United Airlines Reports Third-Quarter 2017 Performance - United Hub

United Airlines Reports Third-Quarter 2017 Performance

October 18, 2017

CHICAGO, Oct. 18, 2017 /PRNewswire/ -- United Airlines (UAL) today announced its third-quarter 2017 financial results. 

  • UAL reported third-quarter net income of $637 million, diluted earnings per share of $2.12, pre-tax earnings of approximately $1.0 billion and pre-tax margin of 9.9 percent.
  • Excluding special charges, UAL reported third-quarter net income of $669 million, diluted earnings per share of $2.22, pre-tax earnings of $1.0 billion and pre-tax margin of 10.4 percent.
  • UAL repurchased $556 million of its common shares in the third quarter, bringing the year-to-date share repurchases to $1.3 billion.
  • UAL delivered the best-ever third-quarter consolidated on-time departures in the history of the company, and employees earned $11 million in bonuses for operational performance.

"I could not be prouder of how our employees are raising the bar both in terms of serving our customers, as well as delivering record-setting operational performance. Not only did they manage to keep our operation moving through back-to-back natural disasters, but the United family banded together to help one another take part in one of the largest relief efforts in our airline's history," said Oscar Munoz, chief executive officer of United Airlines. "Even with the challenging environment in the third quarter, we continue to set the stage for United's long-term success and investing in the right strategy for our future."

During the quarter, the company cancelled approximately 8,300 flights as a result of severe weather in southeast Texas, Florida and parts of the Caribbean. The operational disruption reduced third-quarter pre-tax income by an estimated $185 million.

"Our employees continued to run a great operation and set new company records during the third quarter despite a challenging operational environment with an unprecedented series of storms. Our team set new records for on-time performance this quarter and had the fewest maintenance delays in over five years," said Scott Kirby, president of United Airlines. "Our company took part in relief efforts by operating 46 relief flights, delivering more than 1.7 million pounds of relief supplies and together with our customers and employees, raising and contributing more than $9 million to community and employee assistance. And thanks to a remarkable effort by the people of United, our Houston hub returned to full operations quicker than expected following Harvey."

Third-Quarter Revenue

For the third quarter of 2017, revenue was $9.9 billion, roughly flat year-over-year including an estimated $210 million loss of revenue from severe weather during the quarter. Third-quarter 2017 consolidated passenger revenue per available seat mile (PRASM) was down 3.7 percent compared to the third quarter of 2016. Cargo revenue was $257 million in the third quarter of 2017, an increase of 14.7 percent year-over-year primarily due to higher international freight volume.

Third-Quarter Costs

Operating expense was $8.8 billion in the third quarter, up 6.0 percent year-over-year. Consolidated unit cost per available seat mile (CASM) increased 3.0 percent compared to the third quarter of 2016 due largely to higher fuel and labor expense. Third-quarter consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, increased 2.6 percent year-over-year, driven mainly by higher labor expense.

Liquidity and Capital Allocation

UAL generated $577 million in operating cash flow and ended the quarter with $6.3 billion in unrestricted liquidity, including $2.0 billion of undrawn commitments under its revolving credit facility. Capital expenditures were $1.1 billion in the third quarter.

In the third quarter of 2017, UAL raised $400 million of unsecured debt with an interest rate of 4.25 percent. The company contributed $160 million to its pension plans and made debt and capital lease principal payments of $222 million. In the quarter, UAL purchased $556 million of its common shares at an average price of $67.08 per share. As of Sept. 30, 2017, the company had approximately $553 million remaining under its existing share repurchase authority.

For the 12 months ended Sept. 30, 2017, the company's pre-tax income was $3.3 billion and return on invested capital (ROIC) was 14.9 percent.

"As we balance United's customer, employee and shareholder priorities going forward, a key focus remains returning cash to shareholders and we continued this during the third quarter, repurchasing $556 million of stock, which brings our year-to-date repurchase total to $1.3 billion," said Andrew Levy, executive vice president and chief financial officer of United Airlines. "Our balance sheet remains strong as evidenced by the 4.25 interest percent rate on the $400 million of unsecured debt raised during the quarter."

For more information on UAL's fourth-quarter 2017 guidance, please visit ir.united.com for the company's investor update.

Third-Quarter Highlights
Customer Experience

  • New Customer Solutions Desk rolled out system-wide with a dedicated team to develop creative solutions to ensure customers reach their final destinations when their travel plans don't go as expected.
  • Named the 2017 Airline of the Year in recognition of United Polaris business class experience at the International Flight Services Association (IFSA) Compass Awards.
  • Unveiled a bag tracking feature in the United mobile app which allows customers to track their checked bags from check-in to arrival.
  • Retrofitted the first Boeing 767-300ER aircraft with the United Polaris business class.
  • United Polaris earned Global Traveler magazine's "Outstanding Innovations" award at the Global Traveler's fifth annual Leisure Lifestyle Awards.
  • Became the first U.S.-based airline to offer a new option to check in and learn about flights without the touch of a finger through a new United skill for Amazon Echo and Amazon Echo Dot.
  • Officially announced the final flight of the Boeing 747-400 as it retires, with the final voyage on Nov. 7, 2017 from San Francisco to Honolulu.

Network and Fleet

  • Announced several new routes:
    • New international nonstop service between Houston and Sydney, nonstop seasonal service to Mazatlan, Mexico, increased seasonal service to popular ski destinations and more options for Seattle-area customers with daily service between Paine Field and Denver and San Francisco.
    • Announced new seasonal service between Denver and London; Newark, New Jersey, and Porto, Portugal and Reykjavik, Iceland; San Francisco and Zurich; and Washington Dulles and Edinburgh, Scotland. Additionally, announced expanded year-round service between Newark and Rome.
  • Announced an agreement with Airbus to modify its A350 order resulting in a conversion of the model type from the A350-1000 to the A350-900, an increase in the order size from 35 to 45 aircraft and a deferral of the first delivery to late 2022.
  • Took delivery of one Boeing 787-9 aircraft, four Boeing 737-800 aircraft and nine Embraer E175 aircraft.
  • Finalized agreements to take delivery of two additional used Airbus A320 aircraft by the end of 2017.

Operations and Employees

  • In response to the recent catastrophic weather events Harvey, Irma and Maria, United and its employees came together to keep the operation moving and take part in relief efforts:
    • Operated 84 additional flights to provide additional seats and deliver needed relief supplies to impacted areas.
    • Operated 46 relief flights, flying more than 2,000 evacuees out of impacted areas.
    • Flew 767 flights with larger aircraft in order to carry more people and supplies. The combination resulted in over 13,600 additional seats to impacted areas.
    • Delivered over 1.7 million pounds of relief supplies to aid the recovery in Texas, Florida, Puerto Rico and the Caribbean.
    • Customers and employees, with supporting funds from the company, raised and contributed more than $9 million to community and employee assistance.
  • Continued to improve the mobile tools used by employees, including the first release of the "in the moment" care app, and new functionality in flight attendant tools to better serve customers. These tools were the basis for the company receiving the CIO 100 award.
  • Announced partnerships with three world-class design and apparel companies – Brooks Brothers, Tracy Reese and Carhartt – to inspire and create a new line of uniforms for the carrier's more than 70,000 front-line employees.

About United

United Airlines and United Express operate approximately 4,500 flights a day to 337 airports across five continents. In 2016, United and United Express operated more than 1.6 million flights carrying more than 143 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, Newark/New York, San Francisco and Washington, D.C. United operates 751 mainline aircraft and the airline's United Express carriers operate 489 regional aircraft. The airline is a founding member of Star Alliance, which provides service to more than 190 countries via 28 member airlines. For more information, visit united.com, follow @United on Twitter or connect on 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 anticipated financial and operating 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," "goals" 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 release are based upon information available to us on the date of this release. 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; costs associated with any modification or termination of our aircraft orders; our ability to utilize our net operating losses; our ability to attract and retain customers; potential reputational or other impact from adverse events in our operations; 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 and political 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 if we decide to do so; 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; the effects of any technology failures or cybersecurity breaches; disruptions to our regional network; the costs and availability of aviation and other insurance; industry consolidation or changes in airline alliances; the success of our investments in airlines in other parts of the world; 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); the impact of regulatory, investigative and legal proceedings and legal compliance risks; the impact of any management changes; labor costs; our ability to maintain satisfactory labor relations and the results of any collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; weather conditions; and other risks and uncertainties set forth under Part I, Item 1A., "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission.

-tables attached-

UNITED CONTINENTAL HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)




Three Months Ended
September 30,


%
Increase/
(Decrease)



Nine Months Ended
September 30,


%
Increase/
(Decrease)


(In millions, except per share data)


2017


2016




2017


2016



Operating revenue:















Passenger - Mainline


$

7,083



$

7,017



0.9




$

19,970



$

19,119



4.5



Passenger - Regional


1,445



1,586



(8.9)




4,354



4,577



(4.9)



Total passenger revenue (B)


8,528



8,603



(0.9)




24,324



23,696



2.7



Cargo


257



224



14.7




731



626



16.8



Other operating revenue


1,093



1,086



0.6




3,243



3,182



1.9



Total operating revenue


9,878



9,913



(0.4)




28,298



27,504



2.9


















Operating expense:















Salaries and related costs


2,812



2,625



7.1




8,341



7,707



8.2



Aircraft fuel (C)


1,809



1,603



12.9




5,038



4,258



18.3



Landing fees and other rent


585



546



7.1




1,670



1,612



3.6



Regional capacity purchase


567



572



(0.9)




1,652



1,645



0.4



Depreciation and amortization


556



503



10.5




1,610



1,473



9.3



Aircraft maintenance materials and outside repairs


451



451






1,377



1,301



5.8



Distribution expenses


352



345



2.0




1,021



987



3.4



Aircraft rent


145



168



(13.7)




476



521



(8.6)



Special charges (D)


50



45



NM




145



669



NM


Other operating expenses


1,459



1,431



2.0




4,199



3,998



5.0



Total operating expense


8,786



8,289



6.0




25,529



24,171



5.6


















Operating income


1,092



1,624



(32.8)




2,769



3,333



(16.9)


















Operating margin


11.1

%


16.4

%


(5.3)


pts.


9.8

%


12.1

%


(2.3)


pts.

Operating margin, excluding special charges (A) (Non-GAAP)


11.6

%


16.8

%


(5.2)


pts.


10.3

%


14.6

%


(4.3)


pts.
















Nonoperating income (expense):















Interest expense


(164)



(150)



9.3




(472)



(466)



1.3



Interest capitalized


20



20






64



48



33.3



Interest income


17



14



21.4




41



31



32.3



Miscellaneous, net (D)


15



2



NM




(3)



(11)



(72.7)



Total nonoperating expense


(112)



(114)



(1.8)




(370)



(398)



(7.0)


















Income before income taxes


980



1,510



(35.1)




2,399



2,935



(18.3)


















Pre-tax margin


9.9

%


15.2

%


(5.3)


pts.


8.5

%


10.7

%


(2.2)


pts.

Pre-tax margin, excluding special charges and reflecting hedge adjustments (A) (Non-GAAP)


10.4

%


15.7

%


(5.3)


pts.


9.0

%


13.1

%


(4.1)


pts.
















Income tax expense (E)


343



545



(37.1)




848



1,069



(20.7)



Net income


$

637



$

965



(34.0)




$

1,551



$

1,866



(16.9)


















Earnings per share, diluted


$

2.12



$

3.01



(29.6)




$

5.04



$

5.57



(9.5)



Weighted average shares, diluted


301



321



(6.2)




308



335



(8.1)


















NM Not meaningful















 

UNITED CONTINENTAL HOLDINGS, INC.

STATISTICS




Three Months Ended

September 30,


%

Increase/

(Decrease)



Nine Months Ended

September 30,


%

Increase/

(Decrease)




2017


2016



2017


2016


Mainline:















Passengers (thousands)


29,182



27,501



6.1




81,091



75,417



7.5



Revenue passenger miles (millions)


53,515



51,875



3.2




146,252



140,573



4.0



Available seat miles (millions)


63,183



60,635



4.2




176,710



169,252



4.4



Cargo ton miles (millions)


830



714



16.2




2,406



2,015



19.4



Passenger revenue per available seat mile (cents)


11.21



11.57



(3.1)




11.30



11.30





Average yield per revenue passenger mile (cents)


13.24



13.53



(2.1)




13.65



13.60



0.4



Aircraft in fleet at end of period


751



724



3.7




751



724



3.7



Average stage length (miles)


1,825



1,882



(3.0)




1,817



1,878



(3.2)



Average daily utilization of each aircraft (hours: minutes)


     10:58


     10:59


(0.2)




     10:30


      10:25


0.8


















Regional:















Passengers (thousands)


10,120



11,150



(9.2)




29,563



31,737



(6.9)



Revenue passenger miles (millions)


5,630



6,297



(10.6)




16,860



18,198



(7.4)



Available seat miles (millions)


6,900



7,439



(7.2)




20,648



21,820



(5.4)



Passenger revenue per available seat mile (cents)


20.94



21.32



(1.8)




21.09



20.98



0.5



Average yield per revenue passenger mile (cents)


25.67



25.19



1.9




25.82



25.15



2.7



Aircraft in fleet at end of period


489



490



(0.2)




489



490



(0.2)



Average stage length (miles)


542



556



(2.5)




558



565



(1.2)


















Consolidated (Mainline and Regional):















Passengers (thousands)


39,302



38,651



1.7




110,654



107,154



3.3



Revenue passenger miles (millions)


59,145



58,172



1.7




163,112



158,771



2.7



Available seat miles (millions)


70,083



68,074



3.0




197,358



191,072



3.3



Passenger load factor:















Consolidated


84.4

%


85.5

%


(1.1)


pts.


82.6

%


83.1

%


(0.5)


pts.

Domestic


85.3

%


86.4

%


(1.1)


pts.


85.2

%


85.4

%


(0.2)


pts.

International


83.3

%


84.3

%


(1.0)


pt.


79.5

%


80.4

%


(0.9)


pts.

Passenger revenue per available seat mile (cents)


12.17



12.64



(3.7)




12.32



12.40



(0.6)



Total revenue per available seat mile (cents)


14.09



14.56



(3.2)




14.34



14.39



(0.3)



Average yield per revenue passenger mile (cents)


14.42



14.79



(2.5)




14.91



14.92



(0.1)



Aircraft in fleet at end of period


1,240



1,214



2.1




1,240



1,214



2.1



Average stage length (miles)


1,480



1,493



(0.9)




1,470



1,484



(0.9)



Average full-time equivalent employees (thousands)


87.3



85.1



2.6




86.2



83.6



3.1




Note: See Part II, Item 6 Selected Financial Data of the company's annual report on Form 10-K for the year ended December 31, 2016 for the definition of these statistics.

 

UNITED CONTINENTAL HOLDINGS, INC.

SUMMARY FINANCIAL METRICS (A)




Three Months Ended

September 30,


%

Increase/

(Decrease)



Nine Months Ended

September 30,


%

Increase/

(Decrease)




2017


2016




2017


2016



(In millions, except per share data)















Operating income


$

1,092



$

1,624



(32.8)




$

2,769



$

3,333



(16.9)



Operating margin


11.1

%


16.4

%


(5.3)


pts.


9.8

%


12.1

%


(2.3)


pts.

Operating income, excluding special charges (Non-GAAP)


1,142



1,669



(31.6)




2,914



4,002



(27.2)



Operating margin, excluding special charges (Non-GAAP)


11.6

%


16.8

%


(5.2)


pts.


10.3

%


14.6

%


(4.3)


pts.
















Adjusted EBITDA, excluding special charges and reflecting hedge adjustments (a) (Non-GAAP)


$

1,713



$

2,177



(21.3)




$

4,521



$

5,465



(17.3)



Adjusted EBITDA margin, excluding special charges and reflecting hedge adjustments (a) (Non-GAAP)


17.3

%


22.0

%


(4.7)


pts.


16.0

%


19.9

%


(3.9)


pts.
















Pre-tax income


$

980



$

1,510



(35.1)




$

2,399



$

2,935



(18.3)



Pre-tax margin


9.9

%


15.2

%


(5.3)


pts.


8.5

%


10.7

%


(2.2)


pts.

Pre-tax income, excluding special charges and reflecting hedge adjustments (a) (Non-GAAP)


1,030



1,558



(33.9)




2,544



3,605



(29.4)



Pre-tax margin, excluding special charges and reflecting hedge adjustments (a) (Non-GAAP)


10.4

%


15.7

%


(5.3)


pts.


9.0

%


13.1

%


(4.1)


pts.
















Net income


$

637



$

965



(34.0)




$

1,551



$

1,866



(16.9)



Net income, excluding special charges and reflecting hedge adjustments (a) (Non-GAAP)


669



997



(32.9)




1,644



2,295



(28.4)


















Diluted earnings per share


$

2.12



$

3.01



(29.6)




$

5.04



$

5.57



(9.5)



Diluted earnings per share, excluding special charges and reflecting hedge adjustments (a) (Non-GAAP)


2.22



3.11



(28.6)




5.35



6.85



(21.9)


















Net cash provided by operating activities


$

577



$

1,138



(49.3)




$

2,685



$

4,884



(45.0)


















Capital expenditures


$

1,120



$

689



62.6




$

2,900



$

2,343



23.8



Adjusted capital expenditures (Non-GAAP)


1,082



679



59.4




3,683



2,269



62.3


















Free cash flow, net of financings (Non-GAAP)


$

(543)



$

449



NM




$

(215)



$

2,541



NM



Free cash flow (Non-GAAP)


(505)



459



NM




(998)



2,615



NM





(a)

 Hedge adjustments include prior period gains (losses) on fuel derivative contracts settled in the current period. See note D for further information.

 

UNITED CONTINENTAL HOLDINGS, INC.

RETURN ON INVESTED CAPITAL (ROIC) - non-GAAP


ROIC - Non-GAAP is a financial measure that we believe provides useful supplemental information for management and investors by measuring the effectiveness of our operations' use of invested capital to generate profits.



(in millions)

Twelve Months Ended
September 30, 2017

NOPAT


Pre-tax income

$

3,283


Special charges and hedge adjustments (D):


  Severance and benefit costs

111


  Labor agreement costs and related items

(60)


  Impairment of assets

15


  (Gains) losses on sale of assets and other special charges

48


   Hedge adjustments

4


Pre-tax income excluding special charges and reflecting hedge adjustments - non-GAAP

3,401


add: Interest expense (net of income tax benefit) (a)

617


add: Interest component of capitalized aircraft rent (net of income tax benefit) (a)

310


add: Net interest on pension (net of income tax benefit) (a)

46


less: Income taxes paid

(18)


NOPAT - Non-GAAP

$

4,356






Invested Capital (five-quarter average)


Total assets

$

41,357


add: Capitalized aircraft operating leases (b)

4,689


less: Non-interest bearing liabilities (c)

(16,734)


Average invested capital - Non-GAAP

$

29,312




Return on invested capital - Non-GAAP

14.9

%



(a)

Income tax benefit measured based on the effective cash tax rate. The effective cash tax rate is calculated by dividing cash taxes paid by pre-tax income excluding special charges and reflecting hedge adjustments. For the twelve months ended September 30, 2017, the effective cash tax rate was 0.5%.

(b)

The purpose of this adjustment is to capitalize the impact of aircraft operating leases. The company uses a multiple of seven times its annual aircraft rent expense to estimate the potential capitalized value and related liability of its aircraft. This is a simplified method used by many rating agencies and financial analysts to assist with the impact of operating leases on financial measures like return on invested capital.

(c)

Non-interest bearing liabilities include advance ticket sales, frequent flyer deferred revenue, deferred income taxes and other non-interest bearing liabilities.

 

UNITED CONTINENTAL HOLDINGS, INC.

NON-GAAP FINANCIAL RECONCILIATION


(A)   UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (GAAP) and Non-GAAP financial measures, including operating income (loss) excluding special charges, income (loss) before income taxes excluding special charges and reflecting hedge adjustments, net income (loss) excluding special charges and reflecting hedge adjustments, net earnings (loss) per share excluding special charges and reflecting hedge adjustments, and CASM, as adjusted, among others.


CASM is a common metric used in the airline industry to measure an airline's cost structure and efficiency. UAL reports CASM excluding special charges, third-party business expenses, fuel and profit sharing. UAL believes that adjusting for special charges is useful to investors because special charges are non-recurring charges not indicative of UAL's ongoing performance. 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. UAL excludes profit sharing because this exclusion allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry. In addition, the company believes that adjusting for prior period gains and losses on fuel derivative contracts settled in the current period is useful because the adjustments allow investors to better understand the cash impact of settled fuel derivative contracts in a given period.


Pursuant to SEC Regulation G, UAL has included the following reconciliations of reported Non-GAAP financial measures to comparable financial measures reported on a GAAP basis.




Three Months Ended

September 30,


%

Increase/

(Decrease)


Nine Months Ended

September 30,


%

Increase/

(Decrease)



2017


2016



2017


2016


CASM Mainline Operations (cents)













Cost per available seat mile (CASM)


12.03



11.65



3.3



12.49



12.15



2.8


Special charges (D)


0.08



0.08



NM



0.08



0.40



NM


Third-party business expenses


0.10



0.10





0.12



0.11



9.1


Fuel expense


2.41



2.21



9.0



2.39



2.11



13.3


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


9.44



9.26



1.9



9.90



9.53



3.9


Profit sharing per available seat mile


0.21



0.34



(38.2)



0.17



0.30



(43.3)


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


9.23



8.92



3.5



9.73



9.23



5.4















CASM Consolidated Operations (cents)













Cost per available seat mile (CASM)


12.54



12.18



3.0



12.94



12.65



2.3


Special charges (D)


0.07



0.07



NM



0.08



0.35



NM


Third-party business expenses


0.09



0.09





0.10



0.10




Fuel expense


2.58



2.35



9.8



2.55



2.23



14.3


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


9.80



9.67



1.3



10.21



9.97



2.4


Profit sharing per available seat mile


0.19



0.30



(36.7)



0.16



0.26



(38.5)


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


9.61



9.37



2.6



10.05



9.71



3.5


 

UNITED CONTINENTAL HOLDINGS, INC.

NON-GAAP FINANCIAL RECONCILIATION (Continued)




Three Months Ended

September 30,


$

Increase/

(Decrease)


%

Increase/

(Decrease)


Nine Months Ended

September 30,


$

Increase/

(Decrease)


%

Increase/

(Decrease)

(in millions)


2017


2016



2017


2016


Operating expenses


$

8,786



$

8,289



$

497



6.0



$

25,529



$

24,171



$

1,358



5.6


Special charges (D)


50



45



5



NM



145



669



(524)



NM


Operating expenses, excluding special charges


8,736



8,244



492



6.0



25,384



23,502



1,882



8.0


Third-party business expenses


62



61



1



1.6



205



188



17



9.0


Fuel expense


1,809



1,603



206



12.9



5,038



4,258



780



18.3


Profit sharing, including taxes


130



204



(74)



(36.3)



304



506



(202)



(39.9)


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


$

6,735



$

6,376



$

359



5.6



$

19,837



$

18,550



$

1,287



6.9



















Operating income


$

1,092



$

1,624



$

(532)



(32.8)



$

2,769



$

3,333



$

(564)



(16.9)


Special charges (D)


50



45



5



NM



145



669



(524)



NM


Operating income, excluding special charges


$

1,142



$

1,669



$

(527)



(31.6)



$

2,914



$

4,002



$

(1,088)



(27.2)



















 Income before income taxes


$

980



$

1,510



$

(530)



(35.1)



$

2,399



$

2,935



$

(536)



(18.3)


Special charges and hedge adjustments before income taxes (D)


50



48



2



NM



145



670



(525)



NM


Income before income taxes excluding special charges and reflecting hedge adjustments


$

1,030



$

1,558



$

(528)



(33.9)



$

2,544



$

3,605



$

(1,061)



(29.4)



















 Net income


$

637



$

965



$

(328)



(34.0)



$

1,551



$

1,866



$

(315)



(16.9)


Special charges and hedge adjustments, net of tax (D)


32



32





NM



93



429



(336)



NM


Net income, excluding special charges and reflecting hedge adjustments


$

669



$

997



$

(328)



(32.9)



$

1,644



$

2,295



$

(651)



(28.4)



















 Diluted earnings per share


$

2.12



$

3.01



$

(0.89)



(29.6)



$

5.04



$

5.57



$

(0.53)



(9.5)


Special charges and hedge adjustments


0.16



0.15



0.01



NM



0.47



2.00



(1.53)



NM


Tax effect related to special charges and hedge adjustments


(0.06)



(0.05)



(0.01)



NM



(0.16)



(0.72)



0.56



NM


Diluted earnings per share, excluding special charges and reflecting hedge adjustments


$

2.22



$

3.11



$

(0.89)



(28.6)



$

5.35



$

6.85



$

(1.50)



(21.9)


 

UNITED CONTINENTAL HOLDINGS, INC.

NON-GAAP FINANCIAL RECONCILIATION (Continued)


UAL provides financial metrics, including earnings before interest, taxes, depreciation and amortization (EBITDA), that we believe provide useful supplemental information for management and investors by measuring profit and profit as a percentage of total operating revenues. Adjusted EBITDA is EBITDA excluding special charges that are non-recurring and that management believes are not indicative of UAL's ongoing performance. Adjusted EBITDA also includes hedge adjustments to reflect the cash impact of fuel derivative contracts settled in the current period.




Three Months Ended
September 30,


Nine Months Ended
September 30,

EBITDA


2017


2016


2017


2016

(In millions)









Net income


$

637



$

965



$

1,551



$

1,866


Adjusted for:









Depreciation and amortization


556



503



1,610



1,473


Interest expense


164



150



472



466


Interest capitalized


(20)



(20)



(64)



(48)


Interest income


(17)



(14)



(41)



(31)


Income tax expense


343



545



848



1,069


Special charges and hedge adjustments before income taxes (D)


50



48



145



670


Adjusted EBITDA, excluding special charges and reflecting hedge adjustments - Non-GAAP


$

1,713



$

2,177



$

4,521



$

5,465



UAL believes that adjusting capital expenditures for assets acquired through the issuance of debt and capital leases, airport construction financing and excluding fully reimbursable projects is useful to investors in order to appropriately reflect the non-reimbursable funds spent on capital expenditures.  UAL also believes that adjusting net cash provided by operating activities for capital expenditures and adjusted capital expenditures is useful to allow investors to evaluate the company's ability to generate cash that is available for debt service or general corporate initiatives.




Three Months Ended

September 30,


Nine Months Ended

September 30,

Capital Expenditures (in millions)


2017


2016


2017


2016

Capital expenditures


$

1,120



$

689



$

2,900



$

2,343


Property and equipment acquired through the issuance of debt and capital leases


11



56



918



115


Airport construction financing


9



33



41



68


Fully reimbursable projects


(58)



(99)



(176)



(257)


Adjusted capital expenditures – Non-GAAP


$

1,082



$

679



$

3,683



$

2,269











Free Cash Flow (in millions)









Net cash provided by operating activities


$

577



$

1,138



$

2,685



$

4,884


Less capital expenditures


1,120



689



2,900



2,343


Free cash flow, net of financings - Non-GAAP


$

(543)



$

449



$

(215)



$

2,541











Net cash provided by operating activities


$

577



$

1,138



$

2,685



$

4,884


Less adjusted capital expenditures – Non-GAAP


1,082



679



3,683



2,269


Free cash flow - Non-GAAP


$

(505)



$

459



$

(998)



$

2,615


 

UNITED CONTINENTAL HOLDINGS, INC.

NOTES (UNAUDITED)



(B)     Select passenger revenue information is as follows (in millions):





3Q 2017
Passenger
Revenue

(millions)


Passenger

Revenue

vs.

3Q 2016


PRASM
vs.

3Q 2016


Yield
vs.

3Q 2016


Available

Seat Miles
vs.

3Q 2016












Mainline


$

3,708



3.5%


(3.5%)


(2.8%)


7.3%

Regional


1,407



(8.3%)


(1.8%)


2.3%


(6.7%)

Domestic


5,115



0.0%


(4.4%)


(3.2%)


4.6%












Atlantic


1,622



0.2%


(0.4%)


(0.9%)


0.6%

Pacific


1,059



(9.3%)


(10.4%)


(6.6%)


1.2%

Latin America


732



4.7%


3.5%


3.4%


1.3%

International


3,413



(2.1%)


(3.0%)


(1.9%)


0.9%












Consolidated


$

8,528



(0.9%)


(3.7%)


(2.5%)


3.0%























Mainline


$

7,083



0.9%


(3.1%)


(2.1%)


4.2%

Regional


1,445



(8.9%)


(1.8%)


1.9%


(7.2%)

Consolidated


$

8,528










 

UNITED CONTINENTAL HOLDINGS, INC.

NOTES (UNAUDITED)


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




Three Months Ended

September 30,


%

Increase/

(Decrease)


Nine Months Ended

September 30,


%

Increase/

(Decrease)

(In millions, except per gallon)


2017


2016



2017


2016


Mainline fuel expense excluding hedge impacts


$

1,526



$

1,319



15.7



$

4,219



$

3,370



25.2


Hedge losses reported in fuel expense (a)




(24)



NM



(2)



(197)



NM


Total mainline fuel expense


1,526



1,343



13.6



4,221



3,567



18.3


Regional fuel expense


283



260



8.8



817



691



18.2


Consolidated fuel expense


$

1,809



$

1,603



12.9



$

5,038



$

4,258



18.3















Mainline fuel consumption (gallons)


909



889



2.2



2,537



2,457



3.3


Mainline average aircraft fuel price per gallon


$

1.68



$

1.51



11.3



$

1.66



$

1.45



14.5


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


$

1.68



$

1.48



13.5



$

1.66



$

1.37



21.2















Regional fuel consumption (gallons)


156



168



(7.1)



461



485



(4.9)


Regional average aircraft fuel price per gallon


$

1.81



$

1.55



16.8



$

1.77



$

1.42



24.6















Consolidated fuel consumption (gallons)


1,065



1,057



0.8



2,998



2,942



1.9


Consolidated average aircraft fuel price per gallon


$

1.70



$

1.52



11.8



$

1.68



$

1.45



15.9


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


$

1.70



$

1.49



14.1



$

1.68



$

1.38



21.7



(a)   UAL allocates 100 percent of losses from settled hedges that were designated for hedge accounting to mainline fuel expense.


 

UNITED CONTINENTAL HOLDINGS, INC.

NOTES (UNAUDITED)


(D)     Special charges and hedge adjustments include the following:




Three Months Ended

September 30,


Nine Months Ended

September 30,

(In millions)


2017


2016


2017


2016

Operating:









Severance and benefit costs


$

23



$

13



$

101



$

27


Impairment of assets


15





15



412


Labor agreement costs




14





124


Cleveland airport lease restructuring








74


(Gains) losses on sale of assets and other special charges


12



18



29



32


Subtotal


50



45



145



669


Other nonoperating (gains) losses








(1)


Total special charges


50



45



145



668


Income tax benefit related to special charges


(18)



(16)



(52)



(241)


Total special charges, net of income taxes


32



29



93



427


Hedge adjustments: prior period gains on fuel derivative contracts settled in the current period




3





2


Total special charges and hedge adjustments, net of income taxes


$

32



$

32



$

93



$

429


 

Special charges and hedge adjustments


Severance and benefit costs: During the three and nine months ended September 30, 2017, the company recorded $16 million ($10 million net of taxes) and $73 million ($47 million net of taxes), respectively, of severance and benefit costs related to a voluntary early-out program for its technicians and related employees represented by the International Brotherhood of Teamsters (the "IBT"). In the first quarter of 2017, approximately 1,000 technicians and related employees elected to voluntarily separate from the company and will receive a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through early 2019.  Also during the three and nine months ended September 30, 2017, the company recorded $7 million ($5 million net of taxes) and $28 million ($18 million net of taxes), respectively, of severance primarily related to its management reorganization initiative.


During the three and nine months ended September 30, 2016, the company recorded $13 million ($8 million net of taxes) and $27 million ($17 million net of taxes), respectively, of severance and benefit costs primarily related to a voluntary early-out program for its flight attendants.


Impairment of assets: During the three months ended September 30, 2017, United recorded a $15 million ($10 million net of taxes) intangible asset impairment charge related to a maintenance service agreement.


In April 2016, the Federal Aviation Administration ("FAA") announced that, effective October 30, 2016, it would designate Newark Liberty International Airport ("Newark") as a Level 2 schedule-facilitated airport under the International Air Transport Association Worldwide Slot Guidelines. The designation was associated with an updated demand and capacity analysis of Newark by the FAA. In the second quarter of 2016, the company determined that the FAA's action impaired the entire value of its Newark slots because the slots are no longer the mechanism that governs take-off and landing rights. Accordingly, the company recorded a $412 million special charge ($264 million net of taxes) to write off the intangible asset.


Labor agreement costs: During the nine months ended September 30, 2016, the fleet service, passenger service, storekeeper and other employees represented by the International Association of Machinists and Aerospace Workers (the "IAM") ratified seven new contracts with the company which extended the contracts through 2021. The company also reached a tentative agreement with the IBT during the same time period. During the three and nine months ended September 30, 2016, the company recorded $61 million ($39 million net of taxes) and $171 million ($109 million net of taxes), respectively, of special charges primarily for payments in conjunction with the IAM and IBT agreements described above. Also, as part of its contract with the Association of Flight Attendants, the company amended two of its flight attendant postretirement medical plans. The amendments triggered curtailment accounting, resulting in the recognition of a one-time $47 million gain ($30 million net of taxes) for accelerated recognition of a prior service credit.


Cleveland airport lease restructuring: During the nine months ended September 30, 2016, the City of Cleveland agreed to amend the company's lease, which runs through 2029, associated with certain excess airport terminal space (principally Terminal D) and related facilities at Hopkins International Airport. The company recorded an accrual for remaining payments under the lease for facilities that the company no longer uses and will continue to incur costs under the lease without economic benefit to the company. This liability was measured and recorded at its fair value when the company ceased its right to use such facilities leased to it pursuant to the lease. The company recorded a special charge of $74 million ($47 million net of taxes) related to the amended lease.


Hedge adjustments: Prior to 2017, the company used certain combinations of derivative contracts that were economic hedges but did not qualify for hedge accounting under U.S. generally accepted accounting principles.  As with derivatives that qualified for hedge accounting, the economic hedges and individual contracts were part of the company's program to mitigate the adverse financial impact of potential increases in the price of fuel. The company recorded changes in the fair value of the various contracts that were not designated for hedge accounting to Nonoperating income (expense): Miscellaneous, net in the statements of consolidated operations. During the three and nine months ended September 30, 2016, for fuel derivative contracts that settled in the three and nine months ended September 30, 2016, the company recorded MTM gains of $3 million and $2 million, respectively, in prior periods.


(E) Effective tax rate: The company's effective tax rate for the three and nine months ended September 30, 2017 was 35.0% and 35.3%, respectively. The company's effective tax rate for the three and nine months ended September 30, 2016 was 36.1% and 36.4%, respectively. The effective tax rates for the 2017 and 2016 periods represented a blend of federal, state and foreign taxes and the impact of certain nondeductible items. The effective tax rate for the three and nine months ended September 30, 2017 also reflects the impact of a change in the mix of domestic and foreign earnings.

 

 

SOURCE United Airlines

For further information: United Airlines Worldwide Media Relations, +1-872-825-8640, media.relations@united.com

United Airlines Names Bryan Quigley Senior Vice President - Flight Operations

January 18, 2019

CHICAGO, Jan. 18, 2019 /PRNewswire/ -- United Airlines (UAL) today announced Bryan Quigley has been named senior vice president of flight operations. Quigley will be responsible for overseeing United's 12,500 pilots and will serve as the airline's FAA certificate director of operations. Quigley will replace Howard Attarian who is retiring after more than a decade of leadership at United.

Quigley, who joined United in 1995, has held several leadership positions throughout United. He most recently was the vice president of the company's San Francisco hub. Quigley also served as chief pilot and led the team in charge of the integration of policies and procedures following the merger of United and Continental.

"Bryan is an exceptional leader both in and out of the flight deck. He has developed a deep understanding of the entire airline after leading our San Francisco hub and I believe he will do great work as the leader of our pilots," said Executive Vice President and Chief Operations Officer Greg Hart.

In addition to his time at United, Quigley spent 26 years in the United States Navy, serving as a U.S. naval aviator.

Attarian retires after more than 40 years in aviation. In addition to his time at United, he spent more than 23 years as a pilot for Northwest Airlines and held several leadership positions with the Air Line Pilots Association. Attarian also served in the United States Air Force and was a demonstration pilot with the U.S. Air Force Thunderbirds.

"Over the past five years, Howard has worked tirelessly to develop the best group of aviators in the industry. We will forever be grateful and wish him the best as he enters the next chapter of his life," said Hart.

Quigley holds a bachelor of science degree in Business Administration from Appalachian State University and has completed the Executive Scholar Program from the Kellogg School of Business at Northwestern University.

Matt Miller, current vice president of international will replace Quigley as vice president of the San Francisco hub.

About United

United Airlines and United Express operate approximately 4,800 flights a day to 353 airports across five continents. In 2018, United and United Express operated more than 1.7 million flights carrying more than 158 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, Newark/New York, San Francisco and Washington, D.C. United operates 770 mainline aircraft and the airline's United Express carriers operate 559 regional aircraft. The airline is a founding member of Star Alliance, which provides service to 193 countries via 28 member airlines. For more information, visit united.com, follow @United on Twitter or connect on Facebook. The common stock of United's parent, United Continental Holdings, Inc., is traded on the Nasdaq under the symbol "UAL".

SOURCE United Airlines

For further information: United Airlines Worldwide Media Relations, +1-872-825-8640, media.relations@united.com

United Airlines Reports Full-Year and Fourth-Quarter 2018 Performance

January 15, 2019

CHICAGO, Jan. 15, 2019 /PRNewswire/ -- In a departure from industry trends, United (UAL) announced today that its fourth-quarter unit revenue came in at the high end of its guidance range and also exceeded its full-year adjusted diluted earnings per share target laid out last January. UAL reported full-year net income of $2.1 billion, diluted earnings per share of $7.70 (a 9.1 percent increase year-over-year), pre-tax earnings of $2.7 billion and pre-tax margin of 6.4 percent. UAL reported adjusted full-year net income of $2.5 billion, adjusted pre-tax earnings of $3.2 billion and adjusted pre-tax margin of 7.7 percent.1 UAL increased its full-year 2018 adjusted diluted earnings per share outlook three times during the year despite a $2.4 billion year-over-year headwind from fuel. Full-year adjusted diluted earnings per share increased 33.5 percent year-over-year to $9.13, above the high end of the company's most recent guidance range.1

"United's financial performance is a testament to the successful implementation of the first year of our strategic plan and to the record-setting operational performance powered by the more than 90,000 airline professionals who work at United," said Oscar Munoz, chief executive officer of United Airlines. "United delivered proof, not just promises in 2018 - even in the face of significant headwinds from higher than expected fuel costs. It's why I couldn't be more proud of our winning culture and customer-focused team and continue to be enthusiastic about United's bright future."

For 2019, UAL expects adjusted diluted earnings per share to again grow year-over-year to between $10.00 to $12.00.2

  • UAL reported fourth-quarter net income of $462 million, diluted earnings per share of $1.70, pre-tax earnings of $556 million and pre-tax margin of 5.3 percent.
  • UAL reported fourth-quarter adjusted net income of $657 million, adjusted diluted earnings per share of $2.41 and adjusted pre-tax earnings of $814 million.
  • UAL reported fourth-quarter adjusted pre-tax margin of 7.8 percent,1 expanding margin on an adjusted basis of 0.9 points versus the fourth-quarter of 2017.
  • UAL recovered 98% percent of the year-over-year increase in fuel prices in 2018.
  • Consolidated fourth-quarter passenger revenue per available seat mile (PRASM) increased 5 percent year-over-year, at the high end of the company's fourth-quarter 2018 guidance range.
  • Consolidated fourth-quarter unit cost per available seat mile (CASM) increased 7.0 percent year-over-year.
  • Consolidated fourth-quarter CASM, excluding special charges, third-party business expenses, fuel and profit sharing, decreased 0.7 percent year-over-year.
  • Employees earned $334 million in profit sharing for 2018.

For more information on UAL's first-quarter and full-year 2019 guidance, please visit ir.united.com for the company's investor update.

2018 Highlights

Record-Setting Operational Performance3

  • Set new UAL records by flying the most revenue passengers ever, operating the most mainline departures and achieving the fewest cancellations ever in a year, resulting in more UAL customers departing on-time in 2018 than ever before.
  • For the year, achieved the best completion rate in company history with more than 1.7 million flights.
  • In 2018, achieved the best ever company STAR performance (first departures of the day), with nearly 250,000 flights leaving on time.
  • In the fourth quarter, the company achieved top-tier performance in on-time departures among its largest competitors. For the December holiday season, UAL had its best-ever on-time departure performance while flying the most revenue customers it had ever flown during the holiday period.

Customer Experience

  • Opened three new United Polaris lounges located in San Francisco International Airport, Newark Liberty International Airport and Houston's George Bush Intercontinental Airport.
  • Announced UAL's newest premium seating, United® Premium Plus, which will provide more space, comfort and amenities on select international flights starting later this year.
  • Introduced a new boarding process designed to reduce customers' stress by reducing time spent waiting in line and providing them with improved boarding information.
  • Expanded personal device entertainment option to all aircraft, providing at least one free entertainment option on all Wi-Fi equipped aircraft.
  • MileagePlus loyalty program voted Best Overall Frequent-Flyer Program in the world for the 15th consecutive year by readers of Global Traveler, and voted Favorite Frequent-Flyer Program in the Trazee Awards.

Employees

  • Employees earned incentive payments totaling approximately $14 million for achieving operational performance goals in the quarter, marking a full year of earned incentive payments totaling $55 million.
  • Introduced and trained over 90,000 team members on UAL's new customer service decision framework, the core4, which focuses on the principles of safe, caring, dependable and efficient.
  • Deployed 6,000 iPads to maintenance employees, improving reliability and efficiency.
  • Unveiled a state-of-the-art flight training center in Denver, Colorado - the largest in the world and home to the company's more than 30 full flight simulators representing all of UAL's fleet types.
  • Successfully completed the full implementation of the flight attendant joint collective bargaining agreement, allowing the company to operate more efficiently and reliably.
  • Achieved the top score of 100 percent on the 2018 Disability Equality Index (DEI), a prominent benchmarking metric that rates U.S. companies on their disability inclusion policies and practices, also earning UAL a place on DEI's 2018 "Best Places to Work" list.
  • Received "Best-of-the-Best" Award from the National LGBT Chamber of Commerce and National Business Inclusion Consortium for commitment to diversity and inclusion across all communities.

Network

  • Introduced 93 new routes, adding more flights in 2018 than any other U.S. airline.
  • Announced new international service including Washington-Dulles to Tel Aviv, Israel; San Francisco to Amsterdam, Netherlands; Newark/New York to Naples, Italy; as well as Newark/New York to Prague, Czech Republic and Denver to Frankfurt, Germany, all subject to government approval.
  • Launched several exciting new international routes including Houston to Sydney, San Francisco to Tahiti and Denver to London.
  • Announced schedule expansion at East Coast hubs in Newark/New York and Washington-Dulles to offer more nonstop flights to destinations popular with New York-area customers while reallocating largely connecting passenger flights to Washington-Dulles.
  • Announced a joint business agreement with Compañía Panameña de Aviación S.A. (Copa), Aerovías del Continente Americano S.A. (Avianca) and many of Avianca's affiliates, pending government approval.

Fleet

  • Took delivery of 21 new Boeing aircraft, including four 777-300ER, four 787-9, three 787-10 and ten 737 MAX 9 aircraft.
  • In December 2018, ordered an additional four Boeing 777-300ER aircraft and 24 737 MAX aircraft.

Community and Environment

  • Pledged to reduce the company's greenhouse gas emissions by 50 percent by 2050, the only U.S. airline to commit to emissions reductions, further strengthening UAL's ambition to be the world's most environmentally conscious airline.
  • Announced a total of $8 million in grants to benefit organizations in each of UAL's domestic hub communities.
  • Announced new global partnership with the Special Olympics and flew hundreds of Team USA Olympic and Paralympic Winter Games 2018 athletes, coaches and family members to PyeongChang, South Korea, continuing the 38-year relationship between UAL and the United States Olympic Committee.
  • Ranked No. 1 among global carriers in Newsweek's 2017 Global 500 Green Rankings, one of the most recognized environmental performance assessments of the world's largest publicly traded companies.
  • Launched a Crowdrise fundraising campaign to support those affected by Hurricane Florence, Typhoon Mangkhut, flooding in Western Japan, wildfires in California and other disasters.

Earnings Call

UAL will hold a conference call to discuss its fourth-quarter and full-year 2018 financial results and its financial and operational outlook for the first quarter and full year of 2019 on Wednesday, January 16, at 9:30 a.m. Central time /10:30 a.m. Eastern time. A live, listen-only webcast of the conference call will be available at ir.united.com. The webcast will be available for replay within 24 hours of the conference call and then archived on the website for three months.

About United

United Airlines and United Express operate approximately 4,800 flights a day to 353 airports across five continents. In 2018, United and United Express operated more than 1.7 million flights carrying more than 158 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, Newark/New York, San Francisco and Washington, D.C. United operates 770 mainline aircraft and the airline's United Express carriers operate 559 regional aircraft. The airline is a founding member of Star Alliance, which provides service to 193 countries via 28 member airlines. For more information, visit united.com, follow @United on Twitter or connect on Facebook. The common stock of United's parent, United Continental Holdings, Inc., is traded on the Nasdaq under the symbol "UAL".

1Adjusted pre-tax earnings and adjusted pre-tax margin exclude special charges, the mark-to-market ("MTM") impact of financial instruments and imputed interest on certain capitalized leases. Adjusted net income and adjusted diluted earnings per share exclude special charges, the MTM impact of financial instruments, imputed interest on certain capitalized leases and certain tax adjustments. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the tables accompanying this release.

2 Excludes special charges and the MTM impact of financial instruments, the nature of which are not determinable at this time, and imputed interest on certain capitalized leases. Accordingly, UAL is not providing earnings guidance on a GAAP basis.

3 Company history defined as post-2010 merger; company records measured from 2010 merger.

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 anticipated financial and operating 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," "estimates," "forecast," "guidance," "outlook," "goals" 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 release are based upon information available to us on the date of this release. 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: 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, including political developments that may impact our operations in certain countries; demand for travel and the impact that global economic and political conditions have on customer travel patterns; competitive pressures on pricing and on demand; demand for transportation in the markets in which we operate; our capacity decisions and the capacity decisions of our competitors; the effects of any hostilities, act of war or terrorist attack; the effects of any technology failures or cybersecurity breaches; the impact of regulatory, investigative and legal proceedings and legal compliance risks; disruptions to our regional network; 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; costs associated with any modification or termination of our aircraft orders; potential reputational or other impact from adverse events in our operations, the operations of our regional carriers, the operations of our code share partners or the aircraft operated by another airline of the same model as operated by us, our regional carriers or our code share partners; our ability to attract and retain customers; 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; the impact of any management changes; our ability to cost-effectively hedge against increases in the price of aircraft fuel if we decide to do so; any potential realized or unrealized gains or losses related to any fuel or currency hedging programs; labor costs; our ability to maintain satisfactory labor relations and the results of any collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; an outbreak of a disease that affects travel demand or travel behavior; U.S. or foreign governmental legislation, regulation and other actions (including Open Skies agreements and environmental regulations); industry consolidation or changes in airline alliances; our ability to comply with the terms of our various financing arrangements; the costs and availability of financing; our ability to maintain adequate liquidity; the costs and availability of aviation and other insurance; weather conditions; our ability to utilize our net operating losses to offset future taxable income; the impact of changes in tax laws; the success of our investments in airlines in other parts of the world; and other risks and uncertainties set forth under Part I, Item 1A., "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as well as other risks and uncertainties set forth from time to time in the reports we file with the U.S. Securities and Exchange Commission.

-tables attached-

On January 1, 2018, United Continental Holdings, Inc. ("UAL") adopted Accounting Standards Update No. 2014-09 (Topic 606), Revenue from Contracts with Customers, and Accounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. As such, certain previously reported 2017 figures are adjusted in this report on a basis consistent with the new standards. See the Current Report on Form 8-K filed by UAL with the Securities and Exchange Commission on March 1, 2018 for additional information.

UNITED CONTINENTAL HOLDINGS, INC.

STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)




Three Months Ended

December 31,


%



Full Year Ended

December 31,


%


(In millions, except per share data)


2018


2017


Increase/
Decrease)



2018


2017


Increase/
Decrease)

Operating revenue:















Passenger


$

9,556



$

8,587



11.3




$

37,706



$

34,460



9.4



Cargo


334



324



3.1




1,237



1,114



11.0



Other operating revenue


601



540



11.3




2,360



2,210



6.8



Total operating revenue


10,491



9,451



11.0




41,303



37,784



9.3


















Operating expense:















Salaries and related costs


2,924



2,678



9.2




11,458



10,941



4.7



Aircraft fuel


2,380



1,875



26.9




9,307



6,913



34.6



Regional capacity purchase


638



580



10.0




2,601



2,232



16.5



Landing fees and other rent


602



570



5.6




2,359



2,240



5.3



Depreciation and amortization


578



539



7.2




2,240



2,149



4.2



Aircraft maintenance materials and outside repairs


434



479



(9.4)




1,767



1,856



(4.8)



Distribution expenses


396



354



11.9




1,558



1,435



8.6



Aircraft rent


78



145



(46.2)




433



621



(30.3)



Special charges (B)


301



31



NM




487



176



NM



Other operating expenses


1,508



1,424



5.9




5,801



5,550



4.5



Total operating expense


9,839



8,675



13.4




38,011



34,113



11.4


















Operating income


652



776



(16.0)




3,292



3,671



(10.3)


















Operating margin


6.2

%


8.2

%


(2.0)


pts.


8.0

%


9.7

%


(1.7)


pts.

Adjusted operating margin (Non-GAAP) (A)


9.1

%


8.5

%


0.6


pts.


9.1

%


10.2

%


(1.1)


pts.
















Nonoperating income (expense):















Interest expense


(189)



(173)



9.2




(729)



(671)



8.6



Interest capitalized


19



20



(5.0)




70



84



(16.7)



Interest income


31



16



93.8




101



57



77.2



Miscellaneous, net (B)


43



(19)



NM




(76)



(101)



(24.8)



Total nonoperating expense


(96)



(156)



(38.5)




(634)



(631)



0.5


















Income before income taxes


556



620



(10.3)




2,658



3,040



(12.6)


















Pre-tax margin


5.3

%


6.6

%


(1.3)


pts.


6.4

%


8.0

%


(1.6)


pts.

Adjusted pre-tax margin (Non-GAAP) (A)


7.8

%


6.9

%


0.9


pts.


7.7

%


8.5

%


(0.8)


pts.
















Income tax expense (D)


94



41



129.3




529



896



(41.0)



Net income


$

462



$

579



(20.2)




$

2,129



$

2,144



(0.7)


















Diluted earnings per share


$

1.70



$

1.98



(14.1)




$

7.70



$

7.06



9.1



Diluted weighted average shares


272.7



291.8



(6.5)




276.7



303.6



(8.9)




NM Not meaningful

UNITED CONTINENTAL HOLDINGS, INC.

SELECT PASSENGER REVENUE INFORMATION AND STATISTICS


Select passenger revenue information is as follows:




4Q 2018

Passenger

Revenue

(millions)


Passenger

Revenue

vs.

4Q 2017


PRASM

vs.

4Q 2017


Yield

vs.

4Q 2017


Available

Seat Miles

vs.

4Q 2017

Domestic


6,088



12.8%


6.0%


6.7%


6.4%












Atlantic


1,535



9.6%


1.6%


(5.0%)


8.0%

Pacific


1,139



8.8%


4.5%


3.2%


4.0%

Latin America


794



7.2%


3.8%


1.1%


3.1%

International


3,468



8.8%


3.2%


(0.5%)


5.4%












Consolidated


$

9,556



11.3%


5.0%


3.8%


6.0%

Select statistics are as follows:




Three Months Ended

December 31,


%

Increase/

(Decrease)



Full Year Ended

December 31,


%

Increase/

(Decrease)




2018


2017





2018


2017




Passengers (thousands)


39,891



37,413



6.6




158,330



148,067



6.9



Revenue passenger miles (millions)


56,968



53,149



7.2




230,155



216,261



6.4



Available seat miles (millions)


68,902



65,028



6.0




275,262



262,386



4.9



Passenger load factor:















Consolidated


82.7

%


81.7

%


1.0


pt.


83.6

%


82.4

%


1.2


pts.

Domestic


84.6

%


85.2

%


(0.6)


pts.


85.4

%


85.2

%


0.2


pts.

International


80.1

%


77.2

%


2.9


pts.


81.3

%


78.9

%


2.4


pts.

Passenger revenue per available seat mile (cents)


13.87



13.21



5.0




13.70



13.13



4.3



Total revenue per available seat mile (cents)


15.23



14.53



4.8




15.00



14.40



4.2



Average yield per revenue passenger mile (cents)


16.77



16.16



3.8




16.38



15.93



2.8



Aircraft in fleet at end of period


1,329



1,262



5.3




1,329



1,262



5.3



Average stage length (miles)


1,426



1,431



(0.3)




1,446



1,460



(1.0)



Average full-time equivalent employees (thousands)


87.3



85.6



2.0




86.6



86.0



0.7



Average aircraft fuel price per gallon


$

2.30



$

1.91



20.4




$

2.25



$

1.74



29.3



Fuel gallons consumed (millions)


1,036



980



5.7




4,137



3,978



4.0




Note: See Part II, Item 6, Selected Financial Data, of UAL's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, for definitions of these statistics.

UNITED CONTINENTAL HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(In millions)

December 31, 2018


December 31, 2017

ASSETS




Current assets:




Cash and cash equivalents

$

1,694



$

1,482


Short-term investments

2,256



2,316


Receivables, net

1,346



1,340


Aircraft fuel, spare parts and supplies, net

985



924


Prepaid expenses and other

913



1,071


Total current assets

7,194



7,133






Total operating property and equipment, net

28,329



26,208






Other assets:




Goodwill

4,523



4,523


Intangibles, net

3,159



3,539


Restricted cash

105



91


Loans to others, net

496



46


Investments in affiliates and other, net

966



806


Total other assets

9,249



9,005


Total assets

$

44,772



$

42,346






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Advance ticket sales

$

4,381



$

3,940


Accounts payable

2,363



2,196


Frequent flyer deferred revenue

2,286



2,192


Accrued salaries and benefits

2,184



2,166


Current maturities of long-term debt and capital leases

1,379



1,693


Other

600



576


Total current liabilities

13,193



12,763






Other liabilities and deferred credits:




Long-term debt and capital leases

13,349



12,699


Frequent flyer deferred revenue

2,719



2,591


Postretirement benefit liability

1,295



1,602


Pension liability

1,576



1,921


Deferred income taxes

814



204


Other

1,831



1,832


Total other liabilities and deferred credits

21,584



20,849






Commitments and contingencies








Stockholders' equity

9,995



8,734


Total liabilities and stockholders' equity

$

44,772



$

42,346


UNITED CONTINENTAL HOLDINGS, INC.

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)


(In millions)

Full Year Ended
December 31,


2018


2017

Cash Flows from Operating Activities:




Net cash provided by operating activities

$

6,181



$

3,413






Cash Flows from Investing Activities:




Capital expenditures

(4,177)



(3,998)


Purchases of short-term and other investments

(2,552)



(3,241)


Proceeds from sale of short-term and other investments

2,616



3,177


Loans made to others

(456)




Investment in affiliates

(139)




Other, net

145



132


Net cash used in investing activities

(4,563)



(3,930)






Cash Flows from Financing Activities:




Proceeds from issuance of long-term debt and airport construction financing

1,740



2,765


Repurchases of common stock

(1,235)



(1,844)


Payments of long-term debt

(1,727)



(901)


Principal payments under capital leases

(134)



(124)


Other, net

(54)



(91)


Net cash used in financing activities

(1,410)



(195)


Net increase (decrease) in cash, cash equivalents and restricted cash

208



(712)


Cash, cash equivalents and restricted cash at beginning of the year

1,591



2,303


Cash, cash equivalents and restricted cash at end of the year (a)

$

1,799



$

1,591






Investing and Financing Activities Not Affecting Cash:




Property and equipment acquired through the issuance of debt and capital leases

$

174



$

935


Debt associated with termination of a maintenance service agreement

163




Equity interest in Republic Airways Holdings, Inc. received in consideration for bankruptcy claims



92


Airport construction financing

12



42


Operating lease conversions to capital lease

52





(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:


Reconciliation of cash, cash equivalents and restricted cash:




Current assets:




Cash and cash equivalents

$

1,694



$

1,482


Restricted cash included in Prepaid expenses and other



18


Other assets:




Restricted cash

105



91


Total cash, cash equivalents and restricted cash

$

1,799



$

1,591


UNITED CONTINENTAL HOLDINGS, INC.

RETURN ON INVESTED CAPITAL (ROIC) - Non-GAAP


ROIC is a non-GAAP financial measure that UAL believes provides useful supplemental information for management and investors by measuring the effectiveness of the company's operations' use of invested capital to generate profits.


(in millions)

Twelve Months Ended

December 31, 2018

Net Operating Profit After Tax ("NOPAT")


Pre-tax income

$

2,658


Special charges and MTM losses on financial instruments (B):


Impairment of assets

377


Termination of a maintenance service agreement

64


Severance and benefit costs

41


MTM losses on financial instruments

5


(Gains) losses on sale of assets and other special charges

5


Pre-tax income excluding special charges and MTM losses on financial instruments (Non-GAAP)

3,150


add: Interest expense (net of income tax benefit) (a)

725


add: Interest component of capitalized aircraft rent (net of income tax benefit) (a)

211


add: Net interest on pension (net of income tax benefit) (a)

(16)


less: Income taxes paid

(19)


NOPAT (Non-GAAP)

$

4,051






Average Invested Capital (five-quarter average)


Total assets

$

44,133


add: Capitalized aircraft operating leases (b)

3,723


less: Non-interest bearing liabilities (c)

(17,224)


Average invested capital (Non-GAAP)

$

30,632




ROIC (Non-GAAP)

13.2

%





(a)

Income tax benefit measured based on the effective cash tax rate. The effective cash tax rate is calculated by dividing cash taxes paid by pre-tax income excluding special charges. For the twelve months ended December 31, 2018, the effective cash tax rate was 0.6%.

(b)

The purpose of this adjustment is to capitalize the impact of aircraft operating leases. The company uses a multiple of seven times its annual aircraft rent expense to estimate the potential capitalized value and related liability of its aircraft. This is a simplified method used by many rating agencies and financial analysts to assess the impact of operating leases on financial measures like return on invested capital.

(c)

Non-interest bearing liabilities include advance ticket sales, frequent flyer deferred revenue, deferred income taxes and other non-interest bearing liabilities.

UNITED CONTINENTAL HOLDINGS, INC.

NON-GAAP FINANCIAL RECONCILIATION


(A) UAL evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America (GAAP) and Non-GAAP financial measures, including adjusted operating income (loss), adjusted operating margin, adjusted pre-tax income (loss), adjusted pre-tax margin, adjusted net income (loss), adjusted diluted earnings (loss) per share and CASM, excluding special charges, third-party business expenses, fuel, and profit sharing, among others. UAL believes that adjusting for special charges is useful to investors because special charges are not indicative of UAL's ongoing performance. UAL believes that adjusting for MTM gains and losses on financial instruments is useful to investors because those unrealized gains or losses may not ultimately be realized on a cash basis. UAL believes that adjusting for interest expense related to capital leases of Embraer ERJ 145 aircraft is useful to investors because of the accelerated recognition of interest expense.


CASM is a common metric used in the airline industry to measure an airline's cost structure and efficiency. UAL reports CASM excluding special charges, third-party business expenses, fuel and profit sharing. UAL believes that adjusting for special charges is useful to investors because special charges are not indicative of UAL's ongoing performance. UAL also believes that excluding third-party business expenses, such as maintenance, ground handling and catering services for third parties and fuel sales, 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. UAL excludes profit sharing because this exclusion allows investors to better understand and analyze our operating cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.


Reconciliations of reported non-GAAP financial measures to the most directly comparable GAAP financial measures are included below.




Three Months Ended

December 31,


%
Increase/


Full Year Ended

December 31,


%
Increase/



2018


2017


(Decrease)


2018


2017


(Decrease)

CASM (cents)













Cost per available seat mile (CASM) (GAAP)


14.28



13.34



7.0



13.81



13.00



6.2


Special charges (B)


0.44



0.04



NM



0.18



0.07



NM


Third-party business expenses


0.04



0.06



(33.3)



0.04



0.05



(20.0)


Fuel expense


3.46



2.88



20.1



3.38



2.64



28.0


Profit sharing, including taxes


0.12



0.07



71.4



0.12



0.13



(7.7)


CASM, excluding special charges, third-party business expenses, fuel, and profit sharing (Non-GAAP)


10.22



10.29



(0.7)



10.09



10.11



(0.2)



NM Not Meaningful

UNITED CONTINENTAL HOLDINGS, INC.

NON-GAAP FINANCIAL RECONCILIATION (Continued)




Three Months Ended

December 31,


$

Increase/


%

Increase/


Full Year Ended

December 31,


$

Increase/


%

Increase/

(in millions)


2018


2017


(Decrease)


(Decrease)


2018


2017


(Decrease)


(Decrease)

Operating expenses (GAAP)


$

9,839



$

8,675



$

1,164



13.4



$

38,011



$

34,113



$

3,898



11.4


Special charges (B)


301



31



270



NM



487



176



311



NM


Operating expenses, excluding special charges


9,538



8,644



894



10.3



37,524



33,937



3,587



10.6


Adjusted to exclude:

















Third-party business expenses


32



31



1



3.2



121



145



(24)



(16.6)


Fuel expense


2,380



1,875



505



26.9



9,307



6,913



2,394



34.6


Profit sharing, including taxes


82



45



37



82.2



334



349



(15)



(4.3)


Adjusted operating expenses (Non-GAAP)


$

7,044



$

6,693



$

351



5.2



$

27,762



$

26,530



$

1,232



4.6



















Operating income (GAAP)


$

652



$

776



$

(124)



(16.0)



$

3,292



$

3,671



$

(379)



(10.3)


Adjusted to exclude:

















Special charges (B)


301



31



270



NM



487



176



311



NM


Adjusted operating income (Non-GAAP)


$

953



$

807



$

146



18.1



$

3,779



$

3,847



$

(68)



(1.8)



















Pre-tax income (GAAP)


$

556



$

620



$

(64)



(10.3)



$

2,658



$

3,040



$

(382)



(12.6)


Adjusted to exclude:

















Special charges (B)


301



31



270



NM



487



176



311



NM


MTM (gains) losses on financial instruments (B)


(56)





(56)



NM



5





5



NM


Interest expense on ERJ 145 capital leases (C)


13





13



NM



26





26



NM


Adjusted pre-tax income (Non-GAAP)


$

814



$

651



$

163



25.0



$

3,176



$

3,216



$

(40)



(1.2)



















Net income (GAAP)


$

462



$

579



$

(117)



(20.2)



$

2,129



$

2,144



$

(15.0)



(0.7)


Adjusted to exclude:

















Special charges (B)


301



31



270



NM



487



176



311



NM


MTM (gains) losses on financial instruments (B)


(56)





(56)



NM



5





5



NM


Interest expense on ERJ 145 capital leases (C)


13





13



NM



26





26



NM


Income tax benefit related to adjustments above


(58)



(11)



(47)



NM



(116)



(63)



(53)



NM


Special income tax adjustments (D)


(5)



(179)



174



NM



(5)



(179)



174



NM


Adjusted net income (Non-GAAP)


$

657



$

420



$

237



56.4



$

2,526



$

2,078



$

448



21.6



















Diluted earnings per share (GAAP)


$

1.70



$

1.98



$

(0.28)



(14.1)



$

7.70



$

7.06



$

0.64



9.1


Adjusted to exclude:

















Special charges (B)


1.10



0.11



0.99



NM



1.76



0.58



1.18



NM


MTM (gains) losses on financial instruments (B)


(0.21)





(0.21)



NM



0.02





0.02



NM


Interest expense on ERJ 145 capital leases (C)


0.05





0.05



NM



0.09





0.09



NM


Income tax benefit related to adjustments


(0.21)



(0.04)



(0.17)



NM



(0.42)



(0.21)



(0.21)



NM


Special income tax adjustments (D)


(0.02)



(0.61)



0.59



NM



(0.02)



(0.59)



0.57



NM


Adjusted diluted earnings per share (Non-GAAP)


$

2.41



$

1.44



$

0.97



67.4



$

9.13



$

6.84



$

2.29



33.5



NM Not Meaningful

UNITED CONTINENTAL HOLDINGS, INC.

NON-GAAP FINANCIAL RECONCILIATION (Continued)


UAL believes that adjusting capital expenditures for assets acquired through the issuance of debt and capital leases, airport construction financing and excluding fully reimbursable projects is useful to investors in order to appropriately reflect the non-reimbursable funds spent on capital expenditures. UAL also believes that adjusting net cash provided by operating activities for capital expenditures and adjusted capital expenditures is useful to allow investors to evaluate the company's ability to generate cash that is available for debt service or general corporate initiatives.




Three Months Ended

December 31,


Full Year Ended

December 31,

Capital Expenditures (in millions)


2018


2017


2018


2017

Capital expenditures (GAAP)


$

1,585



$

1,098



$

4,177



$

3,998


Property and equipment acquired through the issuance of debt and capital leases


35



17



174



935


Airport construction financing




1



12



42


Fully reimbursable projects


(36)



(70)



(176)



(246)


Adjusted capital expenditures (Non-GAAP)


$

1,584



$

1,046



$

4,187



$

4,729











Free Cash Flow (in millions)









Net cash provided by operating activities (GAAP)


$

1,101



$

728



$

6,181



$

3,413


Less capital expenditures


1,585



1,098



4,177



3,998


Free cash flow, net of financings (Non-GAAP)


$

(484)



$

(370)



$

2,004



$

(585)











Net cash provided by operating activities (GAAP)


$

1,101



$

728



$

6,181



$

3,413


Less adjusted capital expenditures (Non-GAAP)


1,584



1,046



4,187



4,729


Free cash flow (Non-GAAP)


$

(483)



$

(318)



$

1,994



$

(1,316)


UNITED CONTINENTAL HOLDINGS, INC.

NOTES (UNAUDITED)


(B) Special charges and MTM gains and losses on financial instruments include the following:




Three Months Ended

December 31,


Full Year Ended

December 31,

(In millions)


2018


2017


2018


2017

Operating:









Impairment of assets


$

232



$

10



$

377



$

25


Termination of an engine maintenance service agreement


64





64




Severance and benefit costs


7



15



41



116


(Gains) losses on sale of assets and other special charges


(2)



6



5



35


Total special charges


301



31



487



176


Nonoperating MTM (gains) losses on financial instruments


(56)





5




Total special charges and MTM (gains) losses on financial instruments


245



31



492



176


Income tax benefit related to special charges


(68)



(11)



(109)



(63)


Income tax expense (benefit) related to MTM gains and losses on financial instruments


13





(1)




Income tax adjustments (D)


(5)



(179)



(5)



(179)


Total special charges and MTM (gains) losses on financial instruments, net of income taxes


$

185



$

(159)



$

377



$

(66)



Impairment of assets:


Routes: The company conducted its annual impairment review of intangible assets in the fourth quarter of 2018, which consisted of a comparison of the book value of specific assets to the fair value of those assets calculated using the discounted cash flow method. Due to increased costs without sufficient corresponding increases in revenue in the Hong Kong market, the company determined that the value of its Hong Kong routes had been impaired. Accordingly, in the fourth quarter of 2018, the company recorded a special non-cash impairment charge of $206 million ($160 million net of taxes) associated with its Hong Kong routes. The collateral pledged under the company's term loan, including the Hong Kong routes, continues to be sufficient to satisfy the loan covenants.


In May 2018, the Brazil–United States open skies agreement was ratified, which provides air carriers with unrestricted access between the United States and Brazil. The company determined that the approval of the open skies agreement impaired the entire value of its Brazil route authorities because the agreement removes all limitations or reciprocity requirements for flights between the United States and Brazil. Accordingly, in the second quarter of 2018, the company recorded a $105 million special charge ($82 million net of taxes) to write off the entire value of the intangible asset associated with its Brazil routes. This asset was not part of any collateral pledged against any of the company's borrowings. The company continues to maintain its slot assets related to Brazil since airport access is still regulated by slot allocations that are limited by airport facility constraints.


Other: For the three and twelve months ended December 31, 2018, the company also recorded $26 million ($20 million net of taxes) and $66 million ($51 million net of taxes), respectively, of fair value adjustments related to aircraft purchased off lease, write-off of unexercised aircraft purchase options and other impairments related to certain fleet types and international slots no longer in use.


In the fourth quarter of 2017, the company recorded a $10 million ($6 million net of taxes) impairment charge related to obsolete spare parts inventory. During 2017, the company recorded a $15 million ($10 million net of taxes) intangible asset impairment charge related to a maintenance service agreement.


Termination of a maintenance service agreement: In the fourth quarter of 2018, the company recorded a one-time termination charge of $64 million ($50 million net of tax) related to one of its engine maintenance service agreements.


Severance and benefit costs: During the three and twelve months ended December 31, 2018, the company recorded severance and benefit costs related to a voluntary early-out program for its technicians and related employees represented by the International Brotherhood of Teamsters of $3 million ($2 million net of taxes) and $22 million ($17 million net of taxes), respectively. In the first quarter of 2017, approximately 1,000 technicians and related employees elected to voluntarily separate from the company and will receive a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through 2018. Also during the three and twelve months ended December 31, 2018, the company recorded other management severance of $4 million ($3 million net of taxes) and $19 million ($15 million net of taxes), respectively.


During the three and twelve months ended December 31, 2017, the company recorded $10 million ($6 million net of taxes) and $83 million ($53 million net of taxes), respectively, of severance and benefit costs related to the voluntary early-out program for its technicians and related employees, and $5 million ($3 million net of taxes) and $33 million ($21 million net of taxes), respectively, of management severance.


MTM gains and losses on financial instruments: During the three and twelve months ended December 31, 2018, the company recorded gains of $89 million ($69 million net of taxes) and $28 million ($22 million net of taxes), respectively, for the change in market value of certain of its equity investments. During the fourth quarter of 2018, the company recorded losses of $33 million ($26 million net of taxes) for the change in fair value of certain derivative assets related to equity of Avianca Holdings S.A. For equity investments and derivative assets subject to MTM accounting, the company records gains and losses as part of Nonoperating income (expense): Miscellaneous, net in its statements of consolidated operations.



(C) Interest expense related to capital leases of Embraer ERJ 145 aircraft


During the third quarter of 2018, United entered into an agreement with the lessor of 54 Embraer ERJ 145 aircraft to purchase those aircraft in 2019. The provisions of the new lease agreement resulted in a change in accounting classification of these new leases from operating leases to capital leases up until the purchase date. The company recognized $13 million ($10 million net of tax) and $26 million ($20 million net of tax) of additional interest expense in the three and twelve months ended December 31, 2018, respectively, as a result of this change.


(D) Effective tax rate


The company's effective tax rate for the three and twelve months ended December 31, 2018 was 16.9% and 19.9%, respectively, and the effective tax rate for the three and twelve months ended December 31, 2017 was 6.6% and 29.5%, respectively. The effective tax rate represents a blend of federal, state and foreign taxes and included the impact of certain nondeductible items. The effective tax rate for the three and twelve months ended December 31, 2018 also reflects the reduced federal corporate income tax rate as a result of the enactment of the Tax Cuts and Jobs Act (the "Tax Act") in December 2017 and the impact of a change in the company's mix of domestic and foreign earnings. The rates for the 2018 and 2017 periods were impacted by one-time benefits of $5 million and $179 million, respectively, due to the passage of the Tax Act.

SOURCE United Airlines

For further information: United Airlines Worldwide Media Relations, +1-872-825-8640, media.relations@united.com

LA's Newest Star: The United Polaris Lounge Opens at Los Angeles International Airport

January 10, 2019

LOS ANGELES, Jan. 10, 2019 /PRNewswire/ -- Beginning January 12, United customers traveling in United Polaris® business class, the airline's international premium cabin travel experience, will now be able to relax and dine before their travels in the new United Polaris lounge at Los Angeles International Airport.

The award-winning Polaris lounge experience builds on the airline's concept to be uniquely United while embracing the energy and distinct culture of Southern California and the exciting destinations United serves from here. This Polaris lounge features Southern California-style throughout, including works by local, Los Angeles-based artists, Rema Ghuloum, Chris Trueman and Ruth Pastine, and a food and beverage program inspired by the City of Angels. It is conveniently located in Terminal 7 between Gates 73 and 75A and faces west to capture the city's vibrant sunset skies.

The United Polaris lounge is the most recent investment United has made at LAX, where the airline recently completed a $573 million renovation of Terminal 7. Customers also can now take advantage of the recently completed cut-through, a new road that provides a shortcut to avoid the LAX "horseshoe" road around the terminals to help ease their travels. In addition to the Polaris lounge, United recently opened a new United Club in Terminal 7, and offers customers who want a more upscale experience access to The Private Terminal. These latest improvements and amenities help give United customers the best possible airport experience at LAX.

The airline is also committed to the greater Los Angeles community, having announced last year a $1 million grant to Southern California-based First Place for Youth.

"Los Angeles is one of United's most important gateways, particularly to Asia and Australia, and this lounge provides our customers with a best-in-class experience before they board their flights, especially for those customers with late-night departures and early-morning arrivals," said Janet Lamkin, United's California President. "We continue to expand our presence in Los Angeles, connecting customers from all over California and the U.S. to our global network. The addition of the United Polaris lounge is yet another way we provide customers with the best possible travel experience at LAX."

United Polaris Lounge at LAX Facts & Highlights

  • More than 12,000 square feet
  • 140 seats, with a variety of seating areas for productivity, privacy and dining
  • 272 power outlets and 120 USB ports
  • Luxurious shower suites, featuring rainfall showerheads and Soho House & Co's Cowshed Spa products
  • Private daybeds outfitted with Saks Fifth Avenue bedding
  • Customers are invited to enjoy a full restaurant-quality experience in The Dining Room before their flights. With a menu that blends international comfort foods developed by Los Angeles native Chef Tritia Gestuvo, highlights include: almond-crusted fish and chips, chilaquiles, Korean bulgogi arancini, fresh crafted sandwiches on La Brea Bakery® bread, flavorful street tacos and house-made cinnamon churros.
  • In a nod to the innovative cocktail culture of Los Angeles, the lounge features signature cocktails inspired by the City of Stars, including the Let's Rumble, made from Cruso Spiced Rum, fresh lemon, prickly pear puree and house-made simple syrup and the On Sunset, a playful take on the tequila sunrise, made from Casa Noble Tequila, Del Maguey Single Village Mezcal and agave nectar.

The United Polaris lounge at Los Angeles International Airport is the fifth Polaris lounge to open. Other United Polaris lounge locations include: Chicago O'Hare International Airport, George Bush Intercontinental in Houston, Newark Liberty International Airport and San Francisco International Airport.

The focus behind the United Polaris experience has always been to provide long-haul travelers with what they've asked for: the best sleep in the sky. On average, United continues to add one aircraft with the new United Polaris business class seat every 10 days from now through 2020. On Monday, the airline's newest aircraft, the Boeing 787-10 Dreamliner, officially entered service, featuring the Polaris business class seat as well as the airline's new United Premium Plus seat. United in the first North American carrier to operate the 787-10 and the only airline in the world to operate all three models of the Dreamliner.

For more photos of the United Polaris lounge at Los Angeles International Airport, visit the United Newsroom.

About United

United Airlines and United Express operate approximately 4,800 flights a day to 353 airports across five continents. In 2018, United and United Express operated more than 1.7 million flights carrying more than 158 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, Newark/New York, San Francisco and Washington, D.C. United operates 770 mainline aircraft and the airline's United Express carriers operate 559 regional aircraft. The airline is a founding member of Star Alliance, which provides service to 193 countries via 28 member airlines. For more information, visit united.com, follow @United on Twitter or connect on Facebook. The common stock of United's parent, United Continental Holdings, Inc., is traded on the Nasdaq under the symbol "UAL".

SOURCE United Airlines

For further information: United Airlines Worldwide Media Relations, +1-872-825-8640, media.relations@united.com

United Airlines Unveils New United MileagePlus X App

January 10, 2019

CHICAGO, Jan. 10, 2019 /PRNewswire/ -- Today, United Airlines is introducing the relaunch of the United MileagePlus X app, which offers United MileagePlus® members a unique opportunity to earn award miles for everyday purchases. The app has been refreshed to integrate additional programs to make it even easier for members to accumulate miles. Additionally, the app features the launch of United Visa Rewards with offers from merchants like Sam's Club®, Wayfair®, and StubHubTM, offering UnitedSM Chase Visa Cardmembers even more ways to earn miles.

App enhancements

  • MileagePlus DiningSM: The existing MileagePlus Dining program has been integrated into the MileagePlus X app. With seamless enrollment and showcasing nearby restaurants, members' ability to choose where to dine and earn miles is now in the palm of their hand.
  • MileagePlus Shopping: The longstanding shopping program is now available through the MileagePlus X app, and offers members the ability to shop and earn miles on the go at more than 900 retailers.
  • United Visa Rewards: This new program is powered by Visa Commerce Network, which allows enrolled individuals to receive valuable offers within MileagePlus X thanks to the power of the Visa payments network. United Visa Rewards is available exclusively to United Chase Visa Cardmembers in the U.S. who are now able to enroll their eligible card into the program via the app. From there, they can view active enhanced mileage earning offers from participating merchants. Once program participants make a qualifying purchase with a participating merchant, they will receive a near real-time reward notification within the app. As a special launch offer, from now until March 31, 2019, United Chase Visa Cardmembers can earn 1,000 bonus award miles by simply enrolling their eligible credit card for the first time into the program.1

"We are excited to launch the new MileagePlus X app, which allows MileagePlus members to earn and redeem award miles in real time for their everyday purchases at hundreds of merchants across the U.S, matching the increased benefits our UnitedSM Explorer Cardmembers received with the new credit card last summer," said Luc Bondar, president of MileagePlus Holdings and vice president of loyalty at United Airlines. "As mobile payments become more commonplace, it was a natural tie for United to update the features, enable members to make purchases and earn and use miles on the go."

"Visa and United have been working together for over 20 years," said Terry Angelos, SVP, loyalty & offers, Visa. "As digitally-savvy individuals continue to help shape the future of digital commerce, Visa continues to work with United and Chase to bring new ways to reward consumers for their loyalty. At the same time, participating merchants will benefit from Visa Commerce Network's ability to deliver custom solutions that will help increase their customer base and loyalty, ultimately helping them continue to grow their business."

Through the MileagePlus X app, members can purchase eGift Cards from hundreds of restaurants and retailers. One of the savviest ways to take advantage of this feature is to buy an eGift Card in the amount of the purchase price while at checkout at a participating merchant. In addition, primary United Chase Cardmembers earn a 25% bonus on miles earned from MileagePlus on eGift Card purchases made through the app. Customers can find eGift Cards from a variety of categories such as shopping, dining, transportation, lodging, music, and more.

About MileagePlus®

MileagePlus® is United's industry-leading loyalty program. With a wide network of partners through which members may earn and redeem miles. MileagePlus members earn award miles by flying United, United Express, Star Alliance airlines or other airline partners, and by purchasing products or services from partners around the globe. Members enjoy a host of options for using those award miles, including award travel, hotel stays, car rentals and merchandise. For the 15th consecutive year, Global Traveler voted United's MileagePlus® loyalty program the best overall frequent-flyer program in the world.

About United

United Airlines and United Express operate approximately 4,800 flights a day to 353 airports across five continents. In 2018, United and United Express operated more than 1.7 million flights carrying more than 158 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, Newark/New York, San Francisco and Washington, D.C. United operates 770 mainline aircraft and the airline's United Express carriers operate 559 regional aircraft. The airline is a founding member of Star Alliance, which provides service to 193 countries via 28 member airlines. For more information, visit united.com, follow @United on Twitter or connect on Facebook. The common stock of United's parent, United Continental Holdings, Inc., is traded on the Nasdaq under the symbol "UAL".

1 Available to first time enrollees only

 

SOURCE United Airlines

For further information: United Airlines Worldwide Media Relations, 872.825.8640, media.relations@united.com

United Reports December 2018 Operational Performance

January 09, 2019

CHICAGO, Jan. 9, 2019 /PRNewswire/ -- United Airlines (UAL) today reported December 2018 operational results.

UAL's December 2018 consolidated traffic (revenue passenger miles) increased 6.9 percent and consolidated capacity (available seat miles) increased 6.4 percent versus December 2017. UAL's December 2018 consolidated load factor increased 0.4 points compared to December 2017.

December Highlights

  • Announced UAL's largest ever international network expansion from San Francisco International Airport by offering nonstop year-round service to Toronto and Melbourne, Australia, seasonal service to New Delhi and a second daily flight between San Francisco and Seoul, South Korea - all subject to government approvals. In addition to the new routes, UAL will begin new year-round nonstop service between San Francisco and each of Auckland, New Zealand, Tahiti, French Polynesia and Amsterdam.
  • Announced the addition of 11 new routes from UAL's hubs in Chicago, Houston, Los Angeles and Washington, D.C. The company's new summer service, beginning in June 2019, will connect customers to popular summer vacation destinations in California, Colorado, Florida, Oregon, Michigan and Nova Scotia.
  • Mileage Plus loyalty program was voted Best Overall Frequent-Flyer Program in the world for the 15th consecutive year by readers of Global Traveler and was awarded the 2018 Frequent Traveler Titan Award for the Americas.

About United

United Airlines and United Express operate approximately 4,800 flights a day to 353 airports across five continents. In 2018, United and United Express operated more than 1.7 million flights carrying more than 158 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, Newark/New York, San Francisco and Washington, D.C. United operates 770 mainline aircraft and the airline's United Express carriers operate 559 regional aircraft. The airline is a founding member of Star Alliance, which provides service to 193 countries via 28 member airlines. For more information, visit united.com, follow @United on Twitter or connect on Facebook. The common stock of United's parent, United Continental Holdings, Inc., is traded on the Nasdaq under the symbol "UAL".



Preliminary Operational Results



















December



Year-to-Date



2018

2017

Change



2018

2017

Change

















REVENUE PASSENGER MILES (000)

















Domestic

11,058,944

10,479,105

5.5%



132,954,893

124,267,502

7.0%

Mainline

8,982,444

8,578,667

4.7%



108,634,884

102,312,669

6.2%

Regional

2,076,500

1,900,438

9.3%



24,320,009

21,954,833

10.8%

International

8,270,205

7,596,002

8.9%



97,199,892

91,992,999

5.7%

Atlantic

2,986,741

2,645,206

12.9%



40,610,724

36,220,795

12.1%

Pacific

3,108,677

2,880,088