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UNITED CONTINENTAL HOLDINGS, INC. filed this Form 8-K on 04/24/2014
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8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 24, 2014

 

 

UNITED CONTINENTAL HOLDINGS, INC.

UNITED AIRLINES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-06033   36-2675207
Delaware   001-10323   74-2099724

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification Number)

 

233 S. Wacker Drive, Chicago, IL   60606
233 S. Wacker Drive, Chicago, IL   60606
(Address of principal executive offices)   (Zip Code)

(872) 825-4000

(872) 825-4000

Registrant’s telephone number, including area code 

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition

On April 24, 2014, United Continental Holdings, Inc. (“UAL”), the holding company whose primary subsidiary is United Airlines, Inc. (“United,” and together with UAL, the “Company”), issued a press release announcing the financial results of the Company for first quarter 2014. The press release is attached as Exhibit 99.1 and is incorporated herein by reference.

The information in this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 7.01 Regulation FD Disclosure

On April 24, 2014, UAL will provide an investor update related to the financial and operational outlook for the Company for second quarter and full year 2014. A copy of the investor update is attached as Exhibit 99.2 and is incorporated herein by reference.

The information in this Item 7.01, including Exhibit 99.2, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

 

Exhibit No.

  

Description

99.1*    Press Release issued by United Continental Holdings, Inc. dated April 24, 2014
99.2*    Investor Update issued by United Continental Holdings, Inc. dated April 24, 2014

 

* Furnished herewith electronically.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

UNITED CONTINENTAL HOLDINGS, INC.
UNITED AIRLINES, INC.
By:  

/s/ Chris Kenny

Name:   Chris Kenny
Title:   Vice President and Controller

Date: April 24, 2014


EXHIBIT INDEX

 

Exhibit No.

  

Description

99.1*    Press Release issued by United Continental Holdings, Inc. dated April 24, 2014
99.2*    Investor Update issued by United Continental Holdings, Inc. dated April 24, 2014

 

* Furnished herewith electronically.
EX-99.1

Exhibit 99.1

 

LOGO

United Announces

First-Quarter 2014 Results

UAL Reports $489 Million First-Quarter 2014 Loss Excluding Special Items;

$609 Million Loss Including Special Items

CHICAGO, April 24, 2014 – United Airlines (UAL) today reported a first-quarter 2014 net loss of $489 million, or $1.33 per share, excluding $120 million of special items. Including special items, UAL reported a first-quarter 2014 net loss of $609 million, or $1.66 per share.

 

    Historic severe weather increased United’s first-quarter loss by approximately $200 million.

 

    United’s consolidated passenger revenue per available seat mile (PRASM) decreased 2.0 percent in the first quarter of 2014 compared to the first quarter of 2013. Weather-related cancellations reduced first-quarter 2014 consolidated PRASM by approximately 1.5 percentage points.

 

    First-quarter 2014 consolidated unit costs (CASM) increased 1.0 percent year-over-year. First-quarter 2014 consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, increased 3.1 percent year-over-year on a consolidated capacity reduction of 0.3 percent.

 

    UAL ended the first quarter with $6.0 billion in unrestricted liquidity.

“This quarter’s financial performance is well below what we can and should achieve. We are taking the appropriate steps with our operations, network, service and product to deliver significantly better financial results,” said Jeff Smisek, UAL’s chairman, president and chief executive officer. “The entire United team is sharply focused on accomplishing the goals we have laid out for long-term financial success.”

First-Quarter Revenue and Capacity

For the first quarter of 2014, total revenue was $8.7 billion, a decrease of 0.3 percent year-over-year. First-quarter consolidated passenger revenue decreased 2.3 percent to $7.4 billion, compared to the same period in 2013. Ancillary revenue per passenger in the first quarter increased 7.6 percent year-over-year to more than $21 per passenger. First-quarter cargo revenue decreased 7.9 percent versus the first quarter of 2013 to $209 million. Other revenue in the first quarter increased 18.0 percent year-over-year to $1.1 billion, in large part due to an agreement to sell jet fuel to a third party.

 

LOGO


UAL Announces First-Quarter 2014 Results / Page 2

 

Consolidated revenue passenger miles and consolidated available seat miles each decreased 0.3 percent year-over-year for the first quarter, driven largely by adverse weather, resulting in a first-quarter consolidated load factor of 81.1 percent.

First-quarter 2014 consolidated PRASM and consolidated yield each decreased 2.0 percent compared to the first quarter of 2013.

“We recognize that we have lagged on revenue and are taking the necessary actions to remedy that,” said Jim Compton, UAL’s vice chairman and chief revenue officer. “Our employees pulled together during the unprecedented extreme winter weather that marked this quarter. We appreciate their hard work, which resulted in higher customer satisfaction scores than for the same period last year.”

Passenger revenue for the first quarter of 2014 and period-to-period comparisons of related statistics for UAL’s mainline and regional operations are as follows:

 

     1Q 2014
Passenger
Revenue

(millions)
     Passenger
Revenue vs.

1Q 2013
    PRASM vs.
1Q 2013
    Yield vs.
1Q 2013
    Available
Seat Miles
vs.

1Q 2013
 

Domestic

   $ 2,916         0.2     1.4     0.3     (1.0 %) 

Atlantic

     1,163         (1.9 %)      (3.4 %)      0.4     1.5

Pacific

     1,086         (5.0 %)      (6.3 %)      (4.0 %)      1.4

Latin America

     683         (2.6 %)      (1.7 %)      (3.6 %)      (0.9 %) 
  

 

 

          

International

     2,932         (3.2 %)      (4.1 %)      (2.2 %)      0.9

Mainline

     5,848         (1.5 %)      (1.5 %)      (1.0 %)      0.0

Regional

     1,536         (5.2 %)      (3.5 %)      (6.0 %)      (1.8 %) 
  

 

 

          

Consolidated

   $ 7,384         (2.3 %)      (2.0 %)      (2.0 %)      (0.3 %) 

First-Quarter Costs

Total operating expenses increased $60 million, or 0.7 percent, in the first quarter versus the same period in 2013. Excluding special charges, first-quarter total operating expenses increased $100 million, or 1.1 percent, year-over-year.

First-quarter consolidated CASM increased 1.0 percent year-over-year. First-quarter consolidated CASM, excluding special charges, third-party business expense, fuel and profit sharing, increased 3.1 percent compared to the first quarter of 2013. Third-party business expense was $193 million in the first quarter of 2014.

“We are making good progress in reducing costs and delivering sustainable efficiencies, all while improving the product for our customers,” said John Rainey, UAL’s executive vice president and chief financial officer. “While we are not pleased with our first-quarter financial results, we are building a strong foundation that will result in improved financial performance.”


UAL Announces First-Quarter 2014 Results / Page 3

 

Liquidity and Cash Flow

UAL ended the first quarter with $6.0 billion in unrestricted liquidity, including $1.0 billion of undrawn commitments under a revolving credit facility. The company generated $694 million of operating cash flow in the first quarter. During the first quarter, the company had gross capital expenditures of $737 million, excluding fully reimbursable projects. The company made debt and capital lease principal payments of $637 million in the first quarter.

First-Quarter 2014 Accomplishments

Operations, Employees and Customer Service

 

    United Airlines reported a first-quarter mainline on-time arrival rate (domestic and international) of 74.3 percent, adversely affected by unusually bad winter storms during the quarter that impacted many of the airline’s hubs. The on-time arrival rate is based on flights arriving within 14 minutes of scheduled arrival time.

 

    United paid employees $190 million in profit sharing for 2013 performance.

 

    Building on the success of last year’s training, the company launched its second wave of customer service training geared toward delivering on United’s flyer-friendly brand promise.

Finance, Network and Fleet

 

    The company pre-paid $400 million of 8 percent unsecured notes due 2024 and reduced its convertible debt balance by $202 million in the first quarter.

 

    United priced $949 million of enhanced equipment trust certificates at a blended interest rate of 4.13 percent, a record low interest rate for financings of this type. The proceeds are being used to finance the acquisition of 13 Boeing 737-900ERs, nine Embraer 175s, two 787-8 Dreamliners and one 787-9 Dreamliner.

 

    The company took delivery of two new Boeing 787-8 Dreamliners in the first quarter, bringing its total Dreamliner fleet to 10 aircraft, and its first Embraer 175, the newest addition to the United Express fleet. United also took delivery of 10 new Boeing 737-900ERs and exited from scheduled service three 757-200s during the first quarter.

 

    United operated the first commercial flight worldwide with the new, fuel-efficient Split Scimitar winglets. Once the Split Scimitar installation is complete, winglet technology on United’s 737, 757 and 767 fleet is expected to save the airline more than 65 million gallons of fuel a year, equivalent to over $200 million per year in jet fuel costs at today’s prices.

 

    United continued installing slimmer, next-generation economy class seats on certain aircraft. The airline now offers these seats, which are 10 to 15 percent lighter than the seats they are replacing, on approximately 200 aircraft and expects to complete installation on approximately 350 aircraft by the end of 2014.


UAL Announces First-Quarter 2014 Results / Page 4

 

    United expanded its industry-leading global route network, launching nonstop flights from San Francisco to Taipei, Taiwan. The company also announced new nonstop international flights beginning later this year to Aruba; Santiago, Dominican Republic; and Nassau, Bahamas; and the airline’s first scheduled international route using the new 787-9 Dreamliner from Los Angeles to Melbourne, Australia. The airline started five new domestic routes in the first quarter, including United’s first service to Elmira, N.Y. and Topeka, Kan., and it also announced 10 new domestic markets including the company’s first service to Bangor, Maine; Devil’s Lake, N.D.; Jamestown, N.D.; and St. Cloud, Minn.

Flyer-Friendly Product, Loyalty Program and Facilities

 

    The company and its partners at San Francisco International Airport opened the newly renovated Boarding Area E in Terminal 3, a 10-gate, 68,800-square-foot boarding area.

 

    United opened a new Global Services reception lobby for its top frequent flyers at the airline’s New York hub at Newark Liberty International Airport. The company also completed construction on a new widebody aircraft maintenance hangar at Newark, expanding its maintenance capability for widebody aircraft at the airport by 33 percent. The company continued outfitting aircraft with satellite Wi-Fi across its mainline fleet. The airline now offers Wi-Fi on more than 230 aircraft and expects to have more than 450 Wi-Fi equipped aircraft by the end of 2014.

 

    United announced that it is rolling out a new personal device entertainment system onboard mainline aircraft later this year. With the new service, customers can choose from more than 150 movies and nearly 200 TV shows and watch them on their personal devices.

 

    United together with global distribution system (GDS) Travelport announced that Travelport-connected agents in the U.S. can now sell United Economy Plus extra-legroom seating. Travelport is the first GDS to re-launch the capability for travel agents to sell Economy Plus.

 

    The airline expanded its Mercedes-Benz tarmac transportation service, originally offered in Chicago and Houston, to its hubs at Newark Liberty and San Francisco.

 

    United debuted new electronics charging stations at its Chicago O’Hare hub. The airline is installing nearly 500 electronics charging stations in customer seating areas at airports nationwide.

 

    The airline added new menu items including gluten-free options for premium-cabin and United Economy customers. In addition, the company expanded for sale its premium wine service in United Economy on flights between the United States and Europe.


UAL Announces First-Quarter 2014 Results / Page 5

 

    United and the PGA TOUR teamed up to offer members of MileagePlus special discounts and access to courses within the PGA TOUR’s TPC Network – a collection of more than 30 world-class golf destinations throughout North America. United is the official airline of the PGA TOUR.

About United

United Airlines and United Express operate an average of more than 5,300 flights a day to more than 360 airports across six continents. In 2013, United and United Express carried more passenger traffic than any other airline in the world and operated nearly two million flights carrying 139 million customers. United is delivering a more flyer-friendly experience, offering more premium-cabin flat-bed seats and extra-legroom, economy-class seating than any airline in North America. In 2013, United became the first U.S. global carrier to offer satellite-based Wi-Fi, including on long-haul overseas routes. The airline also features DIRECTV® on more than 200 aircraft, with more live television access than any airline in the world. United operates nearly 700 mainline aircraft and, in 2014, will take delivery of 35 new Boeing aircraft and welcome 27 new E175 aircraft to United Express. Business Traveler magazine awarded United Best Airline for North American Travel for 2013, and readers of Global Traveler magazine have voted United’s MileagePlus program the Best Frequent-Flyer program for 10 consecutive years. Air Transport World named United the Eco-Aviation Airline of the Year Gold Winner in 2013. United is a founding member of Star Alliance, which provides service to 195 countries via 26 member airlines. More than 85,000 United employees reside in every U.S. state and in countries around the world. For more information, visit united.com or follow United on Twitter and Facebook. The common stock of United’s parent, United Continental Holdings, Inc., is traded on the NYSE under the symbol UAL.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements included in this release are forward-looking and thus reflect our current expectations and beliefs with respect to certain current and future events and financial performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as “expects,” “will,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook” and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this report are based upon information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: our ability to comply with the terms of our various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our operational plans and revenue-generating initiatives, including optimizing our revenue; our ability to control our costs, including realizing benefits from our resource optimization efforts, cost reduction initiatives and fleet replacement programs; our ability to utilize our net operating losses; our ability to attract and retain customers; demand for transportation in the markets in which we operate; an outbreak of a disease that affects travel demand or travel behavior; demand for travel and the impact that global economic conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets); economic and political instability and other risks of doing business globally; our ability to cost-effectively hedge against increases in the price of


UAL Announces First-Quarter 2014 Results / Page 6

 

aircraft fuel; any potential realized or unrealized gains or losses related to fuel or currency hedging programs; the effects of any hostilities, act of war or terrorist attack; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; disruptions to our regional network; the costs and availability of aviation and other insurance; industry consolidation or changes in airline alliances; competitive pressures on pricing and on demand; our capacity decisions and the capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation and other actions (including open skies agreements and environmental regulations); labor costs; our ability to maintain satisfactory labor relations and the results of the collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; weather conditions; the possibility that expected merger synergies will not be realized or will not be realized within the expected time period; and other risks and uncertainties set forth under Part I, Item 1A, Risk Factors, of UAL’s Annual Report on Form 10-K, as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC.

-tables attached-

 

-more-


UAL Announces First-Quarter 2014 Results / Page 7

 

UNITED CONTINENTAL HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2014 AND 2013

 

 
     Three Months Ended
March 31,
    %  
(In millions, except per share data)    2014     2013     Increase/
(Decrease)
 

Operating revenue:

      

Passenger:

      

Mainline

   $ 5,848      $ 5,938        (1.5

Regional

     1,536        1,621        (5.2
  

 

 

   

 

 

   

Total passenger revenue

     7,384        7,559        (2.3

Cargo

     209        227        (7.9

Other operating revenue

     1,103        935        18.0   
  

 

 

   

 

 

   

Total operating revenue

     8,696        8,721        (0.3
  

 

 

   

 

 

   
Operating expense:       

Aircraft fuel (A)

     2,917        3,050        (4.4

Salaries and related costs

     2,153        2,127        1.2   

Regional capacity purchase (B)

     559        588        (4.9

Landing fees and other rent

     572        497        15.1   

Aircraft maintenance materials and outside repairs

     458        438        4.6   

Depreciation and amortization

     409        408        0.2   

Distribution expenses

     318        328        (3.0

Aircraft rent

     224        240        (6.7

Special charges (C)

     52        92        NM   

Other operating expenses

     1,383        1,217        13.6   
  

 

 

   

 

 

   

Total operating expense

     9,045        8,985        0.7   
  

 

 

   

 

 

   
Operating loss      (349     (264     32.2   
Nonoperating income (expense):       

Interest expense

     (187     (201     (7.0

Interest capitalized

     14        11        27.3   

Interest income

     5        5        —     

Miscellaneous, net

     (89     23        NM   
  

 

 

   

 

 

   

Total nonoperating expense

     (257     (162     58.6   
  

 

 

   

 

 

   
Loss before income taxes      (606     (426     42.3   
Income tax expense (benefit) (D)      3        (9     NM   
  

 

 

   

 

 

   
Net loss    $ (609   $ (417     46.0   
  

 

 

   

 

 

   
Loss per share, basic    $ (1.66   $ (1.26     31.7   
  

 

 

   

 

 

   
Loss per share, diluted    $ (1.66   $ (1.26     31.7   
  

 

 

   

 

 

   
Weighted average shares, basic      368        332        10.8   
Weighted average shares, diluted      368        332        10.8   
NM Not meaningful       

 

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UAL Announces First-Quarter 2014 Results / Page 8

 

UNITED CONTINENTAL HOLDINGS, INC.

NOTES (UNAUDITED)

 

(A) UAL’s results of operations include fuel expense for both mainline and regional operations.

 

     Three Months Ended
March 31,
    %  
(In millions, except per gallon)    2014     2013     Increase/
(Decrease)
 

Mainline fuel expense excluding hedge impacts

   $ 2,365      $ 2,461        (3.9

Hedge losses reported in fuel expense (a)

     (3     (9     NM   
  

 

 

   

 

 

   

Total mainline fuel expense

     2,368        2,470        (4.1

Regional fuel expense

     549        580        (5.3
  

 

 

   

 

 

   

Consolidated fuel expense

     2,917        3,050        (4.4

Cash received on settled hedges that do not qualify for hedge accounting (b)

     7        17        NM   
  

 

 

   

 

 

   

Fuel expense including all gains (losses) from cash-settled hedges

   $ 2,910      $ 3,033        (4.1
  

 

 

   

 

 

   

Mainline fuel consumption (gallons)

     746        748        (0.3

Mainline average aircraft fuel price per gallon excluding hedge losses recorded in fuel expense

   $ 3.17      $ 3.29        (3.6

Mainline average aircraft fuel price per gallon

   $ 3.17      $ 3.30        (3.9

Mainline average aircraft fuel price per gallon including all gains (losses) from settled hedges

   $ 3.16      $ 3.28        (3.7

Regional fuel consumption (gallons)

     170        176        (3.4

Regional average aircraft fuel price per gallon

   $ 3.23      $ 3.30        (2.1

Consolidated fuel consumption (gallons)

     916        924        (0.9

Consolidated average aircraft fuel price per gallon excluding hedge losses recorded in fuel expense

   $ 3.18      $ 3.29        (3.3

Consolidated average aircraft fuel price per gallon

   $ 3.18      $ 3.30        (3.6

Consolidated average aircraft fuel price per gallon including all gains (losses) from cash-settled hedges

   $ 3.18      $ 3.28        (3.0

 

(a) Includes gains (losses) from settled hedges that were designated for hedge accounting. UAL allocates 100 percent of hedge accounting gains (losses) to mainline fuel expense.
(b) Includes ineffectiveness gains (losses) on cash-settled hedges and gains (losses) on cash-settled hedges that were not designated for hedge accounting.

 

(B) UAL has contractual relationships with various regional carriers to provide regional jet and turboprop service branded as United Express. Under these agreements, UAL pays the regional carriers or other third parties contractually agreed fees for crew expenses, maintenance expenses and other costs of operating these flights. These costs include aircraft rent of $162 million for the three months ended March 31, 2014, of which $109 million and $53 million is included in regional capacity purchase expense and aircraft rentals, respectively, in our Statements of Consolidated Operations.

 

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UAL Announces First-Quarter 2014 Results / Page 9

 

UNITED CONTINENTAL HOLDINGS, INC.

NOTES (UNAUDITED)

 

(C) Special items include the following:

 

     Three Months Ended
March 31,
 
(In millions)    2014     2013  

Integration-related costs

   $ 34      $ 70   

Severance and benefits

     14        14   

(Gains) losses on sale of assets and other special (gains) losses, net

     4        (3

Additional costs associated with the temporarily grounded Boeing 787 aircraft

     —          11   
  

 

 

   

 

 

 

Special charges

     52        92   

Venezuela foreign exchange loss

   $ 21      $ —     

Income tax benefit

     (1     —     
  

 

 

   

 

 

 

Total operating and nonoperating special charges, net of income taxes

   $ 72      $ 92   

Mark-to-market (MTM) (gains) losses from fuel hedges settling in future periods

   $ 26        (48

Prior period gains on fuel contracts settled in the current period

     22        15   
  

 

 

   

 

 

 

Total special items, net of income taxes

   $ 120      $ 59   
  

 

 

   

 

 

 

2014 - Special items

Integration-related costs: Integration-related costs include compensation costs related to systems integration and training, new uniforms, relocation for employees and severance primarily associated with administrative headcount reductions.

Severance and benefits: The company recorded $14 million of severance and benefits. We currently expect to reduce up to 470 airport operations and catering positions at Cleveland as a result of the previously announced capacity reductions and an additional 238 airport positions in Canada.

Venezuela foreign exchange loss: The company recorded $21 million of losses due to exchange rate changes in Venezuela applicable to funds held in local currency. Approximately $100 million of the company’s unrestricted cash balance was held as Venezuelan bolivars as of March 31, 2014. United is working with Venezuelan authorities regarding the timing of the repatriation of its funds held in local currency.

MTM (gains) losses from fuel hedges settling in future periods and prior period gains on fuel contracts settled in the current period: The company utilizes certain derivative instruments that are economic hedges but do not qualify for hedge accounting under U.S. Generally Accepted Accounting Principles. The company records changes in the fair value of these economic hedges to Nonoperating income (expense): Miscellaneous, net in the statements of consolidated operations. During the three months ended March 31, 2014, the company recorded $26 million in MTM losses on economic hedges that will settle in future periods. For economic hedges that settled in the three months ended March 31, 2014, the company recorded MTM gains of $22 million in prior periods. The figures above also include an insignificant amount of ineffectiveness on hedges that are designated for hedge accounting.

2013 - Special items

Integration-related costs: Integration-related costs included compensation costs related to systems integration and training, branding activities, new uniforms, write-off or acceleration of depreciation on systems and facilities that were no longer used or planned to be used for significantly shorter periods, relocation for employees and severance primarily associated with administrative headcount reductions.

Voluntary severance and benefits: The company recorded $14 million associated with a voluntary program offered by United in which flight attendants took an unpaid 13-month leave of absence. The flight attendants continue to receive medical benefits and other company benefits while on leave under the program. Approximately 1,300 flight attendants opted to participate in the program.

Charges for temporarily grounded 787 aircraft: The company recorded $11 million associated with the temporary grounding of its Boeing 787 aircraft. The charges were comprised of aircraft depreciation expense and dedicated personnel costs that the company incurred while the aircraft were grounded.

Gains on sales of assets and other special items, net: The company recorded a $5 million gain related to a contract termination and $2 million in losses on the sale of assets.

MTM (gains) losses from fuel hedges settling in future periods and prior period gains on fuel contracts settled in the current period: During the three months ended March 31, 2013, the company recorded $48 million in MTM gains on economic hedges that settled in later periods. For economic hedges that settled in the three months ended March 31, 2013, the company recorded MTM gains of $15 million in prior periods. The figures above also include an insignificant amount of ineffectiveness on hedges that are designated for hedge accounting.

 

(D) The company is required to provide a valuation allowance for our deferred tax assets in excess of deferred tax liabilities because UAL concluded that it is more likely than not that such deferred tax assets will ultimately not be realized. As a result, pre-tax losses for the three months ended March 31, 2014, and March 31, 2013, were not tax benefited.

 

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UAL Announces First-Quarter 2014 Results / Page 10

 

UNITED CONTINENTAL HOLDINGS, INC.

STATISTICS

 

     Three Months Ended
March 31,
    %  
     2014     2013     Increase/
(Decrease)
 

Mainline:

      

Passengers (thousands)

     21,229        21,479        (1.2

Revenue passenger miles (millions)

     40,337        40,547        (0.5

Available seat miles (millions)

     49,797        49,820        —     

Cargo ton miles (millions)

     585        546        7.1   

Passenger load factor:

      

Mainline

     81.0     81.4     (0.4 )pts. 

Domestic

     85.0     84.2     0.8  pts. 

International

     77.1     78.6     (1.5 )pts. 

Passenger revenue per available seat mile (cents)

     11.74        11.92        (1.5

Average yield per revenue passenger mile (cents)

     14.50        14.64        (1.0

Cost per available seat mile (CASM) (cents):

      

CASM (a)

     14.90        14.90        —     

CASM, excluding special charges (b)

     14.80        14.72        0.5   

CASM, excluding special charges and third-party business expenses (b)

     14.41        14.48        (0.5

CASM, excluding special charges, third-party business expenses and fuel (b)

     9.66        9.52        1.5   

CASM, holding fuel rate and profit sharing constant, excluding special charges and third-party business expenses (b)

     14.60        14.48        0.8   

Average aircraft fuel price per gallon excluding hedge gains (losses) recorded in fuel expense (c)

   $ 3.17      $ 3.29        (3.6

Average aircraft fuel price per gallon (c)

   $ 3.17      $ 3.30        (3.9

Average aircraft fuel price per gallon including all gains (losses) from cash-settled hedges (c)

   $ 3.16      $ 3.28        (3.7

Fuel gallons consumed (millions)

     746        748        (0.3

Aircraft in fleet at end of period

     700        703        (0.4

Average stage length (miles) (d)

     1,919        1,876        2.3   

Average daily utilization of each aircraft (hours)

     9:58        9:59        (0.2

Regional:

      

Passengers (thousands)

     10,671        10,876        (1.9

Revenue passenger miles (millions)

     6,046        5,997        0.8   

Available seat miles (millions)

     7,419        7,552        (1.8

Passenger load factor

     81.5     79.4     2.1  pts. 

Passenger revenue per available seat mile (cents)

     20.70        21.46        (3.5

Average yield per revenue passenger mile (cents)

     25.41        27.03        (6.0

Aircraft in fleet at end of period

     572        558        2.5   

Average stage length (miles) (d)

     553        536        3.2   

 

-more-


UAL Announces First-Quarter 2014 Results / Page 11

UNITED CONTINENTAL HOLDINGS, INC.

STATISTICS (Continued)

 

     Three Months Ended
March 31,
    %  
     2014     2013     Increase/
(Decrease)
 

Consolidated (Mainline and Regional):

      

Passengers (thousands)

     31,900        32,355        (1.4

Revenue passenger miles (millions)

     46,383        46,544        (0.3

Available seat miles (millions)

     57,216        57,372        (0.3

Passenger load factor

     81.1     81.1     —   pts. 

Passenger revenue per available seat mile (cents)

     12.91        13.18        (2.0

Total revenue per available seat miles (cents)

     15.20        15.20        —     

Average yield per revenue passenger mile (cents)

     15.92        16.24        (2.0

CASM (a)

     15.81        15.66        1.0   

CASM, excluding special charges (b)

     15.72        15.50        1.4   

CASM, excluding special charges and third-party business expenses (b)

     15.38        15.29        0.6   

CASM, excluding special charges, third-party business expenses and fuel (b)

     10.28        9.97        3.1   

CASM, holding fuel rate and profit sharing constant, excluding special charges and third-party business expenses (b)

     15.56        15.29        1.8   

Average aircraft fuel price per gallon excluding hedge losses recorded in fuel expense (c)

   $ 3.18      $ 3.29        (3.3

Average aircraft fuel price per gallon (c)

   $ 3.18      $ 3.30        (3.6

Average aircraft fuel price per gallon including all gains (losses) from cash-settled hedges (c)

   $ 3.18      $ 3.28        (3.0

Fuel gallons consumed (millions)

     916        924        (0.9

Average full-time equivalent employees (thousands)

     83.2        84.3        (1.3

 

(a) Includes impact of special charges (See Note C).
(b) These financial measures provide management and investors the ability to monitor the company’s performance on a consistent basis.
(c) Fuel price per gallon includes aircraft fuel and related taxes.
(d) Average stage length equals the average distance a seat travels adjusted for size of aircraft (available seat miles/seats).

 

-more-


UAL Announces First-Quarter 2014 Results / Page 12

 

UNITED CONTINENTAL HOLDINGS, INC.

NON-GAAP FINANCIAL RECONCILIATION

UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (GAAP) and non-GAAP financial measures, including net income/loss excluding special items, net earnings/loss per share excluding special items, and CASM, among others. CASM is a common metric used in the airline industry to measure an airline’s cost structure and efficiency. Pursuant to SEC Regulation G, UAL has included the following reconciliation of reported non-GAAP financial measures to comparable financial measures reported on a GAAP basis. UAL believes that adjusting for special items is useful to investors because special charges are non-recurring charges not indicative of UAL’s ongoing performance. In addition, the company believes that adjusting for MTM (gains) losses from fuel hedges settling in future periods and prior period gains on fuel contracts settled in the current period is useful because the adjustments allow investors to better understand the cash impact of settled hedges in a given period. UAL also believes that excluding third-party business expenses, such as maintenance, ground handling and catering services for third parties, fuel sales and non-air mileage redemptions, provides more meaningful disclosure because these expenses are not directly related to UAL’s core business. UAL also believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management’s performance excluding the effects of a significant cost item over which management has limited influence.

 

     Three Months Ended
March 31,
    $     %  
(in millions)    2014     2013     Increase/
(Decrease)
    Increase/
(Decrease)
 

Operating expenses

   $ 9,045      $ 8,985      $ 60        0.7   

Less: Special charges (C)

     52        92        (40     NM   
  

 

 

   

 

 

   

 

 

   

Operating expenses, excluding special charges

     8,993        8,893        100        1.1   

Less: Third-party business expenses

     193        121        72        59.5   

Less: Fuel expense

     2,917        3,050        (133     (4.4

Less: Profit sharing, including taxes

     —          —          —          —     
  

 

 

   

 

 

   

 

 

   

Operating expenses, excluding fuel, profit sharing, special charges and third-party business expenses

   $ 5,883      $ 5,722      $ 161        2.8   
  

 

 

   

 

 

   

 

 

   

Net loss

   $ (609   $ (417   $ 192        46.0   

Less: Special items, net (C)

     120        59        61        NM   
  

 

 

   

 

 

   

 

 

   

Net loss, excluding special items, net

   $ (489   $ (358   $ 131        36.6   
  

 

 

   

 

 

   

 

 

   

Diluted loss per share

   $ (1.66   $ (1.26   $ 0.40        31.7   

Add back: Special items, net of tax

     0.33        0.18        0.15        NM   
  

 

 

   

 

 

   

 

 

   

Diluted loss per share, excluding special items, net

   $ (1.33   $ (1.08   $ 0.25        23.1   
  

 

 

   

 

 

   

 

 

   

 

-more-


UAL Announces First-Quarter 2014 Results / Page 13

UNITED CONTINENTAL HOLDINGS, INC.

NON-GAAP FINANCIAL RECONCILIATION (Continued)

 

     Three Months Ended
March 31,
     %  
     2014      2013      Increase/
(Decrease)
 

CASM Mainline Operations (cents)

        

Cost per available seat mile (CASM)

     14.90         14.90         —     

Less: Special charges (C)

     0.10         0.18         NM   
  

 

 

    

 

 

    

CASM, excluding special charges

     14.80         14.72         0.5   

Less: Third-party business expenses

     0.39         0.24         62.5   
  

 

 

    

 

 

    

CASM, excluding special charges and third-party business expenses

     14.41         14.48         (0.5

Less: Fuel expense

     4.75         4.96         (4.2
  

 

 

    

 

 

    

CASM, excluding special charges, third-party business expenses and fuel

     9.66         9.52         1.5   

Less: Profit sharing per available seat mile

     —           —           NM   
  

 

 

    

 

 

    

CASM, excluding special charges, third-party business expenses, fuel, and profit sharing

     9.66         9.52         1.5   

Add: Profit sharing held constant at prior year expense per available seat mile

     —           —           NM   

Add: Current year fuel cost at prior year fuel price per available seat mile

     4.94         —           NM   

Add: Prior year fuel cost per available seat mile

     —           4.96         NM   
  

 

 

    

 

 

    

CASM, holding fuel rate and profit sharing constant and excluding special charges and third-party business expenses

     14.60         14.48         0.8   
  

 

 

    

 

 

    

CASM Consolidated Operations (cents)

        

Cost per available seat mile (CASM)

     15.81         15.66         1.0   

Less: Special charges (C)

     0.09         0.16         NM   
  

 

 

    

 

 

    

CASM, excluding special charges

     15.72         15.50         1.4   

Less: Third-party business expenses

     0.34         0.21         61.9   
  

 

 

    

 

 

    

CASM, excluding special charges and third-party business expenses

     15.38         15.29         0.6   

Less: Fuel expense

     5.10         5.32         (4.1
  

 

 

    

 

 

    

CASM, excluding special charges, third-party business expenses and fuel

     10.28         9.97         3.1   

Less: Profit sharing per available seat mile

     —                   NM   
  

 

 

    

 

 

    

CASM, excluding special charges, third-party business expenses, fuel and profit sharing

     10.28         9.97         3.1   

Add: Profit sharing held constant at prior year expense per available seat mile

     —           —           NM   

Add: Current year fuel cost at prior year fuel price per available seat mile

     5.28         —           NM   

Add: Prior year fuel cost per available seat mile

     —           5.32         NM   
  

 

 

    

 

 

    

CASM, holding fuel rate and profit sharing constant and excluding special charges and third-party business expenses

     15.56         15.29         1.8   
  

 

 

    

 

 

    

 

-more-


UAL Announces First-Quarter 2014 Results / Page 14

 

UNITED CONTINENTAL HOLDINGS, INC.

RETURN ON INVESTED CAPITAL (ROIC)

 

(in millions)    Twelve Months Ended
March 31, 2014
 

Net Operating Profit After Tax (NOPAT)

  

Pre-tax income excluding special items (a)

   $ 896   

Add: Interest expense (b)

     781   

Add: Interest component of capitalized aircraft rent (b)

     458   

Add: Net interest on pension (b)

     133   

Add: Adjusted income tax benefit

     14   
  

 

 

 

NOPAT

   $ 2,282   
  

 

 

 

Effective tax rate

     (1.6 %) 

Invested Capital (five-quarter average)

  

Total assets

   $ 37,113   

Add: Capitalized aircraft rent (@ 7.0x)

     6,658   

Less:

  

Advance ticket sales

     (4,353

Frequent flier deferred revenue

     (6,540

Deferred incomes taxes

     2,658   

Tax valuation allowance

     (4,232

Other non-interest bearing liabilities

     (6,638
  

 

 

 

Average Invested Capital (five-quarter average)

   $ 24,666   
  

 

 

 

Return on Invested Capital

     9.3
  

 

 

 
     Twelve Months Ended
March 31, 2014
 

(a) Non-GAAP Financial Reconciliation

  

Pre-tax income

   $ 359   

Add: Special items

     537   
  

 

 

 

Pre-tax income excluding special items

   $ 896   
  

 

 

 

 

(b) Net of tax shield

# # #

EX-99.2

Exhibit 99.2

 

LOGO    LOGO
Investor Update    Issue Date: April 24, 2014

This investor update provides guidance and certain forward looking statements about United Continental Holdings, Inc. (the “Company” or “UAL”). The information in this investor update contains the financial and operational outlook for the Company for second quarter and full year 2014.

Capacity

For second quarter 2014, the Company estimates its consolidated system available seat miles (“ASMs”) to be between flat and up 1.0% as compared to the same period in the prior year. The Company estimates its full-year 2014 consolidated system ASMs to increase between 0.5% and 1.5% year-over-year.

Revenue

The Company expects its second-quarter 2014 consolidated passenger revenue per available seat mile (“PRASM”) to increase between 1.0% and 3.0% versus the second quarter of 2013.

Advance Booked Seat Factor (Percentage of Available Seats that are Sold)

Compared to the same period last year, for the next six weeks, mainline domestic advance booked seat factor is down 2.9 points and mainline international advance booked seat factor is down 0.2 points. Mainline Atlantic advance booked seat factor is down 0.6 points, mainline Pacific advance booked seat factor is down 1.2 points and mainline Latin America advance booked seat factor is up 0.9 points. Regional advance booked seat factor is down 1.8 points.

Non-Fuel Expense

For the second quarter 2014, the Company expects consolidated cost per ASM (“CASM”), excluding profit sharing, fuel, third-party business expenses and special charges, to increase 1.25% to 2.25% year-over-year. The Company expects full-year 2014 consolidated CASM, excluding profit sharing, fuel, third-party business expenses and special charges, to increase 1.0% to 2.0% year-over-year.

The Company expects to record approximately $200 million of third-party business expense in the second quarter and approximately $560 million for full year 2014. This is lower than previous full-year 2014 third-party business expense guidance due to the Company discontinuing an agreement to sell fuel to a third party effective June 30, 2014. Corresponding third-party business revenue associated with third-party business activities is recorded in other revenue.

Fuel Expense

UAL estimates its consolidated fuel price, including the impact of cash-settled hedges, to be between $3.10 and $3.15 per gallon for the second quarter and between $3.11 and $3.16 for full year 2014. These estimates are based on the April 17, 2014 fuel forward curve.

Non-Operating Expense

The Company estimates non-operating expense to be between $150 million and $180 million for the second quarter and between $670 million and $720 million for full year 2014.

The Company excludes non-cash gains/losses on fuel hedges from its non-operating expense and non-GAAP earnings.

Profit Sharing and Share-Based Compensation

For 2014, the Company will pay approximately 10% of total adjusted earnings as profit sharing to employees for adjusted earnings up to a 6.9% adjusted pre-tax margin and approximately 14% for any adjusted earnings above that amount. Adjusted earnings for the purposes of profit sharing are calculated as GAAP pre-tax earnings, excluding special items, profit sharing expense and share-based compensation program expense.

Share-based compensation expense for the purposes of the profit sharing calculation is estimated to be $18 million in the second quarter and $85 million for full year 2014.

Capital Expenditures and Scheduled Debt and Capital Lease Payments

The Company expects between $770 million and $820 million of gross capital expenditures in the second quarter and between $2.9 billion and $3.1 billion for full year 2014, including net purchase deposits. UAL’s gross capital expenditures exclude fully reimbursable capital projects.

The Company expects debt and capital lease payments to total approximately $290 million in the second quarter and approximately $1.5 billion for full year 2014.

Pension Expense and Contributions

The Company estimates that its pension expense will be approximately $130 million for 2014. This amount excludes non-cash settlement charges related to lump-sum distributions. The Company expects to make approximately $290 million of cash contributions to its defined benefit pension plans in 2014.

Taxes

UAL currently expects to record minimal cash income taxes in 2014.


 

LOGO

Company Outlook

Second-Quarter and Full-Year 2014 Operational Outlook

 

     Estimated 2Q 2014      Year-Over-
Year %
Change

Higher/(Lower)
    Estimated FY 2014      Year-Over-Year %
Change

Higher/
(Lower)
 

Capacity (Million ASMs)

                                

Mainline Capacity

                                

Domestic

     26,969       -      27,242         (1.4 %)    -      (0.4 %)                 

Atlantic

     12,323       -      12,447         (0.5 %)    -      0.5                

Pacific

     10,082       -      10,181         2.0   -      3.0                

Latin America

     5,703       -      5,757         5.9   -      6.9                

Total Mainline Capacity

     55,077       -      55,627         0.1   -      1.1                

Regional

     8,153       -      8,236         (1.1 %)    -      (0.1 %)                 

Consolidated Capacity

                                

Domestic

     34,833       -      35,187         (1.4 %)    -      (0.4 %)      137,003       -      138,384         (0.8 %)    -      0.2

International

     28,397       -      28,676         1.7   -      2.7     109,467       -      110,540         2.0   -      3.0

Total Consolidated Capacity

     63,230       -      63,863         0.0   -      1.0     246,470       -      248,924         0.5   -      1.5

Traffic (Million RPMs)

                                

Mainline Traffic

                                

Domestic

                                

Atlantic

                                

Pacific

                                

Latin America

                                

Total Mainline System Traffic

           Traffic guidance to be provided at a future date   

Regional System Traffic

                                

Consolidated System Traffic

                                

Domestic System

                                

International System

                                

Total Consolidated System Traffic

                                

Load Factor

                                

Mainline Load Factor

                                

Domestic

                                

Atlantic

                                

Pacific

                                

Latin America

                                

Total Mainline Load Factor

           Load factor guidance to be provided at a future date   

Regional Load Factor

                                

Consolidated Load Factor

                                

Domestic

                                

International

                                

Total Consolidated Load Factor

                                

(more)

 

2


LOGO

 

Company Outlook

Second-Quarter and Full-Year 2014 Financial Outlook

 

    Estimated 2Q 2014     Year-Over-Year %
Change

Higher/(Lower)
    Estimated
FY 2014
    Year-Over-Year
% Change
Higher/(Lower)
 

Revenue (¢/ASM)

                        

Mainline Passenger Unit Revenue

    12.54      -     12.78        1.0   -     3.0             

Consolidated Passenger Unit Revenue

    13.84      -     14.11        1.0   -     3.0             

Operating Expense1 (¢/ASM)

                        

Mainline Unit Cost Excluding Profit Sharing & Third-Party Business Expenses

    13.55      -     13.72        1.6   -     2.8     13.67      -     13.83        0.1   -      1.3

Consolidated Unit Cost Excluding Profit Sharing & Third-Party Business Expenses

    14.37      -     14.55        1.3   -     2.6     14.51      -     14.69        (0.1 %)    -      1.2

Non-Fuel Expense1 (¢/ASM)

                        

Mainline Unit Cost Excluding Profit Sharing, Fuel & Third-Party Business Expenses

    8.94      -     9.03        1.5   -     2.5     9.05      -     9.14        1.0   -      2.0

Consolidated Unit Cost Excluding Profit Sharing, Fuel & Third-Party Business Expenses

    9.44      -     9.54        1.25   -     2.25     9.58      -     9.68        1.0   -      2.0

Third-Party Business Expenses ($M)

    $200             $560         

Select Expense Measures ($M)

                        

Aircraft Rent

    $225             $890         

Depreciation and Amortization

    $420             $1,660         

Fuel Expense

                        

Mainline Fuel Consumption (Million Gallons)

    825             3,205         

Consolidated Fuel Consumption (Million Gallons)

    1,010             3,935         

Consolidated Fuel Price Excluding Hedges (Price per Gallon)

  $ 3.10      -   $ 3.15            $ 3.11      -   $ 3.16          

Consolidated Fuel Price Including Cash-settled Hedges (Price per Gallon)

  $ 3.10      -   $ 3.15            $ 3.11      -   $ 3.16          

Non-Operating Expense ($M)

                        

Non-Operating Expense2

  $ 150      -   $ 180            $ 670      -   $ 720          

Income Taxes

                        

Effective Income Tax Rate

    0%             0%         

Capital Expenditures

                        

Gross Capital Expenditures incl. Purchase Deposits

  $ 770M      -   $ 820M            $ 2.9B      -   $ 3.1B          

Debt and Capital Lease Payments

    $290M             $1.5B         

 

1. Excludes special charges
2. Excludes non-cash gains/losses on fuel hedges

 

(more)

 

3


LOGO

Company Outlook

Fuel Price Sensitivity

As of April 17, 2014, the Company had hedged 25% of its projected fuel requirements for second quarter 2014, 20% for third quarter 2014 and 24% for full year 2014. The Company uses a combination of three-way and four-way collars on aircraft fuel, Brent crude oil and diesel fuel.

With the Company’s current portfolio, hedge gains/losses are recorded in both fuel expense and non-operating expense (cash-settled and non-cash). The table below outlines the Company’s estimated cash hedge impacts at various price points relative to the baseline April 17, 2014 fuel forward curve, where Brent crude spot price was $109.53 per barrel.

 

Brent Fuel Scenarios*

  

Cash Hedge Impact

   2Q14
forecast
    3Q14
forecast
    4Q14
forecast
 
+$40 / Barrel    Fuel Price Excluding Hedge** ($/gal)    $ 4.08      $ 4.09      $ 4.04   
   Hedge Gain/(Loss) ($/gal)      0.09        0.06        0.06   
+$30 / Barrel    Fuel Price Excluding Hedge** ($/gal)    $ 3.84      $ 3.85      $ 3.80   
   Hedge Gain/(Loss) ($/gal)      0.08        0.06        0.06   
+$20 / Barrel    Fuel Price Excluding Hedge** ($/gal)    $ 3.60      $ 3.61      $ 3.56   
   Hedge Gain/(Loss) ($/gal)      0.07        0.06        0.06   
+$10 / Barrel    Fuel Price Excluding Hedge** ($/gal)    $ 3.36      $ 3.38      $ 3.32   
   Hedge Gain/(Loss) ($/gal)      0.04        0.04        0.03   
Current Price ($109.53/bbl)    Fuel Price Excluding Hedge** ($/gal)    $ 3.13      $ 3.14      $ 3.09   
   Hedge Gain/(Loss) ($/gal)      0.00        (0.01     (0.01
($10) / Barrel    Fuel Price Excluding Hedge** ($/gal)    $ 2.89      $ 2.90      $ 2.85   
   Hedge Gain/(Loss) ($/gal)      (0.00     (0.02     (0.02
($20) / Barrel    Fuel Price Excluding Hedge** ($/gal)    $ 2.65      $ 2.66      $ 2.61   
   Hedge Gain/(Loss) ($/gal)      (0.02     (0.04     (0.05
($30) / Barrel    Fuel Price Excluding Hedge** ($/gal)    $ 2.41      $ 2.42      $ 2.37   
   Hedge Gain/(Loss) ($/gal)      (0.05     (0.09     (0.10
($40) / Barrel    Fuel Price Excluding Hedge** ($/gal)    $ 2.17      $ 2.18      $ 2.13   
   Hedge Gain/(Loss) ($/gal)      (0.10     (0.14     (0.15

 

* Projected fuel scenarios represent hypothetical fuel curves parallel to the baseline April 17, 2014 curve and are meant to illustrate the behavior of our fuel hedge portfolio at different commodity price points
** Fuel price per gallon excluding hedge impacts, but including taxes and transportation costs

(more)

 

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Company Outlook

Fleet Plan

As of April 24, 2014, the Company’s fleet plan was as follows:

 

     Mainline Aircraft in Scheduled Service  
     YE 2013      1Q D     2Q D     3Q D     4Q D     YE2014      FY D  

B747-400

     23         —          —          —          —          23         —     

B777-200

     74         —          —          —          —          74         —     

B787-8/9

     8         2        —          2        2        14         6   

B767-300/400

     51         —          —          —          (1     50         (1

B757-200/300

     131         (3     (9     (11     (14     94         (37

B737-700/800/900

     254         9        9        5        6        283         29   

A319/A320

     152         —          —          —          —          152         —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total Mainline Aircraft

     693         8        —          (4     (7     690         (3

 

     Regional Aircraft in Scheduled Service  
     YE 2013      1Q D      2Q D     3Q D     4Q D     YE2014      FY D  

Q400

     28         —           —          —          —          28         —     

Q300

     5         —           —          —          —          5         —     

Q200

     16         —           —          —          —          16         —     

ERJ-145

     277         —           (18     (9     (7     243         (34

ERJ-135

     9         —           —          —          (9     —           (9

CRJ200

     75         —           —          —          —          75         —     

CRJ700

     115         —           —          —          —          115         —     

EMB 120

     9         —           —          —          —          9         —     

EMB 170

     38         —           —          —          —          38         —     

EMB 175

     —           —           6        8        13        27         27   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total Regional Aircraft

     572         —           (12     (1     (3     556         (16

Share Count

These share count charts are based upon several assumptions including market stock price and number of shares outstanding. The number of shares used in the actual earnings per share calculation will likely be different from those set forth below.

 

     2Q 2014  
   (Estimated)  
     Basic Share Count      Diluted Share Count      Interest Add-back  

Net Income

   (in millions)      (in millions)      (in $ millions)  

Less than or equal to $0

     373         373       $ —     

$1 million—$43 million

     373         373         —     

$44 million—$71 million

     373         380         1   

$72 million—$331 million

     373         392         3   

$332 million or greater

     373         396         7   
     Full Year 2014  
   (Estimated)  
     Basic Share Count      Diluted Share Count      Interest Add-back  

Net Income

   (in millions)      (in millions)      (in $ millions)  

Less than or equal to $0

     372         372       $ —     

$1 million—$173 million

     372         372         —     

$174 million—$285 million

     372         380         3   

$286 million—$1.326 billion

     372         392         13   

$1.327 billion or greater

     372         396         28   

 

(more)

 

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GAAP to Non-GAAP Reconciliations

UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (“GAAP”) and non-GAAP financial measures, including net income/loss excluding special items, net earnings/loss per share excluding special items, and CASM, among others. CASM is a common metric used in the airline industry to measure an airline’s cost structure and efficiency. Pursuant to SEC Regulation G, UAL has included the following reconciliation of reported non-GAAP financial measures to comparable financial measures reported on a GAAP basis. UAL believes that adjusting for special items is useful to investors because special charges are non-recurring charges not indicative of UAL’s ongoing performance. In addition, the company believes that adjusting for MTM (gains) losses from fuel hedges settling in future periods and prior period gains on fuel contracts settled in the current period is useful because the adjustments allow investors to better understand the cash impact of settled hedges in a given period. UAL also believes that excluding third-party business expenses, such as maintenance, ground handling and catering services for third parties, fuel sales and non-air mileage redemptions, provides more meaningful disclosure because these expenses are not directly related to UAL’s core business. UAL also believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management’s performance excluding the effects of a significant cost item over which management has limited influence.

 

     Estimated
2Q 2014
    Estimated
FY 2014
 
     Low     High     Low      High  

Mainline Unit Cost (¢/ASM)

         

Mainline CASM Excluding Profit Sharing

     13.91        14.08        13.93         14.09   

Special Charges (a)

     —          —          —           —     
  

 

 

   

 

 

   

 

 

    

 

 

 

Mainline CASM Excluding Profit Sharing & Special Charges (b)

     13.91        14.08        13.93         14.09   

Less: Third-Party Business Expenses

     0.36        0.36        0.26         0.26   
  

 

 

   

 

 

   

 

 

    

 

 

 

Mainline CASM Excluding Profit Sharing, Third-Party Business Expenses & Special Charges (b)

     13.55        13.72        13.67         13.83   

Less: Fuel Expense (c)

     4.61        4.69        4.62         4.69   
  

 

 

   

 

 

   

 

 

    

 

 

 

Mainline CASM Excluding Profit Sharing, Third-Party Business Expenses, Fuel & Special Charges (b)

     8.94        9.03        9.05         9.14   
     Low     High     Low      High  

Consolidated Unit Cost (¢/ASM)

         

Consolidated CASM Excluding Profit Sharing

     14.68        14.86        14.74         14.92   

Special Charges (a)

     —          —          —           —     
  

 

 

   

 

 

   

 

 

    

 

 

 

Consolidated CASM Excluding Profit Sharing & Special Charges (b)

     14.68        14.86        14.74         14.92   

Less: Third-Party Business Expenses

     0.31        0.31        0.23         0.23   
  

 

 

   

 

 

   

 

 

    

 

 

 

Consolidated CASM Excluding Profit Sharing, Third-Party Business Expenses & Special Charges (b)

     14.37        14.55        14.51         14.69   

Less: Fuel Expense (c)

     4.93        5.01        4.93         5.01   
  

 

 

   

 

 

   

 

 

    

 

 

 

Consolidated CASM Excluding Profit Sharing, Third-Party Business Expenses, Fuel & Special Charges (b)

     9.44        9.54        9.58         9.68   
     Low     High     Low      High  

Non-operating Expense ($M)

         

Non-operating expense

   $ 171      $ 201      $ 634       $ 684   

Non-cash fuel hedge adjustments

     (21     (21     36         36   
  

 

 

   

 

 

   

 

 

    

 

 

 

Non-operating expense, adjusted (b)

   $ 150      $ 180      $ 670       $ 720   

 

(a) Operating expense per ASM – CASM excludes special charges, the impact of certain primarily non-cash impairment, severance and other similar accounting charges. While the Company anticipates that it will record such special charges throughout the year and may record profit sharing, at this time the Company is unable to provide an estimate of these charges with reasonable certainty.
(b) These financial measures provide management and investors the ability to measure and monitor the Company’s performance on a consistent basis.
(c) Both the cost and availability of fuel are subject to many economic and political factors and are therefore beyond the Company’s control.

 

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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

Certain statements included in this investor update are forward-looking and thus reflect our current expectations and beliefs with respect to certain current and future events and financial performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as “expects,” “will,” “plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “outlook” and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this report are based upon information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law. Our actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: our ability to comply with the terms of our various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our operational plans and revenue-generating initiatives, including optimizing our revenue; our ability to control our costs, including realizing benefits from our resource optimization efforts, cost reduction initiatives and fleet replacement programs; our ability to utilize our net operating losses; our ability to attract and retain customers; demand for transportation in the markets in which we operate; an outbreak of a disease that affects travel demand or travel behavior; demand for travel and the impact that global economic conditions have on customer travel patterns; excessive taxation and the inability to offset future taxable income; general economic conditions (including interest rates, foreign currency exchange rates, investment or credit market conditions, crude oil prices, costs of aircraft fuel and energy refining capacity in relevant markets); economic and political instability and other risks of doing business globally; our ability to cost-effectively hedge against increases in the price of aircraft fuel; any potential realized or unrealized gains or losses related to fuel or currency hedging programs; the effects of any hostilities, act of war or terrorist attack; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; disruptions to our regional network; the costs and availability of aviation and other insurance; industry consolidation or changes in airline alliances; competitive pressures on pricing and on demand; our capacity decisions and the capacity decisions of our competitors; U.S. or foreign governmental legislation, regulation and other actions (including open skies agreements and environmental regulations); labor costs; our ability to maintain satisfactory labor relations and the results of the collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; weather conditions; the possibility that expected merger synergies will not be realized or will not be realized within the expected time period; and other risks and uncertainties set forth under Part I, Item 1A, Risk Factors, of UAL’s Annual Report on Form 10-K, as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC.

For further questions, contact Investor Relations at (872) 825-8610 or investorrelations@united.com

 

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