Q&A With Pam Hendry, Vice President and Treasurer at United Airlines

Note: This is an article highlight from the Autumn 2024 Issue of Jetrader . To view the full magazine, including past issues, please visit the ISTAT website .

Jetrader: What was your career path prior to becoming vice president and treasurer at United Airlines??

Pam Hendry (PH): When I was first starting out in my career, I knew I wanted to do something in finance. What was interesting to me, coming from Southern California, was taking finance and using it in the entertainment industry. I started out in public accounting. I was on some entertainment clients, but I was also on this aircraft leasing job called International Lease Finance Corporation (ILFC). Ultimately, I was offered a job there, and I took it. At first, I hated it. I cried every night. But then that changed, and it turned into a 25-year career.

I started out in accounting but also doing the treasury functions, because it was a very small company. Ultimately, they realized they needed to split those functions and asked me which one I preferred. Treasury, especially at a capital-intensive business, is interesting because it is forward looking. It is strategic and different from many other treasurer roles in other industries. Having a global footprint and huge transactions made the treasurer role really interesting to me.

I did that for many years, and then after the acquisition by AerCap, I left. I knew there were other things I still wanted to do, so I did some consulting work, did a startup that didn’t start and ultimately was semi-retired when I got the call from United. Gerry Laderman had been promoted. Basically, the gentleman who was treasurer for life was now the chief financial officer, and there was an opportunity. I asked my husband if he was prepared to move to Chicago. He said yes, and then I had to convince the United folks that being a California girl would not mean that as soon as winter hit, I would freak out and need to run away. I convinced everyone that I was ready for the lifestyle. I didn’t need to convince anyone of my skill set, but I had to convince them I had a big, heavy winter jacket.

Jetrader: Who were your mentors and role models throughout your career?

PH: I actually didn’t have any mentors, at least not the way we think about them today: a formalized process where someone acts on your behalf or gives you support through conversations. When I think about it now, the way that I would look toward other people defined for me how I would behave or not behave — how the other leaders were, how they were appreciated or listened to or deferred to or not. You can see a lot of what is successful and unsuccessful by looking around the conference room table.

Having that awareness very late means I now take the role of mentor, ally and advocate very seriously. I do a lot of that, both formally and ?on an ad-hoc basis. Some of them have asked for it. Others, I’ve just told them that I’m going to do it.

Jetrader: United has historically relied heavily on secured corporate debt (“EETCs”) to finance its fleet. Recently, it seems you’re diversifying to other financing sources. How do you evaluate the available sources of aircraft finance currently, and what mix of financings do you expect going forward?

Historically, EETCs were the way we financed our fleet, but one of the things that COVID-19 laid bare — and also all of the supply chain issues — is that having a transactional view about funding the business is no longer effective.

PH: Historically, EETCs were the way we financed our fleet, but one of the things that COVID-19 laid bare — and also all of the supply chain issues — is that having a transactional view about funding the business is no longer effective. We don’t just fund or finance aircraft anymore; we finance the business. Part of the luxury of being able to talk that way is because we have a huge cash balance. Building that cash balance required us to use, initially, other forms of collateral that we didn’t historically use. Thinking about our loyalty program, thinking about our midlife aircraft, where the original financing had already matured, but we still own those aircraft, and we’re going to own them for 30-plus years, shouldn’t we be able to refinance those?

Building a cash balance based on existing asset classes versus future deliveries sets us up for flexibility so that we can take delivery of an aircraft today for cash and then back-lever it at some point in the future when the market looks attractive or when we’ve purchased a number of aircraft to the size that would support a EETC. In the old days, you would borrow money in a EETC and put that money on the shelf, and you knew that over the next three to nine months, those aircraft would deliver. Now, I don’t know when I’m going to get an airplane, so I don’t want to have loans accruing interest when I don’t need to.

What is also interesting is that we have educated and introduced a whole new set of investors to the airline space. They can come in, if they want, at a loyalty financing; they can come in at slots, gates and routes; they can come in at aircraft. And then for aircraft, it’s not just the EETCs; it’s all of the bank debt products and the Japanese leasing market. We will continue to look at new sources of capital and take advantage of the new investors.

Jetrader: Boeing is experiencing severe challenges with the delivery of both the 787s and 737 MAX, which are core parts of your current and future fleet. How is this affecting United’s operations, fleet planning and route planning? What are your contingency plans moving forward?

PH: It absolutely does impact us. It impacts us when we think about capacity, when we think about our plans for retirement and keeping those aircraft flying longer. We have a number of tools in our tool chest, and the restrictions that are external, we have been able to work toward our advantage.

Jetrader: United Next involves a broad strategy of up-gauging aircraft size. How far along are you in this process? How has the lack of availability of the MAX 10 affected your plans?

PH: The lack of availability and the delay in the certification of the MAX 10 is something that we have been dealing with. In some cases, we’ve converted MAX 10s to MAX 9s. In other cases, we’ve leased A321s when we don’t have the aircraft coming on our own book in the time frame that we want.

Jetrader: You have experience facing airlines while working for a lessor, and now you face lessors while working for an airline. How has your time at ILFC informed your dealings with lessors?

PH: I never really talked to airlines as a lessor unless they were in dire financial straits. Otherwise, we just got their money every month and said, “Thank you.” So, I only ever talked to airlines when they weren’t paying their bills.

When I was at the lessor, there were not a large number of lessors. In fact, we always talked about the barrier to entry for leasing. Then when capital became so cheap, all sorts of new entrants could come in and build a book of business and actually get financing and do things very quickly. I was in the leasing world for 25 years, and I would say the first 18 of them, there really wasn’t a lot of competition. Fast forward and you now have a huge number of aircraft lessors who are able to access debt at a very attractive level, whether they are investment grade or just able to take advantage of low interest rates since the financial crisis, there are so many more lessors.

At United now, because we’ve not historically done a lot of leasing, we can get attractive lease rates as lessors look to expand their business with us. We’re doing some sale leasebacks, we’re doing some operating leases. It’s an attractive form of capital for us.

Jetrader: Airlines faced great challenges with the onset of COVID-19. Can you share United’s experience managing through the pandemic, both financially and operationally? How do you plan for unexpected events and “unknown unknowns” in the future? Are airlines always going to need to carry large cash balances that would once have been considered excessive?

PH: We have some basic rules of the road for how to deal with the unknowns. Number one is, as a treasurer, you never run out of money. Knowing that we were entering COVID-19 but not knowing what it meant for our business or when it would end, we needed to shore up our cash balance as quickly as possible. We did that through a number of ways. The first thing we did was borrow US$2.75 billion against our unencumbered assets, then we started looking for other asset classes that we never really looked at before.

And when we structured debt, we did so in a way that planned for the future. We never said “OK, we’ll just give it all away now because the world is ending, so it doesn’t matter.” We have to assume that the crisis will end and that we will come out on the other side.

So, the second mantra after “don’t run out of money” is don’t provide covenants or restrictions that you wouldn’t want to live with in a regular day in a regular market. I’ve seen that too many times and it hamstrings the recovery when you have antiquated terms that will limit your ability to do business going forward. Don’t give in to what seems like “Oh, that’s easy to give.”

Always think about the future. Also, the fact that we have a lot of cash on the books sets us up for that next crisis. We don’t know when, we don’t know what, we don’t know how long, but we do know, in this industry, it is always coming. So just be prepared.

[Having a] lot of cash on the books sets us up for that next crisis. We don’t know when, we don’t know what, we don’t know how long, but we do know, in this industry, it is always coming.

Jetrader: You spent many years on the West Coast in warm, sunny Los Angeles and have now spent some time in the somewhat less warm and sunny Chicago. How has the transition been for you personally?

PH: We live in River North. We no longer have a car, which is anathema to anybody living in Los Angeles, but we can do that because our kids are grown and gone. We enjoy the city life of Chicago, the culture, and the food and the sports. All of that is so accessible. I also really enjoy the excuse of not being able to go out because it’s too cold. We spend a lot of time back in LA to visit family and friends. We get the best of both worlds. And working at an airline, we can expand that world and travel to all sorts of interesting places that United flies. We do take advantage of that.

Jetrader: As a seasoned aviation finance executive, how do you see the future of aircraft financing evolving over the next decade? What trends or innovations do you anticipate will shape the industry?

PH: Necessity is the mother of invention. You saw that happen through COVID-19 where we found different structures and different asset classes that we were able to use. I think that the industry itself is always going to be top of mind, for political reasons, for personal reasons — everyone needs the airline industry.

Regarding innovation, I think the online innovations that we have presented through the United.com website and through our app so that the travel journey has become something where, yes, you can’t control everything, but you have more control. You can see if a flight is delayed, why it’s delayed, making choices about weather in advance, rebooking, following your luggage, and everything else. I think we are on the forefront of innovations that give you more power as a traveling customer.

Jetrader: What advice do you have for those entering the aviation business today or those relatively new to the industry?

Coming into this industry by mistake, I will say: Once you’re in it, you can never leave. There are people who love aviation and only want to work in aviation, but there are many different access points.

PH: For me, coming into this industry by mistake, I will say: Once you’re in it, you can never leave. There are people who love aviation and only want to work in aviation, but there are many different access points. You can come in with a finance background or a marketing background and you can come in at many points in your career. But once you are here, the global nature, the labor intensive, capital intensive, regulatory, all of these things that make it so complicated also make it so interesting. Therefore, once you’re here, you never want to leave. So be careful.

What you should also do is make sure you are nice to everyone along the way. Learning that lesson is important and learning it early on is key, because it is such a small industry. This lesson continues to be important as you move through your career, because you never know who’s going to help you 10 years from now. And also send a thank-you email. I just gave career advice to a young man, and he landed a job and reached out to let me know and thank me. I will remember that.