you. I was hoping you could talk about how important the new international premium product will be for United. For instance, do you think it will help you regain customers you lost to foreign flags that had a better product? Do you think youíll sell more business class tickets to people whoíve been sitting in coach? Thank you.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Barbara, let me have Graham Atkinson, our Chief Customer Officer, to take the first part of your question.
Barbara De Lollis - USA Today
Thanks.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
You bet.
Graham W. Atkinson - Executive Vice President and Chief Customer Officer
Yes, good morning, Barbara. So, the product is coming to market shortly and we spent a couple of years designing and developing this product with an eye very much focused on our international best-in-class competition, thatís why we developed the fully lie-flat ñ 180 degree angled lie-flat seats in business class, as well as a completely new product in first class. And we believe itís going to drive significant yield improvement and a significant share shift. And thatís been the whole rationale for the development of this project. We fully acknowledge, we are middle of the pack right now and we intend to change that.
Barbara De Lollis - USA Today
Are there some risks that are going to reallyÖ that you think will really form better once this is in place?
Graham W. Atkinson - Executive Vice President and Chief Customer Officer
Iím sorry, I couldnít catch that.
Barbara De Lollis - USA Today
Are there some risks that really scream out for this improved product? Do you think youíllÖ I know itís starting at Dulles-Frankfurt, but what are the risks do you think?
Graham W. Atkinson - Executive Vice President and Chief Customer Officer
Well, we have a very diverseÖ uniquely diverse network Iíd say right across the world and we have world-class competitors in all regions. So, obviously some of the routes thatÖ most attractive are those that are the longest and those fly across the Pacific against some of the world-class competition that resides on the other side of Pacific. But, I would say right across the gambit, we feel ready to compete with anyone with this new product.
Barbara De Lollis - USA Today
Okay. Thank you very much.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thank you.
Operator
Thank you very much, maíam. Ladies and gentlemen, your next question comes from the line of Ted Reed of the TheStreet.com. Please proceed.
Ted Reed - TheStreet.com
Hi.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Ted, How are you?
Ted Reed - TheStreet.com
Good. How are you?
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Good.
Ted Reed - TheStreet.com
John, Iíd would like to ask you, why is this that your RASM increase is so much higher than your closest competitors and 9% versus the 5 or 6%? I know you are taking out capacity, I assume you have great yield management, but those things arenít different. So, why is you are so much higher?
John P. Tague - Executive Vice President and Chief Revenue Officer
Well, in fact, our capacity reduction was less than some of our principal competitors. So, I donít think thatís quite the catalyst for competitive performance in all cases. I would probably debate the notion that everybody has revenue management, therefore everyone executes equally. Our whole principle over the last 3 or 4 years is that we can drive best-in-class execution, be it in our B2B selling effort or the way we manage capacity or the way we price and manage our inventories and we are not done yet. We have a very significant suite of initiatives that Glenn alluded to to improve that performance further and we reject the idea, some would say that revenues happened to us as opposed to our accountability to deliver a best-in-class performance.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Hi, Ted, in the question about the 250 initiatives, there were some apparent confusion that we had 250 strategic initiatives that were akin to Mileage Plus or to the MRO. When in fact, in the 250, whether they be capital intensive in the $4 billion or not, a good many of them belong to John and his revenue team and they are all intended to drive improved performance against the current performance, which you rightly say is better than peers.
Ted Reed - TheStreet.com
I just, I might have lost and no why itís so much ñ why itís so much better though, there arenít any real secrets, are you like holding out tickets longer and you will manage in there, is there something like that?
John P. Tague - Executive Vice President and Chief Revenue Officer
Well, I might just fuse the fact that there arenít any secrets, but if there were I certainly would share that what you, Ted.
Ted Reed - TheStreet.com
All right. [inaudible].
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Yes, nice try, Ted.
Ted Reed - TheStreet.com
All right. Thank you.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
You bet. Bye-bye.
Operator
Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of Kelly Yamanouchi of Denver Post. Please proceed.
Kelly Yamanouchi - Denver Post
Hi. I wanted to ask a couple of questions about your planned domestic capacity reduction. Iím wondering in terms of maintaining the quality of your schedule, are you going to be able to prevent pulling out of any routes and how doesÖ how do your domestic capacity reductions affect your international feed as you are increasing your international capacity?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Yeah, thanks, Kelly. We donít expect anything noticeable from a customer perspective relative to the current exceptional quality of our schedule domestically. So, I would say it will be invisible from that perspective and in fact, as weíve reduced ASM spend in the U.S. over the last several years, weíve actually added new destinations and new routes quite consistently. Weíre very happy with the relationship between our domestic feed and the international system. We think sometimes that ñ itís an issue, but itís a bit of a red herring to support an unprofitable level of service domestically under a belief that itís essential to your international profitability, while true generally on the margins, we do not believe it is true.
Kelly Yamanouchi - Denver Post
I see. Okay. And Iím also wondering if you plan to announce any more major international markets for 2008, we havenít already?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Well, weíve announced a number of markets, the daily to Kuwait between now and the end of the year, Los Angeles to Frankfort as Glenn mentioned, the new China service. And then I would expect that we will have additional announcements forthcoming, some of which may impact Denver.
Kelly Yamanouchi - Denver Post
Okay. When would that be?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Shortly.
Kelly Yamanouchi - Denver Post
Okay. Will it be London?
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thank you, Kelly.
Kelly Yamanouchi - Denver Post
All right. Thank you.
Operator
Thank you very much, maíam. Ladies and gentlemen, your next question comes from the line of John Pletz of Crainís Chicago Business. Please proceed.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Hi, John.
John Pletz - Crainís Chicago Business
Hi, there. Just another question on international capacity growth, sort of mentioning, I guess, specific routes. Is it likely to be split between various hubs or is it going to be focused on one side of the country or the other?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
No, weíve continued to grow our international presence in San Francisco, Chicago, and Dulles and we evaluate opportunities as they come about in each of those regions. I donít think that we have any sort of a directional bias other than the economics, they all present good opportunities for us going forward.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
I think an example there, John, would be the fact that we were delighted to get San Francisco-Guangzhou, we were disappointed not to get LA-Shanghai. We are pleased to have LA-Frankfurt.
John Pletz - Crainís Chicago Business
Okay. Anything regarding Dulles in terms of running out things there?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Iím sorry. Could you?
John Pletz - Crainís Chicago Business
In terms of whatís happening on the East Coast, trying to just figure out what basis where think you might be underserved or you see opportunity in terms of departure points for international?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
I think the thing to understand about Dulles that John can elaborate on is Dulles has been a very rewarding international hub for us to develop contrary to some of the expectations during the restructuring.
John P. Tague - Executive Vice President and Chief Revenue Officer
So, I think as we alluded on the last call, Dulles is really performing extremely well for us. And I would say that is a uniform comment across virtually every route internationally in Dulles. So, weíre very encouraged about that region being the real deal in terms of a genuine large-scale international hub on the East Coast over time. Weíll obviously have to tackle some facilities issues as we move through this. But weíre very encouraged by the potential there.
John Pletz - Crainís Chicago Business
Thanks.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thank you.
Operator
Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of Laura Mandaro of MarketWatch. Please proceed.
Laura Mandaro - MarketWatch
Hi there.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Hi, Laura.
Laura Mandaro ñ MarketWatch
Hi. From the conference call, it sounded like you are further along talking to possible buyers for the maintenance business than you would be for the Mileage Plus. Do you have that right and are you talking to interested buyers of the Mileage Plus or you are not there yet?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Hi, this is Jake.
Laura Mandaro ñ MarketWatch
Yeah.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Weíre talking, as I said, to people on the MRO business. We have not developed a P&L for the Mileage business yet, so we donít really have anything to talk to people about. Having said that, there are people that are ringing my phone wanting to talk about it, but we have not engaged in any discussions, because we think it obviously makes sense to develop a P&L and define what the business is before beginning to talk to anyone about it seriously. But, weíve had some inbound interest.
Laura Mandaro ñ MarketWatch
Right. If I could just follow up a little detail there, so is there a P&L for the MRO business already orÖ and can you just--?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Yes, the MRO business has a P&L and it hasÖ weíve identified all the assets that go with the business and definition of the business and the contract, if you will, between the airline and the maintenance business and thatís is what we are talking to the strategics and the private equity firms about.
Laura Mandaro ñ MarketWatch
Right. Is that publiclyÖ you make that available on?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
No, we didn't.
Laura Mandaro ñ MarketWatch
You donít at all. Can you give us some--?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
No, itís not. So, we produced that information and itís not broken out of our financial statements and we have not made it public.
Laura Mandaro ñ MarketWatch
Okay. And then so on theÖ you are saying you are working and getting a P&L for the maintenanceÖ the Mileage business. Would thatÖ and you are leaning towards disclosing now, would that just be sort of a footnote if it were to be disclosed in the financial statements or can you give us--?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
I think there are a lot of ways you could disclose it in the financial statements.
Laura Mandaro ñ MarketWatch
Okay.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
We havenít gotten that far to determine whether we are going to do that or not, and as I said, we are biased in favor of it.
Laura Mandaro ñ MarketWatch
Okay. Okay, good. Were you the one who answered the first question from Bloomberg or was that Glenn? Iím sorry, I canít identify about United Express and the--?
Frederic F. Brace - Executive Vice President and Chief Financial Officer
That was me.
Laura Mandaro ñ MarketWatch
Okay, thanks very much.
Frederic F. Brace - Executive Vice President and Chief Financial Officer
Okay.
Operator
Thank you very much, maíam. And that concludes our Q&A session for today and also concludes our presentation. I want to thank you gain for your patience during our little technical issue there in the middle. You may now disconnect your lines. Have a good day.
Glenn F. Tilton - Chairman, President and Chief Executive Officer
Thank you, Bill.
Operator
Thank you.
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